PRESS RELEASE

CONSOLIDATED RESULTS AT 30 JUNE 2020

The Board of Directors of Banco di Desio e della Brianza S.p.A. has approved the "Consolidated Interim Financial Report at 30 June 2020"

Strong capital strengthening (70 basis points) driven by regulatory interventions and portfolio repositioning. Volumes of loans and deposits in progressive growth, "Covid-19" effect on revenues gradually absorbed and partially offset by the cost containment measures (-2.1% despite the extraordinary costs incurred for the emergency). Profitability impacted by prudential action on provisions especially for performing loans, with ROE at 2.1%. Asset quality ratios and coverage above average for the system.

PROFITABILITY

CAPITAL

SOLIDITY 1

  • CONSOLIDATED NET PROFIT of 9.6 million euro with an annualised ROE of 2.1%, confirming the resilience of the Banco Desio Group, despite the slowdown in the economy and a significantly increasing cost of risk (+48.5) mainly due to including the economic projections of the Covid-19 epidemic in the risk models.
  • CAPITAL STRENGTHENING due to the de-risking carried out on the portfolio and regulatory interventions implemented by the European Union.

Capital ratios2

Banco Desio Brianza

Banco Desio Group

Brianza Unione Group3

CET 1

14.87%

13.77%

10.73%

TIER 1

14.88%

13.78%

11.54%

Total Capital

15.48%

14.34%

12.81%

SUPPORT FOR

THE ECONOMY

LIQUIDITY AND ASSET QUALITY

  • Almost 24 thousand moratorium "Covid-19" requests processed for over 2.9 billion euro.
  • More than 14 thousand requests from businesses for liquidity approved for a total of 1.2 billion euro ("DL Liquidità")
  • LOANS TO ORDINARY CUSTOMERS at the end of the half-year stood at Euro 9.6 billion, rising in the second quarter because of new loans to businesses
  • INCREASE IN DIRECT DEPOSITS amounting to Euro 11.3 billion (+1.2%) confirming the strong relationship with customers, and INDIRECT DEPOSITS of Euro 15.7 billion (+0.8%, of which ORDINARY CUSTOMERS -0.8% caused by negative market effect)
  • Ordinary customer loans/Direct deposits ratio of 84.3%, formerly 85.5%
  • LIQUIDITY well under control with the liquidity coverage ratio (LCR) at 182.6% (vs 179.8% at 31.12.2019)
  • LEVELS OF COVERAGE of non-performing and performing loans increasing Doubtful loans at 62.6%, 64.1% gross of write-offs (61.5% and 63.1% at 31.12.2019) Non-performing loans of 47.7% (vs 45.5%), 48.8% gross of write-offs (vs 46.7%) Performing loans of 0.62% (vs 0.49%)
  • INCIDENCE OF NPLs:
    Net doubtful loans/Net loans ratio of 1.3% (vs 1.3% at 31.12.2019) Gross doubtful loans/Gross loans ratio of 3.3% (vs 3.1%)
    Net non-performing loans/Net loans ratio of 3.4% (vs 3.6%) Gross non-performing loans/Gross loans ratio of 6.3% (vs 6.3%)
  1. Based on the Bank of Italy's instructions sent to Banco di Desio e della Brianza S.p.A. and to the Parent Company Brianza Unione di Luigi Gavazzi e Stefano Lado S.A.p.A. on 21 May 2020, the following minimum capital requirements have been assigned to the Brianza Unione Group for CRR purposes, following completion of the Supervisory Review and Evaluation Process (SREP): CET1 ratio of 7.35%, binding - pursuant to art. 67-ter TUB - for 4.85% (minimum regulatory requirement of 4.5% and additional requirements of 0.35%) with the difference represented by the capital conservation buffer, Tier1 ratio of 8.95%, binding for 6.45% (minimum regulatory requirement of 6.0% and additional requirements of 0.45%) with the difference represented by the capital conservation buffer, and Total Capital Ratio of 11.1%, binding for 8.6% (minimum regulatory requirement of 8% and additional requirements of 0.6%) with the difference represented by the capital conservation buffer.
  2. In application of the transitional arrangements introduced by Regulation (EU) 2017/2395 of 12 December 2017 and subsequent amendments.
  3. The consolidated ratios at Brianza Unione of Luigi Gavazzi and Stefano Lado S.A.p.A., a company that holds 49.88% of Banco di Desio and della Brianza S.p.A. (of which it holds 50.44% of the ordinary shares and 44.69% of the savings shares), were calculated on the basis of the provisions of articles 11, paragraphs 2 and 3 and 13, paragraph 2 of the CRR Regulation.

1

***

The Board of Directors of Banco di Desio e della Brianza S.p.A. met on 30 July 2020 and approved the consolidated interim financial report at 30 June 2020, prepared in accordance with art. 154-ter of D.Lgs. 58/1998 (CFA), implementing D.Lgs. 195 of 6 November 2007 (the so-called "Transparency Directive") and drawn up in compliance with applicable international accounting standards recognised in the European Community in accordance with EU Regulation 1606 of 19 July 2002, especially IAS 34 - Interim financial statements, and Bank of Italy Circular 262 of 22 December 2005 (6th update).

On 30 July 2020, the Board of Directors took note of the Bank of Italy's Recommendation of 28 July 2020, which urged all banks to refrain from paying dividends for 2019 and 2020 until 1 January 2021.

As regards dividends, the resolution passed by the Shareholders' Meeting on 23 April 2020 in accordance with the previous Recommendation of 27 March 2020 still stands, except for the extension of the suspension of payment until at least 1 January 2021 with respect to the original deadline of 1 October 2020.

As regards variable remuneration, on 25 June 2020 the Board of Directors approved a revision of the bonus system which led to a significant reduction in the variable component (the so-called "bonus pool") for the current year.

2

Information on Covid-19

The viral pneumonia known as "Covid-19", or more commonly "Coronavirus", has had a significant international spread, with consequences on economic activity, also due to the containment and prevention measures adopted in different forms in the various countries, including restrictions on movement, social distancing, quarantine measures and closures of business activities.

Considering the climate of considerable uncertainty resulting from this situation, in preparing the consolidated interim financial report at 30 June 2020, which will be subject to subsequent publication, we have taken into account the recommendations contained in a series of documents published by various international institutions (ESMA, EBA, ECB- SSM, IFRS Foundation), aimed at avoiding a mechanical application of international accounting standards and, with particular reference to IFRS 9 Financial Instruments, to avoid the use of excessively pro-cyclical assumptions in the models used to estimate the credit losses expected during the pandemic.

In the current situation, strongly influenced by the effects of the Covid-19 epidemic on the main macroeconomic variables, in the consolidated interim financial report at 30 June 2020 we will provide all of the information elements on the main balance sheet items for which the application of certain accounting standards necessarily implies the use of estimates and assumptions with an effect on their book values. The report will also provide the information requested by Consob with Recommendations no. 6/2020 "Covid 19 - Calling attention to financial disclosures" and no. 8/2020 "Covid 19 - Calling attention to financial disclosures", and in particular:

  • a summary of the main interventions/support measures adopted or in the process of being adopted in 2020 by the authorities and the initiatives taken by the Banco Desio Group,
  • a description of the implications of the Covid-19 epidemic on the main balance sheet items,
  • a representation of the effects on the expected loss measurement models.

Further qualitative and/or quantitative indications of the actual and potential impacts of Covid-19 on the Group's economic and financial prospects will be provided in subsequent reports.

3

Consolidated balance sheet

Total customer funds under management at 30 June 2020 reached Euro 27.0 billion, representing an increase for some Euro 0.3 billion with respect to the 2019 year-end balance (1.0%), attributable to the upward trend in both indirect (+0.8%) and direct deposits (+1.2%).

Direct deposits at the end of the first half amounted to Euro 11.3 billion, an increase of 1.2% which comes from the higher amounts due to customers of Euro 0.2 billion (+2.5%), partially offset by a reduction in debt securities in issue (-5.8%).

Overall, at 30 June 2020 indirect deposits posted an increase of 0.8% compared with the end of the previous year, rising to Euro 15.7 billion.

This trend is attributable to institutional customer deposits (+3.3%); deposits from ordinary customers, on the other hand, decreased by Euro 0.1 billion (-0.8%), due to the trend in assets under management (-1.3%), partially offset by assets under administration (+0.2%).

The total value of loans to customers at the end of the first half of the year came in at Euro 9.7 billion (+1.4% on the end of 2019), of which Euro 9.6 billion were loans to ordinary customers (-0.1%).

At 30 June 2020, the Group's total financial assets amounted to Euro 3.5 billion, an increase of some Euro 0.1 billion compared with the end of 2019 (+3.3%). Long-term investment policy (held to collect portfolio) is characterised by a significant exposure to Italian government securities. The residual life of the securities available for sale (held to collect & sell portfolio) is decidedly limited (duration 1.36).

The Group's net interbank position at 30 June 2020 is negative for Euro 0.9 billion, compared with the position at the end of the previous year, which was also negative for Euro 1 billion.

Shareholders' equity pertaining to the Parent Company at 30 June 2020, including net profit for the period, amounts to Euro 958.9 million, compared with Euro 965.1 million at the end of 2019. The negative change of Euro 6.2 million is due to the resolution associated with the 2019 dividend of Euro 14.5 million, partly offset by comprehensive income of the period positive for Euro 8.3 million.

On 25 January 2018, the Board of Directors of the bank resolved to adopt the transitional arrangements introduced by the Regulation (EU) 2017/2395 of 12 December 2017, aimed at mitigating the impact of IFRS 9 on own funds and capital ratios. The calculation of the capital ratios has also benefited from the previous surveys of the measures for easing capital requirements introduced by EU Regulation 873/2020.

With reference to the Banco Desio Banking Group, after paying out 40% envisaged by the dividend policy, Own Funds amounted to Euro 1,027.3 million at 30 June 2020 (CET 1 + AT1 Euro 987.7 million + T2 Euro 39.7 million ), compared with Euro 1,038.1 million at the end of the previous year. The Common Equity Tier 1 ratio (CET1/Risk-weighted assets) was 13.8% (13.0% at 31 December 2019). The Tier 1 ratio (T1/Risk-weighted assets) was 13.8% (13.0% at 31 December 2019), while the Total capital ratio (total Own Funds/Risk-weighted assets) was 14.3% (13.7% at 31 December 2019).

The calculation of Own Funds and of the consolidated prudential requirements, which are transmitted to the Bank of Italy in relation to the prudential supervisory reports (COREP) and statistical reports (FINREP), is made with reference to Brianza Unione di Luigi Gavazzi e Stefano Lado S.A.p.A. as it is the financial parent company of the banking group according to European legislation. The consolidated own funds calculated by the financial parent company Brianza Unione amount to Euro 917.5 million at 30 June 2020 (CET1 + AT1 of Euro 826.7 million + T2 of Euro 90.8 million), compared with Euro 908.6 million at the end of the previous year. The Common Equity Tier 1 ratio (CET1/Risk-weighted assets) was 10.7% (10.0% at 31 December 2019). The Tier 1 ratio (T1/Risk-weighted assets) was 11.5% (10.7% at 31 December 2019), while the Total capital ratio (total Own Funds/Risk-weighted assets) was 12.8% (12.0% at 31 December 2019).

Following the periodic Supervisory Review and Evaluation Process (SREP), on 21 May 2020, the Bank of Italy informed Banco di Desio e della Brianza S.p.S. and the financial parent company Brianza Unione di Luigi Gavazzi e Stefano Lado

4

S.A.p.A. of its decision regarding capital, ordering that, from the next report on own funds, the Brianza Unione Group was to adopt the following consolidated capital ratios:

  • CET1 ratio of 7.35%, binding for 4.85% (minimum regulatory requirement of 4.5% and additional requirements of 0.35% as a result of the SREP), while the remainder is represented by the capital conservation buffer;
  • Tier 1 ratio of 8.95%, binding for 6.45% (minimum regulatory requirement of 6% and additional requirements of 0.45% as a result of the SREP), while the remainder is represented by the capital conservation buffer;
  • Total Capital Ratio of 11.10%, binding for 8.60% (minimum regulatory requirement of 8% and additional requirements of 0.60% as a result of the SREP), while the remainder is represented by the capital conservation buffer.

The solidity of the Group with respect to the new requirements3 is confirmed.

Consolidated income statement

The net profit attributable to the Parent Company at 30 June 2020, negatively affected by the cost of credit, comes to Euro

9.6 million, a decrease of 60.2% compared with the profit for the comparative period of Euro 24.1 million. The main cost and revenue items in the reclassified income statement are analysed below.

Operating income

Core revenues decreased by about Euro 7.6 million compared with the previous period (-3.8%), coming in at Euro 193.1 million. This is due to the decrease in net interest income for Euro 2.2 million (-2.1%), in the net commission income which decreases by Euro 1.6 million (-2.0%) in the net result of financial assets and liabilities for Euro 0.7 million (- 11.7%), in dividends for Euro 0.5 million (-43.9%) and in other operating income /expense for Euro 2.6 million (-51.7%).

Operating costs

Operating costs, which include payroll costs, other administrative expenses and net adjustments to property, plant and equipment and intangible assets amounted to around Euro 134.9 million and have decreased, with respect to the comparative period, by Euro 2.9 million (-2.1%).

Payroll costs have decreased by 2.0% on the prior period, as well as administrative expenses which declined by Euro 0.7 million (-1.5%); The balance of net adjustments to property, plant and equipment and intangible assets came to Euro 4.7 million (-10.1%).

Results of operations

The results of operations at 30 June 2020 therefore amounted to Euro 58.2 million, Euro 4.7 million down on the prior period (-7.4%).

Net profit (loss) from continuing operations after tax

The result of operations of Euro 58.2 million leads to a net profit (loss) from operations after tax of Euro 10.1 million,

58.4% down on the Euro 24.3 million in the comparative period, mainly because of:

  • the cost of credit (net impairment adjustments to financial assets measured at amortised cost plus gains (losses) on disposal or repurchase of loans) of Euro 40.0 million (Euro 26.9 million in the first half of the previous year);
  • net adjustments to securities owned negative for Euro 1.3 million (positive for Euro 2.9 million in the comparison period);

3 Based on the Bank of Italy's previous communication on this matter, which was sent to the Parent Company Banco Desio on 27 June 2019, concerning the minimum capital requirements at consolidated level to be respected as a result of the SREP: CET1 ratio of 7.25%, binding for 4.75% (minimum regulatory requirement of 4.5% and additional requirements of 0.25%) with the remainder represented by the capital conservation buffer, Tier 1 ratio of 8.85%, binding for 6.35% (minimum regulatory requirement of 6.0% and additional requirements of 0.35%) with the remainder represented by the capital conservation buffer and Total Capital Ratio of 11.0%, binding for 8.5% (minimum regulatory requirement of 8% and additional requirements of 0.5%) with the remainder represented by the capital conservation buffer.

5

  • net provisions for risks and charges negative for Euro 3.3 million (negative for Euro 2.0 million in the comparative period);
  • income taxes on continuing operations of Euro 3.8 million (Euro 12.5 million).

Non-recurring profit (loss) after tax

At 30 June 2020 there was a non-recurring loss after tax of Euro 0.5 million. This item basically consists of:

  • the revenue component of Euro 0.4 million relating to the substantial change in a financial instrument subscribed by the bank as part of the interventions made to support the banking system,
  • the Euro 1.1 million charge for the extraordinary contribution to the SRM requested by the national resolution authority on 11 June 2020;

net of the related (positive) tax effects of Euro 0.2 million.

The negative result of Euro 0.2 million in the comparative period is mainly made up of:

  • the revenue component of Euro 1.5 million relating to an insurance refund received.
  • the Euro 1.6 million charge for the extraordinary contribution to the SRM requested by the national resolution authority on 7 June 2019, net of the related tax effect (negative for Euro 0.1 million).

Profit for the period pertaining to the Parent Company

The total of the profit from operations after tax and the non-recurring profit after tax leads to a net profit for the Parent Company at 30 June 2020 of Euro 9.6 million.

***

The Group's distribution network at 30 June 2020 consists of 253 branches

***

At 30 June 2020, the Group had 2,193 employees, a decrease of 5 people compared with the end of the previous period.

***

6

The Financial Reporting Manager, Mauro Walter Colombo, declares pursuant to paragraph 2 of Article 154-bis of the Consolidated Finance Act that the accounting information contained in this press release agrees with the supporting documents, books of account and accounting records.

Desio, 30 July 2020

BANCO DI DESIO E DELLA BRIANZA S.p.A.

Financial Reporting Manager

Mauro Walter Colombo

***

The tables relating to the consolidated reclassified balance sheet and income statement at 30 June 2020 are attached.

The consolidated interim financial report at 30 June 2020 is subject to a limited audit by Deloitte & Touche S.p.A., which is currently being completed.

Desio, 30 July 2020

BANCO DI DESIO E DELLA BRIANZA S.p.A.

The Chairman

Stefano Lado

***

Investor Relator

General and

Marco Rubino di Musebbi

Giorgio Federico Rossin

Corporate Secretariat

Community Srl

Consulenza nella comunicazione

Tel. 0362/613,469

Tel. 02.89404231

Cell. 335/7764435

Tel. 0362/613,214

Mobile 335/6509552

Fax 0362/613.219

Fax 0362/613.219

Fax 02.8321605

g.rossin@bancodesio.it

segreteriag@bancodesio.it

marco.rubino@communitygroup.it

7

Attachments

Consolidated balance sheet

Assets

30.06.2020

31.12.2019

Change

amount

%

10.

Cash and cash equiv alents

50,755

60,816

(10,061)

-16.5%

20.

Financial assets designated at fair v alue through profit or loss

42,693

44,063

(1,370)

-3.1%

a)

Financial assets held for trading

4,472

5,807

(1,335)

-23.0%

c)

Other financial assets that are necessarily measured at fair v alue

38,221

38,256

(35)

-0.1%

30.

Financial assets designated at fair v alue through other comprehensiv e income

522,093

559,634

(37,541)

-6.7%

40. Financial assets measured at amortised cost

13,681,740

12,949,705

732,035

5.7%

a)

Due from banks

1,375,279

915,019

460,260

50.3%

b)

Loans to customers

12,306,461

12,034,686

271,775

2.3%

60.

Adjustment to financial assets with generic hedge (+/-)

593

624

(31)

-5.0%

90.

Property, plant and equipment

219,541

226,305

(6,764)

-3.0%

100.

Intangible assets

18,085

18,194

(109)

-0.6%

of which:

- goodwill

15,322

15,322

110.

Tax assets

202,637

202,765

(128)

-0.1%

a) current

10,954

7,812

3,142

40.2%

b) deferred

191,683

194,953

(3,270)

-1.7%

130.

Other assets

122,722

129,956

(7,234)

-5.6%

Total assets

14,860,859

14,192,062

668,797

4.7%

Liabilities and shareholders' equity

30.06.2020

31.12.2019

Change

amount

%

10.

Financial liabilities measured at amortised cost

13,378,212

12,850,498

527,714

4.1%

a)

Due to banks

1,995,605

1,603,208

392,397

24.5%

b)

Due to customers

9,734,741

9,498,187

236,554

2.5%

c)

Debt securities in issue

1,647,866

1,749,103

(101,237)

-5.8%

20.

Financial liabilities held for trading

7,729

8,138

(409)

-5.0%

40.

Hedging deriv ativ es

1,914

2,157

(243)

-11.3%

60.

Tax liabilities

12,855

15,816

(2,961)

-18.7%

b) deferred

12,855

15,816

(2,961)

-18.7%

80.

Other liabilities

440,172

289,279

150,893

52.5%

90.

Prov ision for termination indemnities

24,995

25,480

(485)

-1.9%

100.

Prov isions for risks and charges

36,086

35,582

504

1.4%

a)

commitments and guarantees giv en

4,593

2,734

1,859

68.0%

c)

other prov isions for risks and charges

31,493

32,848

(1,355)

-4.1%

120.

Valuation reserv es

44,016

45,373

(1,357)

-3.0%

150.

Reserv es

818,440

792,741

25,699

3.2%

160.

Share premium reserv e

16,145

16,145

170.

Share capital

70,693

70,693

190.

Minority interests (+/-)

4

4

200.

Net profit (loss) for the period (+/-)

9,598

40,156

(30,558)

-76.1%

Total liabilities and shareholders' equity

14,860,859

14,192,062

668,797

4.7%

8

Reclassified consolidated income statement

Voci

Variazioni

Importi in migliaia di euro

30.06.2020

30.06.2019

Valore

%

10+20

Net interest income

104,759

106,988

-2,229

-2.1%

70

Div idends and similar income

586

1,044

-458

-43.9%

40+50

Net commission income

79,899

81,497

-1,598

-2.0%

80+90+100+

Net result of financial assets and liabilities

5,419

6,135

-716

-11.7%

110

230

Other operating income/expense

2,431

5,034

-2,603

-51.7%

Operating income

193,094

200,698

-7,604

-3.8%

190 a

Payroll costs

-83,013

-84,700

1,687

-2.0%

190 b

Other administrativ e costs

-47,123

-47,829

706

-1.5%

210+220

Net adjustments to property, plant and equipment and intangible assets

-4,735

-5,268

533

-10.1%

Operating costs

-134,871

-137,797

2,926

-2.1%

Result of operations

58,223

62,901

-4,678

-7.4%

130a+100a

Cost of credit

-39,977

-26,921

-13,056

48.5%

130 b

Net adjustments to securities owned

-1,325

2,883

-4,208

n.s.

140

Profit/losses from contractual changes without write-offs

225

-111

336

n.s.

200 a

Net prov isions for risks and charges - commitments and guarantees giv en

-1,878

-850

-1,028

120.9%

200 b

Net prov isions for risks and charges - other

-1,390

-1,148

-242

21.1%

Profit (loss) from continuing operations before tax

13,878

36,754

-22,876

-62.2%

300

Income taxes on continuing operations

-3,787

-12,504

8,717

-69.7%

Profit (loss) from continuing operations after tax

10,091

24,250

-14,159

-58.4%

Net result of the measurement at fair v alue of property, plant and equipment and

260

intangible assets

0

-260

260

-100.0%

Prov isions for risks and charges, other prov isions, one-off expenses and rev enue

-728

-74

-654

883.8%

Non-recurring result before tax

-728

-334

-394

118.0%

Income taxes from non-recurring items

235

185

50

27.0%

Non-recurring profit (loss) after tax

-493

-149

-344

230.9%

330

Net profit (loss) for the period

9,598

24,101

-14,503

-60.2%

340

Net profit (loss) pertaining to minority interests

0

0

0

n.s.

350

Parent Company net profit (loss)

9,598

24,101

-14,503

-60.2%

Note: in consideration of the merger by absorption of the former subsidiary Banca Popolare di Spoleto by Banco Desio on 1 July 2019 with effect for accounting purposes on 1 January 2019, the item "340 Profit (loss) pertaining to minority interests" for the comparative period was restated in order to make it easier to compare the figures.

9

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Banco di Desio e della Brianza S.p.A. published this content on 31 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 July 2020 16:56:07 UTC