Banca IFIS S.p.A. (IF) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca IFIS First Half 2022 Results' Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Frederik Geertman, Chief Executive Officer of Banca IFIS. Please go ahead, sir.

Thank you, and good afternoon, everybody. Welcome to our semiannual results call. I'll be using the presentation, that you find on our site. And moving into it. I will go straight to Page 4. We want to share with you some messages about this time. You'll notice that we'll get back to this on a few occasions. We see the bank as being well placed to deliver on the business plan and its focus on core businesses. We have a very nicely looking a credit book. It's confirmed sound. Negligible asset quality deterioration from loans formally under moratory. As you know, negligible direct exposure to us in Ukraine. And also this quarter, we haven't made any write-backs of quite sizable actually, unused provisions we have made for COVID, and we've actually added a few prudential add-ons on the performing portfolio. We are quite confident also in the NPL book because we've been buying with more stringent assumptions, both during COVID and more lately, due to, let's say, a certain prudence on the macroeconomic outlook. We have a coverage book that you know, mostly on how to collect and with a maturity matching its financing. We're holding on to a bit of cash for reinvestment. So the book is slightly smaller than it was, and we can opportunistically decide when to deploy that cash. As you know, we have a potential upside from a pickup in interest rates that would gradually materialize here in the business plan. And you can -- If you see the rates, we expect that to enter into our P&L. And interestingly, on 6, the factoring business and the leasing business is then we'll be more explicit about that later presentation, an Interest in inflation hedge, as they are directly connected obviously to the size of the invoices. CET1, we're posting at 14.9% on June 30, not including 2 effects. One of them is certain. The other one is highly likely, which together amounts to roughly 100 basis points. So we read the CET1 as more similar to 15.9% at present. Page 5, getting into what happened during Q2. We posted net income of EUR 38 million, which is plus 7% Q-on-Q up 33% year-on-year core business growth. Net revenues are at EUR 161 million, plus 5% year-on-year in the Q and 6% net of the PPA, driven by both the Commercial Banking and the NPL business. We had a record factoring turnover in Q2 2022, was 19% year-on-year and plus 33% new business volume in leasing. Quite a resilient cash performance of the NPL portfolio still EUR 91 million. Loan loss provisions of EUR 17 million, including, as I mentioned before, a bit of extra provisions on the performing portfolio. And finally, we have a bit of work in Q2 around the application of the New Definition of Default ("New DoD") on our exposures versus the Italian public health system. I'll get back on the 2. The synthesis is that we fully apply the new definition of the 4 parameters so we have no exclusions anymore. And that's in the numbers. Page 6, revenues, plus 5% year-on-year. If you take the first half of the year, which we don't depict here, it's plus 12%, slightly higher in Q1 than in Q2. We gave a bit of extra inflow on some one-offs that we had in Q1, and we didn't have in Q2. So there's a little bit of intra-quarter volatility, if you may there. Also because part of the very dynamic commercial activities, as I mentioned before, was actually in June, so it's only partly reflected in the numbers of the quarter. and also because we had a little bit of impact from the decision on the pharma portfolio, which I will get back to later. We remind everybody a couple of scenario considerations, basically the same message we gave last quarter. So we expect an upside of EUR 30 to EUR 45 million annually in net interest income, but that will come in; firstly, if we have 100 basis points rate increase, of course, which would be the scenario that we simulated and also as that feeds gradually into our book, right over the course of the business plan period. So that's not immediately available. Of course, potential negative impact from weaker macroeconomic growth. There is obviously a major scenario question out there. Page 7. One of the reasons why we believe we have a resilient business, and you are probably used to seeing interest rate correlations, right? Banks normally quantify it, talk about it, you will, in many cases, ask questions. Interestingly, in our business mix, the largest 2 loan books, Factoring and Leasing have quite a strong positive correlation on inflation. On factoring, it's actually 1:1. I mean there are very few businesses out there where if you have a 10% increase in inflation, you have a 10% increase in the size of the invoice. For IFIS, that translates into a 10% revenue increase. Proportionally, obviously. And of course, the factoring book turns a number of times per year. So you can expect that to materialize very quickly. On leasing, the effect is the same, but obviously, some new business. If the goods that are bought and financed by us increase in value then the invoice increases and our loan will increase, right? So we are a bank in a positive rate environment where the rates we see them increasing and where we have inflation, which stands to benefit from a tailwind of this environment in the commercial banking business structurally. Page 8. Commercial activity, plus 19% Factoring turnover, big step from Q1 to Q2, but a very significant impact in June. I believe it was our best June ever. New Leasing Business is plus 33%. The market is basically flat. You see the benefit of being specialized in cars and tech equipment. I always remind our listeners that we don't have real estate leasing, and we don't do on article. So we really benefit from investments in capital goods. If you look at the Car segment on the right, plus 34%. The market in that segment is actually slightly contracting. This is due to both commercial activity, digitalization and efficiency and due to our choice of being particularly close to electric vehicle manufacturers that see in us a very performing partner. Page 9, the NPL portfolio, EUR 91 million, which is quite an impressive cash collection performance, especially considering the environment. On the right, you see where the cash collection comes from. You see that roughly 2/3 is judicial, and therefore, not very much exposed to inflation considerations. On the extrajudicial, so the voluntary retirement plan, which is the green bar. Obviously, when we're not seeing it yet in a very pronounced way. But prospectively, I would expect an impact. If you have families that keep on a repayment plan at the end of the month, maybe EUR 100, EUR 200 set side for the repayment plan. If you double their energy bill and the food bill, obviously right, that's going to be impacted. We're not seeing it in a very pronounced way yet. We're seeing strong impact. We expect on this 1/3 of the NPL portfolio to need to give a bit of time to debtors. Now the problem in itself, on the right-hand side, you see the edge distribution of the debtors, a very positive characteristics of being in small tickets unsecured is that mostly your counterparties are physical persons, and we don't have the issue that you have with companies who at some point actually sees to exist. They're liquidated, and then the whole credit question is obviously becomes irrelevant. Physical people go through phases, maybe a few months or a few years out, they improved their position, and they come back to reestablishing a payment plan. And obviously, our business is to make sure that we keep in contact and that we benefit from the situation if it improves, right. So once again, the benefits of being in small tickets on secured relative to other NPL businesses, which in my feeling are much more exposed to the economic scenario. Page 10, costs. So in Q2, we had EUR 98 million, of which EUR 5 million are the Fondo Interbancario di Tutela dei Depositi and the other fund costs, right, so the contributions that we give to the 2 funds. And that doesn't have a P&L impact incidentally. So you see it in the cost, but it was actually a reserve. So that's booked back. G&A and other operating expenses. An ongoing contract renegotiation, this started about 6 to 9 months ago when we identified it as an area of value. A part of the increase you see is directly connected to higher business volumes, especially the judiciary collection in the NPL business, which is directly connected, obviously, also to taxes and to lower costs. We keep investing in IT, 8 million in the quarter, confirming our commitment to the investments. And incidentally, we don't have a chart on it today, but on our digitalization projects, we are perfectly in line with where we wanted to be. One of the nice things that we completed this quarter is the full onboarding of 100% of all our factoring clients onto the Ifis4 business digital portal, which means that we basically have a digital interface towards our clients, 100% of our clients now operational. Quite a distinctive service model in the Italian market. Page 11. Asset quality, EUR 70 million of Loan Loss Provisions, stable Q-on-Q. As we said, we added EUR 3 million on some older vintage exposure, so that's still bond's portfolio. And we didn't write back the provisions for COVID19. We reallocated them, if I may use the term. They are now set aside against the macroeconomic risks related to Russia Ukraine and lower economic growth. That amount of provisions is of the order of magnitude of our annual regular provision. So we're talking about a very sizable sum, unused, still set aside available for any scenario that may pop up. NPE ratios. Here, you see the impact of the New DoD decision. First of all, the dark blue bars, you see that gross NPEs, excluding the pharma decision go down to 5.5% to 5.3% and the net from 2.9% to 2.7%. We're posting slightly higher numbers. Why does that happen? We concluded in the second quarter of this year, the analysis of the application of the New Definition of Default on the loans vs Italian public health system. You may recall or know that there's quite a bit of regulatory uncertainty there, different approaches from different market participants, sentences by the Italian or age sentence by the Italian constitutional court in December, which took away a certain exemption that was connected to COVID that we thought we had benefited from, which were selectively taken away. In a scenario like this, having the exposure to a potential explicit intervention by the regulator with the new and more detailed rules that may arise, we decided to take away uncertainty. So we entered the business or the subject in a very determined way. We started to restructure our loan portfolio. We've sold a small piece. With particularly problematic loans in terms of collection times. We applied a much more selective purchasing strategy, drastically more selective purchasing strategy, and we classified in the end without any exceptions, EUR 145 million in past due. We expect that portfolio to further decrease in the coming quarters. So we expect to digest it both through maybe some add-on transactions and through simple collection. So we have a gross NPE ratio, including this effect of 6.4% in Q1 '22 and 7.3% in Q2 '22, which is all else being equal, destined to improve over the next couple of quarters. I don't want to put a firm time line on that, but I think in a couple of quarters, the thing will be out of the way. Marginal P&L impact, modest CET1 impact, we'll quantify that in a minute. Page 12. This is a page we have shown also in Q1. This is an update. In case somebody would like to check, you will see that the amounts hardly moved, so we have a very strong confirmation even after further 3 months that the aggregate impact of COVID of the moratoria on Banca IFIS' cost of risk is non-material. I remind everybody that of this EUR 23 million total exposure of loans that have at least 3 installments in arrears. The majority is 80% guaranteed by the state or leasing, which is obviously the underlying value. So lose get in default in this case is very benign, right. So we can say after further 3 months of observing the performance of the loan book that the effect of COVID has been almost nonmaterial. I can't stress enough the message this gives on the quality of the loan book. Page 13. Capital ratios, you see that we go from 15.7% to 14.9%. I'll take you through the walk as usual, 13 basis points OCI reserves, that's the BTP-bund spread. Then we have 33% impact from New DoD. through a certain SRP process, so a significant risk transfer process that has regulatory approval terms. And therefore, we made the request for the recognition, and we expect that to enter in Q3, and therefore, we expect to get it back. Then we have a remaining 23 basis points impact, still due to the same effect that will be a more gradual. Reduction as we manage the book down. Finally, 12 basis points of new business growth, leading to 14.9% CET1 ratio at 30th of June. On the right-hand side, take into account the things we already know for 14.9%, you can read 15.9%, not including, as we always do, the profits that were generated in this first half of the year. So remember that you have EUR 72 million profit with a payout ratio of 50% that will add to the CET1 ratio once we recognize it. Very, very solid position. So in a brief synthesis, I would stop here. There are a couple of slides in the appendix. I won't go through them, but I do encourage you to read them, especially the part on the NPL portfolio, the models, et cetera, I find it interesting. There's a lot of transparency there that we hope you can benefit from. And I'll now start to take your questions. Thank you.

[Operator Instructions] The first question comes from Manuela Meroni of Sanpaolo.

I have 4 questions. The first one is on the outlook. I'm wondering what do you believe are the biggest risk for Banca IFIS in case of a recession? The second question, again, on outlook, if you want. When do you expect to see the effect of the Ukraine/Russia crisis on the Italian SMEs. Third question on your business plan. I'm wondering if you are seeing a significant difference between what you have embedded in your business plan and what you are actually seeing in terms of asset quality, nonperforming loans or cash recovery and volumes in general? And finally, on the New Definition of Default, could you just summarize what are the impacts in terms of asset quality ratios, Common Equity Tier 1 and net income. And I'm wondering if you are going to exit the business towards the national health system.

Manuela, and good afternoon to you. Yes, outlook. Question one and question 2, are face of a same coin probably, right? So I would-- cause Russia, Ukraine will impact the Italian SMEs, that for me expect to see it, right. I think it will very much depend on the severity of the slowdown. From what I see, it is quite certain that a slowdown is underway. Industrial orders, European statistics point in that direction. Retail sales in Germany came out a few days ago, quite bad. It will materialize, right. We are thinking, obviously, of where it will express itself. Now we're looking at a mix of effects. So first of all, I would expect asset quality deterioration, right. Now this, that depends on the type of slowdown that we're observing. There's some binary element in there, which is whether or not Europe will see gas rationing? So assuming we won't see gas rationing, which is quite binary, and I don't want to get into the probabilities. I would expect a moderate slowdown or moderate contraction. And in that case, I would expect a cost of risk for us, which can be accommodated with the cost of risk we have as a budget with maybe some minor use of the buffers we have in place. So the buffers to me look quite comfortable in order to-- with buffers, I mean, provisions that are already made, right, so no additional P&L impact. Another thing that I would expect is, as I mentioned before, on the NPL side, maybe a bit of slowdown in the voluntary plans. Now of course, that can also be managed. I mean you can reply to that with productivity, trying to increase more plans, right, trying to make sure that you benefit from productivity, agent motivation, digitalization. So all the things you can do to offset a slightly more challenging environment. One of the reasons why we confirm the 2022 business plan is that; First of all, we are, as you've seen in the numbers, at a slightly faster run rate than the plan envisaged in the first half of the year. So we're a little bit ahead. Secondly, because barring a terrible scenario, which once again is not my core hypothesis, we can absorb the macro impact I just described with, quite easily, with provisions that were already made, right. So it's going to be cost of risk. It's going to be a bit of slowdown potentially in the NPL collection. And on the other side, I mentioned the mix of effects. Inflation leads to factoring increase, right, so you might have a bit less industrial production or what you might, at the same time, have bigger invoices. The same goes for leasing. Part of what we've seen in June, I think, in terms of record factoring turnover is actually attributable to that. So keep in mind that we also have some offsetting factors on top of the rates, obviously, that will maybe shift our P&L. So overall, we don't want to be in denial about the second half of 2022, which we think will be macro-wise, a lot more challenging than the first half of 2022, but we feel quite confident given these, the characteristics of the bank and what we've already seen in terms of resilience. That is not going to be so detrimental to our numbers. Your third question, business plan in real versus actual. It's actually growing more or less as planned. The divisions are revenue-wise going a bit faster than we thought, and we've absorbed a bit of impact on the pharma side. Obviously, we had a classification effort. We had an impact on the ratios, and I'll get back to it. It was your fourth question. We also have a bit of impact on the revenue side because as we got a lot more selective in buying invoices, a couple of million in the quarter in the last quarter went missing, and we have to compensate it with other things. Overall, I would say, our business plan, you expect some deviation from what you imagine over the course of time, right, as business has developed slightly differently. But considering that we're 6 months into the plan, we don't see any real deviations, right. I think in the third year, we might see, other than at the end of year, has evolved a bit differently than we thought. But for now, the plan is growing actually as we thought, a little bit ahead with some capacity to absorb more challenge in second half of the year. A New Definition of Default. The impact on ratios, I will take you to the slide, right, because we've quantified it's the gray bars on page, going right now 11, right. So in Q2 '22, it's 2% points on the gross NPL ratio and 2% points on the net NPL ratio. How is that the same? Well, it's obvious. There are loans vis-a-vis the public health system. The risk that we don't collect that is very low. The provisions on that type of cost due are very low. The problem is that, technically, we wanted to get out of a discussion about whether they are past dues or not. So it's most technical effect, but there you have it, it's in the numbers. It could have been a lot worse the impact, had we not managed it so aggressively this quarter. Once again, only obstacle, that we really wanted to avoid optically much more negative ratios as it's still there, we're still publishing it and also from a regulatory point of view, it doesn't look so nice. So these 2% points expect us to manage them down, do not expect loan loss provision impact, right. Because of the type of credit we're talking about, it's a technical thing, right. Obviously, when you classify it in past dues, you get capital absorption. And on that, I bring you to Page 13. The aggregate impact of this move is you see it in the bottom part of the page, right, 33% points -- 33 basis points, forgive me, of impact attributable to a portfolio we sold so that will come back, once the SFP process is done. 23 basis points are connected to the 2% that you saw in the ratios, right. And that will, as we manage that downwards, the 23 basis points will also come back over 9, right. Let me just add a little clarification about why is there even a discussion, right, whether this should be passed due or not. It gets very technical. Essentially, the client is paying late. So the number of days before you collect the invoice would lead you to classify it in first due. But it's an invoice. So if there's a commercial dispute at the core of the fact that the client is not paying, that's in us relevant in terms of loan risk. So the regulator allows you not to consider commercial disputes. The question then becomes, what is the commercial dispute? And so the whole point about different interpretations made by different market participants about this issue is where you place yourself in defining commercial disputes. It got so technical that we basically decided that we had enough of it, and we just simplified and took the most prudent regulatory approach. It will cost us some revenues prospectively. Because as you can imagine, when you get more selective in buying and you don't benefit from penalty rates in a time in, the business becomes a bit more poor, a bit less rich. So it was 5% of our overall loan book. It was worth about EUR 12 million revenues. Part of the EUR 12 million, we will substitute it with other things, right. That happens in the course of the business plan you mentioned, right, some things go better than others. So we'll make a little bit of sacrifice on the revenues. But we wanted to get out of this uncertainty and of the discussion with the regulator about this commercial dispute that was getting a bit of a, as we all getting a bit complicated, okay? I hope I answered your question.

Yes. Just a question on the strategy on the business with the National Health System. So are you going to dismiss all the business? Or you just are going just to be more selective?

The second, you mentioned, more selectivity, more aggressive follow-up on payments, no application of penalty rates that leads to a much more constructive behavior from the debtors. If you don't apply penalty rates and work with them on collection, they tend to pay you in time. If you get into a court process and much longer times and you apply penalty rates, you can do wait longer. So it's kind of a virtuous circle or a vicious circle depending on which side you go to, right. So we intend to continue financing them. We intend to do it selectively. And so part of the EUR 12 million, unless we get some very good news on volume, part of the EUR 12 million we expect not to see it because it's connected to the penalty rates. I can't make a firm estimate on how much. In Q2 already, some of that went away. In Q2, we already a couple of million impact, which rightly does the job in other ways. So keeping the business, keeping financing the system slightly less rich business, slightly less controversial business. That's it.

The next question is from Irene Rossetto of KBW.

A couple of questions from my side. The first one on the NPL market, what are you comparing and how do you expect it to evolve in the coming months? And then if you could provide an outlook for NII in the second half of the year.

Okay. The NPL market, well, there's a bit of seasonality always. So the first half of the market was slow as usual. The first half of the year was slow as usual, but we had some very nice purchases also because we did some transactions in the secondary market, which also in terms of pricing conditions, it's a very nice place for us to buy. I expect the second half of this year to see a pickup in transactions, might also see some UTP transactions. There's some words in the market that some portfolios may become available. And the last few weeks have seen quite interesting competition. 2 ways to look at it. One is more competition therefore higher prices. So prices could be slightly on the increase. The second way to look at it maybe as an Italian citizen, right, is to note that international capital appears to be still very interested in investing in Italy and in purchasing loans in this asset class. So we see lots of market participants. Taking a look at portfolios, quite a lively market, nothing particularly drastic in terms of impact from the crisis. Probably if you look at the development of Stage 2 loans in the Italian banking book, not 22, but probably 23, I would see some increase in flow. And therefore, a bit of primary market to become to become a little bit lively or again high. I hope I answered your first question. Okay. Second question. On the net interest income, I see that our Investor Relations, Martino Da Rio can't wait to answer your question, so I'll give him the word in.

The net is income came in at EUR 264 million in the first half 2022. In the second half 2022, please consider that the amount of August for us is quite weak in terms of economic activities and in terms of nonperforming loans coverage in the shutdown of the course. So the net interest income is expected on the 200, let's say, between 220 to 240 something like that, if you want to do a number. Then of course, this number will depend on the pickup in interest rates.

The next question is from Simonetta Chiriotti of Mediobanca.

I have seen very good trends in corporate banking volumes, including factoring, leasing and business and so on. But if I look at revenues in these segments in the second quarter, apart from factoring, there is decrease in leasing in corporate banking that is compensated by the corporate center, the GMS. Could you help us to understand the dynamics of what happened in the second quarter? And in general terms, what is happening on margins?

Yes. So I think it's -- first of all, in terms of commercial activity, as I mentioned, a lot of this was June, right. So you don't see -- we had truly spectacular June and quite modest April, right. So a little bit of that activity hasn't translated into the Q2. Incidentally, July has been very good again, right. So we're at a very solid market. Part is that. Part is a couple of -- a couple of elements that fell in Q1 or in Q2 or fall Q2 or in Q3. It depends just on which side of the date you are. I think we had a very, very positive Q1, right, and quite good Q2. If you look at them, you're going to find that the first half of the year, as we mentioned, it's plus 12%. So a quarter-by-quarter evolution also if I look at some one-offs, right, that came in July, I'm not sure you can really read a trend in there. We looked at it because we also saw the numbers. Once you start adding up the one-offs and the effect of June and how brilliant Q1, was this was slightly unexpected for us as well. I remember it's when we presented it. I wouldn't read too much into it, quarter-by-quarter, goes, think we try to avoid it, obviously, but a bit of quarter-by-quarter volatility, you can expect it to happen. Prices, we don't see a big slump in prices. What's going to happen, typically, I think in the transmission mechanisms inside the bank is that the treasury is going to make the internal funding costs much more expensive for the divisions. We use that as a stimulus to increase prices. We have increased prices in factoring in July. We are increasing prices on new business volumes, but that feeds into the book only gradually. What you may actually see over the next quarters, if you take the divisional point of view, right, is that if we make funds, I'm looking at the head of the treasury right now, if we make funds more expensive for the divisions in order for them to increase prices, actually, what you're going to see technically is a bit of transfer from the commercial side to the corporate center side, right, of value. That's just a healthy way to run a bank. It looks like you've lesser quality revenues. And in fact, it's just the same, but you're making your funds more expensive. So it firmly make a prediction over the next quarters and semesters, I would expect and hope that the transfer pricing for the divisions becomes more expensive therefore, that they are encouraged to increase pricing. In the meantime, the treasury will look richer. You will have the impression that it's only corporate center, but in reality, the bank is just managing this pace in a sound way... Okay. So if I have to make a prediction on this mix stream, I would expect this to continue. But it's a gifting in itself. It makes it a bit harder for you to read the P&L, right, but on the other side, it is the right thing to do, okay? So...

The next question is from Andrea Lisi of Equita.

2 quick questions. The first one is on capital, in particular, on the trajectory you expect on your CET1 for the year? And particularly, if there are some headwinds or tailwinds that are not served in the first half? And if you can provide a sensitivity of the CET1 to the increase in spread. The second is about your funding strategy, in particular, you have to show with the call in October if you plan to exercise it.

Yes. Thank you, Andrea. So CET1 evolution... So Q3, we have a starting point of figuratively, right? 15.9%, if you will allow me to add back, right, the 2 elements that we discussed. Add to that, a bit of business growth add to that, I don't know, a bit of bad luck, maybe, who knows, right, we expect some margin. 15.5% something in Q3, more than 15 million in Q4, roughly would be my feeling. But I'm really giving you a gross ceiling, right. Obviously, it will depend on -- it will depend a bit on risk, but also depend big on business volume, right? Allow me to say, when we presented the business plan, we've always said that this quite high capital ratio was meant to be a buffer to insulate our shareholders from volatility in payout ratio and to sleep well at night, okay? Because we are in a credit business. It's not private banking. So I think it's opportune for us to be well capitalized. As it oscillates between 15 and 16, honestly, we don't lose much sleep over it. right? So it could go down a bit, it could go up a bit. If we're in that range, I don't want to sound superficial, but it's really not something that we manage for, okay? Not something that we then take specific managerial action to get 10 basis points extra or 10 basis points less. That's the benefit of having had this positive impact of the holding company transaction that you may remember, right at the end of last year. Sensitivity to the bonds portfolio, let me just look that up. There I go. There it is. Sorry, I didn't have back up, I was just finding it. So we'll give you a precise number, okay? So every 100 basis points of increase in the BTP-bund spread will give you 11 to 19 basis points of CET1 impact. 11 without the filter, right? You will remember that 40% of the effect of the is not considered right until December 31. I mean, without obviously considering -- so without considering the 40%, okay, 19 full impact, okay? I think that was your question, right, Andrea? Yes.

And about the funding strategy.

Yes, sure. Yes. So the Tier 2 -- well, obviously, the first half of 2022 has been a very challenging period for the financial markets, right? So I believe technically, it was in development for a midsized Italian banks Tier 2, right? Ideally, what we want to do is you want to issue you new Tier 2 as you request permission for calling the old one. If we can't issue a new part before the notice date, which is September 17, right, then this becomes fundamentally a regulatory issue, okay, and slightly out of our hands. Let me say, therefore, that we will try to issue within reasonable limits. This should reasonable price limits. If this does not materialize, then we are in a regulatory world, and I can't speak for them. In any case, if we're not able to exercise that call, we will shortly offer for market-friendly alternative solutions. It is about as much as I can legally say...

[Operator Instructions] The next question comes from [ Andreas Santarelli of Homer Investments ].

I wanted to know if you plan to redeem the subordinated bond in October. If so, should the redemption sectorally be proceeded by the issue of a new bond. If redemption were to be, do you think you would obtain patriation from the Bank of Italy...

Yes, Andreas, I think I just answered it on Andrea Lisi question, right? And as you understand, there are limitations to what we can say, considering that they are listed instruments, right? So I walk through the logic again. Normally, you would want to issue a new Tier2 to before calling the old one because it makes a regulatory process very straightforward. We'll try to issue, if we issue, then it shouldn't be a regulatory issue to call the other one, right? Well, that depends on market conditions. So I can't give you anything more firm than what I just said. If the market conditions don't allow the new issue, right, before September 17, which is the renouncing date, okay? Then it becomes a regulatory thing. And there, I need to speak carefully because I can't talk for them, right? In case we would not be able to exercise that call therefore in September 17, the notice in October, the actual transaction, then very soon after I expect us to do something else in a market-friendly way to give investors the opportunity to decide on this bond, okay?

The next question is from [ Jacob Lichwa of GF ].

Again, from the credit side, I appreciate you covered already the point about Tier2. But in terms of the stock, is there a value for you to hold more than the regulatory bucket, if you will, say, 3% or 4% in Tier2 debt? And also in terms of senior, you have a maturity next year. So early next year, what are you thinking there with respect to that, please?

Yes. Thank you. So first of all, we have out there currently EUR 450 million Tier2 -- EUR 400 million of Tier2, sorry. That constitutes roughly 4% points of total capital ratio, okay? The bond was issued when the CET1 ratio of the bank was 11-point-something. So in this scenario, EUR 400 million could make sense, right? Today, we are at another level that you saw in the presentation. So EUR 400 million may look a bit high. So not necessarily with a new bond issue amount to EUR 400 million. We could look at something a bit small. In answer to your question. With respect to the senior part, we have a funding plan in the 2 year plan. Where we want to increase to on aggregate, EUR 2.5 billion issues of total debt, right, to the public market. We believe there is a value in being a relatively frequent issuer. We like to have both debt and equity investors. So with a reasonable price in a reasonable price environment, we would try to execute on that plan. If it becomes economically to the sense of pages, there's a whole bouquet of alternatives that the Capital Markets team is looking at. Starting from retail, which is still quite cheap, right, and to many other instruments. Rating agencies also like us to have quite an amount of publicly traded senior and subordinated debt out there. So it's something that we would like to preserve as a strategy. Hope I answered your question, Jacob.

Mr. Geertman, there are no questions registered at this time, sir.

Well, thank you, everybody, very much for your attention. I know this was a very busy afternoon with all the banks presenting as it's almost 5. So I think we can let you all free. I wish everybody a nice holiday if you have one. And once again, thank you for being with us on this August 4. We appreciate it. I'll talk to you all in 3 months. Thank you.

The conference is now over, and you may disconnect your telephone.