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Banca IFIS S.p.A.:profitability, capital ratios and credit quality continue improving. The Interbanca Group achieves break-even

Highlights- 1st Half 2017 Results
RECLASSIFIED DATA1
First half
1 January - 30 June

-Net banking income: 250,0 million Euro (+65,7%)
- Net profit from financial activities: 268,5 million Euro (+98,7%)
- Operating costs: 122,6 million Euro (+59,7%)
- Profit for the period: 103,7 million Euro (+165,0%)
- Credit risk cost of loans to SMEs positive for 14 bps;
- SMEs net bad-loan ratio (excluding NPL Area): 1.4% (+0,2%);
- SMEs gross bad-loan coverage ratio: 90,7% (-1,3%);
- Total Group employees: 1.404 people (1.323 at 31 December 2016);
- Common Equity Tier 1 (CET1): 16,4% (15,7% at 31 December 2016) ;
- Total Own Funds Capital Ratio: 16,4% (15,7% at 31 December 2016)2.

Highlights- 2nd Quarter 2017 Results
RECLASSIFIED DATA3
Second quarter
1 April - 30 June

- Net banking income: 147,8 million Euro (+98,8%)
- Net profit from financial activities: 166,4 million Euro (+149,0%)
- Operating costs: 66,2 million Euro (+61,6%)
- Profit for the period: 71,0 million Euro (+315,6%)

Mestre (Venice), 8 August 2017 - The Board of Directors of Banca IFIS met today under the chairmanship of Sebastien Egon Fürstenberg and approved the interim financial report for the first half of 2017.
"The results approved today are in line with the commitments made to shareholders at the time of the Interbanca Group's acquisition as well as the announcement of the 2017-2019 strategic plan", said Giovanni Bossi, Banca IFIS CEO. "Above all, I want to underscore the consistency of our performance with the business model adopted by Banca IFIS. Our results testify to the success of our efforts to integrate and develop the businesses. We are focusing on the bank's core segments and the technological tools supporting the relationship with customers and our market growth. We have come a long way in the past few months, but have much further still to go: the company has significant potential and tremendous growth opportunities. We have a duty to continue creating value. Our history shows that since 2002 we have always generated returns in capital above 10%: it is this strength and the responsibility that accompanies our every day decisions".

Highlights (reclassified data4)

- Net banking income5 totalled 250,0 million Euro, +65,7% from 265,4 million Euro in the first half of 2016 (150,9 million Euro at 30 June 2016). The positive performance of all the Bank's core segments was the result of, among other things, a series of factors such as the consolidation of the former GE Capital Interbanca Group, which concerned specifically Corporate Banking and Leasing; the gain on the sale of NPLs; and the positive impact of the breakdown of the difference between the fair value as measured in the business combination and the carrying amount of the receivables recognised by Interbanca and the leasing subsidiary over time, which largely arose from the positions allocated to Workout & Recovery and Structured Finance. More detailed information for each segment can be found below. At 30 June 2017, net banking income included also the costs associated with the funding for the acquisition, which concerned the increase in rendimax funding volumes and the securitisations carried out in late 2016.
- Net value adjustments amounted to a positive 18,5 million Euro, compared to a negative 15,8 million Euro in the first half of 2016. The adjustments in the Trade Receivables segment alone stood at 11,7 million Euro, compared to 11,6 million Euro at 30 June 2016 (+0,7%). This result testifies to Banca IFIS's relentless ability to lend by carefully assuming credit risk. There were other value adjustments referring to Leasing (1,1 million Euro), Tax Receivables (0,1 million Euro), and Corporate Banking (31,8 million Euro). Concerning specifically net value adjustments on NPL receivables, 14,8 million Euro were reclassified to interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.
- Operating costs totalled 122,6 million Euro (76,8 million Euro at 30 June 2016, +59,7%). The cost/income ratio stood at 49,0%, compared to 50,9% in the prior-year period. Personnel expenses amounted to 49,5 million Euro (27,6 million Euro in June 2016, +79,3%). The increase referred for 16,6 million Euro to the former Interbanca Group. At 30 June 2017, the Group's employees numbered 1404. Administrative expenses amounted to 69,9 million Euro, up 50,3% from 46,5 million Euro in the prior-year period. The item included 14,7 million Euro in costs referring to the Group's new subsidiaries.

At 30 June 2017, the Group profit for the period totalled 103,7 million Euro, up 165,0% from 39,1 million Euro at 30 June 2016.

For a better understanding of the results for the period and the comparative data, please note that changes in market interest rates and the bank's funding rates required revising the method to calculate the internal transfer rates for 2017, and therefore updating them. To facilitate the comparison of the two reference periods, the 2016 results have been restated according to the 2017 funding approach across all segments.

As for the contribution of individual segments5 to the operating and financial results at 30 June 2017, here below are the highlights:

- Loans to businesses (including the trade receivables, leasing, and corporate banking segments) generated 164,3 million Euro in net banking income. Total loans to businesses amounted to 5.245,9 million Euro, compared to 5.233,8 million Euro at 31 December 2016 (+0,2%). This was largely the result of the slight decline in the trade receivables segment (-4,0%) and the increase in the corporate banking and leasing segments (+7,4% and +5,5%, respectively). Specifically, the breakdown of loans to corporate customers was as follows: 15,8 % are due from the public sector and 84,2% from the private sector.
Trade Receivables generated 70,1 million Euro in net banking income (68,0 million Euro in the first half of 2016, +3,2%); the segment's turnover rose to 5,6 billion Euro (+12,5% from 30 June 2016), with 5.136 corporate customers (+5,3% compared to the prior-year period). Outstanding trade receivables declined by 2.970,3 million Euro (-4,0% from December 2016). The Corporate Banking segment generated 65,1 million Euro in net banking income. This amount included the 53,7 million Euro positive impact of the breakdown of the difference between the fair value as measured in the business combination and the carrying amount of the receivables recognised by the subsidiary Interbanca over time. This largely arose from the positions allocated to Workout & Recovery and Structured Finance. The nominal amount of the segment's receivables was 1.711,8 million Euro (-1,6%). The Leasing segment's net banking income totalled 29,0 million Euro thanks to the positive trend in the number of customers as well as loans, contributing to the rise in market share, and included the positive impact of the breakdown of the difference between the fair value as measured in the business combination and the carrying amount of the receivables recognised by the subsidiary over time, which amounted to 4,1 million Euro. The nominal amount of the segment's receivables was 1.336,1 million Euro.
- The NPL Area1 generated 79,0 million Euro in net banking income, compared to 58,4 million Euro in the prior-year period (+35,2%). This amount included 17,6 million Euro in gains on the sale of a portfolio (5,7 million Euro at June 30 2016). In the first six months of 2017, the NPL Area acquired portfolios of receivables with a nominal value of 2,3 billion Euro, bringing the total amount of positions to 1.447.090 for an overall nominal value of 11,0 billion Euro.
- Tax Receivables generated 8,8 million Euro in net banking income, up 14,2% from 7,7 million Euro at 30 June 2016.
- The net banking income of Governance&Services was negative 2 million Euro. This was largely because of the lower overall contribution from the government bond portfolio-which in the first half of 2016 contributed 7,5 million Euro in interest income-as well as the fact that Banca IFIS incurred, and continues incurring in 2017, significant costs associated with the additional funding for the closing of the acquisition of the former Interbanca Group.

Here below is the breakdown of net non-performing loans concerning loans to SMEs:
- net bad loans amounted to 71,6 million Euro, compared to 65,1 million Euro at the end of 2016 (+10%); the net bad-loan ratio was 1,4%, up from 1,3% at 31 December 2016. The coverage ratio stood at 90,7% (92% at 31 December 2016)
- the balance of net unlikely to pay was 226,4 million Euro, +9,2% from 207,3 million Euro at the end of 2016; the coverage ratio declined to 43,5% from 45,9% at 31 December 2016.
- Net non-performing past due exposures totalled 173,5 million Euro, compared with 137,4 million Euro in December 2016 (+26,2%). The rise in past due exposures was due to the natural increase in such exposures to Italy's Public Administration as well as to new private-sector past due positions concerning individual long-standing clients that had never been classified within this category. The coverage ratio of net non-performing past due exposures was 10,4% (19,4% at 31 December 2016).

Overall, gross non-performing loans to businesses (always excluding the non-performing loans of the NPL Area and the Tax Receivables segment) totalled 1.367,3 million Euro, with 895,7 million Euro in impairment losses and a coverage ratio of 65,5%.

At the end of the period, consolidated equity totalled 1.283,3 million Euro, compared to 1.218,8 million Euro at 31 December 2016.

The consolidated CET1 and Total Own Funds Ratios of the Banca IFIS Group alone, excluding the effect of the consolidation of the Parent Company La Scogliera2 , both amounted to 16,38% at the end of 30 June 2017, compared to 15,71% at the end of 2016.

For more details, see the Consolidated Interim Report at 30 June 2017, available in the "Institutional Investors" section of the official website www.bancaifis.it

Declaration of the Corporate Accounting Reporting Officer

Pursuant to Article 154 bis, Paragraph 2 of the Consolidated Law on Finance, the Corporate Accounting Reporting Officer, Mariacristina Taormina, declares that the accounting information contained in this press release corresponds to the accounting records, books and entries.


1 Net value adjustments in the NPL Area, totalling 14,8 million Euro at 30 June 2017 compared to 16,5 million Euro at 30 June 2016, were reclassified to interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.

2 The reported total own funds refers only to the scope of the Banca IFIS Group, thus excluding the effects of the prudential consolidation in the parent La Scogliera S.p.A. Consolidated own funds, risk-weighted assets and solvency ratios at 30 June 2017 were determined based on the regulatory principles set out in Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR) dated 26 June 2013, which were transposed in the Bank of Italy's Circulars no. 285 and 286 of 17 December 2013. Article 19 of the CRR requires to include the unconsolidated holding of the banking Group in prudential consolidation. The CET1 at 30 June 2017 including La Scogliera S.p.A. amounted to 14,8%, compared to 14,7% at 31 December 2016, while the Total Own Funds Ratio totalled 15,6%, compared to 15,3% at 31 December 2016.

3 Net value adjustments in the NPL Area, totalling 6,5 million Euro in the 2nd quarter of 2017 and 13,7 million Euro in the 2nd quarter of 2016, were reclassified to interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.

4 Net value adjustments in the NPL Area, totalling 14,8 million Euro at 30 June 2017 compared to 16,5 million Euro at 30 June 2016, were reclassified to interest receivable and similar income to present more fairly this particular business, for which net value adjustments represent an integral part of the return on the investment.

5 To facilitate the comparison between the results of the reference periods, the funding cost included in the net interest income for 2016 was recalculated according to the new 2017 funding approach.

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Source: BANCA IFIS