da Intermonte – BANCASISTEMA Company Research Report

Buon pomeriggio,

di seguito e in allegato inviamo il company research report relativo a BANCASISTEMA a cura di Intermonte.

Rimaniamo a disposizione per ulteriori informazioni.

Un caro saluto,
Diana Avendano Grassini

M. +39 3381313854

Boost to NII due to ECB rate increase from January ‘23 onwards

3Q22 results: core revenues beat our estimates (Eu26.1mn vs. Eu25.6mn expected) thanks to a great performance from fees income (partly driven by a change in the accounting of the variable commission for income-backed loans agents – from a cash to an accrual basis) which more than offset a lower NII contribution, while total revenues were slightly below expectations due to no tangible contribution from trading. Operating costs were broadly in line with our estimates, while the cost of risk was well below partially compensated by higher risk provisions, bringing net income to Eu5.6mn vs. Eu5.9mn expected. The phased-in CET1 ratio dropped QoQ to 12.1%, mainly due to a Eu10mn negative impact within OCI reserves.

Potential boost to CET1 ratio: in the conference call, the CEO emphasised the possible positive impact on capital ratios deriving from the ECOFIN proposal to introduce a prudential filter equal to overall OCI government bonds reserves. According to BST, factoring in this proposal the CET1 ratio would have been 13.3%.

Conference call feedback: i) NII – the new interest rates environment could dent BST’s NII in 4Q as the likely increase in the cost of funding should not be offset by an increase in assets’ profitability in the very short term; the bank expects to finalise an LPI disposal in 4Q, however, which could underpin the quarterly figure; going forward NII is projected to benefit from higher LPI (the new rate will be adopted on 1 January 2023) and a higher discount on invoices acquired; ii) income-backed loans segment – in previous conference calls the CEO confirmed the desire to sell some income-backed loans in the final quarter of the year, as occurred in 2021, in order to book some capital gains; due to higher interest rates, however, such transactions are unlikely in 2022; iii) Eu40 charge per overdue invoice – on the European Court of Justice sentence on the right to charge Eu40 per overdue invoice, the CEO said that such a move would be aggressive from a commercial point of view and BST is not planning its introduction.

Change in estimates: we are confirming our 2022/2023/2024 estimates. Looking at FY22, our Eu24mn bottom line projection is confirmed albeit with a different mix due to the trends outlined above: slightly lower NII that could suffer in 4Q (when not considering the potential impact of the LPIs disposal), higher fee income, no tangible contribution from trading in the final quarter of the year and a lower cost of risk.

OUTPERFORM confirmed; target Eu2.35. We believe the next couple of quarters will be important to gauge the company’s ability to re-price its loan book. The three different businesses seem well placed to benefit from the likely macroeconomic slowdown as factoring could be a great tool for non-financial corporations in order to optimise NFP, while income-backed loans and pawnbroking could be used as an important source of funding by Italian households in distressed times. We confirm our positive view on the stock, with a Eu2.35 target price based on FY23 profitability