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 EFI's First Half 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Frederic Gerdeman, Chief Executive Officer of Banca IFIS. Please go ahead, sir.

Thank you, Madam, and good afternoon, everybody. Welcome to our summer conference call, where we present the first half 2026 results. As usual, I will give a brief presentation and then take your questions. I'm joined today by our Chairman, Ernesto Christenberergfacio, who is listening in; and by my team, the CFO, Roberto Ferrari; and the Investor Relations representative, Martino Dario, who will assist me in taking your questions. I would take you right away to Page 4 and dive into the presentation. Financial performance. We posted first half 2026 net profit of roughly EUR 8 million. So we're clearly in profit, and this includes roughly EUR 84 million of provisions that I will now set out in detail. Out of these EUR 84 million of provisions recorded in the first half of 2026, EUR 73 million were recorded in the second quarter. Around EUR 30 million reflected the findings of the on-site inspection conducted by the Bank of Italy. And the guidance communicated on June 25 also included roughly EUR 40 million additional expected provisions in Ilimity, of which 4 are already booked in the second quarter and the remaining will be booked in the second half of the year following the definitive update of the reports of the noncore NPL special purpose vehicles and given the expected defaults of the built-in portfolio. Capital, a CET1 ratio of 13.4% at June 30, excluding, as always, the earnings of the semester, providing a solid buffer for a bank of our scale well above the current requirements by Bank of Italy, which are at 9.9%, including 1% Pilar 2 guidance. We remain, of course, focused on capital management, and I will come back on it and we'll closely monitor capital ratios throughout the integration, the derisking and the NPL portfolio deconsolidation process that we will discuss. We have a new ML requirement effective from the 31st of March 2026. It's set at 13.3 of the trial, including the CBR and set at 4.7% of the LRE fully met through CET1 capital, as you can see, and broadly unchanged compared to the previous requirement. There's an increase of 1 basis points I underlined that the previous requirement was before the limit acquisition. So it's not my place, obviously, to comment on decisions by the Central Bank, but we find the substantially unvaried number encouraging. Productive derisking and integration is going on in 2026, laying the foundations for stronger profitability and value creation from 2027 onwards. Page 5, the path towards long-term value creation, what we do in these last months. So we're fully on track with the integration of Essity. We're laying the foundations to deliver confirmed $75 million of annual cost and revenue synergies in '27 and onwards. Ilimity completed the disposal of Hype, of Aknetris and of Abilio, significantly simplifying the group's operating structure and balance sheet. And we also completed the renegotiation of Elinity's IT contracts as a key part of the integration process. A new long-term agreement strengthens this partnership with PhenomniaFibonanci and delivers, as we discussed, significant recurring cost savings. As part of this agreement, Phenomia will acquire full ownership of Altermine Banking, while Bancaitis and Phenomia will continue their strategic partnership through a company focused on AI. We started the competitive process for the deconsolidation of our NPL business, this is progressing in line with our expected time line. I can report strong interest from a broad range of potential counterparties, including domestic and international investors, specialized NPL operators, financial institutions and private equity firms. We are on a clear strategic direction. We're proactively reshaping the business model towards a well-rounded SME banking specialist ensuring proactive alignment with the regulatory environment through the disposal of the NPL business and the risk profile of the group. The Ilimity acquisition in the Furstenberg division are concrete milestones of this long-term transformation focused on sustainable value creation that will be fully articulated in the new business plan that we will start to think of -- in the end of the year. Cost of funding reduction and the consequent margin developments are on track, notwithstanding a moderate increase in base rates. Page 6, a bit of details on the execution of some of the transactions I mentioned. So we secure the cost synergy run rate from 2027 onwards of $50 million. A $30 million operating cost reduction secured, completed the IT contract negotiation, as I mentioned, and also streamline the limited cost base to centralized procurement and efficiency measures, and we can now report that we have a 650 FTE reduction already completed both through the early retirement program at Banca IFIS and the limit, which is fully subscribed and to further work for streamlining delivered through the disposals of the 2 noncore subsidiaries and the voluntary exits at Limited, which has proceeded ahead of plans. We have EUR 35 million revenue synergies activated. We believe that is now totally in reach revamping a limited core semi business across structured finance, factoring and turnaround. We are currently moving factoring contracts onto the EFS platform. New lending origination has been aligned with our risk standards and the integration is progressing in line with the plan organizationally, the control functions, initiatives on culture, risk culture, especially is all going as we planned. We now look at the rest of the year in a simplified group structure with noncore subsidiaries has been spun off. The IT service perimeter has been streamlined and speaking about executed transactions. So these are beyond binding offers. These are now closed transactions. Therefore, we can stay with confidence that the synergies on costs and nonrevenues are activated. Page 7, we will focus on this transaction. So on IT, we completed this IT agreement and realigned the Altamine partnership structure that was originally 52% phenomena and 48% limited. Pinova Group will acquire 100% of Altaline Banking focused on selected IT banking services and a digital banking platform tend to accelerate the digital transformation of third-party financial institutions, that's their business. The long-term service agreement with Banca lease has been correspondingly amended with annual payments significantly reduced to achieve those cost synergies. We remain partners with FinomiaGrop. We're making a joint investment in Alterman, 62% Sinonia 48% Limited. Company focused on AI, we will leverage the operand platforms and know how to develop AI-driven banking solutions with a specialized technological partner, we believe there is certainly advantageous to speed up our capabilities in this area. Disposal of our net bridge we completed it. We sold it for EUR 30 million and generated 10 basis points on our CET1 ratio -- transaction enhances the operational efficiency through a strategic partnership with a leading servicing platform. It's being integrated, as you know, in a much larger company. with long-term servicing agreements in place to ensure continuity of the management of our NPL portfolio that we will continue to tactically unwind as opportunities arise. Disposal of Abilio we sold a video, which was 82% owned by limit and 18% Baconator regained specialized operator, long-standing experience in the judicial disposal sector, they will be certainly able to valorize this company and relaunch their business. This disposal does not include the real estate agent Equion, which following this transaction will be owned by Koma majority stake of 60%, the natural owner, we think to lead the next phase of their development. We remain with 40%, and we'll revisit this file once this development has taken shape. Page 8, deconsolidation of the NPL business, surely an area of interest. You will remember, we announced at the start of the year, the activation of a study phase in which we were going to explore our strategic options. We then announced to the market the decision to be consolidated. Now we can report that the profile -- the process is underway. We are offering a leading integrated platform for small tickets, NPL investment and servicing supported by a disciplined investment approach and definitely a strong track record, unparalleled technology, processes, pricing capabilities unparalleled data and unparalleled capacity to notarize the data. strategic rationale is, of course, for us to be consolidation. Therefore, given the regulatory outlook, improved capital efficiency and also secure the best long-term value-creating solution, not just for IFIS, but also for the NPL business. We believe that the development of this business long term is better placed in an ownership structure where you don't have the regulatory headwind that is clear at present and that in the next years will only increase. Timetable on the right of Page 8, June and July, high-level serves and were prepared and the NDAs were signed. So we got those quite numerous bidders joining us of very high-level players, domestic and international. We expect nonbinding offers in the second half of the year. We will immediately make them the due diligence available and we expect the binding offers towards the end of the year, always in the second half, but towards the end of the year, hopefully getting us to sign and close in the first half of 2027. So a proactive strategic action and response to the new calendar provisioning situation. Page 9, the results of the quarter, $190 million revenues and minus EUR 33.5 million net result in the quarter. But as I mentioned in the semester, a net positive result. This is obviously on the back of the provisions. Just to explain the Q-on-Q evolution. The first quarter of 2026 includes a positive contribution from the turnaround business, which was in a limited by the successful early repayment of an exposure to a mid corporate. It was a very good transaction for us. You could consider it a one-off, but I would encourage you to consider this partly recurring. It is typical of the turnaround business that these exits happen periodically. That's the way it works. It doesn't happen every quarter. So it can't really smooth it, but I think we will see more of these kinds of results in the future coming out of that business as the good transactions mature. Second quarter of 2026 includes the $30 million of provisioning arising from the internal review performed following Bancomer's on-site inspection as well as the first tranche of provisions due to updated recovery expectations on certain noncore assets, which we discussed also on June 25. The EUR 4.2 million loss or gain on disposal of investments in our case, gain is the net result of the disposal of ArecNetrix and Abilio. Page 10. Asset quality, gross NPE ratio of 7.4%, net NPE ratio of 4.9%. So first, a few words on what you see here as an increase and then an outlook. So the NPA has increased by roughly EUR 152 million, mainly driven by reclassifications following the assessment based on the Bank of Italy inspection and higher built nonperforming exposures. The first is worth roughly EUR 112 million, the second roughly EUR 25 million. I remind you that, of course, built is assisted by public guarantees, up for about 18%, 80% and the rest, $5 million is other portfolio dynamics. We also classified another piece of the pharma book, which is a runoff using even more stringent criteria based on the evolution of the market, if you will, and the practice that we are observing in the market. The total book is now worth roughly EUR 100 million. So that's always decreasing. As you remember, we exited the business in the last year, it was reduced to less than 5 of what it was. And I -- looking forward, can report, we are in ongoing discussions for the sale of roughly EUR 60 million to EUR 80 million. Actually, I would estimate this a bit higher probably closer to 90% all in all, of generated NPLs. So we are managing these ratios downwards towards the end of the year. Page 11, capital ratios, we end up at 13.39% and very minor variations due to the calendar provisioning and some intangible access reduction. And then we have an effect of RWA increase due to, I would say, very healthy development in Banca ifs, significant increase in RWAs due to business development, partially offset by a lower RWA in the limit as we restructure the business. And any limit, now a mixed bag of things that are looking to increase, which are commercially what we like and stuff that we are allowing to run off. Page 13, I want to focus a few slides on the quality of our commercial banking business, future of the group, right? If you look at quarterly revenues in aggregate, right, you can see commercial and corporate banking revenues of EUR 87 million. That was EUR 81 million in the first quarter, EUR 83 million in the second quarter of last year. It reflects solid commercial momentum, which I will show later, continued pricing discipline and good seasonality in structured finance, with EUR 48 million of NPL revenues was 47% in the first quarter and 76% last year, exceptionally positive, reflecting lower purchasing activity ahead of the portfolio deconsolidation makes sense, I would say, and a strategic shift towards forward flow agreements. Also a slightly lower use of recognition of mobile revenues in the light of the upcoming disposal. So a prudence in revenue recognition that you can see in those numbers. Noncore G&A revenues at EUR 21 million, benefiting from strong performance of the proprietary finance portfolio. The NPL business, a bit of deep dive. We remain on Page 14, registering very solid cash collection. The models have been consistently outperformed we focus, as we mentioned, forward flow agreements, we now have with the most prestigious consumer finance players and 1 of the largest banks in the country, 2 of the large banks in the country, actually, forward flow agreements in place that leads to the acquisition of low vintage portfolios aligned by what we think is a market trend, which is the move by major originators to towards earlier disposals, right, with a priority on assets offering a quicker resolution. We increased the use of extra provisional recovery, and we continue to dispose of tail portfolios. I remind you that we took EUR 12 billion of gross book value of -- gross book values between 2023 and the first half of '26. Thereby, we are lowering portfolio vintage, and we're significantly decreasing the complexity in the book because all this gross book value with very limited net book value, I'll remind you, these are sales, right? They don't have a lot of balance sheet weight in terms of net book value, but they give a lot of complexity. In all these transactions, we book moderate, but we booked small gains on the transaction. So we tend to sell at or slightly above the book value, registered small decreases in net book value and large decreases in gross book value. EUR 94 million cash recovery in the quarter, EUR 98 million last quarter roughly the bank continues to deliver between EUR 350 million and EUR 400 million cash recovery on these portfolios, reliably, consistently and out of the small tickets portfolio. Page 15, interest margin evolution. This is the commercial banking interest income. I mentioned the strength and the quality of the business. We are now seeing, as we mentioned a few times that we were expecting, right? The overall margins increase as the base rates increase and as the prices increase, average gross interest income in Commercial Banking reached 4.8% in the second quarter Cost of funding has remained flat at 3%, notwithstanding the base rate increase. So it's a net result of very sizable reductions in the spread and the spread that we pay, obviously, on the funding and the base rate. So what happens, you see it on the right, plus 20 basis point base rate, aggregate interest income plus 20 basis points, aggregate cost of funding stable, net effect on the margin, 20 basis points. So we now reached 1.8% again, which we last saw in the first quarter of 2025. Page 16, costs, EUR 180 million. We increased EUR 10 million Q-on-Q. I wouldn't read too much in it. the first quarter benefited from the rise of EUR 3 million previously accrued costs that did not materialize. The remaining 7% are a bit due to seasonality in the proprietary finance business, there were dividend withholding tax effects, toltax that unfortunately translates into the cost line. So it blurs it a bit. but that's where it came from. The cost linked to NPL recovery, notwithstanding the excellent cash collection is in line with previous quarter and personnel is roughly flat. Focusing on commercial activity, factoring EUR 3.4 billion turnover in the second quarter, nice growth relative to the first quarter with a very strong focus on profitability, average spread at 3.4% on top of the base rate, well above market average. Net revenues over average customer loans 5.7% and loan loss provisions that obviously, you see them high there on the slide. They include EUR 17 million of the precautionary provisions following the Bank of it inspections. Those 17 are part of the 30 that we mentioned. Page 18 how this business made. You can see on the left-hand side that we have 21% market share in active clients and 6% share in turnover in the country. What does it mean? It means that we serve the SMEs. So we don't pursue large accounts with huge turnover and very moderate express of the largest in the country. We pursue SMEs and help them with a very useful, I think, to manage their liquidity. And on the right-hand side, you can see how the revenues are skewed towards small companies, between EUR 10 million and EUR 50 million. They now make up 70% of the overall revenues that we make in factoring. So therefore, risk fragmentation therefore, a very good risk return profiles because we finance the SMEs, but we risk in factoring, as you know, the large corporates that they serve. So very good risk return profile. Page 19, leasing, EUR 179 million new business underwritten. Second quarter was strong. We remain true to our mantra. You can see here that we reached net revenues over average customer loans of 4.1% today in the stock. So this is different from any other leasing business that you will see in large universal banks, which will typically include real estate leasing, it will typically include nautical leasing, so it will include very long-term contracts with a significant risk component in it. What we have here is mostly operational, mostly instrumental, mostly equipment and automotive once again, risk fermentation, higher margins and on a very significant part of the portfolio, I believe it is 80%. We have remarketing agreements in place when we underwrite in case the asset becomes ours, we know the price at which we will sell it when we underwrite the loan for sure. Therefore, risk very, very well managed in that portfolio. Page 20, Corporate banking and lending, EUR 433 million new business underwritten in the quarter, very solid result, structure finance roughly 30 to 40 transactions annually with an average deal size of about $12 million. So you can see that there too, we fragment the risk, we have a conservative leverage profile. It doesn't usually go over 3. There's a component of state guaranteed lending as a component of the pharmacy business and India's capital fee, capital fee, which in the second quarter of the year, underwrote $160 million of salary loans, so that's become 1 of the larger salary loan businesses, consumer credit business in the country today, and it has 0 legacy issues meaning that we started the relaunch of this company when the regulatory environment was clear. So we have 0 issues with the way the contracts were underwritten in the past in much of the market, which today leads to some -- obviously, some needs to adjust certain portfolios in certain other players. Page 21, credit. We keep seeing no signs of widespread macro credit risk materializing in the commercial business. Therefore, you have also a bit of forward-looking feeling on how things are going. You can see that the provisions obviously see in Q2, they were very significant, but they were due to extraordinary items, like, for instance, the recognition of the future provisions in limit. But if you look at the quality of the book, this is Bankasi's payment base flat Stage 2 loans going down. In the third quarter of 2025, we had 9%. Today, we have 7% rating migrations roughly and probability of the fall slightly increasing, and that's mostly in the MCC book where, as you know, we have government guarantees. I have finished the slides that I want to present, and I will now take your questions on anything that might require some further clarification. Thank you for your attention this far.

[Operator Instructions] The first question is from Manuela Meroni in -- this Sao Paulo.

Good afternoon, and thanks for the transparency and the level of disclosure provided I have a few questions. The first 1 is on the provisions. Out of the EUR 70 million additional provision expected that you communicated on the 25th of June, you recognized a EUR 34 million in this quarter. What are the key drivers for the remaining provision expected in the second half of this year? The second question, again, on provisions. Why were the EUR 40 million additional provision on limited assets not identified during the PWC due diligence process and what has changed since then? . Third question on the nonperforming loans of Ilimity. I'm wondering if you can share what is the remaining net book value of Limited's NPL portfolio? And how much has been written off until now? For question on the outlook. Can you provide a guidance on the loan loss provision for the full year 2026. And finally, on dividend, what is your best estimate for 2026 dividend per share at this stage .

Yes. Thanks, Manuela. Very clear. So I'll take them in the order in which you asked them, timing of provisions. So based on the revised guidance that we gave for 26 at the end of June, the expected provisions were increased by approximately EUR 70 million versus the original forecast, right, and hence, the revision of the guidance. So of this increase around EUR 34 million was already recognized in the second quarter, the EUR 30 million from Bank of Italy and 4 Ilimity, so the remainder is $36 million of that increase that we expect to take in the second half of the year. So this will arrive within 2026. . You saw that in the second quarter, we had EUR 73 million provisions, EUR 30 million of those were Bank of Italy. And whilst this process is still ongoing, we decided to reflect these adjustments already in the second quarter results, right in line with our approach to risk, given that they had become rather certain. The remaining EUR 4 million we recorded in the second quarter are limited SPBs, as I said and the 36 that remain, they are the best 36 increase, I should say. They are the current best estimate based on the information we have today on the limited portfolio. So this reflects substantially updated recovery assumptions, right, both in terms of timing and in terms of quantity. Based on the preliminary indications that we received from the external services, and it also includes some expected defaults in the built portfolio based on the performance we observed during the first half of the year, right? And as I mentioned, all this is going to come in the third and fourth quarter, a little bit in the third and a little bit in the fourth. That's what you should expect. Due diligence. Why wasn't it captured in the due diligence. So that was carried out in the second half of the year on the basis of the numbers at June 2025, right? So the additional provisions we shared with the market reflect the incorporation of new information, updated assumption. We have since the due diligence was concluded, we have received updated recovery reports from external services. We have observed a deterioration in the expected recoveries for other portfolios. We recorded, as I mentioned, in bile higher-than-expected default trends, and this was simply not visible at the time of the due diligence. And therefore, it required a new reassessment right, of the risk portfolio. So the most significant component are the SPVs managed by external services. This -- obviously, the cash recoveries for these assets depend on judicial processes, insolvency processes, restructurings, so timing and expected recoveries can evolve, obviously, over time. We have not yet received the formal report, but the preliminary expectations indicate lower recoveries and these arrived just in the last month, right, mostly in the month of June, actually, both low recoveries and longer periods, as I mentioned. Overall, I would like to add that the additional provisions represent our best expectation of the Ilimity's portfolios, the risk and the expected recoveries based on the most recent information available at today, right, and the prudent assessment of the underlying credit dynamics. You asked about the total remaining size of the Ilimity NPL book that is roughly EUR 900 million today, EUR 930 million. That excludes built. Builty is in runoff, but it's not in this number. roughly 750 of that is held in SPVs. And if you go back in time, I'll give you another number since the first half of '24, right, the aggregate derisking in these portfolios has been roughly $250 million, right, of cemetery down. Outlook on the loan loss provisions. As you know, we don't like to give guidance on individual line items -- we gave a guidance on the net profit, but not on individual line items of the P&L, but try to help you a bit. So loan loss provisions in the first half, you know, we will add roughly EUR 36 million of the remainder of the increase. And you can add to that normal run rate without the expectation of any surprises. So I think you can work out a reasonable number on the basis of those elements. As you take the provisions of the first half that you find in the presentation, you had 36 and you add a bit more, and then you will end up roughly where you want to be. Finally, dividends. Yes, a question came up last time as well. we will decide on the 2026 dividends towards the end of the year when we have the definitive results of the Bank of Italy inspection and also some visibility on the economics of the NPL transaction. So no decision today, no guidance today, but dividends are and will continue to be a key component of our equity story, and we remain committed to delivering an attractive level of remuneration to our shareholders, which we believe our balance sheet will permit in the years to come. I think I got them all.

The next question is from Simonetta Chiriotti from Mediobanca

Yes. So my question regards the Banco detail inspection. Have you received any preliminary feedback on this? And when do you expect the final supervisory report to be issued .

Yes. Naturally up to the regulator will speak for them, but we expect to receive the draft findings before the end of September. Hopefully at the start, but I would say before the end. As its customer in these reviews, Simonetta, the process involves that you get an initial report that's followed by an opportunity for the bank to provide its observations and supporting evidence before the final report has been issued, right? So as a result, the overall process is likely to extend into September, October and won't close formally before the next couple of months. I can't comment further on the point. We will need to wait until we see the report. Let me just add that our approach here has been to remain an objective and forward-looking at prudent and very much compliant with the regulator, I think proactively on what we know and we will wait until the rest arrive in written form.

Yes. I think you are speaking of deadlines. Has the Bank of Italy given you any deadline for the disposal of the NPL business? Or is the regulator like not involved in the specific process .

Yes. I want to say this very clearly. The Board did not decide to dispose of the NPL business on the basis of specific expectations from the Central Bank, okay? So in fact, there are currently no regulatory indication or request or specific deadline from the Bank of Italy to dispose of this business. The key strategic consideration reflects long-term effects of the calendar provisioning framework, yes? So as we assess long-term economics and strategic value of our businesses, we have to take into account a fully phased-in regulatory regime, right, as we look forward. So Canada provisionally progressively increases capital absorption and it will, therefore, influence negatively the risk return profile of the NPL investments. So it's a disciplined and objective approach. It's proactive. We evaluate all strategic options, right, try to ensure proactive and full regulatory alignment, but there is no specific indication from the regulator in any shape or form.

The next question is from Lorenzo Giacometti from Intermonte.

Thank you for the disclosure. So I have a few questions on the NPL business. I think we saw in the local newspapers, some news about the potential candidates, but I was wondering if you can share with us the potential level of interest received by the potential investors. And if you can disclose or assume a potential impact of the deconsolidation of this kind of business? And the second question, always on the NPL business. If you can provide us some color on what are your assumption about the NPL contribution going on in 2026. And that's it.

Yes, Lorenzo, so very clear. So on the disposal, well, the process is progressing in line with our effective time line. And I won't hide we are quite encouraged by the high level of interest that we have received. So we're currently engaged with a broad range, I would say, of potential counterparties, including, as I mentioned, right, domestic and international investors, specialized players, financial institutions, holding companies, actually, private equity firms that the largest names, you can imagine globally. Process will remain competitive. We expect to receive nonbinding offers by the end of September, following planning offers before the year-end. It's very early to comment on valuation or transaction structure for that matter. I would just say that the interest we received reflect the strength of the franchise and the quality of the servicing platform. We think it is a unique opportunity to enter the market in Italy really as a key player. So we are focused on achieving the best possible outcome for all the stakeholders, ensuing -- ensuring also business continuity and the smooth transition. And that includes, by the way, employees, clients, the servicing partners, the counterparties. We think, as I mentioned, that a different ownership setup in the long term will be beneficial for the companies as well, right, the servicing and investing companies. This is as much as we know today, but I will keep the market informed as new information arises that we are able to share. I would stop at this. Then in terms of contribution, it remained broadly stable in the first quarter. It's largely in line with our expectation. So it reflects, I would say, deliberate and disciplined approach to new portfolio acquisitions. We've been rather rigorous in pricing, also lately, we've seen a few options where we saw some behavior we found not entirely rational and given also the context that we are in, we decided to keep our discipline. We think it's consistent with how you should manage operations in the light of an upcoming M&A transaction. So we're prioritizing cash recovery, as you saw in operational efficiency while maintaining the selectivity that I mentioned. And also in the like of the possible deconsolidation where we recognized lower mobile revenues based on future recovery expectations that has historically been a part of the business it's typical of amortized cost accounting. So you also see prudence in revenue recognition in the light of the transaction that's coming up, right? So altogether, expect the NPL business to continue performing for the remaining quarters, roughly as you've seen it in the first 2 quarters. It's just a matter of I would say, responsible housekeeping before the transaction arises. I hope I was a specific enough lines.

Yes, very clear. But maybe I'll just add another one, which is on one-off items. So shall we expect further one-off items deriving from the Bank of Italy inaction and the noncore portfolio of limit I mean what are your assumptions on that when looking also at the full year 2026 guidance, which, if I'm not mistaken, it's not considering this kind of impact

Yes, you're correct. So first of all, with respect to the inspection, the inspection was on Banaf is not only Ilimity. So you don't need to assume any impact of the inspection only Ilimity. And secondly, on Ilimity, we think that the current values really reflect the latest available information taken into account in the most prudent way. Also months ahead, as you might have noticed, we've shared with the market this perception we have of these portfolios. Back to EFEs, with respect to the inspection, we cannot speak for the regulators. So we really need to wait until we receive the final report. And I really don't have a lot to add, right? With respect to the impact of the deconsolidation, I think in your question, you asked if that was inside the numbers inside the guidance, No, it's not, right? . It's really too early to quantify potential effects or effects on capital, which should be highly beneficial as this all ultimately depend on the structure that selected, the perimeter, the execution terms. So we will remain as transparent as possible in the next couple of months as information becomes available, both on the inspection and on the transaction, we will share it with the market when we can. This is as much as I can say, Lorenzo at present.

The next question is from Sarada Patel from Citi.

I have 2 questions. So the first 1 being on the kind of cost of funding what are the sensitivities and the outlook there in the face of kind of rate hikes. Obviously, it stayed stable this quarter. you're thinking over there? And then the second question is just more technical clarification. So the upcoming limited Tier 2 that's coming open to call, can you receive approval to call that potentially from the Bank of Italy once the draft report comes in September? Or is it only after the full process closes in October or possibly later as you said?