Trade receivables

This segment includes the following business areas:

  • Italian Trade Receivables, dedicated to supporting the trade receivables of SMEs operating in the domestic market;
  • Foreign Trade Receivables, for companies growing abroad or based abroad and working with Italian customers; this area includes IFIS Finance’s operations in Poland;
  • Pharma, supporting the trade receivables of local health services' suppliers.

The net banking income of the trade receivables segment, amounting to 158,7 million Euro (+2,0% compared to 155,6 million Euro in 2014), mainly refers to the Credi Impresa Futuro and Pharma business areas.
Credi Impresa Futuro's margin was essentially in line with 2014 (+1,1%).

As for the net banking income of the Pharma business area, it was up 2,6% from 28,7 million Euro last year to 29,4 million Euro. This result continues reflecting the decrease in purchase commissions charged to the seller and classified as interest income, deriving from the more “aggressive” market approach adopted by the business area starting from 2014. Specifically, said approach involves acquiring portfolios of receivables at or slightly below par. The profitability of this new approach is based on the interest for late payments accrued on assets that present particularly low risks. Currently, the Bank conservatively recognises the interest for late payments below the nominal rate of interest on arrears. It is reviewing this accounting method in accordance with the reference legal framework to better represent the actual profitability of the Pharma business area.

Currently, interest income includes a portion (amounting to 987 thousand Euro) of interest on arrears accruing from the estimated collection date: the Bank, based on historical data and available information, estimates that at least 20% can be recovered.

At 31 December 2015 the Bank accrued, but did not recognise, interest on arrears—calculated from the invoice’s original maturity date—related to already collected receivables (totalling approximately 43,1 million Euro) as well as non-collected receivables (approximately 50,0 million Euro) due from the Public Administration.
There was a significant increase in the receivables managed by the Pharma business area, which reported a turnover of 1,7 billion Euro—up 103,0% from December 2014.

The segment generated 10,1 billion Euro in turnover (+21,8% from December 2014), with 4.487 corporate customers (up 5% compared to the prior-year period) and 2,8 billion Euro in outstanding loans (+16,0% from December 2014). This significant increase was partly attributable to the agreement entered into with a leading market player at the end of 2015, which allowed the Bank to enter the business of multi-utilities selling receivables due from Italy's local administrations. However, this had no economic impact on the current year.

Net impairment losses on receivables referred for 21,2 million Euro to the Trade Receivables segment (33,0 million Euro in 2014). The consistently downward trend is attributable to the monitoring of how the counterparty's risk profile evolves. All along, the Bank has maintained a rigorous and consistent policy for assessing borrowers' creditworthiness. The decrease in impairment losses resulted in a significant improvement in the ratio of credit risk cost concerning trade receivables to the relevant average loan balance over the last 12 months, which was down to 90 bps from 173 bps at 31 December 2014.

INCOME STATEMENT DATA
(in thousands of Euro)
31.12.2015 31.12.2014 CHANGE
      ABSOLUTE %
Net interest income 98.175 92.331 5.844 6,3%
Net commission income 60.496 63.230 (2.734) (4,3)%
Net banking income 158.671 155.561 3.110 2,0%
Net impairment losses on loans and receivables (21.248) (33.006) 11.758 (35,6)%
Net profit from financial activities 137.423 122.555 14.868 12,1%

QUARTERLY INCOME STATEMENT DATA
(in thousands of Euro)
4th Q 2015 4th Q 2014 CHANGE
      ABSOLUTE %
Net interest income 24.114 23.956 158 0,7%
Net commission income 15.614 15.566 48 0,3%
Net banking income 39.728 39.522 206 0,5%
Net impairment losses on loans and receivables (6.491) (2.988) (3.503) 117,2%
Net profit from financial activities 33.237 36.534 (3.297) (9,0)%

STATEMENT OF FINANCIAL POSITION DATA
(in thousands of Euro)
31.12.2015 31.12.2014 CHANGE
      ABSOLUTE %
Bad loans 30.950 33.049 (2.099) (6,4)%
Unlikely to pay 39.551 43.781 (4.230) (9,7)%
Past due loans 58.214 35.798 22.416 62,6%
Total net impaired loans  128.715 112.628 16.087 14,3%
Net performing loans 2.719.409 2.342.424 376.985 16,1%
Total loans to customers (cash)  2.848.124 2.455.052 393.072 16,0%

Loans to customers included in this segment are composed as follows: 32,1% are receivables due from the Public Administration (compared to 27,1% at 31 December 2014) and 67,9% due from the private sector (compared to 72,9% at 31 December 2014).

Net non-performing exposures in the trade receivables segment rose 14,3% from 112,6 million Euro at the end of 2014 to 128,7 million Euro, largely because of rising past due exposures.

The segment's net bad-loan ratio was down to 1,1% from 1,3% at 31 December 2014, while the ratio of net unlikely to pay to loans fell to 1,4% from 1,8% at 31 December 2014. The segment's ratio of total net impaired loans to loans edged down from 4,6% at the end of 2014 to 4,5% at 31 December 2015. Net impaired loans amounted to 22,4% as a percentage of equity, compared to 25,7% in the prior year.

IMPAIRED TRADE RECEIVABLES
(in thousands of Euro)
BAD LOANS(1)  UNLIKELY TO PAY PAST DUE TOTAL
BALANCE AT 31.12.2015        
Gross amount 255.404 58.257 59.788 373.449
Incidence on gross total receivables 8,2% 1,9% 1,9% 12,0%
Adjustments 224.454 18.706 1.574 244.734
Incidence on gross value 87,9% 32,1% 2,6% 65,5%
Net amount 30.950 39.551 58.214 128.715
Incidence on net total receivables 1,1% 1,4% 2,0% 4,5%
BALANCE AT 31.12.2014        
Gross amount 243.729 57.982 37.301 339.012
Incidence on gross total receivables 9,1% 2,2% 1,3% 12,6%
Adjustments 210.680 14.201 1.503 226.384
Incidence on gross value 86,4% 24,5% 4,0% 66,8%
Net amount 33.049 43.781 35.798 112.628
Incidence on net total receivables 1,3% 1,8% 1,5% 4,6%

(1) Bad loans are recognised in the financial statements up to the point in which all credit collection procedures have been exhausted.

KPI 31.12.2015 31.12.2014 CHANGE
      ABSOLUTE %
Turnover 10.126.397 8.312.798 1.813.599 21,8%
Net banking income/ Turnover 1,6% 1,9% - (0,3)%

KPI y/y 31.12.2015 31.12.2014 CHANGE
      ABSOLUTE %
Net banking income/Due from customers 5,6% 6,3%  - (0,7)%
Value adjustment on receivables/Due from customers 0,7% 1,3% - (0,6)%
Net Bad loans/Due from customers 1,1% 1,3% - (0,2)%
Coverage of gross Bad loans 87,9% 86,4% - 1,5%
Impaired assets/ Due from customers 4,5% 4,6% - (0,1)%
Total RWA per sector 1.970.886 1.802.978 167.908 9,3%

The following table shows the nominal value of receivables purchased (operating data not recognised in the statements) for factoring transactions outstanding at the end of the period (Total Receivables), broken down into receivables with or without recourse and receivables purchased outright. Please note that the breakdown of purchased receivables in the following table is based on the contract form used by the Bank.

TOTAL RECEIVABLES
(in thousands of Euro)
YEAR CHANGE
  31.12.2015 31.12.2014 ABSOLUTE %
Receivables with recourse 2.128.825 2.000.116 128.709 6,4%
of which due from the Public Administration 361.000 391.943 (30.943) (7,9)%
Receivables without recourse 277.159 201.131 76.028 37,8%
of which due from the Public Administration 4.468 12.036 (7.568) (62,9)%
Outright purchases 1.170.998 899.811 271.187 30,1%
of which due from the Public Administration 888.844 655.035 233.809 35,7%
Total receivables  3.576.982 3.101.058 475.924 15,3%
of which due from the Public Administration 1.254.312 1.059.014 195.298 18,4%

The breakdown of customers by geographic area in Italy, with a separate indication for those abroad, is as follows:

BREAKDOWN OF CUSTOMERS BY GEOGRAPHIC AREA LOAN COMMITMENTS TURNOVER
Northern Italy 44,4% 53,0%
Central Italy 24,7% 29,8%
Southern Italy 27,0% 10,7%
Abroad 3,9% 6,5%
Total 100,0% 100,0%