Banca Ifis: net profit of 80,2 million Euro in the first 9 months Bank revises year-end guidance upwards

PRESS RELEASE

FIRST NINE MONTHS OF 2021

Banca Ifis: net profit of 80,2 million Euro in the first 9 months Bank revises year-end guidance upwards

In the first nine months of the year, the Bank's revenues recorded double digit growth, reaching 449.2 million Euro: an all-time high, net of the PPA, as a result of strong growth in business in the commercial portfolio and excellent performances in the Npl Segment. Profits up significantly, despite further prudent provisions to absorb the expiry of government support measures at the end of the year.

In the quarter, year-on-year record of cash recoveries of Npl portfolios purchased, which almost eliminates the less favourable seasonality of the third quarter. Annual target of purchasing 3 billion Euro of Npl portfolios achieved.

The digitisation programme continues and, by joining the Net-Zero Banking Alliance, the Bank further reinforces its commitment to contribute concretely to a more sustainable and inclusive future.

2021 guidance

For 2021, Banca Ifis raises estimates and expects to achieve a net profit between 90 and 100 million Euro (the target communicated on 5 August 2021 was between 80 and 90 million Euro) and revenues between 570 and 590 million Euro (the guidance communicated on 5 August 2021 was between 540 and 560 million Euro).

The guidance was prepared on the assumption of gradual improvement in the scenario, no macroeconomic or pandemic- related shocks and continued support from Governments and central banks for the economic recovery.

Results for the first nine months of 2021

Reclassified data1 - 1 January 2021/30 September 2021

• Net interest and other banking income rose to 449,2 million Euro (+39,6% compared to 321,7 million Euro at 30.09.2020), benefiting from both the improved performance of the Npl Segment and the dynamism of the Commercial and Corporate Banking Segment.
• Operating costs come to 267,6 million Euro (+16.6% on 30.09.2020) due to higher variable costs linked to the legal business of the Npl Segment, the entrance of Farbanca and the former Aigis Banca business unit into the scope of consolidation and ICT projects.
• The net profit attributable to the Parent Company of 80,2 million Euro recorded double-digit growth (+53,2%) compared to 52,3 million Euro in the same period of 2020. Excluding the PPA and the extraordinary gain of 24,2 million Euro from the sale of the property in Corso Venezia in Milan in 2020, the result was five times that of 2020.
• The Cost of credit of 62,4 million Euro, of which 19,8 million Euro in the third quarter alone. The figure for the last quarter includes additional provisions of a further 8,1 million Euro in the Npl portfolio due to the long-termeffects of Covid-19and 5 million Euro for concentration risk on positions in the Corporate Banking & Lending Area.
• Solid liquidity position: approximately 1,8 billion Euro at 30 September 2021 in reserves and free assets that can be financed by the ECB (LCR above 1.500%)

Capital requirements with the consolidation within La Scogliera

• CET1 up to 11,68% (11,29% at 31 December 2020) with respect to an SREP requirement of 8,12%; TCR: 15,35% (14,85% at 31 December 2020) with respect to an SREP requirement of 12,5%. These results are calculated without including the profits generated by the Banking Group during the first nine months of 2021.

Capital requirements without the consolidation within La Scogliera2

• CET1: 16,24% (15,47% at 31 December, 2020); TCR: 20,77% (19,87% at 31 December 2020). These results are calculated without including the profits generated by the Banking Group during the first nine months of 2021.

1 In the following statements, net impairment losses/reversals on receivables of the Npl Segment were reclassified to interest receivable and similar income to the extent to which they represent the operations of this business and are an integral part of the return on the investment. For this reason too, apart from the specific operations, the effects of an analysis performed also in response to the Covid-19 pandemic, have been classified amongst value adjustments.

2 Consolidated own funds, risk-weighted assets and solvency ratios at 30 September 2021 were calculated based on the regulatory principles set out in Directive no. 2013/36/EU (CRD IV) and Regulation (EU) no. 575/2013 (CRR) of 26 June 2013, as updated and amended over time and transposed, where applicable, in the Bank of Italy's Circulars no. 285 and no. 286 of 17 December 2013. In particular, the CRR provides for the prudential consolidation of Banca Ifis in the holding La Scogliera. For the sake of disclosure, we calculated the same indicators without including the effects of the consolidation within La Scogliera. Therefore, the reported total own funds refer only to the scope of the Banca Ifis Banking Group, as defined in accordance with Italian Legislative Decree no. 385/93, thus excluding the effects of the prudential consolidation within the parent company La Scogliera S.p.A.

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PRESS RELEASE

FIRST NINE MONTHS OF 2021

Mestre (Venice), 4 November 2021 - The Board of Directors of Banca Ifis, chaired by the Deputy Chairman, Ernesto Fürstenberg Fassio, today approved the results for the first nine months of 2021.

"The results of the first nine months confirm the Bank's ability to effectively cover specific businesses and to seize the opportunities offered by the greatly recovered market - explains Frederik Geertman, CEO of Banca Ifis -. The net profit for the period attributable to the Parent Company of 80,2 million Euro exceeded our expectations; the result, calculated net of the PPA and extraordinary gains related to the sale of the Milan property, is 25% higher than in the same period of 2019 and approximately 5 times higher than in 2020.

Industrial revenues for the period recorded double-digit growth, up to 449,2 million Euro, supported by the new mix of the commercial portfolio and the excellent performance of the Npl Segment. Revenues, net of the PPA (amounting to 21,5 million Euro), reached an all-timehigh.

The positive trend in these results has prompted us to revise the guidance for 2021 upwards and to estimate net banking income between 570 and 590 million Euro and an operating profit between 90 and 100 million Euro. All this was done in the assumption of gradual improvement in the scenario, no macroeconomic or pandemic-related shocks and continued support from Governments and central banks for the economic recovery.

More specifically, the Commercial & Corporate Banking Segment demonstrated its ability to rapidly adapt its offering to market needs, thanks to a combination of the commercial strategy and operational and technological efficiency. Although in 2020 we were able to seize the commercial opportunities linked to the strong demand for state-guaranteedmortgages, in 2021 we quickly identified and satisfied the growing demand for factoring linked to ecobonuses and commercial recovery, through the provision of dedicated products and services.

During the period, the process of digitalising and developing business services from an omni-channel perspective continued: the "Ifis4business" platform for factoring customers is nearing completion and will be extended to all products in the portfolio by the first half of 2022. The migration of the former Aigis Banca business unit is scheduled for completion in November, and in the Leasing Area, the launch of a new digital sales portal for suppliers, sales people and customers that will make it possible to optimise the management of the commercial chain.

Positive signs are also recorded by loans in moratorium where 74% of our customers have resumed regular payments. The remaining receivables in arrears, amounting to 211 million Euro, consist mainly of lease receivables, with underlying vehicles and capital goods, and loans, mainly Government-backed.

During the first nine months of the year, cash recoveries on Npl portfolios acquired reached an all-time high and amounted to 252 million Euro, +38% compared to 183 million Euro in the first nine months of 2020, confirming the portfolio's resilience in the face of the crisis. On 2 November we finalised our largest Npl acquisition, taking over 2,8 billion Euro of impaired loans from Cerberus. The transaction enabled the Bank to meet its estimated 2021 Npl portfolio purchase target of around 3 billion Euro ahead of schedule and will provide a solid contribution to the Bank's profitability in the coming years.

CET1, calculated excluding the profit for the first nine months, stood at 11,68%, up from 11,29% at 31 December, 2020, confirming Banca Ifis' ability to finance business growth.

Our Bank's recent membership of the Net-Zero Banking Alliance further reinforces our commitment to building a more sustainable and inclusive future and will allow us to contribute actively to achieving the common goal of zero net emissions by 2050," concludes Geertman.

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Highlights

RECLASSIFIED DATA 13

The Banca Ifis Group's consolidated income statement at 30 September 2021 reported a profit attributable to the Parent Company of 80,2 million Euro.

Highlights from the Banca Ifis Group's income statements for the first nine months of 2021 are set out below.

Net interest and other banking income1

Net interest and other banking income totalled 449,2 million Euro, up 39,6% from 321,7 million Euro at 30 September 2020. This increase of 127,5 million Euro was mainly related to: the improved general economic environment from which all the Group's businesses benefited, the contribution of 14,1 million Euro from Farbanca and approximately 3,1 million Euro from the former Aigis Banca business unit (not part of the Banca Ifis Group in the first nine months of 2020) and the positive change in other components of net banking income of 18,4 million Euro (from 5,4 million Euro at 30 September 2020 to 23,8 million Euro at 30 September 2021).

These positive effects primarily benefited net interest income, which increased by 39,0% from 260,8 million Euro at 30 September 2020 to 362,6 million Euro at 30 September 2021.

Net commissions amounted to 62,9 million Euro, a slight increase compared to the figure at 30 September 2020, which was 55,5 million Euro (+13,3%): this performance was driven by a greater contribution from commission income connected to activities in the Structured Finance division.

The other components of net banking income are made up primarily as follows:

• 6,9 million Euro the net positive result of other financial assets and liabilities measured at fair value through profit or loss (up 16,3 million Euro on the negative 9,4 million Euro at 30 September 2020), which includes the net positive change to the fair value of capital instruments and units of UCITS funds;
• 10,3 million Euro in net gains on the disposal or repurchase of financial assets and liabilities, down compared to net gains of 13,5 million Euro at 30 September 2020, where the higher proceeds from the disposal of assets (10,4 million Euro in the first nine months of 2021 compared to 6,1 million Euro at 30 September 2020) only partially offset the substantial elimination in 2021 of gains on the repurchase of own liabilities;
• 6,8 million Euro for dividends generated by shares held in the Group-owned portfolio, a significant increase on the 2,9 million Euro in the first nine months of 2020.

Net impairment losses1

Net credit risk adjustments totalled 62,4 million Euro at 30 September 2021, compared to net losses of 47,9 million Euro at 30 September 2020. The figure for the first nine months of 2021 includes adjustments of 17,0 million Euro relative to the Npl Segment, recorded following a detailed analysis, currently approaching completion, carried out also in response to the Covid-19 pandemic, in terms of greater collection times, mainly on higher vintage positions.

Operating costs

Operating costs totalled 267.6 million Euro, marking an increase of +16.6% compared to 229.4 million Euro at 30 September 2020.

Below are the item's main components:

• personnel expenses rose by 16,1% to 103,7 million Euro (89,3 million Euro for the period ended 30 September 2020). The increase in this item is due to higher allocations for variable remuneration of approximately 7,5 million Euro compared to 2020 - a year that was affected by prudential policies related to the uncertainty of the pandemic - and to the entry into the Banca Ifis Group of Farbanca and the former Aigis Banca business

In the following statements, net impairment losses/reversals on receivables of the Npl Segment were reclassified to interest receivable and similar income to the extent to which they represent the operations of this business and are an integral part of the return on the investment. For this reason too, apart from the specific operations, the effects of an analysis performed also in response to the Covid-19 pandemic, have been classified amongst value adjustments.

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PRESS RELEASE

FIRST NINE MONTHS OF 2021

unit for approximately 3,7 million Euro. The number of Group employees at 30 September 2021 was 1.853 as compared with 1.736 staff at 30 September 2020, mainly due to the entrances connected with Farbanca and the former Aigis Banca BU;

• other administrative expenses, at 30 September 2021, amounted to 161,7 million Euro, an increase of 31,5% on 30 September 2020. The increase is attributable to higher costs for professional services and expenses for the purchase of goods and other services mainly related both to the resumption of credit recovery activities in the Npl Segment and to the change in the scope of consolidation with the inclusion of Farbanca and the BU acquired from the former Aigis Banca and the related integration costs;
• net provisions for risks and charges amounted to 9,4 million Euro, down 55,3% compared to 20,9 million Euro at 30 September 2020, which included provisions of 6,9 million Euro relating to the Solidarity Fund and prudential allocations to commitments to disburse funds and guarantees for a total of 7,2 million Euro mainly related to the unique macroeconomic context of 2020;
• other net operating income amounted to 21,4 million Euro, up 26,8% compared to the same period of the previous year (16,9 million at 30 September 2020). The item referred mainly to revenue from the recovery of expenses charged to third parties. The relevant cost component is included in other administrative expenses, namely under legal expenses and indirect taxes, as well as recoveries of expenses associated with leasing operations. The change is mainly due to the positive difference that emerged during the provisional allocation of the purchase price of the former Aigis Banca business unit, amounting to 3,4 million Euro.

Net profit for the period

At 30 September 2021, net profit pertaining to the Parent Company came to 80.2 million Euro, up 52.2% compared to

52.3 million Euro in the same period of 2020, which benefitted from an extraordinary capital gain of 24.2 million Euro and the related tax effect due to the sale of the Milan property in Corso Venezia).

The Group's net profit for the period to 30 September 2021, including profit attributable to minority interests of 1.4 million Euro, was up 55.5% to 81.6 million Euro.

Focus on individual Segments

Below are the main dynamics recorded in the individual Segments that go towards forming the economic-equity results at 30 September 2021.

Net profit of the Commercial & Corporate Banking Segment comes to 47,2 million Euro, up 37,4% on 30 September 2020. This change is driven by the growth of net banking income for 53.5 million Euro, while value adjustments for the credit risk come to 32 million Euro, are higher than in the first nine months of last year, by 1.8 million Euro. Operating costs rose by a total of 27,8 million Euro on the figure recorded in the same period of 2020. In detail:

• in the first nine months of 2021, the contribution made by the Factoring Area to net banking income booked by the Commercial & Corporate Banking Segment came to 108.7 million, up 5.8 million Euro on the same period of last year;
• net banking income of the Leasing Area is 43.2 million Euro, up 6.8 million Euro (+18.6%) on 30 September 2020; this result is due for 5.4 million Euro to lesser interest expense following a review of internal transfer rates and for 1.4 million Euro to greater commission income in the financial leasing segment;
• net banking income of the Corporate Banking & Lending Area, which came to 61,1 million Euro at 30 September 2021, rose by 40,9 million Euro on the first nine months of last year, with an increase in the interest margin of 23,7 million Euro, in the commission component for 6 million Euro and in other components of net banking income for 11,2 million Euro.

Net profit for the period of the Npl Segment is 32.1 million Euro, a significant rise of 151.4% on the 12.8 million Euro booked for the same period of last year thanks to the recovery of all business activities.

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The net banking income of the Segment1 amounted to 184.3 million Euro (+57.9%) as compared with 116.7 million Euro at 30 September 2020. The net profit from financial activities of the NPL segment therefore amounted to 167.3 million Euro, an increase of 43.3% compared to 116.7 million Euro at 30 September 2020. A major achievement resulting from the improvement in the economic-health situation in 2021 compared to 2020, when the pandemic led to the closure of the courts and the consequent stalling of judicial and third-party recovery activities.

"Interest income from amortised cost", referring to the interest accruing at the original effective interest rate, amounted to 111.6 million Euro at 30 September 2021, marking an increase of 7.5% compared to 103.8 million Euro in the same period of 2020, due mainly to the increase in receivables at amortised cost.

The item "Other components of net interest income from changes in cash flow" stood at 87.7 million Euro at 30 September 2020, compared to 27.8 million Euro at 30 September 2020, due to the changed pandemic context. This item includes:

• out-of-courtsettlements of 41,4 million Euro, consisting of 58,4 million Euro in connection with recovery plans, offset in part by negative changes of 17 million Euro in connection with the valuation of statistical curves;
• legal management for 46,3 million Euro, where the contribution of actions for injunction, attachment and ODA is 43,2 million Euro while that of the secured and corporate pool is 3,1 million Euro.

The Segment presents "Net adjustments for credit risk" of 17,0 million Euro; these adjustments refer to the write-down of receivables following a detailed analysis, now in its closing stages, carried out also in response to the Covid-19 pandemic, in terms of greater collection times, mainly on higher vintage positions.

In line with debt collection activities, operating costs rise by 20,3%, going from 100 million Euro at 30 September 2020, to 120,3 million Euro at 30 September 2021. This increase is essentially due to the variable costs linked to debt collection.

At 30 September 2021, the Governance & Services and Non-CoreSegment recorded a profit of 2,2 million Euro as compared with the profit of 5.3 million Euro of 30 September 2020, which benefited from the capital gain, gross of taxes, of 24.2 million Euro deriving from the sale of the property in Corso Venezia, Milan.

The segment's net banking income amounted to 51,9 million Euro, up 6,5 million Euro compared to the same period of the previous year: this variation is linked to the increase in net banking income of the Governance & Services portfolio of 9.4 million Euro, partially offset by a decline in the Non-Core portfolio in run-off for 2.9 million Euro.

Operating costs come to 35,1 million Euro, down 9,9 million Euro on 30 September 2020. The change is mainly due to non-recurring effects that affected the two periods under comparison. In particular, the first nine months of 2021 include in other income 3.4 million Euro related to the positive difference that emerged during the provisional allocation of the purchase price of the former Aigis Banca business unit, while the first nine months of 2020 included 6.9 million Euro related to the allocation made to the employee solidarity fund.

________________________

In the following statements, net impairment losses/reversals on receivables of the Npl Segment were reclassified to interest receivable and similar income to the extent to which they represent the operations of this business and are an integral part of the return on the investment. For this reason too, apart from the specific operations, the effects of an analysis performed also in response to the Covid-19 pandemic, have been classified amongst value adjustments.

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