doValue S.p.A. (DOV) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to doValue Full Year 2021 Preliminary Financial Results Presentation. I'm Alberto Goretti, Head of IR at doValue, and I'm here along with Andrea Mangoni, our Chief Executive Officer; and Manuela Franchi, our General Manager of Corporate Function and CFO. As usual, we'll go through the presentation in 30 minutes, and we have 30 minutes for Q&A. So without further ado, let me hand it over to Andrea to get started. Andrea, over to you.

Thank you, Alberto. Good morning, everyone, and thanks for joining us today. I'm very satisfied with 2021 results. Starting from Page 3 of the presentation. The year that just closed has been a record one in terms of origination activities. We have secured close to EUR 15 billion of new GBV, composed by more than EUR 3 billion of forward flow and more than EUR 11 billion of new mandates, exceeding by a wide margin our initial targets for 2021. The year 2022 has also started very well with about EUR 1.5 billion of new GACS won in Italy as well as EUR 500 million mandate won in Greece from Fortress. In addition, we have signed an agreement with a major Italian bank with which we are not working in the past for a pilot project for the management of a portfolio granular here that we have exposure starting in March with our new platform exported from Greece. This is the first tangible sign of what we have discussed during our Capital Market Day at the end of January in terms of our willingness to broaden our reference market beyond NPLs and utilities. In terms of financial performance, we have built our guidance for 2021, both in terms of EBITDA and net income with a strong EBITDA margin of 35%. The exceptional performance was mainly driven by a very strong fourth quarter where we experienced the strong collection performance and the normalization of the operating environment in terms of auction, foreclosure and cash-in cost. Collection rate now stands at a solid 4.3%, well ahead compared to the level of 2020, but also above the pre-COVID level of 4.2% in 2019. In terms of financial leverage, we have now achieved the lower end of our target range, and we can therefore accelerate our dividend payments starting from EUR 0.50 in 2021 and growing from such level at a rate of at least 20% per annum. As already mentioned, we are now in a fully normalized environment as far as cost activity is concerned, and the expectation is that new NPE generation will pick up in 2022 on the back of the end of Moratoria across further Europe -- Southern Europe last year. On Page 4, we had a record year in 2021 in terms of origination and mandates secured. We have exceeded our target for forward close by a multiple of 1.6x, and that exceeded the midpoint of our target for new mandates by a multiple of 1.4x. As mentioned, we have already secured about EUR 2 billion of new mandates in the first 2 months of 2022, and we expect to meet or possibly exceed our overall target of EUR 13 billion, EUR 14 billion of inflow for the year. Moving to Page 5. On the back of our pretty strong fourth quarter, we have been able to beat our guidance both in terms of EBITDA and net income. We are now at the bottom end of our leverage target range, and we are confirming our dividend per share indication of 50% for 2021. As mentioned, we expect to pay at least EUR 200 million of dividend for the years 2021 to 2024, and we have other levers including the share buyback to potentially increase the distributions. Page 6 is on Q4. The last quarter of 2021 has been particularly strong, with gross revenues growing by a multiple of 1.3x quarter-on-quarter, EBITDA growing by a multiple of 1.7x and cash flow growing by a multiple of 1.8x. As a reminder, the 2 quarters are fully comparable in terms of consolidation perimeter. But clearly, in the last quarter of last year shows a full normalization of the operating environment. Also, it's worth mentioning that our business in Greece continues to perform pretty much ahead of our underwriting business plan, which is something we are extremely pleased off. Moving to Page 7. We discussed a lot about the doTransformation program during our Capital Markets Day. Here, we give you some indication of the activities we have carried out in the last few weeks, such as the merger of 2 NPL platforms into 1 state-of-the-art in Italy end of January or the full onboarding of the Frontier portfolio at the beginning of February in Greece. As a reminder, doTransformation represents for us a complete overhaul of our operational model and will require investment in terms of money, effort and focus, but we expect it to yield substantial results from 2024 onwards. Page 8 is on our pipeline. In terms of origination activity, here, we can show some early signs of wins by doValue. In particular, we have won 2 important GACS in Italy for a total value between EUR 1.5 billion and EUR 2 billion as well as portfolio in Greece from Fortress for an additional EUR 500 million. We are working on all the potential transaction we listed above. And hopefully, we will be able to give you positive news in due course. As far as SAREB is concerned, there is no relevant news today versus what we discussed during the Capital Markets Day, and we still expect SAREB to make a decision in the next weeks. Moving to Page 9. I can say I'm very proud of our results in 2021. And I believe these results make us even more confident about our business plan targets presented a few weeks ago. As you know, 2022 is going to be a transition year mainly due to the SAREB, but also because of the investment required in order to transform our operational machine. I'm confident that we will go back to a growth trajectory in terms of EBITDA from 2023 onward. Our EBITDA margin will reach 37% target by 2024, and our cash flow generation will remain strong. On Page 10, a few words on dividend. As you know, we have upgraded our dividend policy in order to give our shareholders more visibility around the distributions for the next 3 years. We will recommend to the Board of Directors a dividend of 5% for 2021, which is set to grow by at least 20% per annum to 2024. Considering the strong expected cash flow generation for the next 3 years, our current dividend policy will still leave us scope to perform M&A. But without material M&A, I think we can definitely increase our distributions even further. Now let me hand it over to Manuela for the second part on the presentation. Over to you, Manuela.

Thank you, Andrea. Good morning to everyone. Moving to Page 12. In terms of key financials, our GBV has remained broadly stable in 2021, in particular considering the tail of mandates won but not yet onboarded as of the end of 2021. GBV stands at a pro forma level of EUR 158 billion, substantially in line with the level at the end of 2020. As you know, we just mentioned before that Frontier has been onboarded in February, so as part of our actual EBITDA -- of our actual GBV today. Collection has grown substantially in 2021, partially due to the large consolidation perimeter, but also due to the full normalization of our operating environment. This is partly reflected by the collection rate, which stands at 4.3%, the highest level in the entire history of doValue and very good results considering the restriction on the auction activity in Italy during the first half of 2021. Gross revenue grew by 56% or 20% on a pro forma basis if we consider FPS for the full year 2020. Outsourcing costs decreased as a percentage of revenue from 12% to 11%. EBITDA grew by 58%, mainly due to the triple effect of the large consolidation perimeter, the normalization of collection for COVID and the higher-than-average profitability of doValue Greece, which stands at 54% for 2021. Overall, in 2021, we recorded a strong increase in EBITDA margin by almost 5 percentage points from 30% to 35%. Net income grew by a multiple of 4.2x in 2021. On the back of growing EBITDA, partially offset by higher D&A, higher provision, interest cost related to the bond and higher taxes. Finally, last year, we achieved a substantial deleveraging, bringing our net debt to EBITDA down to 2x from 2.6x at the end of 2020. This has been mainly achieved through EBITDA growth, while net debt remains broadly stable as free cash flow activity was affected by M&A and other one-off items and was mostly dedicated to dividend payments. Moving now to Page 13. Regarding gross book value evolution. The movement in the gross book value reflects on the positive side of the mandates won in 2020 and onboarded in '21, such as the EUR 2.8 billion Icon portfolio in Greece as well as the mandates won and onboarded in '21, including EUR 3.3 billion of forward flows and EUR 5.7 billion of new mandates won in '21 and onboarded before year-end. Collections stood at EUR 5.7 billion, reflecting a record collection rate of 4.3%, well ahead of both '19 and 2020 levels. In terms of write-offs and disposal, the main items here is related to the EUR 3.5 billion Saturn portfolio from Alpha Bank in Cyprus, which you know the bank has decided to sell by the first half -- the first quarter of 2022. And for which we are carrying out today an advisory role for Alpha Bank in the management of the portfolio. We believe we are well-positioned to win the management of the NPL portfolio once it is sold by Alpha Bank to a new investor, and we expect to give you some positive news on this point very soon. Disposal mostly relates to our business in Italy and partially Spain. But as customary, most of the EUR 5.8 billion of disposal were compensated by indemnity fees. As previously described, the Mexico transaction with Eurobank in Greece is [ muted ] from a GBV perspective and is not included in the disposal bucket, although the indemnity fee was paid by Eurobank to compensate the delta between the initial fees and the fees associated with the securitization structure. Project Mexico has allowed us to enlarge our customer base by including Waterwheel Capital Management, a U.S.-based investor very active in Greece. Although gross book value has nominally decreased in '21 by EUR 8 billion, we have more than EUR 8 billion of new mandates, which will become GBV during 2022, including also Project Frontier already onboarded. Moving to Page 14. Our business remains highly diversified in terms of clients, geography, security and business type. In particular, it's quite clear that while Italy makes about half of our GBV, the revenue contribution is directly skewed to the Atlantic region, considering the higher fees that characterize the market's [ ingredient ] cycles, the more recent average wins but also the fact that Eurobank contractors still reflects the initial fee agreed at the time of the FPS acquisition. This latest aspect is also quite clear in the difference in contribution of commercial banks in terms of GBV versus gross revenue, in particular in relation to the Santander and Eurobank fees, which still reflects the required remuneration of the capital deployed in purchasing this contract. As discussed in many cases, the SAREB contract will expire in July 2022 and represented circa EUR 20 million of EBITDA in 2021. Considering the competitive nature of the SAREB products and the fact that [ lump-sum ] payment is required by SAREB on the award of the new contract, fees are going to be materially lower than the current one as discussed during the Capital Markets Day. Based on the latest feedback from SAREB, we believe that the contribution of SAREB's EBITDA is likely going to be limited to no more than EUR 2 million per annum from 2023. As anticipated by Andrea, we expect to hear back from SAREB in the coming weeks, and we remain positive on our position. Moving to Page 15. In recent years, we have complemented our historical core NPL product offering towards higher margin segment, such as REO, UTP and Early Arrears, which offer more favorable fee levels and structure. This is quite well reflected in the difference between GBV and gross revenue associated to those products, and our business plans foresee a strong focus in further expanding our activity in these asset classes. Moving now to Page 16. Gross revenue in 2021 grew by 56% on a reported basis and 20% on a pro forma basis, considering the FPS acquisition from the beginning of 2020. The growth trend is also confirmed comparing the fourth quarter of '21 with the first quarter of '20, which are comparable from a perimeter point of view with gross revenue growing by 55%. All regions reported positive gross revenue growth, with Iberia being affected by one-off positive items in 2020, which made comparisons more difficult compared to the other regions. The year 2021 also saw a relative decrease of the outsourcing cost as a proportion of revenue from 12% to 11%. Moving to Page 17. Operating expenses in 2021 grew by 26% on a reported basis or 14% on a pro forma basis but decreased as a proportion of revenue from 58% to 53%. In particular, all items decreased as a percentage of revenue, demonstrating the positive operational leverage which characterizes our business and the strong focus on [ role ] and optimization. Let's move now to the EBITDA, excluding NRI, which grew by 58% as shown on Page 18, or 27% on a pro forma basis, with both Italy and the Hellenic region posting positive growth. The EBITDA trajectory in Iberia was affected by an increase in cost in 2021, partially due also to higher bonuses being paid in '21 versus '20. Moving to Page 19. Collection performance is improving in all regions, yielding 120 bps improvement in collection rates on a consolidated basis compared to 2020, a 10 bps improvement compared to 2019. While the revenue contribution of the 3 regions is broadly comparable from an absolute point of view, it's quite clear that Greece and Cyprus contribute very positively to the overall profitability of the value group. This is a feature which is likely to characterize our business going forward through the business plan period to 2024 as the Italian business fully recover, Spain will deal with the SAREB renegotiation in 2022 and Greece will tackle an attractive pipeline of potential mandates in the next few quarters. Please note that the calculation for the Hellenic region collection rate has been updated to reflect the full inclusion of FPS, which had not been included in the last set of results as of September 2021 as was noted in the previous presentation. Moving to Page 20. The net income has increased substantially, both on a reported basis and also excluding NRI. In particular, net income growth was driven by EBITDA growth, partially offset by an increase in D&A; an increase in provision for risk and charges, of which a large component are recurring; increase in interest cost due to the higher gross debt on the back of the FPS acquisition; and higher taxes. As a reminder, 2020 was characterized by the tax claim item, which was classified as nonrecurring in the 2020 P&L and paid in 2021. On the cash flow on Page 21. This is certainly affected by certain one-off items, which have impacted the conversion metrics. In particular, the favorable payment terms agreed with Eurobank in 2020 at the time of the closing of the FPS acquisition have positively impacted the cash flows as 2021 fees were [ cashed in ] at the end of 2020. In addition, the cash flow generation in '21 was affected by the payment of the EUR 53 million Spanish tax claim and a EUR 5 million share buyback. Notwithstanding this event, we have now achieved the bottom end of our leverage target range of 2x to 3x. Moving to Page 22. The bond issuance completed in July this year and the full reimbursement of the bank debt facility related to the acquisition of Altamira has greatly improved the profile of our debt structure, moving from the mix of bullet and amortizing debt profile to an exclusive bullet profile, which is bringing a meaningful benefit in terms of cash flow generation to our business. Our average debt maturity is almost 4 years, and we have also increased our RCF lines by EUR 55 million in January 2022, with the total RCF available now being EUR 120 million. Now let me hand it over to Andrea for his closing remarks.

Thanks, Manuela. And just to conclude on Page 23, I wanted to leave you some final considerations. First, we closed the record year in 2021 in terms of inflow, and we have started 2022 on the right foot with already EUR 2 billion of new mandates secured. Second, pandemic is now in the past, and our operational activity is fully normalized. Third, our doTransformation program is progressing well. We will keep you updated on this. And hopefully, you will see the results of the program feeding to our P&L and cash flow generation in the coming quarters. Fourth, we will soon have more clarity on SAREB, which is an important milestone for us. We remain positive on the SAREB process. But as discussed in a number of occasions, SAREB is not a pillar of our business plan, and we can achieve the target we have set ourselves with or without SAREB. Lastly, we have definitely shifted to a new paradigm in terms of dividend distribution, also thanks to our leverage having reached our target. And we believe this will give greater visibility to investors and support our share price. So thank you for your time and attention. We can now start with the Q&A session.

Thank you very much, Andrea and Manuela. [Operator Instructions] Let's maybe start with Nicholas Binda at Intermonte.

I have 3 questions. The first one is related to 2022 EBITDA. I was wondering if you reiterate the guidance for flat figures. And if so, if the targets are related to the actual results of EUR 200 million or to the previous guidance, so EUR 190 million, EUR 195 million. The second one is related to Spain. EBITDA in Spain in 2021 was 5% above the high end of the 2024 target. So I was wondering if do you see room to do better that -- what indicated in the business plan? And finally, I was wondering if you could provide some sensitivity of your business model to interest rates and inflation. So yes, any color would be really appreciated.

Thank you, Nicholas. To your first question on our guidance for 2022, what we've said in the past was that EBITDA was expected to be flat and flat compared to our previous guidance of EUR 190 million, EUR 195 million for 2021. Having now achieved a better-than-expected EBITDA for 2021, I think it's fair to say that probably EBITDA for 2022 would be marginally lower, again, mostly driven by the SAREB process. But certainly, we remain positive in 2022. The year started well in terms of origination. So we'll keep you updated on the guidance on 2022 through the course of the year. In terms of interest rate and inflation, the way we frame this internally is that certainly higher inflation and higher interest rate provide, unfortunately, more stress to companies and households. And all in all, this might exacerbate the distressed situations already in place, and that should lead to higher NPEs we generate in the system. On the flip side, bank benefits from higher interest rates, and therefore, they should be accommodating a higher provision without stringent need of disposing those NPEs. But broadly speaking, I think these are items that are positive to our business in terms of generation of NPE. When it comes to our P&L -- sorry, lastly, I think interest rates and high inflation supports generally real estate prices, which should allow us to collect more on the secured part of the debt we have under management. When it comes to our P&L, most of our debt structure is fixed interest. It's the coupon of the bond. They are fixed. And we don't have any maturities before 2025. So no impact in the short term from potentially higher interest rate. And we have a mild -- a very mild correlation with inflation in our OpEx. Yes, salaries are mostly inflation but to a moderate degree compared to the headline inflation you see, we produced the benefits at the moment. On your second question in terms of the business plan, we reiterate our targets. But clearly, they were set on the previous guidance. But again, we'll keep you updated on that, and we remain fairly positive on the business plan overall.

I think the second in line is Luigi from Banca Akros.

Yes. First question is on your servicing revenues. If you please can give us the split between the base fees and the collection fees. The second question is on the evolution of the cash flow for this year, 2022, given that there will be marginal pressure on the EBITDA generation. And additionally, you're going to do some investments for the doTransformation, cost-cutting plan. We have to expect, I think, a much lower cash flow generation, possibly an acceleration in the 2 following years. Does this affect your dividend policy or we have to stick to a 20% increase in the dividend per share? And third question is on the collection rate. So you updated the figure for Greece. Is it possible to have a comparison for 2020 on the same base? And given that you are targeting the 6% collection rate in 2024, the world group -- for the world group, how do we have to look at it for the different geographies? So I imagine that the collection rate in Italy will not triple or more than double, let's say. So what do we have to expect going on?

Luigi, you asked the first question was related to the split in the outsourcing revenue of the base and collection or of the total?

No. Of the servicing revenues. That was an information you were giving in the past.

Yes. It's the 53% is coming from the base fee and 66% from the variables. In terms of cash flow for this year, we have, as you know, from the debt capital market presentation, sorry, on 40 -- more than EUR 40 million payments on the CapEx side, also flat EBITDA. But this makes us believe that there's still a positive free cash flow generation after -- before paying dividends, and obviously, before any M&A. So definitely, our dividend policy is confirmed because we have defined it as the bottom of what we want to deliver to shareholders. So the 20%, it's something we can only do better from. In terms of collection rate, vis-a-vis the previous year on the Hellenic region was 3.1%. So definitely a strong improvement in this area, while moving to the figures you see now of 4.3%. While on the Italian side, you have seen the results, and we think in the medium term, we will go back to the original guidance of 2.4% to 2.6%, but it's not going to be in 2022, but over the business plan horizon.

I think the next in line is Andrea from Equita.

My first question is on the rumors about possible disposal of UTP portfolios by UniCredit. You have a forward flow agreement on NPL generation. If you can elaborate on how this may impact your business in terms of new inflows coming from the agreement with UniCredit. The second one is if you can provide us some indication of which is the contribution in terms of EBITDA you expect from Frontier already from this year? And the last one, if you can elaborate a bit more on the provision for risk and charges, which were posted in the last quarter, so in the fourth quarter. So if you can elaborate which are -- which elements are included in these items.

On UniCredit, the disposal process of the UTP stock from UniCredit will not impact our projections because, first, our current projection in terms of new NPL inflow from UniCredit are extremely conservative; and second, we are currently discussing with UniCredit the extension of our current contract in terms of size. So again, the impact of the UTP disposal process currently underway will be definitely negligible on our results. Your second question was on Frontier. Yes, the collection of Frontier will start from the onboarding rate. So it means February 7 this year. And I hand over to Manuela for the last one.

Andrea, if you don't mind repeating your last question because we were not able to catch it.

No, sorry. It is about which elements are included the provision for risk and charges which were posted in the last quarter of the year. So I mean maybe related to staff exit and things like that. But just if you can elaborate on which elements are included.

Yes, definitely. The first component is related to layoffs. So you know we continue on our plan to reduce the personnel, and therefore, we have around EUR 10 million related to that. EUR 6 million are related to the adjustment for the value of the SAREB contracts, which obviously takes into account the new scenarios of feed. The other components are related to the adjustment. The EUR 3 million is related to the adjustment of the price of the Eurobank contract. Because as it was contractually agreed, there was a final element to be defined based on the results of the company after 8 months from the closing period, which was due this year. And the remaining components are related to general risk provisions that we carry on our ordinary business. Most of which have been there also in the past. So the -- all the components, probably the elements which you see every year is only the last piece.

I think I have Andreas Markou from Berenberg on the line.

Congrats on the results. A few from me. I want to start with the regional performance in Q4. So if we do the math based on the numbers, I get to an EBITDA margin for Italy, which is lower quarter-on-quarter, and this is a bit surprising given that Q4 is always a much stronger quarter in terms of profitability because of seasonality. And then Spain has actually done much better versus Q3. So maybe if you can comment a little bit here on those 2 regions, and then I'll come back to Greece.

Yes. On Italy, there is always the element of the group cost which are pretty much flat over the years. And while we accumulated, any potential extraordinary costs, we have even in the normal activity. As you know, Andreas, we classify in general only those related to acquisitions. So you saw the amount this year given that we did the legal acquisition related to BidX, QueroQuitar and also the transaction we did in Greece, where we sold the notes to a new investor on Mexico. Obviously, we paid advisory costs to structure that transaction, but we also gained -- we had a capital gain related to it. So all that goes beyond this is cost of extraordinary nature. For us, they go in the office, and we classify them usually on Italy. So Italy is a little bit like the absorbing point of all the elements. So while -- if we look specifically to Iberia, as we said also in the Capital Markets Day, the performance in the last part of the year has really kicked up in an important way, also due to the new management in place, which is putting a strong effort on the operating machine, especially on the NPL side, which Andrea mentioned is where we could have done better. And this is already using results. So while the cost base has increased before more than proportionate to the results to take into account, the changes also in the composition of the personnel that's happened with the inclusion of new managers, including the CEO, the CFO, the effect of this new personnel is concentrated in the last part of the year. And also, obviously, we'll be leading the performance from 2022 onwards. And it is also visible in terms of our scoring with our clients. The reason why we are [ putting ] very highly with SAREB, especially in the second half of 2021, is also due to these operating changes.

Okay. Sorry, just to clarify. So in Italy, you said about this kind of one-off costs that you're taking. But I guess the numbers you're giving us, I'm using EBITDA excluding NRIs?

No. In fact, I said that everything which is exceptional related to business, which is not NRI, we put always in the ordinary cost. So we don't separate it. NRI are only for acquisition. So because we -- yes, sorry.

No, no, that's clear. Okay. Maybe now go to Greece, which Greece has been exceptionally strong, more than something like 64% margin in Q4. I understand part of it is driven by the indemnity fee of Mexico. Can you tell us the absolute amount of that? So what would be the margin for Greece excluding this kind of one-off indemnity fee? And then if we look -- and then if we think of performance for '22, you obviously have given us a guidance for the group. But how should we think of the different regions? And then what are potential risks. For example, the portfolio you mentioned with Alpha Bank in Cyprus, my understanding, this has gone to Cerberus. So again, what is the risk here that you actually might not keep the servicing mandate for this portfolio? And is there any other sort of risk you're seeing for this year? Now we are kind of going to post-pandemic situation, but as you said, interest rates are rising, default rates are also rising. Are you seeing any potential risk for stress in real estate towards the end of the year? Anything else that you are factoring in, in your guidance or which could be an emerging risk?

On the total indemnities for the group, we are pretty much in line with historical average, which is around EUR 20 million. Obviously, I mean, the total disposals were much bigger than the amount that included Mexico. Actually, in the -- on Page 15, the disposal here do not include Mexico. So let's say that the Mexico allocation in this number is probably 3 quarters. And without this number, this would still have an EBITDA margin above -- well above 50% for the first Q. In terms of guidance of margin by region, because of the reason we said on Spain were due to the cost of SAREB, the contribution only specifically for the SAREB contribution was basically on 20 to deal. The EBITDA margin in the Iberia region will be just below 10%. For the Hellenic region, we'll be above 50%. And for Italy, it will be growing marginally from the levels of 2021. On the specific transaction in -- you mentioned in Cerberus, this is a portfolio we know extremely well given that we have been managing it for a while. And since the decision of Alpha Bank to dispose it, we took it off from our GBV, but we still have an advisory role. So we feel very confident also about the next phase. We have a very good relationship with Cerberus even. If they are not one of our core clients, we have always have the dialogue with them. And you will see that our origination capability go well beyond as we have demonstrated from our core clients. In fact, we demonstrated it in Greece. We will demonstrate it in Cyprus. And now we have a long track record in Italy of origination with many other clients which are not the shareholders. In terms of the risk of the plan, I will address specifically the 2 points you mentioned but leave to Andrea also to broaden the scope of the answer. Today, we are seeing the elements of the full [ set ], not much impacting the collections, but really impacting in a positive way the production of new flows. So we see a positive performance on the collection. And also on the real estate side, the prices are actually on the positive trend. But notwithstanding that, we have a conservative assumption on real estate prices in our business plan across all the countries. So we are not including significant relevant upsides, taking into account that the situation of threats of the general economy.

Yes. I think Manuela is right. All in all, we were extremely conservative in our business plan. So the execution risk is low, is lower even in a negative macro. Just to give you an example, Andreas, the average default rate we put in our number crunch in exercise is in between 1% and 2%. So we are talking about extremely, extremely low default rate. Just to give you a benchmark of the current situation in Italy is at a cost rate, we are above 3%. So I think we were conservative enough and with low execution risk. And based on the last Q result, I think we can do better. We will update you, the financial community, during this year. But I'm definitely positive.

Okay. Great. I have 2 more. Can I take them now, Alberto or...

Sure.

Go ahead, yes.

Yes. Okay. Great. So the first one is on the Ariadne portfolio in Greece? What is the timing of that? And again, what is your positioning? Where do you stand versus competition? What's the likelihood that you will get that significant portfolio? And then the second is on M&A. Are you looking at anything else currently? Anything that might come up this year? I mean we've talked about kind of performing loan business, how you want to expand there. Should we be expecting anything in the next 6 months or so?

Yes. On Ariadne, Ariadne is quite important. It's a big chunk. And we will participate to the competitive PQH -- competitive bidding process. And I think the no binding offer date is set for next week -- before end of February. We are positive because we will replicate for the Ariadne the partnership with Fortress and Bain and this partnership was successful in Frontier. So considering our positioning in Greece, we are positive on Ariadne, and this project is one of our main priority for this year. The portfolio, as you rightly said, is a huge one. So the competitive bidding process would be complex. But again, I think ourselves, Fortress, Bain, et cetera, we demonstrated our competitiveness in the Greek market. And so we can tap this opportunity -- this so important opportunity.

On the M&A question, there are different processes, which are described on Page 8, which will entail from M&A, especially when they include sale of platforms with the forward flow agreement. One example is [ Farlight ] another one is the Portuguese project. So these are already examples of projects where we are working on in our core business, which entails a platform and forward flow that are critical and important for us. We expect -- and these are already in the process. So they are not expected to come. There are others that will come in the second part of the year also in Italian market in terms of opportunity for flow agreements. And obviously, we will be focused on those. And then there is the broader space of the fintech and [indiscernible] state where we are enlarging our proposition. And there, we will continue with the add-ons, small add-ons, which help us to broaden our reference market, but nothing which impacts in a relevant way our net financial position.

I think next in line is Filippo from Kepler.

I've got just one question, very briefly on your -- on regards to GACS portfolio, are you confident into a good recovery of the collection of this portfolio? And so you should disclose any risk of the penalties that you may incur if you not perform in terms of collection as expected by the business plan or the securitization?

Yes. Yes. on the that space, first of all, I think we are the leader by far in this market because, last year -- last couple of years, we were more or less 75% of the transaction -- the GACS transactions, I mean. But we are not just the leader because of the origination capacity, but because our performance. Considering our current GACS portfolio, we do not foresee any risk in terms of termination, additional subordination and an increase with [ documentation ], et cetera. We are currently on track on our target. And I think this is positive because it's not the -- it's not a common situation in this peculiar market. Some of our competitor is late in terms of being on track with the target, et cetera. So I think this year, we will see the start of the GACS secondary market because probably the investor will sell down to the market the asset, and this will be an additional opportunity for the value considering our unparalleled track record on it. And nothing of this is included our current business plan, the EUR 4.5 billion acquisition we put in our business plan for Italy are before the impact of the secondary market rates.

I think we have probably a last question from Borja Ramirez with Citi.

I have only one quick question. And I apologize if this was already mentioned as I missed some parts of the call. The question is as follows. Given higher inflation rate in some countries, which is around -- reaching 6% in some cases as of today and also potentially rising rates in Europe in the coming quarters, at least expected by the market, this may potentially affect debt payment capacity to some extent. I would like to check if you expect any potential implications of rising inflation or rates on the -- any implications on the default rates. And in that case, which segments or regions could be more impacted?

Yes, Borja. So it's recurring question that we get. And our view is that higher inflation, higher interest rate will put more pressure on corporates and households, and therefore, we will likely generate more of this more going forward, which is in a way positive to our GBV stock. In terms of the impact for us to collect, remember that 75% of our GBV is somewhat secured to real estate assets and inflation tends to be a positive contributor to real estate prices. So in a way, this positively support our collection activity. As a reminder, the big impairments in our collection activity was when costs were closed in 2020, and this is not happening anymore. So we don't see an issue with higher interest rate and higher inflation in terms of our ability to collect.

Yes. Sorry, if I may have not explained myself correctly. What I meant to ask is not on the collections, but rather in the default rate going forward.

Default rates will increase because of our inflation and higher interest rates because especially more costs to corporates and households. And that is in a way a contributor to growth in GBV or contributor to more IPs on bank's balance sheet. Right. So no more questions in the queue. So thanks, everyone, for your time, and have a good weekend. Good bye.

Bye-bye.