Banca Sistema S.p.A. ($BST)

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca Sistema First Quarter 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Christian Carrese, Head of IR. Please go ahead, sir.

Thank you. Good afternoon, everybody. Sorry for the delay, but the Board of Directors of CF+ just finished. So now we can discuss Banca Sistema results. Before starting with the call, just a reminder, you can find the presentation and press release on our website at www.bancasistema.it in the Investors section. Now we can start the call. I pass the floor to the CEO, Iacopo De Francisco.

Okay. Thank you, Christian. So first of all, good evening to everyone, and thank you for joining. This is an important quarter for Banca Sistema because it marks the beginning of a new phase for the group. First of all, unfortunately, I have to remind that there is a mandatory tender offer of CF+ on Banca Sistema that is ongoing here. And this situation reduces and limits what we can disclose, especially on forecasts and forward-looking matters. And therefore, we have to stay within what it is written in the offer documentation. That said, we wanted to use today's presentation not only to discuss Banca Sistema first quarter results, but also to start giving to you a clear view of what is the combined group, what it looks like strategically, financially, and industrially. So first of all, one important clarification. All the figures that you're going to see do not include Kruso Kapital, which is expected to be disposed of. Now the presentation is articulated in 2 parts. In the first part, we talk about the combined entity, so the group. And on the second part, we, Ilaria and myself will give disclosure regarding Banca Sistema results. Before starting, let me make a broader point. So first of all, this transaction is not only about adding size. It's not only, therefore, about gaining scale. It is about, this is the way we see it, reshaping the profile, the earnings profile, the risk profile, and the growth profile of the combined group. So what we want to do, and we will try to give you evidences of this is to start transforming Banca Sistema from more or less a mono-liner, a mono-product franchise into a well-diversified specialty finance bank or platform. Now let's move on and let's go to Page 3. This regards to the timeline of the mandatory tender offer of the transaction and of the integration process. First of all, operationally, the pace of execution is very high. In the next quarters and by the end of the year, we will focus on 4 main priorities. The first one is completing the tender process. Second one is executing the legal and operational integration. Third one is simplifying the group structure. And fourth one is preparing the foundations for the business plan, the new business plan. Now if you go through the timeline, you see that I've been appointed as CEO mid-March, end of April, there has been the appointment of a new Board of Directors and new Board of Auditors. 11th of May, ending on the 12th of June, there is ongoing the mandatory public tender offer. By end of June, especially by the 22nd, we expect the translisting of KK and therefore, the payment of the deferred consideration. By June, the Board of Directors of CF+ and Banca Sistema will approve the merger plan and the filing process with Bank of Italy will start. As of now, we do expect and we do confirm that the consolidation of Kruso will happen by the end of the year as well as the integration from a legal and operational perspective will happen by the end of the year. Now we are planning to release a new business plan either by the end of the year, so in the fourth quarter or in the first quarter 2027. Now let me underline one point regarding this mandatory tender offer, which is in place. Now the reason behind this is that it became necessary to proceed with this mandatory tender offer because in the context of the voluntary tender offer launched in June and completed in March, the portion of the consideration represented by Kruso Kapital shares consisted of securities that are/were traded on the EGM rather than on a regulated market. So these circumstances triggered the Article 106 of the TUF. And therefore, CF+ upon completion of the voluntary tender offer and exceeding the 30% became required to launch the second tender offer. In pragmatic terms, nothing has changed in terms of consideration. We do not expect major changes in the capital share that we have gained with the first voluntary offer. The bank -- our aim is that the bank will remain listed. And we do confirm that translisting will happen by the end of June, and therefore, we will be able to deliver the shares of Kruso Kapital. So we do not expect that any payment in cash would be possible or feasible. Sistema will remain listed. Let's go to Page 4. This is the first view of the combined entity, of the new group. If you give a look at group level, the combined entity has more or less EUR 6.9 billion of total assets and EUR 4.4 billion of customer loans, and a little bit more of EUR 4 billion of customer deposits in current accounts. But what matters here is not only the increased size. But what matters here is that -- is the diversification of the different asset classes, of the different business segments, and we will prove this point also talking about revenues and capital allocation. Now the way we look at -- the way we want to present the new group setup from a business perspective is through what we call asset classes. We do have 5 asset classes: Factoring, Tax Credit, Financing, Salary-backed Loans, and Legacy. And each of these can be articulated, can be structured in business segments. For instance, let's take Factoring. Now one business Factoring, but we have Factoring -- PA Factoring. Then within Corporate Factoring, we have entertainment, we have normal corporate, and then we have that specific segment, which is; one, business segment which is run by CF+, which is called Distressed Factoring. Now as you can see, the business mix now spans multiple complementary asset classes. What is the Legacy portfolio, which comes from CF+? This derives from the former activity of CF+ when it was Credito Fondiario as a debt purchaser. And this relates to securitization notes owned by CF+, which have as an underlying NPL, banking NPL, leasing NPEs and so on and so forth. This asset class, if you have given a look to the performance, to the economic results of CF+, it have been negatively influencing the performance of CF+ in the previous years. But since the beginning, so more or less -- more than 1 year ago, since the beginning of 2025, later CF+ signed with the Elliott fund an APS, an Asset Protection Scheme, a financial guarantee on the base of which for the next 10 years, the economic performance of this portfolio has been sterilized. So any change, any negative performance encountered by this portfolio will be covered through a financial guarantee by the Elliott fund. In exchange of this, Elliott receives an annual premium of EUR 2.9 million. Now another important point is that I was saying that what matters here is the diversification. And the diversification structurally changes the profile of the group. If you give a look, public administration factoring remains a strategically important asset class. But within the combined entity, now it represents less than 15% of the customer loans and less than 10% of the customer loans. So -- sorry, and less than 10% of the total assets. So when we talk about -- when we read about on the newspaper regarding potential risk or difficulties in the application of DoD or uncertainty and so on and so forth. As for Banca Sistema, we are talking about something which has a total outstanding of EUR 600 million out of total assets of EUR 7 billion. Okay. Let's move forward. Let's talk about risk-weighted assets. Now the same diversification I just commented is visible from a capital perspective. So we have more or less EUR 1.7 billion of credit risk-weighted assets and overall EUR 2.5 billion of total risk-weighted assets. And overall, the credit risk-weighted asset density is around 40%. Again, what is important here is not only the current capital efficiency, but also the flexibility that it gives us in future capital allocation. Clearly, over time, we will allocate capital dynamically across the asset classes based on risk-adjusted return, funding scalability, and capital absorption. Now -- but this is the framework. So return on risk-weighted assets, we want to apply to all the different business segments and asset classes that we have in place. Now Factoring, as you can see from the numbers, remains the largest strategic business line, but we also benefit from businesses with near zero or low capital absorption. So structurally, there is a strong diversification, both in terms of loan exposure and in terms of risk-weighted assets. Let's take a look to capital. Now what you're going to see in the next quarter is the overall group capital position. So what we are seeing here are consolidated capital ratios. So we are seeing a capital requirement at CF+, which is the parent company level and the overall capital position at consolidated level. These are the numbers that overall represents the position in Q1. So CET1 ratio is 11.4%, TIER1 ratio is 14.3%, and total capital ratio is 15.9%. Now you see the requirements, the capital requirement on CF+ level. One important point here is that we do expect capital ratios improvement, thanks to the legal actions -- sorry, thanks to the corporate restructuring at group level that we are going to perform in the following months. First of all, both KK through the capital deconsolidation and the merger through the squeezing of the minorities will improve the capital position, will improve the ratios. We do expect an impact of the combination of these 2 elements in a range of 1% to 1.5%. Okay. Let's move to the next page. So the P&L. So moving to the P&L. So before discussing the details, what I would like to do is to separate 2 dimensions. First one is the accounting effects linked to the acquisition for the financial impact of the badwill and so on and so forth. Second is the underlying recurring earnings capacity of the combined platform. Now we have just approved Q1 results of CF+, so at consolidated level, the net profit reported today is EUR 71.8 million, which clearly reflects both the impact of the acquisition, including provisional badwill recognition together with several extraordinary costs related to the transaction. But strategically, what I would like to underline what matters much more to us is the recurring earning capacity and value generation potential of the combined group. Now, from this perspective, a few points stand up looking at this page. So first point is that, clearly, this is a bank, this will be a group, this will be a combined entity, which is based on net interest income more than on commissions. Second, the contribution from the different asset classes is already diversified. It's already well articulated. Third one, if you give a look to the current cost base, that should be viewed as a sort of starting point before synergies. As a rule of thumb, we should think that on an annualized basis, the overall cost base will be in the range of EUR 115 million. So in order to calculate synergies and so far we cannot disclose what are our assumption synergy-wise, but you can, let's say, run your numbers, EUR 115 million is the, let's say, the baseline on the base of which synergy -- cost synergies should be calculated. Now clearly, looking forward, 2026 will include several extraordinary items like integration costs and several non-recurring items. We'll try time by time to give a strong transparency on what are these items, what are the extraordinary component of the overall P&L, both at the group level and at level of Banca Sistema. Page 8. Now before going further, let me briefly explain how we will increasingly look at the business. So I already mentioned the asset classes, the business segments. And in order to assess the performance at the level of asset class and of business segments, we will use a unit economics framework. So we will assess and report businesses based on asset yields, funding costs, expense ratio, risk-weighted asset density, capital absorption, leverage in order to define each business return and scalability. Now at this stage, unfortunately, I mean, it is a few weeks that we are here, we are still harmonizing methodologies and building a fully comparable framework. So what you see here is a sort of very, very, very initial high-level representation of unit economics where we are starting to provide asset yields information at the level of the single businesses. But for instance, for cost of funding, for cost of risk, for expense ratio, we still have to go in details and harmonize the way the 2 banks are calculating these type of numbers. But even at this preliminary stage, a few conclusions are already clear. First one, asset yields overall are attractive across several businesses. Second, we see room for cost of funding optimization. Third one, the combined cost income or expense ratio can and will be optimized through synergies. Fourth one, there are 2 businesses that will require strong managerial attention for different reasons. First one is Salary-backed Loan, which historically had a poor performance in Banca Sistema. And second one is PA Factoring on the base of the capital absorption deriving from the application of the new definition of default flow. We believe that there is meaningful potential to improve the allocation of capital and operating resources across businesses. Page 9. If we remain at combined level, at group level, what are therefore our priorities for 2026? First one, execution. The focus here is a disciplined integration, completing the tender offer, executing the merger process, simplifying the legal and operational structure, and starting to capture and to deliver synergies. Second, stabilization of PA Factoring franchise within what we call a new normal operating framework. Let me be clear on this point. The objective here is to build a more resilient and diversified specialty finance bank. PA Factoring is an attractive business segment that cannot stay on a bank balance sheet considering payment times of some Italian PA debtors once it reaches the 180 days of maturity and it enters into past due. In that moment, the bank balance sheet has to be offloaded. Within this condition, but only within this condition, therefore, within a solution that will be able to structurally offload the bank balance sheet from exposure that are -- have gone to past due, within this condition, PA Factoring remains very attractive, and we are working on this dimension. One point that you see on the center part of this page. As part of, let's say, our initial effort here in Banca Sistema, we are, therefore, looking at PA Factoring as a strong business with strong opportunity under the condition that: First one, we are fully compliant with the new definition of default below. In this sense, we are conducting a detailed review of Banca Sistema operational compliance and portfolio management practices. At this stage, we have not identified elements that will suggest structural issues in the operating model. But the review process is still ongoing and will end up, I believe, by the second quarter results. Second element. Regarding the back book, we are working and we are in advanced stage on, let's call them, disposal or securitization to reduce exposure and limit the contagion effect. But also in terms of front book, we are working also on the direction of our revolving securitization for offloading structurally with the balance sheet. Let's go to the third priority here, which is growth, business development, and optimized capital allocation. We see opportunities here to unlock value across multiple areas. If you see here, we call review of football and tax securitization programs. We see a review of the Spain JV. We see a review of the Italian bank loan business line. The topics here, the issues here from our point of view are different. For instance, due to limitation in the capital position, Banca Sistema has been historically forced to, for instance, resell on a quarterly basis Factoring portfolios, forced to set up securitization on the base of which investor could put a junior and therefore the capital association from Banca Sistema will be released. On the basis of a larger capital position, we can review this type of, let's say, situations as well as we can try to optimize, we can try to take the lead, we can try to be -- to operate in other countries, starting from Spain, where Sistema has a JV to operate in that country not anymore on the base of a JV, but on the base of a presence by Sistema itself. We are looking clearly to establish new business lines at group level. We do see that within the financing business that as of today has been mainly focused on state guaranteed lending, there is an opportunity in the market, and we already hired a team, a professional team coming from competitors on acquisition and structured finance. And clearly, we are looking at M&A options, if any, in the market. Let me move now. And before leaving the stage to Ilaria that will take you through the quarter in the format that we have been used to, but let me try to give you 3 messages on how we read the quarter. So before handing over. So first point, the stronger capital position supported by CF+ is already showing tangible effects on the business. Factoring volumes are back to growth, up 21% versus year-end 2025. And the bank, as I said, has not been forced anymore into defensive portfolio management decisions. So unlocking the full commercial potential of the franchise is one of the core industrial rationales of the transaction itself. Second, following the first implementation of the revised new DoD framework in 2025, in Q1 2025, the bank has -- Banca Sistema has managed past due dynamics through specific portfolio actions and disciplined growth especially as far as PA Factoring is concerned. Now as mentioned earlier, we are conducting a deep dive review on the operational framework. As I said before, as of now, we don't see structural issues overall. But a very important point I want to underline again is that within the combined group, within the new side and the new business diversification, public administration exposure is less than 15% of the customer loans. Third one, on profitability. The quarter must be interpreted carefully. So reported net profit of EUR 3.1 million. The comparison versus Q1 2025 is EUR 3.8 million -- sorry, I did say something wrong. So EUR 3.8 million, sorry for that. The comparison versus Q1 2025 is materially affected by specific non-recurring elements that influenced Q1 2025. So first of all, let's consider that we are not considering to the capital anymore that in 2025 there was a one-off related to the European Court of Human Rights revenue contribution. We have to underline that as a consequence of the fact that the bank has been able to keep on its balance sheet specific sizeable, let's say, sizeable volumes on the Factoring, we do not see any more gains from portfolio disposal. So overall, I believe that we are at the beginning of a transition towards a new model, which is built on stronger diversification, stronger capital flexibility, and a more balanced earnings profile. The group starts this journey with 3 important strengths, solid capital, attractive asset yields, and meaningful diversification of opportunities. Clearly, now the focus is on execution, especially for 2026. Now, Ilaria, now it's your turn.

Thank you, Iacopo. Let's now start on Slide 12, on the Factoring commercial performance. Turnover in the quarter was solid, increasing by 29% year-on-year, supporting growth in outstanding volumes, both year-on-year and quarter-on-quarter by 11% and 21%, respectively. The figures related to factoring outstanding do not include the Superbonus tax credits, which accounted for EUR 229 million in the quarter and are reclassified among other assets. Factoring assets increase was supported by both public administration and private segment new volumes, particularly in the Entertainment sector, alongside a significant decline in asset disposals. Non-recourse components account for 69% of the total outstanding, while tax receivables represent 16% of the total outstanding. In terms of breakdown by Obligor, public administration accounts for 49% of the total portfolio. The remainder 51% consists of corporates, public companies, and companies pertaining the entertainment business. Moving now to Slide 13. CQ dynamics saw a stabilization of the outstanding. New production was solid and posted a 22% year-on-year growth, which helped to offset the quarterly repayments, keeping the outstanding pretty unchanged quarter-on-quarter. The analysis on a year-on-year basis showed a 15% decrease of the outstanding due to some disposals and lower new production vis-a-vis repayments. In terms of breakdown by Obligor, the private sector accounts for 8% -- 18%, sorry, while public sector employees and retirees account for 82% of the total. In terms of asset spread, the quarter confirmed the improvement registered in the fourth quarter last year and stood at 3.2%. In terms of balance sheet figures on Slide 14, total assets increased by 8% quarter-on-quarter, thanks to solid commercial performance in all the product lines. Pawn loans have been reclassified among other assets as assets under disposal according to IFRS 5. Italian government bonds classified in the held to collect category were flat year-to-date and amounted to EUR 50 million with a duration of 23 months, while the bonds classified in the held to collect and sell category increased by around EUR 70 million year-to-date and amounted to almost EUR 1.3 billion with duration of around 2 years, due to customers increased by 6% year-to-date, driven by higher term deposits and reproduced customers. Turning to revenue performance on Slide 15. Total gross income shows a decrease of 32% year-on-year due to an unfavorable comparison base, primarily related to the fact that in Q1 2025, we had accrued more than EUR 10 million of late SME interest on certain positions following positive rulings by the European Court of Human Rights. As such, Factoring contribution year-on-year is significantly impacted. Still on Factoring, however, commercial loans and tax credit combined revenues were down year-on-year. This is driven by gross income from Superbonus, which is included in this item, and decreasing from EUR 8.8 million 1 year ago to EUR 5.5 million in the current quarter. However, if we consider commercial loans only, revenues increased by EUR 1.6 million year-on-year. Contribution from Salary-backed Loans in terms of gross income decreased year-on-year, but at a lower pace vis-a-vis loan decrease, thanks to margin expansion, which registered a 30 basis point increase. Let's now turn to Slide 16. In this slide, we show the breakdown of net banking income. Again, due to the unfavorable comparison base mentioned before, adjusted net income shows a 30% decrease year-on-year despite lower interest expenses, which, on the other hand, benefited from a significantly lower cost of funding. Commissions were solid and grew from EUR 1 million to EUR 4 million, also thanks to higher servicing and collection fees. Trading income was also lower year-on-year as we registered almost zero income from asset disposal. The bottom right chart, which represents the contribution to net banking income by business line shows a tiny performance contribution, positive contribution by the CQ business for the first time after several years. Nevertheless, nearly all net banking income is derived from Factoring. Let's now turn to the cost base commented on Slide 17. Total costs grew by less than 1% year-on-year, driven by administrative expenses, while personnel costs were flat. Administrative costs grew by 2% year-on-year and includes non-recurring consultancy costs linked to the voluntary tender offer and also some credit-related costs such as credit insurance and the SRT premium. Administrative expenses also include risk provisions. FTEs net of Kruso Kapital stood at 218. In terms of funding, on Slide 18, the bank decreased retail funding year-on-year with term deposits at EUR 2.35 billion vis-a-vis EUR 2.6 billion in Q1 2025. The decrease has been managed by the bank throughout 2025 to achieve a more efficient funding structure given the decrease in loans over the course of the year. The weight of retail funding in total is now equal to 66%, which is lower year-on-year. Cost of funding was equal to 2.55% in the quarter vis-a-vis 3.16% in Q1 '25. As shown in the graph, cost of funding has continued its downward trend since the end of 2024. Now on Slide 19, Asset quality. As of 31st March 2025, as is well known, the bank reclassified a significant amount of loans that's past due in line with the clarification provided by the Bank of Italy on the application of the new definition of default rules. The bank has since then taken various managerial actions aimed at reducing the stock of past due loans. Among the actions undertaken, it's worth mentioning faster collection, contractual resolutions, and portfolio disposals. All these actions allowed the bank to sharply decrease net non-performing exposure year-on-year by 35% and net past due loans by over 40%. As a result, gross NPE ratio decreased to 14.5% and net NPE ratio to 12.6%. Figures as of the first quarter 2026 do not include Kruso Kapital. As mentioned, it is now classified among the activities under disposal. The exclusion of Kruso Kapital from the asset quality accounted for around EUR 12 million of the NPE decrease in the first quarter 2026. I now hand the floor over to Iacopo.

Yes. Thank you, Ilaria. So I would like to remain on this point here for a second on PA Factoring and on compliance to DoD. First of all, you will remember that 2024 inspection -- Bank of Italy inspection on Banca Sistema raised 3 points, one on governance, the other one on control system, and the third one on the application of DoD, which from a very pragmatic point of view is a topic regarding classification and impairment. Now the first 2 elements, which are governance and control system are, let me use the expression, automatically sold by the change of control by the apprehensions of a parent company, by the new organizational and procedural setup, which is imposed, which is introduced by the parent company, by CF+. As far as the application, the correct application, the correct implementation of the new DoD requirements, I said before that we are conducting a detailed review. But at the same time, I will provide to you some evidences regarding this. At this stage, we have not identified issues, structural issues in the underlying operating model. Clearly, the review process will continue over the coming months. Let me go step by step. LPIs. So the bank as far as Factoring business is concerned, do represent EUR 188 million, which are a part of those EUR 199 million that you see on this page, EUR 188 million of past due. Now we confirm that this amount fully include all the LPIs, so all the late payment interest component for EUR 56 million. Mitigants. The bank has been adopting one single mitigant, which is called dispute mitigant. So 2 conditions must be met for this mitigant to be applied. So an out-of-court challenge by the debtor and the initiation by the bank of legal proceeding before a court or equivalent body within 100 days, 180 days from the due date of the invoice. Now what is the total amount on the base of which this mitigant has been applied. Therefore, what is the total exposure, which has not been classified as a past due, due to the application of the mitigant, it is EUR 8 million. Third element, resolutions. Now the bank has long adopted in accordance with factoring law. And with contractual arrangement in force, the so-called resolution. What is this? The bank -- the mechanism applies as the bank benefit from contractual rights to terminate agreement in respect of acquired receivables in the event of a breach of representation and warranties by this time. Now what is the total amount of resolution that has been performed, activated since June 2024? It has been EUR 205 million, of which EUR 114 million have been already collected. So there is an amount of EUR 91 million remaining. What is happening when the bank activate a resolution? Clearly, it moves from the original debtor, let's consider, for example, a municipality to the corporate, to the original client that sold its credit to the municipality. And the first element that this perform is a credit -- is a thorough creditworthiness assessment of this new debtor. On the base of which out of the EUR 91 million, EUR 30 million has been reclassified to past due, due to -- sorry, to unlikely to pay or to bad loans, clearly considering the creditworthiness of this new debtor as poor. For the remaining EUR 61 million, where the new debtor is in a good creditworthiness stand, it has been applied even in this case, the mitigant, the dispute mitigant I mentioned before. In this case, we are talking about a sign of high credit standing operating in the energy sector. Now let me put one other element on the table. Collection, and in particular, correct allocation of collections to the specific invoices indicated by the debtor in accordance with the applicable regulation. First of all, the bank, Banca Sistema did not receive findings from Bank of Italy on this matter. Second, periodic audit reviews are carried out on this topic. Third one, the bank uses the most widely adopted management application IT system on the market. Therefore in any case, also on this point, we are conducting a thorough due diligence also using adviser to check every single aspect. Final element I would like to underline, the negative court rulings. So with reference to this situation, the gross exposure of Banca Sistema, so situation in which the bank has received negative court rulings, the overall exposure is EUR 37.3 million gross, plus EUR 5.7 million of LPI. So total exposure, gross exposure of EUR 43 million. Now on the base of which EUR 14.4 million of write-downs impairment have been applied. So I would underline the point that these are first evidence that we gather, but we are conducting due diligence on this point. Now I would like to close. So before moving to Q&A, sorry for being a bit longer than normal, let's say, presentation, but we thought that it would have been important, first of all, to clarify specific understandings that we have of the situation, especially on the PA Factoring and on the other side, to start talking, educating, presenting figures and results at group level. But before moving to Q&A, let me leave you with a few key takeaways. First one, let me confirm this point. This transaction fundamentally changes the profile of the group. The new group is significantly more diversified in terms of asset mix, earnings drivers and capital allocation strong. The second point, the stronger capital base is already translating into commercial momentum. So what constrained Banca Sistema in the past was not demand, but capital flexibility. Third one, the group combines attractive asset yields on the different asset classes with a relatively efficient capital absorption. Over time, our goal, our mandate is to allocate capital dynamically across the businesses based on a risk-adjusted return consideration. Fourth, we are approaching the integration process, especially this year. I told you, we are expecting the merger by the end of the year and to give you an indication, roughly in November. 2026 will still be a transition year, impacted by several extraordinary items by integration costs and non-recurring items, badwill and so on and so forth, while 2027 should begin to reflect the first tangible benefit of synergies and platform optimization. Finally, we believe the group starts this journey from a position of strength. So capital is okay, attractive businesses in which we are, meaningful long-term industrial potential. Yet, our focus is on execution. The drivers of this execution, the lines of this execution have been underlined during this presentation, and I hope that we have been enough, let's say, effective in communicating what are our priorities for this year. So operator, we are now ready for Q&A.

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

A couple of questions from my side. The first one is how do you see the combined entity position in the current macro environment? And then on badwill, how it has moved up to now?

We gather all the questions or question by question. Can we gather all the questions to gain potential to, let's say, cross and move from one question to the other? Is that possible? If there are other questions, clearly.

Ms. Rossetto, your line is open.

Yeah. I already asked my questions. Thank you.

Okay. Sorry, I will answer on this. So maybe the others have time to think about the question. So on the badwill, I will ask to Luca Ghislandi, which is Head of Planning and Control at surplus level to provide you details on how badwill has been calculated and assessed. By the way, clearly, this is a provisional determination that we have defined so far. So there will be a process that, as you well know, will last for at least other 3 quarters. And then I will leave the stage to Luca. On the overall competitive position. Now as you well know, it's been a tough period for, let's say, focused specialty specialized banks with many banks may be weak on the capital position or weak on the business model that disappeared and has been, let's say, bought from other operators or saved within specific frameworks. The main reason for which we started looking at Banca Sistema was its franchise operations. We are -- we have been, let's say, working on the -- sorry, it's factoring -- franchising factoring. We have been working in factoring for years at CF+, and we have appreciated the size of the business, and the fact that there are specific business segments within the factoring business that can provide important returns. Now so far, we have been lucky to be able to match a solid competitive position with the capital availability provided by Elliott, which was our shareholder. Now in the context of a listed company as the one that we want to remain after the integration of CF+ into Banca Sistema, clearly, we are looking at, let's say, further potential consolidation on the base of a business model that as we have proven to you is already solid and diversified. I mentioned to you the fact that we want to give Banca Sistema full potential in terms of internalizing all the revenues that were somehow left aside. We are already moving in order to strengthen Banca Sistema positioning in Spain, which is one of the most interesting market at least as far as PA Factoring is related. Clearly, as a condition for this, the 2, let's say, initiatives that we have in place on the back book for PA Factoring and on the front book for revolving securitization are a key priority for us, and we will report and refer to you as soon as we are ready on this element. Clearly, it remains the combined group a bank with EUR 7 billion assets, so pretty small. So there is room for further growth and there is room for further optimization. And clearly, we are open to potential new, let's say, consolidation opportunities. Luca, do you want to refer on the badwill?

Sure. Hello, it's Luca Ghislandi speaking. As Iacopo said, with regard to the badwill, first of all, we need to consider that it's a process that's still ongoing, and it will take roughly, I mean, it will take 12 months to basically complete all the analysis and define a final number. Anyway -- anyhow, how did we define badwill in this first quarter is that basically bad results from the difference between the tangible common equity of Banca Sistema at the time of the first consolidation, minus the consideration that Banca CF+ paid for the roughly 80% of the shares. Then on top of this, we added some elements resulting from the purchase price allocation exercise we are still -- which is still ongoing and which mainly relates to deposits on to customers and the accounting standard of government bonds. So this has been reflected in a provisional PPA, which up until now, it amounts to roughly EUR 10 million, as you can see from Page 7 of the investor presentation.

The next question is from Davide Rimini, Intesa Sanpaolo.

I have a couple. One is regarding, I collected sort of the message of a much more diversified business and the 5 business lines that you highlighted will be core within the group. I just wonder whether within those, you could elaborate a little bit more sort of the level of commercial presence in Factoring PA. I do understand that business has accelerated in volumes in Q1 benefit from a stronger capital ratios already. But at the same time you highlight that business is the most capital intensive and it has -- given the regulation, it has intensified the capital requirement. So I wonder by the time that you highlight that you attracted just 15% of consolidated risk-weighted assets, going forward will be less capital allocated to that business or more? And the second question is that is on another area of the 5 that you mentioned, the salary-backed loans, which was not part of CF+, it was instead of Banca Sistema. Looking at the asset yield, it is the ones which have been so far yielding the lower within the group for historical reasons. I just wonder whether you could elaborate a little more in terms of the strategy that you have there and whether you might consider the business at scale or not and whether you could also mention the competitive landscape, how do you see that evolving?

Thank you for the question. So let me start from salary-backed loan business. Now the economic contribution of this business has been historically poor within Banca Sistema. The way -- now especially in the last years due to the dynamics of interest rate in the market, small operators, small originators have been suffering compared to large operators. It is a business that requires scale, and it is a business that required a competitive cost of funding. And in this moment, we don't have any of those, any of the 2. So we don't have scale because the overall origination ranges on a yearly basis from EUR 150 million to EUR 200 million of new volumes, which is not enough. And on the other side, we don't have a competitive cost of funding because the overall, let's say, cost of funding of the group is 2.5%, 2.6%, which doesn't allow to price correctly. Therefore, we have started a strategic review of the presence of the group into this business, and we will come up with the determination in the following -- in the next month. Going back to PA Factoring. Now the point here is the following, and let me be very clear on this through an example. When you buy from, for instance -- we're talking here about PA Factoring or NHS Factoring. When you buy a portfolio from a big pharma and they sell you, let make 100 of turnover. Now the component that structurally goes into bad -- sorry, into past due of those 100, it is in a range of 2%, 3%, 4%. It's not a lot. But they force you to buy also those debtors within the overall setup of the group. Now what is the situation is the more you buy those type of debtors, the more you buy other debt, so the more the contagion effects influence your overall position and therefore, the overall situation becomes unsustainable. Now under the condition that we will be able to, let's say, set up a solution for offloading bank balance sheet of those specific exposures, those specific loans, which are then contaging other exposures. So on the base of this, we do believe that PA Factoring remains very attractive with high asset yields even if we are assuming that after 180 plus 1 day, we should be forced to sell to specific nonbank investors, let's say, that specific credit lines and the implicit LPIs and returns that those credit lines are bringing with themselves. So this is the condition. Under these conditions, let's say, capital allocated might even increase in this asset class compared to others that we have, for instance, just mentioned. Definitely, if a setup like this cannot be put in place, but let me say we are positive instead of being able to set up a process like this. But I mean, now the overall situation will have to be, let's say, reconsidered or optimized in terms of capital allocation because, I mean, the amount of capital required would immediately become too much.

The next question is from Jackie Ineke, Spring Investments.

I've got a couple of questions on capital, if I may, and apologies for background noise here. But it was good to see on Slide 6, you showed the consolidated capital ratios. Just a question there, first of all, you note there that the requirements are just at the overall capital ratio levels. It's not linked to any SREP. So my first question is, has the SREP for the group been suspended for the year? And you seem to indicate that it will come back once the merger is fully done. And the second question is, last time I spoke, I think, maybe about 5 or 6 months ago, there was the kind of estimate that the lowest level for CET1 would be around 12% in 1Q. It looks like, obviously, it's 11.4%, so that's a little bit lower, but I appreciate there's a lot of moving parts. Could you confirm that, that is the low point, that is expected to be the low point for CET1 this year?

Let me start from this second question. As -- sorry, we cannot disclose as you -- as I anticipated at the beginning forecast because this would go against the limitation that we have as a consequence of the tender offer. Despite of this, I mentioned that in the context of this transaction in the context of this industrial, let's say, process, the lowest point in terms of capital position is the one at the closing. So it is now, because the moves that will happen and especially the accrual, the consolidation and the merger to the optimization of minorities are very positive in terms of capital release. And I gave you a sense of the potential impact, which I repeat it would be up to 1% to 1.5% that would up across the different capital indication. Now if I got correctly the first question, that refers to specific requirement at Banca Sistema level or at the group level. Can you repeat, please, the first question if you doesn't mind?

I understood -- yes, no problem. Just from Slide 6, I think it clearly states the consolidated capital levels. So I assume CF+ down, including Sistema. And they're given versus overall capital requirements by the supervisor. But in there, it says that the requirement is that it doesn't state the SREP anywhere, which is obviously always above the overall capital requirements. So my question would be, the SREP, has that simply been suspended by the ECB and the Bank of Italy for this year until the merger is complete? That's how Slide 6 reads for me.

So first of all, here, we're talking about the SREP. Typically, on top of the SREP, Bank of Italy provides a guidance, which has to be, let's say, followed by each bank. Now today, as a consequence of the consolidation of Banca Sistema into CF+, the group has taken the capital ratios from CF+ level. And these are the levels that we are showing here. So the 9% CET1 level, 10.9% and 13.4%. Now by the end of the year and so through a process that will be based on aggregated process pro forma run by the 2 banks by June. The merger filings, we will, let's say, provide the Bank of Italy with all the set of information in order to come up, we assume at the merger authorization date to come up with new capital requirements to be applied at the combined entity. So as of now, those ones are the one related to CF+. We do expect that the capital position is sound. We do expect that the overall effort that has been performed by the bank with Bank of Italy in defining the requirements in terms of capital has been very effective. Let's see what will be the new capital decision arriving from Bank of Italy after the fact that the bank -- the combined entity will provide Bank of Italy with a pro forma hiccup and the new, let's say, merger plan as a key component of the merger filing authorization.

The next question is from Lorenzo Giacometti, Intermonte.

Thank you for the presentation which by the way, I think it's very helpful to understand how the group will look like onwards. So coming to my questions, I have actually 2. The first one is if you can give us some more color about the increase in Factoring turnover within the first quarter. And the second one is on the -- if you had some updates from Bank of Italy regarding the extraordinary measures.

Okay. I leave the stage to Ilaria for the color on the Factoring turnover, and I will answer on the bank.

Yes. Thank you, Iacopo. Factoring turnover stood at EUR 1.4 billion in the quarter, which is higher than any other quarter in 2025. So we can't, on these days, give projections for the future, but we can say that the solid -- the performance of the commercial team year-to-date was particularly solid, definitely higher than the performance in each quarter, even in the last one, which is historically -- which has historically been the strongest over the course of each year. So the Q1 performance was stronger and more solid even than last quarter of 2025. This is definitely a good signal showing that we have removed many of the constraints that Iacopo was mentioning in terms of capital availability.

Okay. On the ban, what we are asked to provide the Bank of Italy is this thorough due diligence that we are performing, as I mentioned several times on the overall new DoD operational platform application implementation within Banca Sistema. Once that the parent company, the new management has provided a full assessment and has taken potentially into consideration impact maybe within the purchase price allocation and so on and so forth. Now in that moment, the process for removing the ban will be started, not before. So clearly, there is a full alignment of interest by the new, let's say, by the parent company, the new Board, shareholders to work hard on this assessment. So that means that we will provide the Bank of Italy with all this information in the following months, in the next months.

[Operator Instructions] There are no more questions registered at this time.

Thank you, everybody, and speak to you soon for the second quarter results.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.