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 Fourth Quarter 2025 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Frederik Geertman, CEO of Banca IFIS. Please go ahead, sir.

Thank you, Madam, and good afternoon, everybody. Welcome to our full year 2025 results call. We're very pleased to update the market on our quite robust financial performance and on the progress that we've made in integrating illimity. I'm joined today in our call by Roberto Ferrari, our CFO; by Fabio Lanza, our COO; and Martino Da Rio, the Investor Relations representative, and they will illustrate probably some specific aspects later on in the presentation. As you will have seen on the presentation, we will both give you a consolidated view that includes a very specific explanation of the extraordinary items connected to the transaction and a view on Banca IFIS stand-alone so that you have full transparency on its evolution. I will take you straight to Page 4, where we give the executive summary of the results. So in 2025, the group presents a net income of EUR 328 million, underscoring the Brazilian profitability of Banca IFIS and our first illimity consolidation, which entails, as you will know, both badwill and nonrecurring expenditures. This was affirmed by successfully achieving the 2025 stand-alone guidance that we gave of roughly EUR 160 million, and it also includes the fourth quarter 2025 loss due to the integration costs that were booked as expected and on the due diligence of illimity's assets and the write-offs of their -- on their loan book. Capital CET1 ratio is solid at 13.7%. That includes the net income, but after deducting the 2025 dividends that the Board is proposing and also includes the noncore stake in Hype disposal that contributes roughly 55 basis points. In January, we successfully completed a EUR 400 million Tier 2 bond issuance. We refinanced the outstanding Tier 2. We did that much ahead of time. We wrote a 4.55% coupon, and I'm pleased to say it achieved the tightest spread on a Tier 2 in the bank's 40-year history, also much lower than the bonds that we will replace. The Board proposes EUR 129 million total dividends in 2025. That's EUR 2.12 dividend per share. Of these, EUR 73 million were paid on November 26 last year, and EUR 56 million will be paid on May 20, 2026. You will note that the dividend per share has been kept constant. And therefore, given that the total number of shares has increased with the acquisition of illimity, we are, in fact, increasing the dividend that the bank is able to pay out in this moment. Page 5, update on illimity. In the second half of the year, we conducted, as you know, a comprehensive analysis of the business and the loan portfolio and the investment portfolio alongside the ECB requested due diligence, which was done by an external auditor. So both the external auditor and our internal teams have gone through the balance sheet. This has revealed EUR 75 million of adjustments. Of this EUR 20 million were already booked in the 9 months results, so in Q3. The remaining EUR 55 million are recognized in the fourth quarter, and that's driven by Banca IFIS' more conservative assessments on those assets and by the independent third party that did the due diligence. We confirm the EUR 75 million annual pretax cost and revenue synergies. And we can do that quite solidly, in particular, because we are -- have made some significant headway in restructuring illimity's IT partnerships. This will deliver a lot of simplification, but also significantly reduce legal risks, operating costs and complexity and therefore, secures the 2027 synergies target, which we can now affirm is solid. The strategic review of illimity's noncore assets is underway. As mentioned, we take a look at strategic fit. So should the bank be in this business, long-term value, capital expenditures that may be necessary or FTEs that may be required to keep them up and running. And on the basis of all these elements, we evaluate the items that can go for sale. That is ongoing, and we can report that the most significant one, the first one, the stake in Hype was executed the sale for EUR 85 million. So that is now done. Last but not least, we're very pleased to announce the nomination of Raffaele Zingone, Group Chief Commercial Officer as CEO of illimity. Now that we have completed the due diligence and take control phase, if you will, I will refocus on the group role and Raffaele will take the role in illimity and drive its commercial relaunch, which we will update the market on in the next quarters. Today, we will give you information on these financials and these milestones, but we want to briefly take a moment to illustrate what the overall strategic goal is here with this acquisition. So on Page 6, we show you how we represent the project on which we are engaged, which is long-term value creation, leveraging on the combined group excellences. And here, you can see it represented quite simply, and we think a rather compelling vision of the complementary specialties and capabilities becomes quite apparent. Starting on the left, what do we get from illimity in terms of retail, a smart digital retail banking platform that we consider state-of-the-art. This platform will become the group's retail engine. So we are migrating our existing retail customers in Banca IFIS also for term deposits onto this platform. And we are strengthening that with Banca IFIS' credit know-how. And I refer to -- you can see them listed in purple at the lower part. Consumer finance, you will recall, we have a performing consumer finance business in Capitalfin with salary loans, actually extendable to personal finance. We have an existing high-tech rental business that caters to private individuals. So you can rent, for instance, a phone or a PC financed by Banca IFIS. And in that context, we have developed real-time credit scoring for retail customers that is ongoing today. And of course, we have automotive leasing, which we do for individuals. So there's a lot of Banca IFIS retail credit know-how that we will place into the personal digital retail banking space that we have now significantly strengthened with what we have acquired. This is going to, first of all, generate revenue streams, of course, leveraging on these capabilities, but will also strengthen our capability to generate cheaper funding connected to transactional current account relationships. Going to the right, the Banca IFIS you already know, but strengthened by illimity's profitable SME and corporate specializations. Banca IFIS has an unparalleled SME customer base and relationship franchise with very good reputation for service, for speed, that's the basis of our business. We will maintain leadership in small ticket unsecured NPLs. And so you will see a wider, broader SME offer, leveraging on the existing SME franchise, but making available the quality of illimity specializations and of their team that we are very pleased to add to our population. Then finally, third and maybe most importantly, Fürstenberg Bank, that is the project to create the more sophisticated part and commission-generating part of service to the real economy. So we expect a multiyear development enabled by this dedicated branch heritage. In there, we place private banking and wealth management based on a superior digital platform that's called Fürstenberg SIM. It was used to be called Euclidea. It's been rebranded. We have private capital activities with Fürstenberg SGR, which was the illimity SGR, right, so the asset management company, leveraging on also Banca IFIS' equity investments and private debt expertise. And finally, SME investment banking, leveraging on this unparalleled relationship franchise. And this part is going to be low capital absorption, commission generating and the highest, if you will, part of sophistication of the offer of our group. So that we wanted to start sharing with the market. Until now, we've been very much focused on specific project milestones, financials and the vision of what we are doing here and the sense of this acquisition and the transformational long-term potential of what's happening here is something that we will focus on, hence forward also in the context of the commercial relaunch of illimity. Page 7, just a list of the things that were completed and what remains to do. So on the left, due diligence and strategy. Due diligence was done. You've seen the numbers, subsidiary strategy, including the rebranding and placing the various subsidiaries in their appropriate context is done. The commercial offer for commercial and corporate banking that I just described in the integration plan for all the segments is done. NPL portfolio analysis of illimity's business is done. We have signed on HR the agreement with the labor unions for the early retirement plan. So in the next months, we will be collecting people adhering to this opportunity. And both the, how should I say, nonextraordinary HR headcount dynamic and the presence of this fund make it possible for us to state with certainty that also on the HR part, the synergies targets will be met. And therefore, both on IT and HR and on other expenses, we are now looking at a solid confirmation of the synergies that were envisaged when we launched the transaction. IT strategy already mentioned, we'll go deeper into it in a second. We completed the IT target architecture, including the renegotiation of the core banking system contract, which will accommodate all of the group businesses in a single core banking engine with obvious efficiency benefits and the restructuring of illimity's IT partnerships. You remember there were 2. They were partly overlapping. There were some complications in this setup, and that was addressed in the last few months and will be detailed by Fabio Lanza in a second. What remains to be done on the right-hand side of the slide is completion of the target operating model and structure and of course, the collections of the adhesions to the solidarity fund. We will finalize the agreement. It's one of the 2 IT partnerships I mentioned with Fibonacci altermAInd that are controlled by Apax. And of course, what remains to be done is the actual IT migration merger upon the merger of the entities, which will happen in Q4. I would like to briefly hand over to our COO now for Page 8. He can illustrate the work that was done on the IT front and why we think it is significant in this context for you to hear about it. Thanks, Fabio.

Thanks, Frederik. Good afternoon, everybody. As known, IT costs are one of the main OpEx costs in the illimity balance sheet. This is the reason why we immediately started immediately after the merger to take management and control of some partnerships that illimity signed in the recent past. According, as said by Fred, with the long-term value creation business, we are in mind for the next future of the integrated group. On that reason, thanks to the new group dimension and also with the relations that in Banca IFIS had in the past and also in the current year with these 2 partners, we immediately started this collaboration discussion with partner having in mind our 2 main pillars. One from the one hand are the synergies that we can confirm now and the second, the innovation focus that a group like our group has to maintain in the future. On that respect, we have signed a few days ago a memorandum of understanding with the Finomia Group, ex Fibonacci, of course, subject to negotiation and execution of definitive agreements of the single contracts. But in that respect, we could confirm the long-term relation with Finomia Group for the IT banking services directly managed by Finomia. And for the other hand, we redefined the joint venture in altermAInd to focus on generative AI products for the banks, maintaining the long-term relations in this company.

Thank you, Fabio. I will go on to Page 9 now, update on the noncore assets. As mentioned, we did a review with discipline, and we confirm that we will do some disposals throughout 2026 on the basis of the speed at which these discussions are going and on the basis of market conditions. Hype has been executed, already mentioned it. So you will see that we have EUR 4 million capital gain and 55 basis points CET1 ratio, which we can now add pro forma to the 2025 numbers. So you'll see that where we end up formally on Q4 and where we end up having these benefits included. Further evaluations are ongoing. And in addition, we'd like to add that as we looked at the book of illimity, we also noticed that the duration of illimity's portfolio has roughly 80% of the customer loan book expiring in a time frame that is shorter than 4 years. So as we speak, there is a natural derisking ongoing and further derisking will be executed in 2026, both in terms of organizational complexity of the group, number of legal entities, a variety of businesses that are there and in terms of risk in the credit and investments portfolio. Page 10. We wanted to give you some clarity on what happens in Q4, both in the 2 groups, so consolidated IFIS and illimity separate and what happens then full year 2025 to give you maximum clarity. I will only comment the column that is full year 2025 consolidated, okay? And then we will give you some detail on the next page of the extraordinary nonrecurring items that contribute positively. So we have total revenues of EUR 680 million. We have operating costs of EUR 499 million, almost EUR 500 million. And we have EUR 328 million net profit. That's obviously a very large number. It's atypical, and it contributes to replenishing the capital that is required for the balance sheet that has obviously grown with the illimity acquisition. So I will focus briefly on the EUR 201.4 million. So how does that arise? Right? Because you had questions on the badwill in the last call and on the extraordinary items. So let us take you briefly through what the EUR 201.4 million extraordinary items are. You'll find that on Page 11. So you can see that at the acquisition, we started with a badwill of EUR 448 million. On that, we started due diligence and write-off of goodwill on participations that we found not justifiable and therefore, we needed to correct. We wrote off EUR 48 million in Q3. You already saw that. We wrote off EUR 90 million in Q4. It's split, as you see, between participations, due diligence and other adjustments. That leads us to a definitive badwill at the end of Q4 of EUR 310 million. From that, you have to detract if you want to have the final nonrecurring items, you have to detract, of course, the integration and transaction costs that were EUR 80 million in Q4 and EUR 29 million already booked in Q3. You can see it in the little box there. So at the end of the day, we have positive nonrecurring items of EUR 201 million, stemming from the difference of EUR 448 million badwill as we initiated and the EUR 247 million overall restructuring costs, including the real restructuring costs and including also all the write-downs and the corrections on the balance sheet. The EUR 109 million purple box in the second half of 2025 is what you may recall, similar to the EUR 110 million that we announced the day of the offer. It's remarkable that we would be so precise. I guess we estimated it well. The composition is, I will confess, slightly different than we thought, but the number turned out to be in line with expectations. Page 12, funding. Funding is a very relevant item. The bank benefited to a degree from the increase in rates and started obviously paying a bit back, right, when the rates went lower. And that happens because on the asset side, the loans reprice instantly, the variable rate loans, whereas on the liability side, a lot of the funding conditions are persistent. So you need to wait until they expire before you substitute them. Now we're taking a look at the substitutions that therefore, represent an opportunity. First of all, we refinanced -- I'm on the right-hand side of the slide of Page 12. We refinanced illimity's EUR 300 million bond that was at 6.6% and that expired in December. We refinanced it with a 3.6% senior bonds that we had issued a few months before. And in addition, we issued a 10-year Tier 2 bond with a 4.5% coupon, which will replace the similar instruments that will expire in the next months. So we expect to progressively refinance the maturities that are coming up, obviously, and the slide gives you transparency of when they're coming up. In the first half of the year, you can see we have EUR 2.3 billion retail deposits maturing, right? And the breakdown is in the chart on the left-hand side of the slide. I draw your attention to the cost, right? If we're talking about the bond, for instance, that expires in Q2, that pays 6.15%. If you look at the retail deposits that expire in the first quarter, you're looking at 3.58%. Current refinancing conditions are fortunately a lot better, and that will lead to a further decrease of our cost of funding that the CFO will illustrate briefly. Page 13, capital. So you have the moves on capital that you would expect given the balance sheet operations that we did. In Q3, we posted core Tier 1, I'll focus on that for a second of 14.3%. The various adjustments, write-downs, goodwill decreases, risk-weighted assets decreases, et cetera, that happened between Q3 and Q4 lead us to post a formal CET1 ratio at December 31 of 13%, knowing, however, that we have 70 basis points already executed, and therefore, we can compute it pro forma through the sale of a specific -- some specific large NPLs that were in illimity's book that were under calendar provisioning and that were very costly in terms of capital absorption and the sale of the Hype shareholding. So all in all, 13.7%, very comfortable compared to the SREP requirement and around 14%, which remains our long-term guidance, if you will, around which, however, you should expect us to have some oscillations depending on the time of year, on the loan book, on the speed at which we get rid of noncore assets. Page 14, asset quality. Gross NPE ratio of 5.2% net NPE ratio, 3.1%. You can see the coverage levels that we have on those items develop over time, a bit of a mix effect. The coverage on bad loans is increasing, coverage on past dues slightly decreasing. Overall, we think a good and comfortable coverage also including illimity. You see some increase in these ratios, that is connected, as you could expect, right, to the asset quality review that was done. So we had some classifications of loans and also due to the b-ilty book, you will recall that illimity had entered a long-term financing business with third-party distribution with government guarantees. So 80% of that book has government guarantees. That is due to its third-party distribution and due to the nature of that book, that is today generating some flows to nonperforming -- we're monitoring it. There are today no issues with respect to the government guarantees and the way in which illimity worked on this type of business has been discontinued as soon as we took control and as soon as was formally possible. So that's the evolution of the NPE ratios. We can expect some further moderate increase, I would say, in the coming quarters around those ratios. But as said, the majority of what we're seeing is government guaranteed. So you're looking at transitory phenomena. After a few months, you collect the guarantee and the problem basically goes away. Page 15, net income guidance, always important. So 2026 is our integration year. You heard me talk a lot about project agenda, if you will, about divestments, about IT renegotiation, restructuring. This is the year in which we work for the synergies that will materialize in 2027. Our management action is obviously very much focused also on the funding. So we are focused on refinancing our bonds and our customer deposits, reviewing the whole IT setup, as was already described. We need to finalize those contracts. We now have firm commitments, but we need to finalize the contractual part, which has its complexity, implementing the solidarity fund, integrating the commercial -- integrated commercial and operational functions and the divestments and especially making sure we have a good positive mood in terms of commercial revamping of our activities, especially in illimity, which now has funding capital firm guidance in the person of Raffaele Zingone, which we are sure are going to show their value and their competence in the coming months and quarters to significantly add to our book and to our P&L. Point number four, we expect some volatility, as I mentioned in the quarterly results, some of these positive and negative items that we expect to see, they will materialize in a certain quarter, and that's not always smooth, right? So you can make a divestment that can give you a book gain when it arrives to the right one. There's an expectation of deferred tax assets that will materialize at some point, they will materialize probably altogether. So expect us to keep you updated on the progress, expect some volatility quarter-to-quarter in terms of derisking. We will definitely remain opportunistic in simplifying the group as soon as we have a chance. And with all this, we expect a net income target in the range of EUR 170 million to EUR 190 million, of course, assuming no major macroeconomic or geopolitical events, allowing for potential derisking of disposal opportunities that may arise. So the group increases its profit expectations in the integration year and expect, of course, as the full benefit of the synergies materialize to significantly increase its profit in 2027 and really start leveraging the vision that we described. I will briefly take you through slide of Banca IFIS stand-alone to Page 17. Quarterly revenues of Banca IFIS stand-alone are up 6% year-on-year, healthy performance, both of commercial and corporate banking of NPL and EUR 4 million contribution from noncore and GNS. So quite a stable and healthy contribution of the division, which were -- it looks like business as usual in reality to deliver these numbers, a lot of managerial actions and projects and initiatives have been put in place. Page 18. Commercial activity. So factoring turnover slightly down Q-on-Q, but slightly in line with the market, nothing to mention. It's almost a rounding error. We maintain discipline in terms of pricing. The spread is 3.5% on top of the base rate. Remember, it's a business which has a very short duration. So it remains a very attractive type of activity with a very good risk profile and a very good liquidity profile. Leasing, the market had a big growth. We did not on equipment and technology. That's explainable due to the initiative, so the European resilience fund that generates a lot of leasing volume on large tickets. We do not typically participate in that market. We maintain focus on small tickets that give us margins. So we have our own dynamic there. And on automotive, we had a very nice growth right, of 7% year-on-year, still maintain a focus on premium brands and on profitability. Page 19, NPLs, slide you become accustomed to. In Q4, a very healthy EUR 103 million cash collection. The division remains capable to generate roughly EUR 380 million to EUR 400 million cash -- actual cash collections per year. Cash recovery is consistently, as you see in the appendix, above the model of recoveries. Revenues, EUR 88 million, so progress compared to Q4 '24, also on the basis of some transactions we did of portfolio sales where really at the end of the life cycle of the NPLs portfolio which have negligible book value, but some -- obviously some gross book value are being sold at a modest profit. So we keep doing housekeeping and we try to keep the shop clean and not have significant amounts of volume there that are not economically relevant. Page 20, funding. You see that the base rate is by now stable. It's in the dotted block, 2% since the second quarter of 2025. You can see that the decrease in gross interest income is down to roughly 20 basis points and that by now, the spread has stopped contracting. So we have a stable 1.6% overall spread between overall cost of funding and overall gross interest income. Given the maturities that we showed you and given the gap between current costs and prospective costs, we expect this to start to reopen a bit in the coming quarters and contribute to that vision of the guidance that I gave and contribute also in the year after as further volumes mature in the year after to the long-term profitability of our group. Page 21, costs, not a lot to say other than that compared to a year ago, we're slightly down. So no inflation apparently was -- or inflation was apparently offset. We also benefit from a one-off there. We disposed a portfolio of late collection claims that we had connected to the pharma business. it was sold at a EUR 9 million book profit that translates into negative cost. So you see it here. On the low part of the slide, you see the very large swings in the nonrecurring items. I wouldn't comment them in this context. We saw them already in the previous pages. Page 22, it's become an evergreen. This slide, you always ask us, do we see a deterioration? Do we see issues in the economy. We have this SME business, which obviously is very sensitive to how the economy is doing. The most sensitive gauge in my opinion, are the payment days and factoring. You can see that they're actually going down. Companies are paying earlier, indicating no liquidity stress. The Stage 2 loans as a part of the portfolio are slightly down. Rating migrations up and down are stable throughout this quarter. So we are clearly not in the presence of a wide deterioration of the probability of the rating migration in the credit book. [indiscernible] will pickup in probability of default slightly exaggerated, but you can see it goes from 2.8 to 3.1. What you see there is the MCC lending probability of default slightly increasing. I won't comment Page 23. It's the details of the quarter, we normally skip it, and I would hand over to your questions in case you have additional clarifications needed together with the colleagues that are here. Thank you for your attention this quarter.

[Operator Instructions] The first question is from Irene Rossetto of Banca Akros.

A couple of questions from my side. First of all, can you provide guidance for 2026 in terms of revenues, loan loss provisions and operating costs? And then you gave a preliminary indication of EUR 75 million revenues and cost synergies, which you reconfirmed today. Do you see upside in cost synergies?

Yes. Thank you very much. So on guidance, as mentioned, this is a transition year. So we expect the synergies mostly arriving in 2027. But on the other hand, we also have some cost of funding benefit. Keep in mind that the group perimeter is not entirely stable, yes. So obviously, as we look at potential divestments, there will be some changes potentially also in perimeter. So as I mentioned, the net income guidance is around EUR 170 million to EUR 190 million. It's kind of hard to really break it down by line by line in the month of February, but I'll give you some idea of the various items. So we expect some impact -- positive impact from the revamping of the limited commercial activity and from our own growth, from our business growth. So mostly in the second half of the year, we will see a contribution given how that works with credit, right? You first need to have it in the book and then gradually will start to deliver. We expect it to be visible mostly in the second half of 2026, and we expect funding to the benefits to be visible already in the first quarter. Loan loss provisions are obviously very much dependent on macro situation. We are continuing to derisk. I mentioned we sold a significant nonperforming loan on [indiscernible] book a few weeks ago. We expect there that some volatility may exist in terms of provisions as we gain further understanding in terms of the performance of the book. And costs, yes, in '26, we still have very significant cost. So what we're doing is before the synergies materialize is we try to have beyond the projects that are necessary for both the integration and our long-term success we have an extremely disciplined approach to all the other operating costs. So we work on the integration, we work on our future, and we make sure that every other paying is really considered. And therefore, some benefits, some contribution to that income guidance that we gave will also come from a very positive approach to costs that are not connected to those priorities in the coming year. You asked me about synergies. Yes, we think a relevant piece of news in the call today is that we can specifically confirm it. So you will recall now with a lot more backup than with the estimate that we gave at the launch of the offer. And you will recall, we had EUR 50 million cost synergies, which were general expenses, so other administrative expenses. They were IT and they were personnel. And on IT, we spoke a lot, and we have to finalize these contracts, but we have -- we think we have solid agreements in place with partners that have seen the value of a long-term relationship with us and therefore, have been able to restructure the agreement. Other administrative costs, there's definitely potential in, for instance, scale with suppliers, for instance, economies of scope also and simplification of the group. For instance, there's a lot of securitization structures of which we don't really see the use, right? So we may unwind a couple of those and save some money on the cost side and just have the assets on the book. And finally, personnel. The dynamic of the FTE numbers in the group is encouraging. Obviously, when we need specific skills, we are on the market. But overall, it's going in the right direction with very reasonable assumptions on the HR fund, the early retirement fund with very reasonable assumptions, we expect to hit the HR synergies as well. So on the back of that, the revenue synergies are, of course, they weren't so high to begin with in terms of estimates. So we think it is a reasonable target, and we are certainly going to try to meet that. So on the basis of that, we can solidly say EUR 75 million is confirmed. I would wait maybe second half of the year before increasing that target will depend on how we're doing on revenues. It also will depend on how the actual full-time equivalent dynamic is in the 2 banks. If there is a possibility to increase it a bit and communicate to you that maybe we've been even more effective, then we will be pleased to do it. At this point, it slightly premature, so I wouldn't yet increase it for you. But we'll come back on it maybe Q2, Q3 and see how it's going. I hope I answered your question, Irene.

The next question is from Manuela Meroni of Intesa Sanpaolo.

The first one is on illimity. I'm wondering which businesses from illimity do you plan to retain or integrate? The second question is on the IT partnerships. What synergies do you anticipate from the renegotiation of illimity's IT partnerships? Again, on the IT services, could you please clarify which IT services will be performed by the new co and which will be performed by altermAInd? And could you please provide also an explanation of the reasoning behind the decision to spin off certain activities? And lastly, on engineering, on the partnership with engineering, what are the current status of the partnership? And what are the plans on that?

Sorry, Manuela, I was speaking with a microphone's off. I will take the first one on the noncore and the core assets, and I will hand over to the COO for a little bit more of color on the IT part that you requested. So you can see on the slide that we presented with the long-term view, right, what we will certainly fully retain and integrate. So the core retail banking platform, SME specialty finance businesses, factoring, medium-term guaranteed loans, structured finance, turnaround financing, SME investment banking, [ Euclidea ] SGR, obviously, right? So the asset management company, now rebranded Fürstenberg SGR. So all these things that are clearly synergic with us. Other assets are under evaluation. So these are conversations that are ongoing and evaluations that are ongoing. I would rather comment on them when we have some firm agreements in place as we've always done, right? So you can, I think, deduct from the pieces that we are most interested in what the pieces are that we think should be evaluated. On the IT part, I will hand over to Fabio, who can address your questions.

Thank you, Frederik. Thank you, Manuela, for the questions. I think that it is important to underline two things. The first part is that we need as our new group and again, especially taking consideration the long-term value creation business we would like to develop that we need a very strong technological effort and technological development. For the other part, we cannot move too far from the usual IFIS taking cost control actions. In that respect, this renegotiation with the interest in that respect with Fibonacci is exactly in this line. So to maintain a strong relationship with a good supplier, good industrial partner for the long run, but vis-a-vis a reduction in the yearly cost and putting this agreement to serve not only illimity but also the new group [indiscernible] together. This is the reason why we could confirm that with this renegotiation that will explain the full power in terms of synergies in 2027, we could reach the cost synergies that we declare taking consideration that IT cost investments are more than 50% of the synergies. So in that respect, this is because we prioritize this kind of activity. The other point, as said, one hand is cost efficiency. The second is maintaining our innovation approach that you saw in this respect, the long-term relation with [indiscernible] Fibonacci altermAInd will allow us to invest together in some value-added generative AI tools for banking system and to put on the table the full power of the investments done in the last [indiscernible]. I feel that you also asked me something about engineering. Engineering we agreed with Engineering to review the partnership Engineering is a very good partner also for Banca IFIS and we maintain the relation with them. And this is something that is already in place in 2026. The last point I have to say that we have already expensed the cost of this action that the synergy will come in 2027, but in 2026, we will not see any cost for this kind of agreement more than what is the cost of the service. I hope I've answered your question.

The next question is from Lorenzo Giacometti of Intermonte.

I have a few questions. So the first one is if you can give us some more color about the -- basically the change in asset quality ratios. I understand they're driven by b-ilty. But yes, I mean, if you can give us some more color, it will be helpful. The second one is on the impact that you expect from the new budget laws in terms of banking taxes. The third one is on capital. And so what level of CET1 ratio do you expect at 2026 year-end? And the fourth one and the last one is on dividends. So you basically confirmed -- you basically proposed 2025 dividend in line with 2024 in terms of DPS. So looking at 2026, shall we stick to your dividend policy? Or shall we expect a similar kind of dividend? If you can give us some color, it will be very helpful.

Yes. Thanks, Lorenzo. So very clear. If you're okay with it, I would take the first and the last one. So asset quality and the dividends, and I will hand over to the CFO, Roberto Ferrari, for your question on tax and on capital, he can give you a bit more detail on that. So yes, in terms of asset quality, there's not a lot more to say actually than what we saw. We see an increase. We expect that the ratios to further increase a bit in the next month as a long-term credit portfolio that was put in place with MCC guarantees matures. It's very fragmented. So it's -- you can model it. As mentioned, the economic impact is not going to be astronomical. And as I mentioned, we don't have concerns about until now, but we've looked at it quite carefully. We don't have concerns about the validity of the guarantees, which is always relevant, obviously, in those businesses. So that's a dynamic that's ongoing. And we will take a look at that portfolio over time and also maybe see if we can do something managerial with it. But in the meantime, it's there, and we are managing it with care and with attention, and it will generate probably some further flows. In terms of other contribution, yes, when you do a due diligence on the balance sheet and especially when you have various functions involved because we mentioned the due diligence done by a third party. But in addition to that, we had our audit team going through certain types of assets. We had our risk teams, both lending and the Chief Risk Officer, going through certain types of assets. You can imagine that when you do an exercise like that, you're going to maybe have some classification or something that maybe that was performing, you're going to place it maybe in Stage 2 or maybe even in nonperforming. So there was a bit of a contribution in the quarter also of this careful examination. Not huge in terms of reclassification. It was mostly adjusting the value of assets, but we also had some reclassification. And that's the dynamic. So definitely, the progressive derisking of certain parts of the illimity's portfolio is something that's going to keep us busy over the next quarters. You asked about dividends. We gave a guidance of net profit, EUR 170 million to EUR 190 million. I would definitely confirm that for us, the dividends are a cornerstone of our equity story. So we aim to sustain an attractive policy supporting our growth naturally and trying to hover around 14% CET1 ratio, right? Then the actual final dividends in 2026 will hinge on the -- obviously, on the results and also on broader macro conditions such as rates, geopolitical stability and everything. I would for now reconfirm broadly the profit guidance and the stability of our dividend policy, which aims to be attractive and maintain just that amount of capital, which is healthy for our future growth and distribute what is not necessary in order to secure that. For your questions on tax and capital, I will hand over to Roberto.

Thank you, Frederik. Actually, we do expect an impact that should stay between EUR 12 million and EUR 15 million, mainly due to Europe and due to partial deduction of negative interest. On the question number 3 on capital, clearly, we do expect our CET1 ratio to stay close to 14%. I would say to stay between 13.7%, where we are now and 14%, also considering the fact that normally we have a seasonality, and we have our loans growing at the end of the year.

The next question is from Giuseppe Grimaldi of BNP Paribas.

The first one is around the NII trajectory that you have assumed in your guidance. If you could give us a bit of a sense of what would you expect for the year and the cost of funding assumption that you have used? The second question relates to your 2027 net income guidance of roughly EUR 250 million with the synergies. Is it all confirmed based on what you see right now? And the third question relates to a bit of volume development if you are seeing a bit of lending growth into 2026?

Thank you very much. Yes. Net interest income trajectory. We mentioned we did bond issuance, which went rather nicely. Now as the bonds that are more expensive expire, you get significant jumps, right, in terms of advantage, right? And we also have the EUR 2.7 billion deposits maturing in the first 2 quarters. So cost of funding in Q4 was already down to 3.1%. For 2026, we target an average of 3%. I'm looking at the CFO, actually, I think he wants to be below 3%, yes, not 3%. If you're looking at quantification of that pencil in roughly EUR 40 million of benefit, EUR 40 million to EUR 50 million of funding benefit on the net interest income side coming from the funding. Then we hope to have a bit of volume effect as well. Obviously, with new business and with a bit of the revenue synergies coming in and trying to do as much as we can also on the existing businesses. So on the basis of that, it's actually the thing that's mostly underpinning the net income guidance that we gave you, right, these dynamics. You asked me about 2027. Yes. So if today, we confirm the synergies and the things are going broadly as we thought, then we also confirm the EUR 250 million roughly that we gave at the outset of the transaction, right, on January 8, 2025, is when we gave that target. It was a broad target, an aspirational target, but we see it now coming into view. So we confirm it. Lots of moving parts there. So there will be some businesses that are contributing more than we thought at the time. There are some businesses that are probably going to contribute less a bit at that time. We're obviously quite far out, but -- being able today to confirm the synergies means that we can reconfirm that target for 2027 as well. Volume development, it's not particularly big in the market the way we see it, although we do think that we might progressively benefit from the fact that certain players are not really functionally present on the market anymore because they run into problems. And so maybe the offer of the specialized lenders, right, has kind of reduced. And certain business models, which were exclusively geared towards institutional funding and public guarantees, right, they seem to have -- well, failed basically in terms of their long-term viability, right, in the last couple of years. So we wouldn't see in the presence of this GDP development, an overall huge growth in loan business. But what we would see is two things: a, a favorable dynamic in terms of competition with some players being less present; and b, the possibility of leveraging a broader and more sophisticated offer on the basis of the integration with illimity and leveraging each other's distribution channels. So on volumes, we plan to -- we plan for a nice positive relaunch of illimity. We plan for a good move in Banca IFIS. And so we expect some volume growth. It's not just going to be the market. It's going to be mostly competitive dynamics and our ability to cross-sell, okay? So that's our -- obviously our [indiscernible].

The next question is from Simonetta Chiriotti of Mediobanca.

Just a quick question on 2026 guidance. If you could clarify which are the assumptions in terms of one-off items?

Yes, you have some voices in the background, I believe, if I understand your question correctly, you're saying, but your guidance, does it include one-off items or doesn't it? Do you confirm? Yes. Okay. So there is one extraordinary item, which we disclosed, I think the last quarter already. There is some contribution from deferred tax assets, which will materialize in 2026. We don't know exactly when, but during the year, as we confirm the current and future profitability of the group, we will be able to recognize that. What we did not plan for is gains on the sale of businesses, okay? So that's not in the budget that is underpinning our guidance. And on that, when they happen, we will communicate what I would expect in a mix of situations that some may contribute in certain quarters. Other may not. They may be negative in other quarters. On aggregate, we will do them regardless if they're in the long-term interest of the group. So you're going to have a mix of items of one-off items, but they are not on the basis of the guidance that we gave. We are not betting on some short-term financial gain, right? We have a guidance based on our business, commercial development, very prudent approach to risk, disciplined, cost of funding improvements, some DTAs that will come in around half of the year. And if other things happen, then we will account for those as they happen. As I mentioned, we are working for delivery of 2026 and also for 2027. And the type of stuff we're doing in changing the perimeter of the group may lead to some volatility quarter-by-quarter, but we will clearly inform the market and you will see it unfolding. So it's not something to worry about. I hope I answered your question.

Yes. Just a clarification. The unwinding of the tech ventures is not expected to have impact or eventually, have you already factored in those impacts in 2023.

Yes. Just to clarify that. Thanks for the question. No, the unwinding of the IP ventures had a cost, and it was fully accounted for in the integration costs in 2025. So that is behind us. From now on, we only have the synergies and they will materialize in 2027.

The next question is from Davide Giuliano of Equita.

I have two. The first one, if you can give us some clarification on the adjustments between the reported and adjusted net income for illimity. And the second one on synergies. Can you elaborate a bit more on the synergies you expect to be achieved in 2026 in quantitative numbers? Do you think it is reasonable to expect synergies at run rate still in 2027? Or is 2028 more likely?

Yes. So on the adjustments, I think I already answered in if we're talking about loan loss provisions and NPE ratios, yes, I think, Davide, what I can share and the details that we have is what we have already illustrated in the presentation, but also in the previous question, which was a bit similar. Yes, so we had an increase in ratios, but not with a very sizable P&L effect due to the fact that a large component of that was government guaranteed. We expect some further flows in the portfolio. We will take a look at it, monitor it carefully and see if we can maybe adjust something there. Overall, 2026 will still be a year of derisking of the portfolio we acquired. So that's going to happen quarter-by-quarter, and we will also maybe sell some portfolios. We have ongoing discussions about some of those where we think they are less core, right? Not talking about businesses now, I'm talking about portfolios. We're also in some discussions about the sale of certain portfolios that we consider maybe slightly less in line with our specialties and all that's going to contribute to derisking. But what I would say is that we -- at present, we don't have any more color to give you on that. In terms of synergies, if I get it correctly, your question was, well, you seem to have put in place what's needed to capture them. Are we going to see them all in '27? Or are they going to develop further in '28? My answer to that is what we delivered or what we promised to deliver, right, is fully impacted in 2027. So full impact, no ifs and buts, right? If your question is, are you going to see something maybe later even, right? I'm not sure I would still call them synergies. I think we -- at that point, I think we would be certainly looking at ways in which to optimize our cost base. But I'm looking at the COO as I speak, probably we would characterize that as ongoing optimizations. And I would maybe ask Fabio if he wants to add a few words.

In terms of synergies, as known, we said that half of the synergies will explain in 2026. Part are business synergies or revenue synergies and part are cost synergies, the meaning part, roughly EUR 25 million in our declaration during the M&A project. And I can confirm that 2026 will explain this kind of synergies as far as we know in this moment in terms of cost, both in terms of IT cost and HR cost, of course. I hope I've answered your question.

[Operator Instructions] Mr. Geertman, there are no more questions registered at this time.

Thank you. That means we're only 10 minutes late. I thank you all for your attention. I thank the colleagues that were with me today that contributed to the call, and we will happily update you in the next quarter on the stuff that we will have been doing in these weeks and months. In the meantime, thanks for your time and attention.