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Thank you, and welcome, everybody, to the presentation of the first results with the DEPObank acquisition in our books. Giorgio will walk you through how the accounts have been constructed, given the many moving parts, but we are pleased to report good results overall. We have a reported net income of EUR 184 million, that's clearly impacted by the sizable goodwill of the acquisition. But if we strip out the exceptional, the adjusted net income for the period is 8% up year-over-year, thanks to the good performance, particularly with the transaction services business, lower cost and stronger financial income.
The credit risk of the group remains good. That's 1 year into the COVID issue. And the introduction of the new definition of default has not had an impact on our past due; actually our past due have come down compared to the reported number of last year. Importantly, we have in our books, but not accounted in our capital ratio, over EUR 190 million of accrued dividends, of which EUR 165 million come from the 2019 and 2020 results and are available for distribution as soon as the regulator allows under the current regulation in Q4. The capital position of the group remains very strong, with a total capital ratio of 21.7% and a Core Equity Tier 1 ratio of 17.3%. That means that we have over EUR 150 million of excess capital compared to our target capital level of 15% in terms of total capital.
If we look at the 3 businesses that we have post the DEPObank merger. We have seen in factor and lending, plenty of liquidity, which has meant that the portfolio in Italy and Spain has contracted in the first quarter, while the collection of LPI has gone a bit better than last year, but more importantly, the back book income reserve has increased year-over-year. The security services business has benefited from increased AUM. We have also significant more liquidity than last year. And overall, the positive market performance and recovery rebound give us ample visibility on the yield of this business going forward since we are entering into a quarter, Q2, where last year the level of AUM was significantly lower.
The same has to be said around the payment business, where year-on-year, the transactions have increased, although they still haven't fully rebound from the downturn caused by COVID, but we start again with a higher starting point in Q2 compared to last year. And therefore, again, we should have softer comps next quarter.
So where we are on Page 3, we see a good starting point of the integration, but we were facing some headwinds given the high liquidity, particularly in the factoring and lending business. We have finalized the closing of DEPO, and we have good visibilities on synergies, particularly on the cost front. We have locked in roughly 75% of the synergies already, and with the activity to capture rapidly the funding synergies as well. The back book income reserve has increased, that is a source of future profitability. In general, the Securities Services and Payment business has performed well, despite last year Q1 not fully impacted by COVID.
The international business has done better than the domestic business on factoring and lending, which is a proof of how important has been the diversification we conducted in the last few years to strengthen the group. On the minus side, we have been impacted by high liquidity in the public sector, which has accelerated payment, particularly of the newest invoices on a one-off basis in Spain, where the government injected EUR 12 billion of cash to the comunidades to accelerate payments. And on a continuous basis in Italy [ ensuridatilos ] lower volumes being purchased. And so we ended up with a lower customer loan portfolio and now lower new business volume compared to last year, given this acceleration of collection.
On the other side, the higher assets on the Depositary and the higher ECB cash by our customers has generated excess funding, which has impacted in terms of negative rates, what we pay on ECB deposits. This is a summary of what you will see in the presentation, but I will pass on to Giorgio, our CFO, to present actually how we presented the deal and the numbers in this first quarter of reported.
Thank you, Max. Good afternoon. Now we are on Page 4. And we try to figure out how we represent the results of the fourth quarter. On the left side, we have the P&L reported. And we have 3 months of, we can say, all the BFF. And we added 1 month of the new -- after the merge the DEPO, with DEPO. And we have, in this sense, only 1 month after the merger because we started the activities together in the 1st of March. On the other side, on the right, we have the P&L adjusted. In the P&L adjusted, we have the 3 months of the whole company, and we write it off, we can say that way, the bad will and the transaction cost as some adjustment, in order to be able to compare the results of this quarter with the result of the previous quarter of the last -- the first quarter of the last year.
If we go to Page 5, we have the same scheme that we presented 1 month ago in the -- during the Investor Day. In this sense, we can view that the result of the acquisition in terms of increase of capital and the generation of the bad will is the same that we presented last time. We have to consider that the PPA is still ongoing. And so we can have a slight movement in terms of capital, but we don't expect any significant change in this sense.
Going to the next page, to Page 6, we have the explanation of this adjustment. As we can say in the table, the most important line is the Badwill & Transaction/restructuring costs. It is EUR 161.5 million. We have to consider that, considering that the PPA is still ongoing, we didn't write off the intangibles coming from the acquisition, but at the end, the impact in terms of capital is still the same. So we don't have any differences. It's only a representation, a different representation. Considering that the final -- the result adjusted after the typical adjustment that we have like M&A costs, taxes on one-off and things like that, we have year-on-year adjusted net income that is higher about 8%, compared to the same quarter of the previous year.
Going to Page 7. Just a simple explanation, a reminder of the new structure of the group. We have the Corporate Center, with the management, the staff function, financial administration, technology, ICT and the control functions. And in the line below, in blue, we have the 3 business lines. The first one is the Factoring, Lending & Credit Management for Italy for the international market. And on the other side we have the Transaction Services, splitted into Securities Services and Payments. I leave the floor to Max in order to explain, again, the 3 business line and to introduce the financial results of the quarter.
Thank you, Giorgio. So on Page 8, just a summary of what the businesses do. Factoring & Lending is our traditional business that we do across Europe of [ time ] receivables towards the public administrations and also lending to also the public administration in Eastern Europe. The Securities Services business is the Depositary Bank, global custody, fund accounting, transfer agent services that we offer to banks, mutual funds, pension funds based in Italy. In Payments Services, we have the intermediation services provided to other banks, the Corporate Payments and the Check & receivables. And as Giorgio pointed out, is organized across the [ grass to ] business across the Transaction Services division, which represented the operating business of the old DEPO.
On Page 9, it's a snapshot of what Giorgio will present in more details in the following page, is the results from a P&L perspective of the 3 divisions plus the Corporate Center. The factoring and lending business has been slightly declining in terms of profit before tax compared to last year, whereas we've seen growth both in the Securities Services and in the Payments profit before tax. The Corporate Center has had a slightly worse performance compared to last year. As you know, that's the area where we will have most of the synergies going forward and also is where we benefit or suffer in case we have too much liquidity employed in the European Central Bank, which is what we've seen in the first 3 months of the year. So with this, I will leave it to Giorgio to delve into more details around the performance of the 3 divisions.
Okay. Thank you, Max, Starting from the factoring and lending that we have Page 10, most -- one important thing that you have already highlighted is the big impact on the high liquidity that has been put in the system, especially in Italy and Spain. So the result is that the portfolio and the volume decreased compared to the last year. But on the other side, the back book of LPIs continued to grow. This is mostly also driven by the fact that the public administration will continue to pay newer invoices than the older invoices. So for us, it's a backlog of profits that we can gain in the next future, in the next month, in the next years. Coming back to the result, the liquidity, but also we increased also the LPIs collection compared to the same period in the previous year. We maintain a good discipline on cost that are almost stable, and the cost of risk is -- continue to be very, very negligible. And so this is something that we put in place also with considering the introduction of the new definition of default.
Going to the next page, Page 11, we have a focus on factoring and lending portfolio volumes and the outstanding, and we can see the impact of the liquidity that is in the system, but also we can see that the diversification -- we are -- we operate in different countries. So we suffered a bit in Italy and Spain, but we gained -- we increased our portfolio in Portugal, increase and also in Central-Eastern Europe. So the diversification that we put in place in the last year now continue to give us a good result. And this -- for the first quarter, the percentage of loans outside Italy is around 42%. So we are continuing developing the business abroad.
Going to the Page 12, we have the P&L result. There is an impact due to the smaller loan portfolio. The net interest income has been impacted by the lower loans, and obviously considering the high liquidity that we have in the market. But on the other side, we were able also to collect a higher amount of LPIs considering that the first quarter of the year of every year is not a good day in order to conclude transactions to gain LPIs.
Going forward to the new business for BFF, the Securities Services, we have an increase in the asset and the deposit. The market performance has been impacted by the COVID-19 on the financial market, but also we started to see the development of new initiatives, in particular for the alternative investment funds. The liquidity on the AUM increased from 9% to 9.5% comparing the same period of the previous years. And also, we have a commission trend that is positive due to the fact that AuD are growing. For the Fund Accounting and Transfer Agent, the trends are driven by the Depositary Bank performance. And for the Global Custody, the assets under custody increased around 20% year-on-year because of the higher asset that are also being driven by some M&A activities on existing client and also by the market performance.
Going to the next page, that is Page 14. We have the P&L, that there is a positive performance with net interest income at EUR 3 million for the first quarter compared to EUR 2.7 million in the same period of last year. The net fee and the commission driven by the higher asset and the decreasing of the direct OpEx also give us a positive result. And at the end, we have a strong profit before tax growth, around 26%.
Going forward to the Payments business, Page 15. We have different sub business lines. The first one is the transactions of Transfer and collection that is at 7% growing year-on-year. The Card settlement has been impacted in 2021 by the economy restrictions due to the COVID, but the level of the commissions higher, because there was a surge in Guarantee Fund payments, and this can compensate the result of this business. For Checks and receivables, is a market that is declining, but having changed the kind of commission on a fixed -- we have now a fixed base commission, the result has been -- is comparable at the same level of the result of the first 3 months of the previous year. For the Corporate Payments, the transaction are up around 4%, and this is thanks to the positive performance of the Italian Social Security pension payments, and the commission trend is in line with the volumes that we have in this business.
If we go to Page 16, we have the financials related to the Payments. So the performance is positive. The net interest income is almost the same that we had in the previous year. And the Net Fee & Commission income increased revenues coming from the Guarantee Fund services that offset the negative impact driven by the COVID-19 pandemic that we are still living with. Regarding the direct operational expenditures, slightly increased, but the increase is lower than the increase that we had in the volumes.
Going to the next slide, we have the representation of the Corporate Center. The net interest income has been reduced because of the fair value of the DEPObank portfolio because they've been booked at fair value at the closing. And now we have a negative impact, but we have a positive impact in terms of capital. And until the maturity, we are going to gain again the difference between the -- due to the fair value. We have a positive impact for the portfolio Held To Collect due to the impairment methodology because after the merger, we aligned the impairment methodology of BFF -- of DEPO to the one of BFF and this gain has give us a boost in terms of loan loss provision.
One important slide is the 19 -- #18, sorry, because we have the representation of the synergies, the track. We are on track. About the funding, we started -- and we already reduced our historical funding lines, and also we put in place some activities on the online deposits. But the effect of this reduction, we will start to see from the second quarter of the year going forward. In terms of OpEx, we already delivered a lot of initiatives that are able to generate around EUR 14 million of synergies starting from 2022. And we put in place the activities in order to optimize the SG&A run rate cost base. About the transactions & integration costs, we already expensed almost the 55% of transactions & integration costs, and we are following the integration plan.
The result of what we have -- I've tried to explain about the structure of the funding synergies, we will see in Page 19 because we have the combined balance sheet. The sum of the 2 is not exactly the sum. So the final balance sheet is lower than the sum of the 2 parts. The reason why is explained in the middle of the slide: because we reduced the wholesale funding, we reduced the online deposits. We almost closed the Securitization, and the repos are now down to 0. In terms of balance sheet, we have now the effect also in the first quarter, in terms of profit and loss, we will see the effect of this reduction going forward.
In the next slide, Page 20, we have the representation of the balance sheet that is a bit different compared to the historical balance sheet of BFF, and it continues to be stronger. We have a strong LCR, as in the past, but also now we have a better NSFR ratio. So it's a very, very strong balance sheet also in the medium period, compared to the sum of the 2. And also, the government bond portfolio is lower about around EUR 0.3 billion of euros.
Page 21, we received -- after the closing, we received the new -- an upgrade of the Long-Term Bank Deposit rating from Moody's. And now we are the second highest class of rating for long-term deposits among all the of the Italian bank rated by Moody's.
In Page 22, we have our asset quality. We are continuing to be the best-in-class. We have to consider that the business coming from DEPO is a business with almost a 0 credit risk. And in this sense, we continue with the trend. The introduction of the new DoD has been put in place, as expected, the increase of the NPLs is only driven by the municipalities in conservatorship and the NPL ratio is -- continue to be negligible.
Finally, Page 23, we have the capital position. As said before, we have EUR 193 million of accrued dividend. And if we take in consideration our target, that is 15% of the total capital ratio, we have an additional EUR 151 million of excess capital. Finally, the total capital ratio is 21.7%. The CET1 ratio is 17.3%. And we have to consider also that we are not including the 2019 and 2020 dividend that are not still distributed. And so if we put also this reserve, now our capital ratio, the total capital ratio, will weigh up to 30%. We continue to apply the RWAs on a Standard Model. And we didn't apply for any ECB or EBA emergency measure due to the COVID, considering that for our business, operating with the public administration, we don't need to do that. Going forward, I leave the floor again to Max Belingheri in order to explain how we are a "real" public company.
Thank you, Giorgio. On Page 24, just a reminder, with the divestiture by BFF Luxembourg and investment-based management, we now have a free float of over 86%, with the former shareholders of DEPObank holding 7.6% and management, a 5.6% stake. The shareholders appointed a new Board at the end of March, which has been based on the list of board members, suggested by the exiting board with 2/3 of independent, strong international presence and a good agenda balance. So we pride ourselves on striving to be one of the few public companies in Italy with a strong corporate governance. So to sum it up, it has been an intense first quarter for us with the closing of DEPObank. We have stronger visibility on synergies. The factoring and lending business has had a tough quarter, given the liquidity in Italy and Spain, that has been counterbalanced by the benefit of international diversification and a higher year-on-year collection of LPI, which though has still allowed us to increase the stock of unrecognized off-balance sheet LPIs at EUR 418 million. That's the start of future collection that we haven't accounted for in our balance sheet.
On the Securities Services side, AUM/AUC have grown over 20% year-on-year, driven by market performance. Specifically, the end of the quarter last year was a tough quarter for the market, but also business development, and we entered the second quarter from a higher starting point compared to last year. And on the Payments side, business has performed strongly, but we still have to catch up with the total impact of the COVID. Credit quality remains good, also after the implementation of the new definition of default. We've eliminated Cost of Risk, and the level of NPE, which is an NPL which is very low, NPL of 0.2% of total loans. As Giorgio pointed out, we have over EUR 193 million of accrued dividend which are not included in the capital ratio. And with the application of the effect of the new definition of default, we report a very strong capital position with a Core ET1 of 17%, total capital ratio of 21%, well in excess of our 15% total capital. We therefore conclude the presentation and leave the floor for any questions. Thank you.
[Operator Instructions] The first question comes from Luigi Tramontana of Banca Akros.
Yes. Just 2 clarifications on my side. The first one is on your factoring and lending business, which has clearly started the year on a very low tone. You clearly explained that this is due to the high liquidity injected in the public administrations in Italy and Spain. How do you see this business area evolving in the coming quarters? Do you think that this trend will continue or it will be reversed once the situation will normalize? And the second one is on the Payment business, where you had the surge in commissions related to the Guarantee Fund payments, if I understood well. So once again, do you see it going on? Or do you think that the situation will be reversed in the second half of the year and next year?
On the Guarantee Fund payment, we have just been awarded with a consortium of other banks, a 9-year contract for the continued activity of the Guarantee Fund. For the people who haven't looked into that in detail that's the fund that is set up with the Italian government to guarantee part of SME exposure under certain characteristics. We basically provide services around that. The volume has been positively impacted by the measures given by the government to inject cash into the system, which continue. But at the same time, has made the product more known to the market as a whole. And we think that will provide actually a source of stability going forward to this process, not a one-off from the COVID situation. Now the terms of the tender should be public, has been at lower terms than the original plan, but we expect this to continue to contribute well to our Payment business profitability.
In terms of the factoring and lending business, we presented a plan assuming a stable DSO the first quarter. So as I said, the injection of cash from the Spanish government in one-off and a lot of liquidity on the Italian side. It's also a quarter where companies traditionally don't take radical decisions to do or not increase factoring. So what impacted business -- the liquidity impacted the business by simply having smaller portfolios to buy, or having a shorter duration as happened in Spain, which is something we have seen in last year as well. The effort for us is to continue to develop our commercial footprint, which is paying off internationally. We have closed a couple of important contracts in Spain, which should underpin growth in volumes, but we can't control the payment behavior of the government. So that's, I think is the source of uncertainty. We think, overall, we are living through very benign financing condition for governments, which -- with rising interest rates, as we are seeing in the bond market and may be under more pressure. But that's, as you know, a factor we can't control directly.
The next question comes from Simonetta Chiriotti of Mediobanca.
A few questions from my side. So the first one regards LPI, of recovery net of rescheduling, so there is an improvement in the collection of LPI. The part that has a positive impact on the P&L appears to be catching up the lower, is this impression correct? Or -- and what can we expect going forward? Second question regards the contribution to net interest income of the corporate spend. I'm looking at Slide 31 and 32. So there is a difference in -- between the first quarter of 2020 - end of 2021 of around EUR 8 million. You have explained during the presentation that this has to do also with the impact of the portfolio of govvies that you acquired with the DEPO, but I would like to have a bit more of explanation.
And in particular, if this difference is a one-off or if we have to annualize this amount? And finally, on the dividend, in Slide 23, you mentioned as an unpaid dividend first quarter adjusted net income of EUR 27.8 million. Does this means that you will calculate the 2021 dividend on adjusted net profit, so assuming the execution of the acquisition of DEPO since the beginning of the year and excluding transaction costs?
I'll leave Giorgio then to comment in more detail the net interest income point. But one point I would like to flag, if you go back to the bridge on Page 5, you see the green bar in the middle, which is 33.8. Most of it is a mark-to-market on the DEPObank portfolio, which means that the DEPObank portfolio, which has a duration of certainly more than 2 years, has seen most of the yield booked upfront in terms of increased equity, which means that we have -- on a like-for-like basis, then lower interest income. And net interest income will be caught up once those bonds expire and we get bonds with same original duration then yielding a higher yield. And that's how we modeled in the plan. So that's the effect you are seeing linked to this. But Giorgio will provide more details as he completes the other point.
On dividend, the answer is yes. We've always indicated we'll pay out the adjusted net income. We have basically booked to capital the goodwill and with that from equity, the transaction cost and the income of the period of the DEPO de facto. It's a bit of wash on the bad will. So the answer is yes.
The LPI recovery, yes, we've seen a bit better performance. It has been driven mostly by Spain, and we've seen a bit of catch-up in the core processes. And hopefully, that has a positive impact even going forward. And the reason why the bottom line impact has been strong is because, as you know, in Spain we collect 100% of what we have the right to collect through the core process. We have a lot of discussion with public administration. I would say more with the rest of the public administration in Italy than with the local authority in the hospitals, which are less amenable at the moment to do transactions. But that's also early in the year. And so we need to see how things move going forward. But certainly, the fact that the courts are open helps in the discussion with the public administration. Giorgio?
Yes. First of all, we have to consider that at the merger, we had a one-off of the -- due to the mark-to-market. We have the amount of the one-off in the bad will. And going forward, we are going to reabsorb, during the maturity of the govvies, these differences. So at the end, this is a neutral aspect, but we have to consider that now we have it in the balance sheet, and going forward we'll release it in the P&L. And another effect that we have in the net interest income is due to the amount of liquidity that we have compared to the same period, the sum of the 2 entities. We have a higher level of liquidity compared to the same period of the last year.
The next question comes from Lisi Andrea of Equita.
My first question is related to the volumes. And so to the first question, it was made. So in particular, it was about how the trending volumes are observing compares with your expectation that you originally had in the plan? And so what do you expect going forward? Obviously, I know that it's tough to predict. But just if you can provide us a bit more color on that and directly relate it to the volumes and to the client loans. If you can provide us maybe some indication of a level of CET1 where -- which do you see you can hand at the end of the year?
The second question is on the interest revenues, and the factoring and lending business in particular. It was clearly affected by lower volumes, but I was wondering if you also are experiencing some pressure on the discounts at which you purchase the receivables, and in case what action be put in place to avoid excessive discounts?
The third question is on the interest expenses in the lending and factoring business. I see a significant decline, obviously. I think that is partly related to the action you put in place following the DEPO deal. So how much is this reduction related to the synergies related to DEPO? And the last question is on the NPs. I see that the amount of NPs related to municipalities in conservatorship has increased. Is that because you prefer to do more of this kind of exposure because they can help to sustain the NII, or for other reasons?
Let me go through -- maybe back to front. And if we miss some of the questions, please intervene. On the -- look on NP. No, look, we -- we don't target actually to buy exposure to municipalities in conservatorship. That's actually something we haven't done recently. We did it in the past. That's also partially due to the new regulation on [ past due ]. What you see there is simply that there have been more conservatorship. Now we've seen in the last year, actually, a few mispriced [ executors ] for conservatorship, which is good, it's actually the proof of our model, and we collected the principal and the direct payment interest. But simply, that's a portfolio which is still maturing so that part of the business per se. So there's no specific targeting of those type of exposures.
You may see that we account them entirely in [ sofferenze ], in NPLs. Other banks don't. So we are taking the most prudent approach here. On the factoring business, I assume is what you're referring to when you talk about volumes. On the cost of funding that you have -- first, bear in mind, we actually don't transfer -- we don't book the synergies in the factoring business. We book the synergies in the Corporate [ Center ]. And the final synergies have yet to come through because most of the activity of closing the Hanmi lines, Hanmi outflows of deposits have started at or about the closing of the transaction, but that was already in March. So we haven't seen -- we haven't had that benefit really in the first quarter. We've done, as Giorgio pointed out, plenty of activities and are actually ahead of what we are planning to do, partly because of plenty of liquidity to achieve the finance synergies, but we haven't had a significant impact in the first quarter. So that's really the effect of the reduction in WIBOR cost to the cost of funding. Here it's a blend between euro and zloty on one side. And then in general, we have reduced the cost of our funding even before that.
On pricing, liquid price based on return on risk-weighted assets, that is a net of over-recovery of LPIs that has hold up reasonably well. But the gross yield is also impacted on, again, in Poland on the zloty on the WIBOR side, on the WIBOR rate, because most of our exposure in terms of loans is actually in a variable rate. So you have a bit of debt, which balances out with the reduction in cost of funding because we have a matched position in terms of type of interest exposure we have in zloty.
In terms of volumes, pricing pressure, look, in reality, we haven't seen that much pricing pressure. We actually have a slightly better pricing on the existing book than we had last year, but we didn't have the incremental volumes, particularly in Spain, which is a lower pricing market. And then also, we had less incremental volume that we expected. We're not planning, for sure, to have a contraction in volumes year-over-year. But as I mentioned, a number of portfolios were collected before we could buy them, so that has had an impact on our volumes. And if you look on Page 10, what we increased a lot has been the collection of our nonrecourse business, which is the main reason why we had a contraction on the portfolio. And that's a single thing we don't control. And so what we control is actually the commercial effort. We've made some changes on our commercial team at the beginning of the year. So hopefully, that should come through throughout the year.
The first -- the beginning of the year is also a moment where it's more difficult to push commercially, because corporates have often made already a decision in terms of the capital allocation and how to measure their working capital for the year. They tend to revisit that only throughout the year when things change, not usually in general when they just approved their budget. Core equity CET1 by the end of the year, look, we don't at this time -- we don't disclose it. It's a function of the volume and the mix, but because the incremental growth will have a relatively low-risk weighting, we have plenty of capital, and we are substantially above our total capital ratios. It's safe to assume that the earnings of the year will be entirely paid out as dividend, that's something you were concerned about. Simply because the amount of volumes we would have to generate to dent the CET1 level would be extremely substantial, to use an euphemism, given the strong capital position we have.
The next question comes from Reale Antonio of Morgan Stanley.
It's Antonio Reale from Morgan Stanley. I've got 2 questions, please. The first one is once again on -- sorry about this, on the factoring business and particularly looking at your sort of loan drop, it seems that, compared to system data, that you've lost some market share. Correct me if I'm wrong because it's not easy to compare the system data with your disclosure. And so if that's the case, I wonder what's driving that? What are you seeing competitors do differently, maybe a word on the competitive landscape in Italy would help. Conscious of the fact that you've been changing your sales force last year. And I also thought that the RWA density would have sort of provided you with a new level playing field, which should have helped cut the margin. So if you could just describe what you're seeing there on the ground? That's my first question.
And secondly, just an observation and so to pick your brain on how you're thinking about this. It's obviously very unfortunate for you, the timing of the moment to integrate DEPObank and consolidate the EUR 6 billion, EUR 7 billion of deposits, you have -- well, a lack of loan demand to deploy such deposits, which could end up being a drag on your net interest income given the negative rate environment. So my question here is, how do you manage these excess deposits and at the same time, defend your NII until the government injections normalize? Is it via more carry trade? Or how should we think about these excess deposits?
Yes. On the first point, look, as I mentioned, let's not forget, we closed the deal on the 1st of March. And being a prudent business, we did not deploy last year the pricing power we had in the market because we were not sure when the cash would be coming. So is there an opportunity to deploy more capital while generating a similar level of return in the market? I think so. Is it the wise thing to do when the system is awash with cash? Not necessarily. We want to grow also at a risk profile which is consistent with our history. And if -- you mentioned your competitor and their performance. Importantly, I think if you look at their performance is that the public sector exposure, excluding the tax receivables, it's actually roughly 50% of the book. I don't know how much they grew that compared to the recourse factoring in the private sector exposure, because there is no disclosure. And we have, I think, a different approach to risk.
Our NPE level in total, so nonperforming exposure, it's a fraction of theirs, despite them having an overall smaller book. So we prefer to stick to our knittings, and keep the focus on the part of the market which at the end of the day, is less risky and provides overall better returns. The market overall has dropped in Italy on the factoring side. And if you look at our loan portfolio -- and frankly, we are not happy about the results. Why are we lower than last year is, well we haven't grown the volumes, fine. But what has -- sorry, it's not fine. But what has really impacted us has been at the lower starting point at year-end, which was driven again by strong collections. And then the faster collection in the first quarter. And so there's nothing if you are a broker in the business, we have, actually I would say, commercial effort which has never been, I think, as strong as in the last 4 or 5 months. But it takes time to deploy that effort and to convince people to trade. Remember, we're not going around and buying NPL portfolios. We are going around buying a part of the business model of our customers, of their business processes. And so that takes some time.
The next question comes from Prini Filippo of Kepler.
I have got 2 questions. The first one is on late payment interest. Since public administration are paying the invoices with younger vintage at the expense of older invoices, do you plan to increase your expectation of collection period, since there's a stock that's still unpaid from maybe longer than expected?
And the second question is on the operating costs, the synergies and integration costs. If I got correctly, you should have paid more expenses, around EUR 7 million of integration costs in the first quarter this year, since the end of last year was around EUR 10 million. My question is, do we fund these integration costs in the operating cost line? And if so, are already matched with some of your synergies that you indicated on decline of other line of cost?
Look, we, again, these closed in the 1st of March. We haven't -- we don't have a huge amount of synergies already realized on a -- if you want, reduction of OpEx in March. We have some, but very limited. What is more important is, in a sense, the run rate and what we see in the next quarters. The way we've represented in the P&L, the extraordinary cost for the integration has been netted out from the adjusted net income. So actually, the adjusted net income represents the ongoing profitability of the business, and we will basically write off against the equity, if you wish, those costs. Might well be that we -- once we do the PPA, we allocate part of them to the goodwill calculation. But that's, in a sense, that's how we are going to factor that in. It's also consistent with what the regulator asked in terms of goodwill allocation.
And what we've indicated here is we have contracted over EUR 14 million of synergies already, which means that we have changed the contracts, these were underlying synergies, had people leaving the company who have agreed to live with a binding contract or set limits on expenditure which encompasses that. And that EUR 14 million is going to be on a run rate basis all-in 1st of January 2022. And here we are working to get contracted also the remainder of the synergies. So that to give you a sense of visibility of when the synergies will cancel. In terms of time to collection, look, last year, we do every year an assessment to where we are in terms of collection rate and collection time.
And the time on average of what we collect has been similar to the past. If there is a delay on the LPI collection compared to expectation, we always take a provision on the net interest income. So we always keep in a sense of portfolio, which has the same IRR and the same exact collection time as we price. And if there is a delay, we actually take the negative impact on the P&L with the rescheduling also of the NPI. So there is no risk in that respect. It's already baked in the numbers.
[Operator Instructions] There is no question booked at the moment. This concludes our question-and-answer session. I would like to turn the conference over to Massimiliano Belingheri and Giorgio Bicci for any closing remarks.
Thank you, and thank you for joining us today. Hopefully, we have been able to present a more complex business in a simpler way. And if you have questions, would be very much welcome by us and the IR team, and thanks again.