BFF Bank SpA
MIL:BFF
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BFF Bank SpA
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Thank you, and welcome, everybody, to the first quarter results presentation. A good set of results that we are reporting today. And importantly, we are reporting an environment which will be conducive of good development for the business, both from internal growth, but also from the rate environment. It is changing around that as we will see in the presentation today.
If we go through the presentation on Page 2, we're pleased to report over EUR 38 million of net profit adjusted, an increment of over 37% over the previous years including over EUR 30 million of pretax synergies, which are below the run rate of EUR 70 million for the full year, so with positive expectation for the next quarter. The performance of the business has been strong, both in the corporate center, where synergies are allocated, but also in the operating business in security services and payments, which have performed well despite the challenges of the first quarter in terms of market performance and economic slowdown. And we are showing a strong recovery in our core factoring and lending business with new volumes growing at fast pace and a resumption in the growth of the loan book.
Importantly, as you will see in details in this presentation, we're extremely well positioned to a rising interest rate environment. Not only for the interest rate growth, which is expected going forward, but also for the effect of the increase of rates that has already occurred on the long-term end of the curve from January to today, with a strong impact on our P&L going forward.
If we look at the businesses, as I mentioned, factoring and lending has shown a strong rebound of volumes over 40% year-over-year with a loan book, which has started again to grow at double digit, as indicated in our business plan. And the profit before tax growing single digit because of lower recovery in LPI collection, which has been more deferred due to a different timing of collection, particularly in Spain.
Security services have seen growth in volumes, driven mostly the commercial development given the performance in the market. And given good cost control, operating leverage, profit has gone up by 16% year-over-year on a PBT basis. Payments have seen a growth across many of the areas, particularly in card settlement transactions and profit before tax has grown at over 30% year-over-year. Synergies have been strong, but we still have to see all of them given a different timing of how they occur through the year in the quarter. Costs have been kept under control, and net interest income has grown. Although you remember, we still have the effect of the mark-to-market of the DEPO government bond that is flowing through our P&L.
Capital remains exceedingly strong. We have a core equity Tier 1 ratio of 16.7% and a total capital ratio of 23%. We issued, I would say, at a lucky right time, perpetual AT1 in January for EUR 150 million, which gives us plenty of capital flexibility going forward. And we confirm, as we indicated, the intention to pay dividend on a half year basis and the profit of this quarter already earmarked for that payment plus clearly, there will be the profit of the second quarter. We remain not exposed from a commercial point of view to the Ukrainian and Russian market and we've signed a small acquisition to integrate a consulting company, which has been working for us for a number of years to support the development of our ICT infrastructure, particularly on the factoring and lending business.
So overall, on Page 3, we see a lot of pluses in the results today and also in the outlook. A strong increase in volume in factoring and lending with a good Q2 pipeline, a good environment and also development in security services and payments with good headwinds. The visible impact of synergies in the corporate center Importantly, the positive impact of interest rates, we still have to flow through the P&L of the business. We have, on one side, we had to collect portfolio, which will be rolled forward at much higher interest rates than is currently yielding. And we've seen in Poland for the first time in years, positive spread for the -- of the bank of deposits. And therefore, the ability to collect and create margin on the deposit collection, which we have restarted in Poland.
The AT1 has been, we think, a great success in terms of increasing the capital flexibility of the business and the threat of having integrated this MC3 consulting company will give us further impetus to improve our operation in the factoring and lending business. We still have some challenges and care collection have been not as strong as we expected in the first quarter. Last year, we had a strong quarter in Spain given the timing of collections of the core system. But particularly in Italy, we still have to improve on our LPI recovery, although we are still recovering at very high rates of recovery. There are still areas of high liquidity, particularly in some countries, notably in Spain and the for payment times remains steady. We haven't seen a worsening in the on that side of the business.
So if you look at the divisional reporting on Page 4, you can see that all areas have shown growth compared to the previous year, factoring and lending, security services and payments and the corporate center. And therefore, we are reporting the strong earnings that I mentioned before.
I leave it to Giorgio to present the divisional reporting, please Giorgio.
Thank you, Max. Good afternoon to everybody. We are now at Slide #5, and we are going to introduce the factoring and lending performance. We had a strong bound in volumes that are higher compared to the same period of the last year by 42%. And this result, thanks to the commercial effort and also the expectation of higher DSOs going forward.
The collection is down by 13% year-over-year to the progressive absorption of liquidity. And also, it's important to consider that at the beginning of the year, the loan book was smaller. For the collection, the loan book at the end of the quarter is higher by 11%. And now we are back at the same levels at the first quarter 2020 with the growth across all markets, except space. LPIs collection decreased year-over-year. This is primarily due to the delay of out-of-cost agreement, especially in Italy. But on the other side, the LPI stock continued to grow and a good basket in order to maintain the high profitability also for the future.
If you go to the next slide, #6, we have definite economic results of factoring lending. And the net interest income is higher 8% year-over-year, and this is -- has been driven by the higher loan book. The total net revenues are higher compared to the same period of the last year. We had higher than OpEx, and this is also driven by some investments in growth and also to the a bigger portfolio that we have. But on average, the cost income ratio is almost stable compared to the first quarter 2022. We are continuing to maintain our excellent asset quality. Our this profile is really close to 0, and the profit before taxes reflect a growth, the positive trend of the net interest. We have also a positive improvement also in the gross yields on regulated loans. This thanks to the asset refits in Poland and thanks to the increase of the LIBOR despite the lower LPI collection.
Going to the security services KPIs that we have at Page 7. We have a good plan in terms of the positive banks assets under deposits grew by 5% year-over-year. In the first quarter, the deposit grew at 7% on total assets under deposit. And also the Global Custody, Asset Under Custody increased by 9% year-over-year. Total net revenues are up, thanks to the higher net fee and commission income, and these have been driven by the assets under deposit and the asset under case. OpEx decreased is an important result in terms of improvement of the efficiency because we have higher assets under deposits, but at a lower internal costs and also the profit before tax has been confirmed in growth.
Talking about the payments at Page 8, the number of transactional stuff and collection are up compared to the last same period of the last year. And the cash sentiment transaction are significantly higher, plus 35% year-over-year and racing situation that we had before COVID because the first quarter of 2020 was the last quarter before the COVID -- the pandemic situation receivable continue to decrease, but we are following the market trend. And we have seen also an increase in corporate savings primarily thanks to payments from corporate customers that has been penalized during the pandemic, and now that we started, and this is also for the total net revenue is higher by 11% compared to the last -- to the same period of the last year. And the net interest, the income also increased, but in this case, we have a different cost of pricing applied this was a change that was applied at the first half 2021. Commissions are stable. But obviously also a good result because in the first quarter of 2022, we had important revenues coming from the Fondo Nazionale di Garanzia that now this has been normalized. So we are happy to confirm the same result as last year.
Talking about the Corporate Center, we can start to view the positive effect on cost and funding synergies. The profit before tax is positive and this half, EUR 14.1 million compared to the first quarter of 2021. And we are still not including the negative effect coming from the DEPO acquisition in the mark-to-market asset. And for the first quarter, it's EUR 5.7 million. The net interest income increased by EUR 9.3 million year-over-year primarily due to the funding synergies. We have also positive contribution of synergies in the direct OpEx and D&A that are down by 24% year-over-year.
We had a good result also in the other income that are up primarily due to the income coming from some investments. And we are also putting in place a lot of initiatives, 2020 initiatives in order to continue this trend to have an engine more efficient. And we are continuing to select investments that our investment strategy for government bonds will start at the end of the year the campaign in Poland to benefit from the positive spread we have our retail deposits compared to the WIBOR acting in this way can give us also a good benefit going forward.
At Slide #10, we have the balance sheet. It has been confirmed that is stronger in terms of assets and also liabilities. We have a strong LCR, stronger NSFR and also the leverage ratio benefited by the additional Tier 1. Now we are at 4.7%, and this is a good point in order to continuing our flow. Government bond portfolio increased by EUR 140 million compared to the end of the year. The bond portfolio is half floater. We have a positive market to market and not accounted in P&L coming from our bond portfolio. And as said before, we started our campaign in Poland.
Now I leave the floor to our CEO, in order to give a view on the Macro/Public Finances Outlook and also to the interest rate environment.
Thank you, Giorgio. On Page 11, you see a rejig of a slide we had in our 2019 business plan presentation where we highlighted some of the unique characteristics of our business, which is positively geared to the issues that we are facing today in the market. It's a business hours that in case of increased perception of political country risk tends to drive volumes and pricing. Customers have more demand for our product with lower price sensitivity, the traditional banks tend to shy away from our sector. A worsening trend in public finances also is positive for us. It put pressure on preserving cash and therefore, at least to higher payment times from the public administration, more public expenditure drives more invoices and therefore, more volumes for us. Remember in inflationary environment, we buy nominal invoices and therefore, public sector expenditure grows faster than we would see -- we have seen in the past, benefiting our loan book growth, our profitability and our return on tangible equity.
And finally, in a rising interest rate environment, we are double geared to interest rate as the LPI charged at a variable rate of 45%. we book only 28%. We book only 45% of the 8% at on an ongoing basis, and then we book the remainder of what we collect 5 years afterwards when on average, we collect. We have a faster repricing of loans versus liabilities, and we have a high proportion of our loan book funded by equity. So a rising interest rate has a positive interest margin impact.
On Page 12, we try to seize -- to size the opportunity of what happens in case of a sudden increase for 100 or 200 bps of the level of interest rates. This is based on a number of assumptions, which are listed here, including constant balance sheet, the repricing of retail deposits at cost and deposit spreads, which we know in a rising interest environment usually the deposit price guidance in terms of the bank. The fixed rate as a commission or reprice of maturity. The floating rate assets are repriced on a fixing data. And for instance, the LPI are all on variable so that benefits us. The impact, as you see at the bottom of the table is if you take 1 year forward for 100 bps of increment is roughly EUR 12 million, EUR 13 million. And 3 year forward, EUR 16 million, EUR 17 million. That's roughly a 10% increase compared to last year. Net income on a 1-year horizon is around 13% on a 3-year horizon. Now that's a parallel shift.
And so if you look at the graph on top is the effect that we might see in the current curve, the one in yellow moved 100 bps higher to the one in gray or 200 bps higher to the one in green. Here, we don't have the effect instead of what has already happened which is actually the shift from where the yield curve was on -- at the time of the industrial plan, so 1 year ago, roughly, to where it is today. You can see the curve of the industrial plan in blue. And you can see the yield curve today in yellow. That's roughly 1.5% shift upwards of the curve on the 5-year horizon. What does this mean that besides the number you see on Page 12, if you simply take the rollover effect on Page 10 of our fixed bond portfolio, EUR 2.9 billion, let's say, EUR 3 billion to round it up, which currently yields 22 bps. Now the yield on an Italian government bond, which has a 5-year tenure, which is where we invest on an ongoing basis when you had to collect bond portfolio matures is up at 1.7%, which means that this rollover effect on the EUR 3 billion portfolio will generate an incremental yield of 1.5%, reached for EUR 3 billion when that rollover happens means the positive impact of EUR 45 million without changing the size of the bond book.
Importantly, the rest of the bond book is on floaters. So the repricing and the increase in interest rate of the -- implied in the yield curve will occur automatically when interest rates will go up with a spread, which is a 62 bps and therefore, will have been locked in with a longer duration. The duration of this loan book is roughly 37 months.
So going back to Page 12. These are the data what is the impact of the shift from today on the interest rate curve does not include, as we said, what has already occurred, which has a very positive impact on our outlook on our government bond portfolio.
I leave to Giorgio to conclude the presentation.
Thank you. Going to Slide #13. We have the asset quality. We confirm our solid asset quality with a very negligible cost of risk at 1.1 bps and we don't have any material impact on CET1 result for the calendar provisioning, the credit under moratoria at a group level of EUR 1.9 million. We have to consider that the impaired loans mostly towards the public sector. And the NPL are mainly due to the municipality in conservatorship. So if we exclude the municipality and conservatorship, our NPL ratio is 0.2%.
Going to last Page 14. We have EUR 38.1 million of first quarter core dividends and over EUR 189 million of excess capital, The Total Capital Ratio is 23.2%. The CET1 ratio is 16.7%. Thanks to the additional Tier 1, we increased our capital flexibility. And if we include the accrued dividend of the first quarter, our Total Capital Ratio grows at 24.5%. We don't need to apply any measures coming from ECB. And our RWAs calculation is base always as usual on the Basel Standard Model.
With that, I leave the floor to Max also to explain our next event and to conclude the presentation.
Thank you. You have on Page 15, our next meetings with investors, so we're starting Roadshow at the end of this week, but importantly, to recap where we are, we deliver, we think, a good set of first quarter results with strong performance rebound in our factoring and lending business, which had more difficult quarters in the last year. And importantly, we start operating environment, which is strongly conducive to the growth of our business and which from a financials point of view, should benefit greatly on what has already happened in the market with the steepening of the yield curve and the interest rate environment, which is changing.
So thank you very much for attending today, and we are open for any questions that you have.
[Operator Instructions] The first question is from Antonio Reale with Morgan Stanley.
It's Antonio from Morgan Stanley. I have 3 questions, please. The first one on volumes. I look at volumes, and it looks like we've turned the corner at least with stabilization again for the second quarter in a row, and importantly, a stabilization and a strong rebound in Italy. Can you talk about the drivers of this recovery in your view? And how sustainable this is going forward? There's still a lot of liquidity in the system. So I wonder if you're starting to notice a change in behaviors at the client level and more in general, what type of growth rates in volumes would you expect to see in 2022? That's my first question. My second question is on your slide on rates. Thank you for putting it together. By the way, I think it's extremely helpful. I would just like to better understand your assumptions here, specifically how you come up with those numbers? I realize you talk about a parallel shift in the curve, but I'd like to better understand what you assume for some of the sort of 3, 4 key drivers that, at least, I understand, drove your NII, maturity commission, so the discount at which you buy the receivables LPI rate, sort of what you assume in terms of ECB base rate here, deposit costs, particularly in light of the excess that we see at DEPObank? And lastly, the rate at which we deploy some of the success between ECB and government bonds. I ask you because I thought that this is somewhat lower than what I had in mind, especially assuming well, a change in the short end of the curve to rates and for a bank with your mix. So I think any color you can provide us here will be extremely helpful. Also related to that, what will be the move in a 50 basis points hike scenario? As also, I would expect that the first 50 bps move in rates would have a disproportionate positive effect on your NII. And lastly, I hate to ask you on a public forum because I realize it's really not full in your control, but I think it's important to get a sense from you. We've seen a number of departures resignations on your Board recently, some louder than others. But nonetheless, the number of departures in the last 6 months have raised some questions with investors and shareholders. Could you perhaps talk about how you see governance at BFF more generally and where this can improve? And any color or reasons behind some of the departures that you can comment.
Thank you for the question. Also for the last one that you raised, which I think gives me the forum to put to bed this issue. I think particularly for the non-Italian that are [indiscernible], we need to distinguish the 2 boards we have. One we have the main board. And then we have the Board of Statutory Auditors, which is a separate Board, which is appointed in Italy, originally for the audit control of the company that has over time taken other control functions. The main board has been appointed last year with a slate proposed by the exiting Board and voted by the shareholders with one minority shareholder representatives. The Board of Statutory Auditors has been indicated not by the Board, which cannot actually indicate the Board of statutory auditors, but has been submitted as a proposal by Assogestioni. So we didn't have as a company, any say or any influence on the people who are appointed to that Board. Now the resignation came about, and they are -- the motivation are in the public domain for a very different set of reasons. Let me take first, the 2 resignation we had from the main board. One was a representative of Equinova, which then subsequently sold its stake. I don't know if the 2 things were connected, but clearly, timing-wise, were very close. And the first resignation came about from a board member who had reached the limit of the board position she could have given that she is in the Board of the bank. And as actually taken on after she resigned a number of other positions, I think there was an issue around that and probably the interest in having multiple board membership. It's actually, as an aside, the restriction that the regulator puts on interlocking and number of Board position one can take. It's actually something we will generate some issue and recruiting people and board of banks going forward. Now in the Board of Statutory Audits, we have a very committed and very different situation. We had the Chairwoman of the Board, who announced a couple of months before the GSM, that she would be resigning the GSM to take a Statutory Board position in a local bank in a city where she is from to be part more of the local community. And therefore, we brought to the GSM the need to replace her on the Board. So that was if you want, on the ordinary course of business. Assogestioni proposed a new Chairwoman of the Board of Statutory Auditors, who, unfortunately, have a family problem, and she had to resign to take care of some family members, unfortunately, fell sick, which then triggered a process where you need to appoint in the Board of Statutory Auditors, given there are quotas for men and female, the additional member, there are 2 substitute members, sorry, that are available, who is a female. She got appointed. She then went through the interlocking and number of maximum boards she could sit, and she decided that given it was a temporary appointment until the new GSM, that she would not give up on rather board and therefore, designed for the position. And then we appointed the other additional store auditor as the third member given that now we have 3 board members who are all man we need to call a GSM to appoint and rebalance the Board of Statutory Auditors. And again, as a board of BFF, we cannot submit a proposal for that Statutory Auditor Board. So we actually invite whoever of the shareholders also on this call have an intention to submit a slate for those positions to think very carefully that the people who are indicated have the time and the competencies to fill those positions. Unfortunately, the major issue was created around the Board of Statutory Auditors, which again -- where, again, we don't have any influence, unfortunately, on the appointment process. So not a great sequence of events. Frankly, it felt a bit like a comedy at times, but it is what it is. We'll live through that.
Going to more serious matters. On volumes, look, yes, I would say more than stabilization, we're actually started to grow again. I think if you go to Page 24, you can see and it's a very positive indication at the bottom that the customer loans in the first quarter are pretty much the same level as the year-end, which is exactly what we had historically when the business was continuously growing. I think it's a good sign that actually the trajectory of growth has resumed and the accumulation phase of the business on the factoring and lending business will continue. We are seeing the same dynamic in Q2 that we're seeing in Q1. And so we don't see any different trend. We are seeing more interest from customers, given the fact that the interest rate environment is making them more worried about the timing of payments from the public sector on one side and also their own cost of funding going forward. And so we feel pretty good, I would say, about the performance. Certainly, the environmental side helps, but credit to our team, it has been also a much better execution compared to last year and some of the changes that we put forward have had a positive impact in that respect.
Now on rates. On rates, I think -- look, it's always difficult to capture all the questions on an analysis that covers the balance sheet. I will leave to Giorgio to comment on the 50 bps move. My overarching comment is what you might think as a low impact is because the impact we have shown on Page 12 doesn't ensure the steepening, which has already occurred. So let's forget for a second, it's an increase in interest rates and to assume interest rate remains where they are. The curve remains where it is, in particular, curve Italian government bonds. In that case, we have a significant impact on our government bond portfolio, no matter what. There's no repricing. There's no repricing [indiscernible] LPI of clients of the [indiscernible]. We seem to have the steepening of the curve. And that's, as I mentioned before, massive. Only the effect on the fixed bond portfolio on a rollover is EUR 45 million. That's PBT, so EUR 30 million. That's 25% more net income almost than last year. So it's material. What we wanted to show though because the initial move has been already impacted -- has already happened. So the if you want to move from the blue line to the yellow line, what happened if you move everything upward. And the major effect is the fact that we repriced twice the factoring business for the LPI rates and for the maturity commission. The LPI rate, we don't see the full effect on a horizon because it takes 5 years, remember to collect the over-recovery. So part of that effect is actually deferred. And as you can see on the table, we have a disproportionate effect for the initial part of the increase in interest rates. Being a parallel shift where we assume that the retail spreads remain as they are today. I think also underestimate the fact that in general, deposit rate don't move in parallel with the increase in interest rates. They tend to be more sticky. But we haven't included that. That's actually what we are seeing in Poland, for instance, where we've moved to a positive deposit spread. I'll leave it to Giorgio to comment further.
Thank you. If you apply a parallel shift in the interest rate curve of 50 bps, we can observe a different movement because we have to consider that on some liabilities. We have some flow at 0. So the first bps will gained the impact of the increase of the weight from the [indiscernible]. And so if we have this effect of 50 bps of 1 year, we are around EUR 13 million, EUR 15 million. And on 3 years, we have an impact slightly higher than EUR 17 million. So it's a strange curve. At the beginning, we gain more and between 100 bps and 200 bps, the gain we decreased slightly and then it goes up over 200 bps.
Again, it's always on a parallel shift.
The next question is from Giovanni Razzoli with Deutsche Bank.
Some clarification again on the on the NII sensitivity where, I guess, the message is we are more interesting or more leveraged to the steepening of the curve rather than to the parallel shift. So basically, the EUR 45 million of higher NII from the investment yield. Is that correct that we should get it on average of 2.5 years that is more or less the duration of the portfolio? So that's the first part of the explanation you provided us. And sorry, I missed the part relating to the floating component. So what would be the upside there? Because I would have also expect a significant benefit there as probably most of your bonds are in asset swap. So with your EURIBOR moving up, you should also get the benefit there. But I don't know whether I got it correctly or not, if you can please clarify again this point? Another question, completely different topic, is on M&A. If we look at the price report, it seems like you have a little bit increased your M&A appetite also on different businesses. My question is, how shall we look at your strategy going forward? And how do you look at the trade-off between the shareholder remuneration, the constraint of external growth, transformational deals that you have made in DEPObank and also the complexity of the group? So what is the -- how can we look at these moving parts? And the third question, I've seen that in the Q1 results, there are some extraordinary cost of EUR 2 million related to the M&A. I understand this is a detail. But if you can share with us what you referred to because in the context of the quarter, they may also matter?
On -- on the -- sorry, on the floater component. But yes, it's -- it's -- as you see on Page 10, the floaters are linked to the EURIBOR 6 months roughly. So that has a direct impact if there is an increase in rates on the yield on the asset side. And the net interest income, it depends on how much the movement is compared to the to the deposits that have a float -- sorry, a floor, which are roughly EUR 2.5 billion. So the first 50 bps of that is usually captured as a net interest income. And thereafter, clearly, it is captured a bit less. We have the deposits usually priced within the 3 months EURIBOR, so again the steepening of the curve helps a little bit.
On the repricing of the fixed rate portfolio, yes, 28 months, so slightly more than 2.5 years. And so the calculation I did before should be to go through in 3 years' time. The -- when I mentioned the 5 years, as you might remember, we always said in order to have a 3-year average portfolio. We need to buy 5-year bond because by the time you buy them roll over the average duration actually drops for a year. On M&A, we continue to have M&A, should let me do a job. We actually announced some M&A today, which is a small acquisition, but it's important for us strategically. And we will continue to look at M&A around the 3 areas that we've indicated to the market. First is to integrate our business with similar businesses or vertically integrated in what we do, that's a small example. It actually allows us to integrate more what we do on the operational side of our factory and lending business. We are looking at other businesses that have public sector and health care exposure, which is, if you want [indiscernible]. And then we're looking also for other businesses where we can diversify our platform at the same time maintaining as we pointed out, certain simplicity to the group and generate significant return to our shareholders through the deployment of our capital, our excess funding and operational efficiency, which means that I cannot comment on what the press has reported, but we are looking at a number of opportunities, which explains also the M&A costs, which we expense as we go. And we see where we get if they come to fruition. Overall, in terms of complexity, and I come back to that point. We have actually a much simpler business than a traditional bank. We're going through a lot of details in how we represent the business. But at the end of the day, we have 2 commission businesses just generated a slot, which fund a factoring business. And that's it. We don't have multiple business lines. We don't have a retail branch network. We don't have competing channels. It's actually a fairly simple business compared to traditional bank or even if you want to add a specialized bank that operating it, which have chosen to diversify in various verticals instead of diversifying geographically as we have done. So -- but for us, keeping complexity under control is certainly something very important because with complexity comes cost becomes a risk. So I hope that answered your question.
The next question is from Nicholas Binda with Intermonte SIM.
I have 2 questions. The first one is about the factoring business. So the NII on RWA ratio decline year-on-year, negatively affected by the lower LPI collection. On this front, I was wondering how much this item is under your control? And which is your expectation for the next quarters? And the second question is regarding the tax rate. So I was wondering if you could provide us guidance for the full year 2022 as I saw that in this quarter, the tax rate was something like 35%?
Yes. I'll leave Giorgio to comment on the tax rate, He's our tax man. On the LPI -- the -- as I said, compared to last year, last year, we collected quite a bit in Spain in the first quarter, which also has 1% recovery. So big impact on the P&L. We are not happy about our performance on the LPI collection. The good thing is we are collecting at high recovery rate. So we are not collecting and discounting. And if you don't collect today, we know we always collect tomorrow because remember, most of the LPI fund is actually and the legal actions. So if we don't settle with the debtor at a certain point, a court will award us 100% of the LPI, and we collect 100% of the NPI. So we're always playing a game of chicken with a debtor trying to pressure them to settle, not wanted to settle with -- to highly discount and wait for the quarter is to progress, so we can put more pressure on that. So I think there on the team, we have made a number of changes as well when we merged it with the international department in September and some of those changes are coming through fruition. Now because of negotiation, it takes a while before we get that sorted. But not the money is there. It's our right to collect it. We don't make discount to accelerate collection. And so if it's not jumped today, jump tomorrow.
On the tax rate?
Tax rate is 29%. The main difference is related to the fiscal losses coming from depot that was utilized at the end of last year now we don't have no more losses for this year. So this is the main difference that we have.
In terms of outlook, we expect the tax rate to remain in line with what we have today.
The next question is from Simonetta Chiriotti with Mediobanca.
I have a couple of questions. So the first is on volumes. I've seen that in Italy, there are slightly more than EUR 200 million that are not related to the NHS or the Public Administration. So what does this amount is [indiscernible]? Second question is on the LPI collection. Is it possible to have the amount of the LPI of the collection of [indiscernible] in the quarter? And more in general terms, what is the -- I mean, this item has been at least for few quarters now. In terms of scenario, what should happen to see something changed? And also wondering this is delays in the collection is finally becoming a lower positive impact on the P&L because it is true that LPI are collected in -- under the day back later than originally expected? And finally, as to the third question, you have showed an interest being -- interest rate sensitivity. What should we think of the targets that you have for 2023 in light of what is happening on interest rates?
Yes. Let me answer on the last one. We are not changing the guidance today, we haven't actually done reforecasting for 2023 also because the change in interest rates have occurred only recently. We want to have that to stabilize. So in that case, we'll go back to the market when the time is correct and when the exercise has been done. In terms of LPI, your voice broke up. So if we don't answer fully the question, please ask it. But the -- on the LPI, we had [indiscernible] an issue of execution. And one of the reasons why we merge the Italian factoring business, the international business was also to make sure we have a better grasp on the Italian side, on the collection of LPI. Let's not forget also that we are going through the core processes and the side has been slowdown in the court activity during COVID. It means the things haven't progressed as much as they should be. The LPI fund is disproportionate located to Italy. So the performance of the Italian because in a sense the -- some of the historical purchases. And so the performance of Italian business is more of an impact there. In terms of the volumes, which are not any chance in public administration, we have a bit more private and we have some tax credit in there.
And the amount of LPI over recovery net of rescheduling for the quarter?
That's -- let me give the numbers to you. It's minus EUR 3.2 million It's on Page 6. Second line of the table.
The next question is from Andrea Lisi with Equita.
My first question is on the sensitivity to interest rates, I understand that it's very difficult to capture all the different things or the different moving parts. Just wanted to understand your assumption about the movement of the maturity commission, if you assume a 1 bps increase in interest rates that will lead us to an increase of the maturity commission of the same size or if a different assumption is there? And especially also, which is our what do you expect about your capacity to apply -- to ask for a higher discounting in a higher interest rate environment? The second question is on the asset quote. If you can provide us a bit more color on the increase in NPLs in the quarter and if you expect some impact on that? And last one, maybe you have answered the -- to Simonetta, but I didn't get the point. what should happen to observe a recovery and improvement in the over collection of LPIs?
On the last one is frankly better execution and some of the legal actions that we started to come to fruition. So there's no magic in there. We have a counterparty who needs to decide to pay. And they decide to pay when they want to pay and when we are good at pushing them to pay. And when a court orders them today, so that's the -- what happens. On the sensitivity analysis, we have assumed that we reprice the maturity commission at the amount, which is what we've experienced in the past [indiscernible] bps increase, we were able to transfer that increase to customers. But at the time when the refixing of the pricing happens. We have some customers where we can price in Italy with some customers where we have 1-year contract. The majority is actually on that position. And so that assumption we've had. Historically, when we have higher interest rates, the pricing power is pretty good, but we've assumed that we simply have an increase which is equal to the increase in rate. And as I mentioned, we also assume that if today, let's say, in Italy, we have we are offering deposits at 0, which means a spread of, say, 50 bps of EURIBOR overnight. Then if rates go up by 100 bps, then we price the deposits at 150 bps, so still 50 bps higher. Now that usually does not happen. So for instance, what we're seeing in Poland is that now we have more than 1% in our favor on the deposits. But to keep it very simple, we have kept that describe remains the same. So we think there is actual opportunity as most of the banks will experience that actually the deposits will be priced differently.
So the other question, which I forgot, did you take a note?
Yes, it was on the evolution of the asset quote in the quarter with the increase in NPLs, if you can provide some color on that?
Yes. Look, it's an increase on the past dues. So if you look at the past years, we've seen an increase also changed some of the collection policies around the public sector in Italy. So we have a slight increase in past dues. So you see actually, we don't have the data here, but if you compare to the year-end results, the proportion net impaired loans to public sector has gone up, so the increase entirely driven by that. And on the net NPLs, we are basically excluding the municipality and conservatorship will be flat versus slightly down versus year-end up by EUR 1 million compared to the first quarter of 2021.
The next question is from Thomas Purcell with Alua Capital Management.
I just want to keep this very short. We've got EUR 3 billion of fixed securities for the 2.5-year duration. You gave a spread of 150 over the 22 basis points the current yields higher than that, but using 150 that's EUR 45 million of additional interest. You've got $2.9 billion in floaters. Your EURIBOR has gone from minus 40, the December contract is at 63 basis points. So it's up 100, so that's EUR 29 million. And then from the merger accounting, you have EUR 26 million of drag that's going to go away. So if I add all those up, I get another EUR 100 million in that Page 12 where you haven't taken into account. And then in addition to that, you have your loan portfolio, which is also your EURIBOR. Is that all correct?
Yes. You need also to bear in mind that the deposits come from DEPO are floaters.
Yes, I understand that. But right now, as you pointed out, when the rates go from negative 50 to 0 and even go higher, you're not going to take them up, correct?
No. We don't pay an increase of EUR 2.5 billion of the EUR 8.5 billion. So for EUR 6 billion, there is actually a pickup in cost.
The next question is from Michele Baldelli with BNP Paribas.
A couple of questions. The first one relates to the Payments division, just to have some color on the relationship between growing card transactions, but revenues from fees are kind of flattish year-on-year. So if you can elaborate a little bit of color on this? And the second question is given that you had already a very strong market share in the NHS in Italy. And given your very strong growth of this quarter, can you give us some color on this? Are you getting, let's say, to a level very, very high market share or there are players going out or redoing the exposure to this segment, if you can give any color in detail?
Yes. I think the last question is an interesting one because we never think about necessary market share in the market, actually the penetration of the product. So if you think about the NHS expansion in Italy, they are for goods and services, roughly EUR 30 billion. We have probably 1/3 of the market. It's more slightly more. And we are factoring EUR 590 million to make it through the year, EUR 2.4 billion. So it means that the market is actually factoring a fraction of the EUR 30 billion. So let's say, EUR 7.5 billion, EUR 10 billion, we still have EUR 20 billion, which is not a factor. So what we have been able to do is actually to -- we got some cash of other payers mostly to convert new customers to the factoring. We contract -- we won last year, so we were positive on the outlook. And also, there is a rebound of expenditure on the half side. if you look at the forecast, for instance, on the hospital pharmaceutical expenditure, which is forecasted for this year to be EUR 12 billion in 2023 is forecasted to be EUR 12.7 billion. So a EUR 700 million increase is actually pretty substantial, percentage-wise is not enormous because it's 5%. But compared to the size of what we buy is fairly large. So it generates a substantial potential for us. So that's, I think, quite important. On the payments division, Giorgio mentioned before, on the commission side, we actually had last year a strong payment on outsourcing contract we entrant, which was not as large this year. This has been less issuance of government guaranteed loans, and therefore, that was counterbalanced by the growth in card transactions.
The next question comes from Alfred Tagliaferro of TGI Holdings.
Can you hear me?
Yes.
Fantastic. Congratulations on a very good quarter. Given the recent increase in yields, that's been much talked about, you guys are well on track to earn above EUR 200 million in [ NPAT ] in FY '23, which is obviously well in guidance of EUR 170 million to EUR 180 million and also far in excess of consensus, which seems slightly low. Given the look-through P/E ratio and including the excess capital and the accrued dividend and [ NPAT ] probably being well above EUR 200 million is around 4.7x. Why are you not using your excess capital to aggressively repurchase shares given you've now received authorization to repurchase, I think, 5%?
Yes. As you -- as you probably know, we need to go through an approval process with Bank of Italy. So we received authorization by the shareholders, but the decision on the purchase of shares is with the regulators, not with us. So that will take with the time that it takes. So we can't, unfortunately, compared to other businesses deciding then progress immediately. And that's really the reason. That's why we have introduced instead the half year dividend policy to try to give back the excess capital we generate to shareholders in an accelerated form this way.
This concludes our question-and-answer session. I would like to turn the conference back over to Massimiliano Belingheri and Piergiorgio Bicci for any closing remarks.
Thank you. Looking quickly, to be honest, on our results. I think it's a good demonstration of the synergies coming through from the integration of DEPO, only 1 year after we report the business. A good environment for our factoring and lending business and a structural balance sheet, the opportunity even if rates don't go up, it actually benefits from the steepening of the of the yield curve. So that was the business we think has strong footing to continue to perform strongly. And thank you again for your time today.