Banca IFIS SpA
MIL:IF
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Banca IFIS SpA
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Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca IFIS First Quarter 2018 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Giovanni Bossi, Chief Executive Officer of Banca IFIS. Please go ahead, sir.
Thank you. Good afternoon to everybody. The Board of Director of Banca IFIS this morning approved the first quarter 2018 results. The results are good.
Some highlights. The national banking income is at EUR 129 million, and it is plus 35%, more or less. This is due to the strong contribution of the NPL business unit. You know that we are active in the NPL business on the other side of the traditional side in which a traditional bank is involved. So we buy and manage NPL. And with a double-digit growth in the Enterprises segment, and this is another good point for this first quarter.
The -- as regards the net banking income, the -- some highlights on the net banking income. As regards the net profit, net profit is near EUR 38 million, EUR 37.9 million. And this is up 16% or near 16% in respect to the first quarter 2017.
One other point is the cost of credit. I believe that's 73 [indiscernible] 73 basis point. Of course, cost of credit is calculated only on the enterprise's loan. If all these results together with some regulatory -- some regulatory indicators calculated at the Banca IFIS level, the total own fund ratio is 20 -- near 21%, and the common equity Tier 1, that is 15.5%.
Allow me to say that Banca IFIS is really well positioned to grab any opportunities that could arise in a challenging environment -- in the challenging environment in which we are working today. Of course, we expect to play a role in the consolidation of the small financial institution environment in Italy. But this is possible only if you have a good liquidity, of course, and we have it; a good position in terms of equity; and good knowledge, good ideas, good management, good staff to perform at best all our activities.
Just a remark on the 2 main areas in which we are involved. As regards the NPLs where I can say that the environment is challenging, you know that prices are growing. But at the same time, we are -- we demonstrated in this quarter to have the capability to realize profits. We're improving our capability to better work on the portfolios. Same on the enterprises, where sort of -- where the increase in the number of net banking income is a very -- is a good point that we will explain in the some minutes -- the dynamics of which we will explain to you in some minute.
Now Mara, the floor -- I leave the floor to Mara di Giorgio for some further remarks on the results.
Hi. Sorry for having postponed this call. First of all, I would like to start by saying sorry for -- on behalf of all the management of Banca IFIS.
Trying to summarize the results, we needed to focus on what really explains these results. First of all, you can see even on the press release, those probably who have already downloaded and read on the website, that these segment reports are differences just starting from 2018 compared with 2017, okay? And the reason why is because -- the reason why we have adopted this kind of segments from -- starting from now is because we want to represent in the way, which the company, the bank, is manage the results, the data.
So we have 2 focus in our daily activity and in our, say, strategy: To develop our presence and our lending capacity to enterprises on one side; and on the other, we want to create value and to become the private asset management company of the country. So these 2 areas are the only areas where we are focused.
There are some one-off impacts, okay, that needs to be understood, really, for better analyzing the trends represented in the first quarter. And according to the new valuation of this model, for part of the portfolio, we will go deeply and, say, in more depth in the following slides. Anyway, that kind of adoption and evolution of -- the evolution of this model on NPL, on part of NPL, gave us a positive total impact either on the net banking income as well as one-off costs that needs to be really put aside from the, let's say, the total cost represented in this first quarter and not forecasted for the coming quarters.
Overall, I would say that the net profit of the quarter has -- is absolutely in line with the expected net profit for the year. So we are absolutely in line with that. And that the, let's say, we have in this representation of the data, try to make clear, also, the impact of the first time adoption of the IFRS 9. It's not important for the time being in terms of numbers, but it is absolutely important in terms of strategy, the acquisition of Cap.Ital.fin. The -- for the first time, consolidated in these numbers, I said, is not important really in terms of impact on total consolidated numbers, but again, important in terms of future strategy of improving collection for the NPL Area and [ not only ]. And we have also -- we are working also on constantly and coherently what with the -- what we said on the new fund structure. And in April, as you may know, we have issued a bond, okay, of EUR 300 million, trying to balance better, let's say, the retail funding with the institutional funding, okay? So our aim in the strategic plan is to grow close to 50% of the funding of the bank, total funding of the bank coming from retail, and 50% from a flexible sources and diversified sources. Okay.
Going to Slide #4, our margins. We outlined the margins already. Mr. Bossi, the CEO, said that we have reached EUR 139 million of net banking income, up by 34.6%. And this net banking income by segment, okay, is composed of 56%, so more or less just a little bit more than half, from Enterprises and just a little bit less than half by the NPL Area. One thing needs to be mentioned, okay, in the numbers reported on the right side on the table, on the right side. You see that Enterprises net banking income grew by 10.9%. On the other side, we have a minus 1% at the level of net profit from financial activities. The reason why is linked really to the provisions that, let's say, influenced last year results. This year total Enterprises provisions were minus EUR 11 million as compared to minus EUR 2.6 million negative number last year, which result was composed by the release of some [indiscernible] value, okay, after, let's say, the first acquisition -- the first amount from the acquisition of Interbanca. So last year, we had a net number coming from positive numbers and negative numbers. This year, we have just provisions according to the different subsegments, areas that are consolidated. So trade receivables, corporate banking and leasing. This is important.
By the way, you will see in the last slide that the cost of credit, according to these provisions, the end of the first quarter of 2018, is 73 basis points. That, from the accounting point of view, needs to be compared with 31 basis points. But again, if we restate, so we take out the release value last year in the quarter, we had 89 basis points. Again, that has to be compared with 73. So again, from the, let's say, managing the operations from the different business, I would point out that cost of credit has improved on one side. On the other, please have in mind, that in our strategic plan, we said that [ totally ] for the Enterprises 100 basis points is a level, sustainable level, for the future, okay?
Going to Slide 5, Page 5. Okay, we try to give you a comparison with the areas that are composing really the Enterprises. So trade receivables, corporate banking and leasing. Due to the cross-selling activities that we have put in place, mainly for that reason, we have consolidated together in the same network, commercial network, the possibility to sell either the factoring and the medium-lending term -- the medium long-term lending. For this reason, from this quarter, we are representing trade receivables as the sum of either factoring and medium/long-term lending, okay? So again, the way which we have represented to give you the right comparison and the possibility to understand the trends is in these slides. On the left side, the numbers that comes out from the profit and loss account. On the right side, the like-for-like comparisons, okay? Turnover clients outstanding in this sector, trade receivables, grew from, let's say, 3% number of clients, turnover a gain of 2%, outstanding 2%. So all positive numbers.
In terms of loans, we need to point out that in trade receivables, there is a seasonality, okay? Every first quarter of every single year, we are down as compared to the end of the year. So even this year, for this reason, let's say, even this year, the total like-for-like lending is down by 5.1%.
In terms of net banking income, okay, I would point out the growth of 5.5% if we see just factoring [ the change ] all of you have in mind, let's say, that starting from the first quarter, we started to accelerate our growth, okay? It's the case also for this particular quarter, so 2018, where trade receivables was up by 5.5%.
Net profit from financial activity, okay, like-for-like, it was up 1.4%. And again, here is included medium/long-term lending and provisions.
In terms of corporate banking, okay? Again, corporate banking last year had in this number -- in the numbers, included the medium/long-term that this year is not anymore, and according to the acquisition of Interbanca and the PPA, the reversal of the PPA. Reversal of the PPA on the total profit and loss account this year has an impact of EUR 22 million as compared to last quarter 2017 in which the impact was EUR 23 million, so just a little bit lower, okay? And out of the EUR 22 million, EUR 20.4 million are really included in the corporate banking.
In [indiscernible] okay, customer loans grew. The important thing is as we already started from the strategic plan, we are really aggregating new loans. And in this quarter, EUR 95 million were aggregated, okay? And outstanding loans of around EUR 700 million grew by 9%. Net banking income of this area, which, again includes PPA, reversal of the PPA, okay, grew by 14.7%. And a positive number also on net profit from financial activity.
Going to Slide Page 7, leasing. Leasing is very, let's say -- well, first of all I needed to explain you that since the acquisition time, we were including in leasing what we have found, really, in the consolidated in this area since the acquisition. Leasing operations plus a small portfolio of real estate mortgages and a small portfolio of [indiscernible]
[indiscernible] salary-backed loans.
Salary-backed loans. We have cleaned up, let's say, this sector, leaving only leasing operations, okay? And from the first quarter 2018, lease operations are consolidated for the time being in governance and services sector.
So looking just at the operative leasing and at the financial leasing, like-for-like net banking income grew by 31%. Absolutely a great number, achieved mainly in the equipment leasing, okay, in aggregated equipment leasing. And for this reason, either market share and volumes and clients grew during this quarter.
Net profit from financial activity, okay, has to be pointed out that in this number from first quarter 2015, no reversal PPA included, okay? Provisions were a little bit up as compared to the previous quarter 2017 and the amount was EUR 2.5 million. The cost of credit, okay, was 74 basis points. Like-for-like comparison at this level of the leasing is a good trend, double-digit growth again, 11.5%.
Now tax receivables. Okay, it's a very small business. As you know, it remains a very important profitable business as well. Small but good, okay, where the cash of the business is quite abundant and that makes the gross value of this sector decreasing. Nothing more than that.
Okay. Let's go to the NPL Area. I hope that everyone appreciates the great efforts that the bank has done during these first 3 months in achieving a best disclosure, okay, on the segment. First of all, let's go to Page 9, and you see that we are giving, for the first time to the market, the ERC 15 years. Main part of that is EUR 1.8 billion. So according to the net value of EUR 832 million at the end of the first quarter 2018, the ERC for the 15 years, for the coming 15 years, is EUR 1.8 billion. I think that everyone knows what ERC is, and I can tell you that the main part of the ERC, of course, is expected to occur in the first 10 years, okay?
Gross book value is EUR 13 billion, total positions 1.5 with an average ticket of EUR 8,000.
Going to Page 10, okay? Here, we can see that in the first quarter we have not replaced really too much, okay, and the reason why is because that in the market, banks are mainly working on the GACS-compliant assets, okay? So the operations are devoted to the setup of GACS compliance that was extended for 2 September 2018. And that's the reason why the same people, let's say, cannot work also on other trades. By the way, the number of trades in the first quarter 2018 were very apart from the GACS compliance on let's say, areas were very, very few.
On the other hand, the work we represent on the right side is the net book value on gross book value, which, you can see, okay, that yes, it has increased a little bit but not as, let's say, someone is speculating in the market.
By the way, we are able, okay, to work either on the primary market and on the secondary market. That's very important. That gives us the flexibility to choose the best portfolios for us, okay, according to the ability to transform those portfolios and those positions from NPLs to reperforming assets paid with installments in 10, 15 years. And that make us maximizing the value of those portfolios in terms of cash. And that's the reason why, okay, we can either afford, let's say, very important, let's say, recovery rates we can -- sorry, sustain very important recovery rates as well as working with no pressure, okay, with the existing portfolios and not being rash or buying whatever is [indiscernible] whatever portfolio goes into the market. So we -- in this moment, we do prefer, according to what we see, a position that is wait and see. Even if we are active and we are analyzing all projects, but we are not available to buy portfolios at any price. We need, okay, to achieve, according to our report, to our channels of collection of transformation, really, the internal rate of returns that we have in mind. And you can see, let's say, that the -- on the right side of this slide, that the cash collected by quarter -- in the first quarter, for example, of the 3 years, is absolutely a number that gives confidence to everyone. The same thing, if you see the year-end quarter cash collected during the year. It's true that the gross book value has increased, not so much from last year to this year, okay, but at the same time, the cash collected is really progressively increasing due to our unique business model, anyway.
So that, okay, in Page 11, we see the EUR 65.1 million of margin, net banking income as well as net profit from financial activities, okay? That is also impacted by the first adoption, as we said, of the risk value model on a tranche of legal position.
For understanding better what happened, okay, we go to Slide Page 12 where we have segmented the portfolio -- the NPL portfolio. You see immediately, okay, that in the area that we call legal recovery department, okay, we have add a line, a low arrow, that is called judicial ongoing workout. What we're trying to distinguish here as compared to the last representation at year-end is the value of the positions that are not in staging anymore, staging for the judicial workout, okay, but have already started the process and goes through the process for achieving the level of order of assignment. So according to the process, to the stacks, the value, of course, is different. And this is something that for giving, let's say, an appraisal, a valuation from the risk model, we needed to collect a historical data. So after 3 years of historical datas, we have started this year to represent, based on the data, to represent book value. That's, let's say, the 20% book value on NPL line, we have put EUR 52 million of net book value and represented EUR 257 million of that net gross portfolio.
Another thing that we have tried to represent in the segmentation is the difference between contribution of profit and loss account and cash. You see that is not correlated, the contribution of profit and loss account and cash. Cash comes mainly from prejudicial payment plans, that is the first line, okay? And order of assignments in the second line. Of course, there are cases in which transactions could be closed before, okay, the order of assignment on a call of the adaptor. And that's the reason why we have also EUR 6 million in the other line and EUR 3 million in the process, at least onetime line. But you see that, according to our business model, only when a position goes to be -- goes from the stage and, let's say, of -- from NPL to a stage of reperforming assets, starts to give, let's say, us cash back.
Okay, Page 15. Here, we wanted to represent the operating expenses. Two main areas of the operating expenses: Personal expenses and other administrative expenses.
Personal expenses goes with the new account -- new hires -- no, new hirings, sorry, new hiring of resources recorded during the first quarter, which grew by 13%, and personal expenses grew by 11%. And that takes into consideration, also, the consolidation of the Cap.Ital.fin people, colleagues, okay? And on the other side, we have administrative expenses, which grew, let's say, in a very difficult way as compared to the first quarter 2017. Please take into consideration, I've said at the beginning that we released the new valuation coming from the risk model on the judicial part of the NPL -- goes with the 9 -- goes with one-off EUR 9 million of administrative expenses, okay? That goes with the, let's say, the cash, okay, of the -- from -- with the value, the release of the value at the net banking income line.
Okay. So that's just to summarize the P&L account. The net profit grew by 15.8% to EUR 37.9 million, okay? And in this slide, Page 14, you see the, let's say, different items that we have already discussed. Now I give the floor to
Mariacristina Taormina, CFO, for commenting on the balance sheet asset structure. Page 15.
Good afternoon to everybody. As you can see on Slide 15, we -- highlights on the main financial statement account.
For that concern, the loans to customer, the amount is EUR 6.4 billion, with a growth of 1% with reference to the previous year 2017. This segment, as discussed prior -- as discussed before by Mara di Giorgio, are represented at the right side of the slide, and it's for EUR 5.3 billion by Enterprises loans, EUR 1,831 (sic) [ 831 ] million for Area NPL and EUR 2,052 million from GS (sic) [ G&S ] segment. For that concern, the Enterprise segment, it was already discussed by Mara, both for the Area NPL.
For that concern, the G&S area. This area shows an increase from around EUR 140 million, due to the first consolidation of Cap.Ital.fin, the new acquisition made by Banca IFIS in the month of February 2018. And the contribute of this new subsidiary is really small, more or less EUR 8 million of exposure. Both in this segment are included around EUR 50 million of performing loans deriving from the acquisition of NPL portfolio made by NPL Area in the ordinary activity of acquisition. For that concern, the financial asset, the amount is around EUR 600 million. And the composition that you can show -- that you can see it show, with the application of the new classification provided by Bank of Italy and IFRS 9, in this case, we have EUR 35 million of held for trades. That is the old name under IAS 39 in which the valuation is per value to profit and loss. Around EUR 150 million of activity at survey through profit and loss and around EUR 453 million of financial activity at fair value through CI.
This is the results, as I already said, after classification under IFRS 9. We describe in our quarterly report the application that the bank made of this principle in terms of classification, measurement and I see also impairment. For that concern, the dues from bank, it represents the result of liquidity in Bank of Italy, and this is advance for the ongoing activity of the bank. The other asset show a growth of 3.4% in respect to the previous year, and mainly represents some fiscal assets. You can find the breakdown between current tax and DTA assets. For that concern, the DTA assets, the amount exposed, include around EUR 100 million of DTA on loss carryforwards that have an effect -- a negative effect on the calculation of the ratio that we expected to be reduced during this year for the utilization that we shall use in the future.
If you go to the following Slide 16, you can try the asset quality and the trend for the different segment. We are exposing this slide of the asset quality of the segment Enterprises between performing and nonperforming -- between performing and interest loans. One important thing concerning the comparability of the data exposed because the data [ reflect ] to the previous year, 2017, as you know, are under AIS 39. The data exposed for the fiscal 2018 are under IFRS 9. So the comparability is just a bit difficult to put.
That concern, the breakdown of the net NPE. On the right side of the slide, you can see the loans that are on line with the previous year. A net reduction in the likely to payment exposure in part for a reclassification to fair value under IFRS 9, sorry, from the exposure that have a negative result to the SPPI test, partially compensated by a deterioration of the portfolio under ordinary business conditions. For that concern, the past year exposure, the increase from last year from EUR 114 million to EUR 120 million is mainly attributable to the trade receivables segment as part of the business as we say those in the past.
Below, in the slide, you can find the coverage of the debt loans or NPL coverage, here in the slide, that is aligned to the previous year. And the cost of credit already disclosed by Mara in -- before. For that concern, 2018 it's 73 bps for -- compared with final 2017 at 31 bps.
If we go to the Slide 17, about the funding structure. The bank has continued in the first Q 2018 the reshuffle activity of the funding source, with the reduction of the retail funding from 7 -- 65% to 63%, and an increase of the amount of the funding related to that security. And the end of April 2018, as you know, we issued a senior unsecured bond preferred for EUR 300 million.
And the last page of the presentation that shows our equity KPI, already disclosed by Mr. Bossi at the beginning of this call.
Operator, I would open to the Q&A time -- section.
[Operator Instructions] The first question is from Mr. Giuseppe Mapelli of Equita SIM.
First of all, I would like to ask you an update of the merger process between IFIS and La Scogliera. And my second question is on ERC. I don't know if it's possible to have a sort of duration of this ERC. You stated, Mara, that, let's say, the bulk of the [ cash in ] will be recorded in the first 10 years. Let's say, I would like to have some more color on the expected time on this ERC indicator. And my last question is on the new approach towards the valuation of judicial workout. Can you help us to understand what is the technicalities behind this approach? And what is the reason behind the higher cost recorded and considered as one-off in the first half -- in the first quarter?
Okay.
Thank you, Mapelli. With regard to the merger, we are starting some aspect of the merger, and as we declared the pace [indiscernible] quarterly net [indiscernible]
[ April ].
April, that probably the merger will take place before the end of the year. So, so far, nothing I'd say. We're playing operation. We are on the process of starting the operation for the best results possible. As regard the ERC, Mara?
As far as the ERC is concerned, as always, when you are eating, the appetite comes eating, does it not? So that's the way we know that is like that. I can tell you, as I said, our first time giving the ERC is already, I would say, something that we achieved really, okay, in terms of a target that we gave ourself and the targets that our transparency that we wanted to share with the market. At the same time, we are [indiscernible] any additional disclosures on that. So in terms of duration, I already told you, the main part, really main part, is the 10 years, not [indiscernible], okay? But we decided to give 15 years because really, in our business model, we never leave, okay, acquisition without the possibility to be recover during the entire time of the acquisition. That's the reason why we wanted to adopt 15 years instead of 10. That is, we know, market practice, okay? So [indiscernible]. The -- again, the difference is really not as important as something that needs to be mentioned, okay, given 10 years duration. So that's the approach. Okay, the reason why we are adopting continuously, okay, I would say approaches that are improving or evolving, okay, in the valuation of the NPL Area is really pre-correlated to the fact that every single day, we are improving the efficiency of the collection, of the entire machine. We never -- there is no quarter where we have not introduced something new. That's the reason why, simply the reason why -- the reason why even the accounting, let's say, is mirroring, I would say, the vitality, okay, of the area. So that we have 2 main, again, 2 things, so one evolution, let's say, and one, first adoption. In the first adoption, okay, we have either an impact on the net banking income, so positive and correlated costs that were suspended, okay, waiting for the evidence in terms of cash, in terms of the profits, okay? So always -- so that was always [indiscernible] the case of the accounting for this area. When we had decided that we had enough history, so enough data, for giving a valuation from -- a new evaluation that could be adopted by the risk management, okay? According to the positive impact on the P&L, of course, we needed to accrue also the cost. That's, I mean, that is the correlation. That's the simple answer. I don't know if it's clear.
The next question is from Ms. Simonetta Chiriotti of Mediobanca.
My first question is on the impact of the PPA. Could you please recap the total impact and where you have accounted it? So if it is 100% in the corporate business or also in the leasing or where should we consider this item? The second is related to your last answer. I've understood the mechanism, but which is the nature of these costs that have emerged due to the adoption of the risk model? And finally, my last question is more strategical. We have seen really low purchases in the quarter. You have explained why. Going forward, would you -- what do you expect? Do you expect to see more liquidity in the -- in your core business of consumer unsecured or when the big GACS securitization wave is completed? Or should we see IFIS buying other types of assets? So going beyond the core business of consumer unsecured?
So as far as the PPA, your first question, EUR 20 million in Enterprises, EUR 1.4 million in Governance and Services, totally EUR [ 21.8 ] million in the quarter, okay? Another important thing. We have disclosed in the account -- in the report account the, let's say, the remaining part of expected [ effect ] coming from the reversal of the PPA in the coming years, okay? Totally, we still have around EUR 300 million of reversal of PPA expected for the coming years, okay? So that's also important to be mentioned, okay? Then nature of costs. The nature of costs related to the EUR 9 million is mainly indirect tax related again to the fact of the legal approach, the legal recovery, okay?
Sorry, Mara, you cannot say taxes. It is -- the word is taxes. But these are the contributor [Foreign Language] for the stamp duty for the documentation that you have to present to the judge to obtain your sentences. So judicial costs, I could say.
Okay?
Yes.
And as far as looking forward what we do, we should expect, in terms of NPL acquisitions, 2 things. For sure, the markets is concentrated on what's GACS-compliant at the moment, but if we will -- everyone, let's say, has to take into consideration what's going on after September, okay, and that's one point. And of course, the stock -- new stock of unsecured consumer credit is produced, let's say, at the same levels as in the past according to the data, okay? And so I mean, there is a bulk that at the moment, let's say, the unsecured consumer credit companies, at least, are producing and it's not on the market. Secondary, I should say that there are players at the moment that were working in the unsecured consumer market at the origination level, okay? So buying at the origination level that are leaving the market. Third thing, I was -- I said at the beginning during the presentation that we are not available to buy at any price, okay? And the reason why is because we have enough, let's say, NPL stock portfolio at the moment for the, let's say, profitability that is expected to be created from this business unit in the strategic plans. So no rush in buying.
So you -- at this point in time, you wouldn't anticipate the possibility of buying different type of assets?
Not really today.
The next question comes from Christian Carrese of Intermonte.
Thank you for the clarification on the NPL Area. I was wondering if you can give us guidance on what do you expect from the new acquisition of the company's specializing in salary-backed loans. If I remember, you said EUR 8 million as of today is the loan book. So what do you expect the contribution from this company? And do you see any synergies with the other division? And the second question is UniCredit is going to sell EUR 1 billion unsecured loans. Are you going to bid for that portfolio? Or if you can give us an idea just to understand the possible new acquisition. And finally just on the ERC, you gave this number. What are your expectations? Do you think that you can increase with the judicial process this number EUR 1.8 billion over the 15 years?
Thank you, Christian. As regards the UniCredit portfolio, of course I cannot say any words when you point it that way. As you can imagine, we are present in every deal referred to consumer unsecured -- or broadly speaking, unsecured loans. So that's the only point that I prefer to say, nothing more. Other question, Mara?
These are related to the Cap.Ital.fin.
Yes. As regard the salary-backed loans, you know that our strategy -- part of our strategy to have the units, businesses that are very close to the businesses in which we are involved. Cap.Ital.fin and the salary-backed loans is -- makes no exception with this rule. We think that we can use the activity of this unit in favor of other assets or other clients we have. The figure of the nonmaterial value of assets of the unit at the end of 2017 is something that we, of course, change in a very significant way in 2018. You will see results in very different -- significantly different results in terms of total assets in this unit in the next quarters. Again, a close unit but we had average unit to better perform their activities, I think to be sufficiently clear. Mara, [indiscernible] No?
[indiscernible]
Oh, well, regarding the ERC. Again, I understand. Mara told you and I agree, ERC is a very juicy information for all of you interested in the NPLs. But I'd like for you to stay at this point and we will see. Of course, if you ask me if we want to increase the ERC, my answer is yes. And we'll do it, of course, yes. But I cannot declare any other thing, Mara?
According to what we see in the clusters of the NPL that we have presented, okay, and according to this great focus on the judicial collection, okay, and again, looking at the numbers that we have represented in Page 12, where gross book value of EUR 2 billion are still waiting for the judicial workout and that the book value [indiscernible] on gross is 13% at the moment. Thinking that a part of those can grow first to 20% and then to 36%, where the other 2 levels of the judicial are, okay, according to the capacity of the bank, in working as fast as possible, just this part, okay, ERC needs to be expected to grow. At the same time, we will have positions but not at the same pace, not at the same volume, not with the same amount, okay? That's from the reperforming area could go again, let's say, in an area of, let's say, in not [ pacing ] but not performing, let's say. Because, for example, a person could not maintain a job. Then if I add also, that part of positions could be collected, thanks to the new Cap.Ital.fin, let's say, machine, okay, and so it means adding another financial instrument to the total collection. Of course, that gives us confidence that this number is -- I don't want to say quarter-by-quarter, but it needs to be seen in the direction of growing. Otherwise, I mean, it means that the machine is not able to re-transform the positions, okay, in re-performing from NPLs. And we still have, let's say, something like [ 9 ] On EUR 13 billion, which are at 2% book value on gross.
[Operator Instructions] You have a follow-up question from Ms. Simonetta Chiriotti of Mediobanca.
Yes. I was listening to your last answer. But if we will see, in future, growth in the ERC, this means that your collection machine is more efficient than today, because I suppose that the ERC that you have disclosed, basically, consider the collection rate that you have in your models currently. Is it correct?
Yes, it's not completely correct. ERC is a very rough indicator, but it's broadly used in the markets. But you have to take into consideration that even if you buy a portfolio, a new portfolio, the only action buying a new portfolio increases your ERC.
As well as you sell.
As well as the sale of your -- a part of the portfolio represents a decrease in this indicator. So the indicator is important. But you have to take into consideration the indicator with care, with a due care, because it's not -- you can go off-road because an increase could be the result of an acquisition, an increase could be a result of a better management and an increase could be a result of a sale.
Of course, that's absolutely true. Even, I mean, what you said, Simonetta. So ERC is the expected cash, okay, collection at the moment, okay? If we collect better, and that's the case for the evidence that we have now, for example, where we saw, what we show you from the portfolios, okay, that we are managing at the moment, okay, that ERC is increasing.
Mr. Bossi, ladies, there are no more questions registered at this time.
Okay. So I would like to thank you, all of you, and would say again sorry for postponing this call. And for every single question that you could have, please mail me whatever question and we'll go back to you. Thanks. Bye.
Bye.