Good afternoon and welcome to BFF Banking Group first quarter 2024 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touch-tone telephone. To withdraw your question, please press star and 2. Please note this event is being recorded. I would like to turn the conference over to Mr. Massimiliano Belingheri, Group CEO, and Mr. Piergiorgio Bicci, Group CFO. Gentlemen, the floor is yours. Thank you very much, and thanks everybody for joining us today when we report our first quarter results and also some news on various fronts. Let me start first with the first quarter results where we reported EUR 41.5 million of adjusted net profit. That has been up compared to last year if we take out the capital gain we had on the first quarter, and so we're quite pleased with the results. The loan book is at EUR 5.5 billion, is growing at 9% year-on-year, a new historical first quarter high. We have plenty of liquidity and a good deposit base with a loan-to-deposit ratio of 61%. The deposits are almost at EUR 9 billion, and they've grown by a third year-on-year. Importantly, our off-balance sheet reserves continue to grow. We've grown them at EUR 628 million, over EUR 80 million year-on-year, and EUR 23 million versus December, giving us a lot of embedded earnings upside. We remind you also that from the 1st of January, the late payment interest rate has grown to 12.5%, which will underpin also our profitability going forward. The late payment interest rate is reset twice a year in January and in July. So given the capital position, the EUR 41.5 million of adjusted net profit is excess capital that we have, and excluding that excess capital of EUR 41.5 million, we have a CET1 ratio of 13.5%, which is EUR 49 million in excess of our 12% core equity tier one target. In terms of further news, the Late Payment Regulation proposal has been adopted by the European Parliament on the April 23, 2024. That's important because it underpins a more favorable context for our business, not only from the economics of it, given the proposal to increase substantially the late payment fee, but also because it removes any restriction on transferability of receivable, which would underpin volume growth in our space. We've also issued in April, after the closing of the quarter, EUR 300 million of our first Social Senior Unsecured Preferred Notes. That allows us to fulfill our MREL requirements from the 1st of January of next year, and so puts us in a good spot even on that front. We have a new Board of Directors, which was appointed with the AGM of the 18th of April. We have more independent directors and a stronger international presence and a younger board as well. We have renewed five out of nine board members, and we also have renewed entirely the Board of Statutory Auditors. As you've seen from the press release and the presentation we received last week, the results of a Bank of Italy inspection follow-up, which provides in its comments a different interpretation on how the clarifications of Bank of Italy on the application of definition of default should be interpreted, and BFF is looking at how to interpret that interpretation. Bank of Italy has put some limitations on what we can do, and most importantly, a temporary stop on dividend distribution until BFF responded to the assessment, and Bank of Italy then takes a final position. To hit the nail on the head directly, on the following page, you see a bit more details. First of all, what we've received has been a compliance finding. So it's a finding of the inspection that interprets the rules and indicates that we're not fully compliant in the view of the regulator with how they interpret their own regulation. Importantly, there is no indication that that implies an increase in the credit risk. So it's simply around how assets should be classified under the new definition of default. In order to get to the bottom of it, Bank of Italy has requested to temporarily refrain from three things. First, the distribution of the profits generated from fiscal year 2024, the payment of the variable remuneration, and the further expansion in terms of opening new branches or expanding in new countries under the Freedom of Services Act. And that's, again, pending the assessment of Bank of Italy on the application of the DOD. Importantly, there is no limitation instead on paying interest on our AT1 securities. The coupon is due in July. The board met today to review the letter from Bank of Italy and has done a preliminary assessment of what is indicated. It believes that the possible increase in RWA and the possible increase in the prudential kind of provisioning, which could result from the Bank of Italy interpretation, does not actually result in a material change in the bank's economic and financial outlook. That's also taking into account the fact that we have substantial off-balance sheet reserves that we can always draw upon in terms of our capital position and also a number of management actions that can be taken, including on managing our assets. I'm sure that we'll have plenty of questions that we'll reply at the end of this call. In terms of the Late Payment Directive revision, the European Parliament has voted on page five to confirm a more favorable approach to BFF than the European Commission. That has the effect, if this were to go ahead, of allowing, quite importantly, full transferability of receivables. There are a number of countries where there are restrictions on the transferability of receivables, namely Poland or Romania, a country where we don't operate, or other contractual restrictions which are put to suppliers to transfer receivables. So we think if that goes ahead, that will have an important impact in convincing clients more easily to sell the receivable to us. So Commission is done, Parliament is done. Then we have to wait for the position of the Council, which is working, and we expect a general approach from the Council in the second half of 2024 and a dialogue with a final compromise position at the end of this year or beginning of next year. So under the current implementation, the benefits of this new version of the late payment directive or regulation will be felt starting from 2026. Clearly, we haven't included any potential impact of this on our assessment of what we've said before. Looking at the quarterly results on page six, we highlight a strong growth in total revenues, which are up 29% year-over-year if you exclude the almost EUR 20 million of capital gain of last year, but even without that, we've grown at 15%. Cost of funding has gone up substantially, driven by the higher level of interest rate. Importantly, we have been able to keep cost income at a decent level, as you will see later in the presentation, at around 44%, and that translates into a EUR 41.5 million of net income for the period. Our balance sheet on page seven follows our indications on the business plan, so that our intention is to keep the balance sheet fairly stable over time, so not to have to have more equity for our leverage ratio or more bonds for our MREL requirements. The loan-to-deposit ratio has improved also compared to year-end, stands now at 61% compared to 75% of last year, and we have plenty of free bonds which are unpledged that can be used for liquidity. With this, I will leave the floor to Giorgio to present the details of our quarterly results before picking up again at the end of the presentation. Thank you. Thank you, Max. Going to page seven and good afternoon to everybody. Going to page eight, we start from the factoring and lending business where we can see an increase in terms of revenues coming from the increase by 18% year-over-year of the gross interest income, partially compensated by the other incomes that are due to the lower volumes that we had in Italy. We had a strong increase in terms of gross yield compared to the last year, and it's very important to highlight that there is also an increase in our off-balance sheet reserves that is a good opportunity for the increase of the profitability of the business in the future. So the total amount of LPIs, the Recovery Cost Fund, is over EUR 1 billion and increased by 137% compared to the last year. In the next page, at page nine, we have a picture of the loan book of the factoring and lending with a general growth of 99% year-over-year, and there was a strong increase in terms of volumes and loans also coming from the business in Spain where we changed our sales director, and we started to have the benefit coming from this change. Italy was down in terms of volumes by 10% but almost flat in terms of outstanding, and for Italy, now we are changing, starting from the second quarter of the year, the sales organization introducing a new group sales director and the change of the commercial director of Italy. In general, we had a strong result coming from the other countries abroad Italy, and this is a good point in terms of diversification of our business across Europe. At page 10, we have a snapshot on the payments. We confirm the good dynamic in terms of revenues with an increase of 16% in revenues and also an increase in terms of deposits. This has been driven by the increase in number of transactions and also that followed by the increase in terms of revenues that reflect the volume spread. At the end of the period, this effect is positive also in terms of increase of our deposits that has been driven by the increase in general of this kind of activity. For the securities services that we have at page 11, we put in the last month or the last year, at the beginning of the first quarter, a strong effort on the commercial activities, and we had an increase in terms of depository under the depository bank activities year-over-year. We expect in the second quarter the onboarding for Cassa Forense, and we have a positive inflow of EUR 3.1 billion in the first quarter of 2024. The revenues at this moment are flat compared to last year, but it's important to highlight that the end-of-period deposit increased by 21% compared to the last year. We are continuing to invest, and we have the picture at page 12, continuing to invest in terms of increase of our efficiency. Over the plan horizon, we invested in all of our businesses, especially in the first quarter in factoring and lending with an increase in terms of OPEX, but also we had an increase for all the businesses coming from the renewal of the new Banking Sector National Collective Agreement that had an impact in terms of costs for all the businesses. Also for the payment and the transaction services, we increased our costs, and we are continuing, as said before, to invest for the IRB model implementation and also some very important investment for the ICT infrastructure of the bank. At page 14, as said before by Max, we have a picture of our balance sheet. We have an ample and available funding base. We increased our deposits by 23% compared to the last year. Now we have three pillars in terms of deposit: the deposit coming from the payments, from the securities services, and from the online deposits. We have issued our bond to cover the MREL requirement. This has been put in place in April, so we will see it in the second quarter, and the issue was made in order to cover more than the gap that we actually have in order to cover the growth that we will have in terms of business, and we are confident that the amount that we issued, EUR 300 million, is something that we needed. About the issuance, it's important to highlight that it is our first social bond following our social bond framework. We continue to not have any kind of ECB funding to be refinanced, and we had also an increase in our yield on floaters that is at 5.17%, that's partially compensated by the yield on the fixed bond. At page 14, we have our asset quality. It's important to highlight our asset quality is toward the public administration. The real credit risk is very low because we know that our credit will be paid in the future. It's a point of classification. It's important also to highlight that we collect our exposure, and it is visible observing the amount of NPE coming from the Italian municipalities. At the end of the procedure, the municipality comes back to be performing, and then we have the possibility to collect our money. So it's something that is only for a transition for a certain period of time, but at the end, we are going to collect it. At page 15, we have our capital ratios. We have above or more than EUR 40 million, the increase up to EUR 40 million the excess capital. Our target is 12%, and we remain at that level also for the future, and the CET1 is at 13.5%. Having said that, I leave the floor to Max in order to present the new Board of Directors. Thank you. Thank you, Giorgio. On page 16, you see the board lineup. As you know, we have a new board that came in April. It's a board which is renewed, and I think it's a substantial upgrade in many fronts compared to the past. It's also a board which has a majority of new board members and who has been tasked also in the last few days to review what Bank of Italy has written to us and the potential impact. And so it's actually quite positive. I think that the assessment done has been the one that we wrote so that we don't expect any material change in our economic and financial outlook, meaning in what we indicated in terms of our targets to the market. But I'm sure there will be plenty of questions, not only on our first quarter results. I leave the floor to the participants to ask questions now. Thank you, sir. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchscreen telephone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and two. At this time, we will pause momentarily to assemble our roster. The first question comes from Giovanni Razzoli of Deutsche Bank. Good afternoon to everybody. Questions on this Bank of Italy inspection. So can you share with us what they mean or what you mean by a different interpretation that the Bank of Italy has relative to the credits toward the public administration? And again, you mentioned the calendar provision, the potential application of the calendar provision, but if I remember correctly, calendar provision applies only when loans are due after a couple of years with the linear progression of capital to be set aside. So my perception is that the issue raised by Bank of Italy may cover only a limited part of your portfolio. Is my understanding correct? Can you share with us also some light here as much as you can? Then I can hardly reconcile all these negative surprises with the interpretation that the Bank of Italy already issued back in November 2022 with the detailed Q&A section on how to classify the past-due loans. So can you remind us what have you done following that November 2022 clarification paper by Bank of Italy that you are also mentioning in your press release and why there are still differences onto that? The last point, let's go to the potential bottom line of this difference interpretation. Shall we end up in a situation where you will have a lower CET1 ratio because higher risk-weighted assets calendar provisioning or whatever, but the same leverage ratio show that the actual leverage of the bank is not changing because the risk profile of the bank is not changing? Thank you. Thank you, Giovanni. We'll ask a lot of questions, so please come back to me if I don't answer what we said. Let's first answer yes, calendar provision applies only to exposures which are quite dated. So it's two years or more. So the impact will be done only if we were to have very dated exposures. And actually, we don't quantify that in the press release, but given that's what the regulator verbatim indicated, that's what we communicate to the market. So we should always remember our portfolio's portfolio returns quite quickly. I think it's also important to mention that because there's no credit risk associated with it and Bank of Italy is not making a finding on the inspection around credit risk but only on classification, the calendar provisioning we take gets then released when we collect the receivables. So if you want, it's a reserve that we need to take that then gets released over time. I think that's important in thinking the real economic effects of what is meant. In terms of the Bank of Italy findings, we had, as you know, four different interpretations by Bank of Italy, interpretation meaning different papers issued over a period of two years. The last one, which was in September 2022, which I think is what you referred to, and that you may remember had increased the level of past due back then. We thought we had fully complied with those rules. Bank of Italy has come back with some observation on our compliance and is asking us to review our portfolio in the next 60 days to come back to them with our position. The effect is that we will not pay an interim dividend if Bank of Italy doesn't come back to us with a final answer before August, which is likely. In terms of the potential bottom line, we have still a target of 12% CET1 ratio. If we absorb more capital, we'll absorb more capital. If clearly we need to absorb more capital, then we have the automatism of the dividend policy. We have the ability to bring on balance sheet part of our off-balance sheet reserves. And I think it's important to note that given the fact that the off-balance sheet reserves refer to late payment interest, which then gets collected in a number of years, the bringing on board on balance sheet, the off-balance sheet reserves has mostly the impact of bringing forward earnings that will be beyond the plan horizon. That's, we think, something which gives us confidence of the statement that the board has made to the market. There are a lot of moving parts. We think there are a number of ways for the company to address the Bank of Italy findings. We have plenty of capital reserves, plenty of ability to generate capital, and a number of additional mitigation factors that we can use to address Bank of Italy. But it's a dialogue that we still need to have with the regulator, and it will play out in terms of us stating our position over the next few months. I hope this answers your questions. Yes, thank you. Probably just a clarification on what is the different interpretation of Bank of Italy. It's back to my first point. So why they don't agree on the way you classify those credits toward the public administration? What is the difference? Well, it's a number of, frankly, fairly detailed items. So I would say the major one is the level of retroactivity of the rules that Bank of Italy has issued. So if what they've issued in November 2022 should apply from then on or from a period before, I would say that's one of the major areas of debate, if you want. Okay, thank you. The next question comes from Manuela Meroni of Intesa Sanpaolo. Yes, good afternoon. Thank you for taking my questions. The first one is, again, related to the potential magnitude of the impact on the capital base that you might have. You have a 150 basis points buffer over your 12% target CET1. You have over 550 basis points buffer over the SREP requirements. So a such draconian indication or the position of the regulator on the distribution of dividend led us to understand that the potential magnitude is sizable. So could you please help us understand what could be potentially the magnitude of the impact on the capital base? The second question is on the timetable. Could you please provide us your thoughts about when the Bank of Italy will come out with its final position? Do you expect something in the third or fourth quarter of this year or what else? The third question is on the mitigating actions. You made a reference on your off-balance sheet reserve. So I'm wondering how much of this off-balance reserve could be brought on balance. So how much is historically the recovery rate of the LPI that potentially could be used in order to bring to the balance sheet your reserve? And you also mentioned other mitigating actions that you could put in place. So could you please clarify what other mitigating actions you might have? Thank you. Yes, thank you. First of all, on the magnitude, I think we should take comfort from the fact that the AT1 coupon is being paid because that's technically the coupon reduction in equity. So I think that's an important signal. Second, the important signal is what the board has approved today, stating that on the conditions we said in the notes that the possible increase in RWA and potential calendar provisioning does not result in a material change in the bank economic and financial outlook. Otherwise, we would have issued a profit warning. We haven't. Clearly, there are a lot of moving parts, and it's a discussion with the regulator that we are not going to conduct in public. But I think you should take comfort from those two things. In terms of timing, the bank has committed to reply to these findings and propose its position in 60 days. Then the timing of Bank of Italy is not something we manage. I think they are cognizant that they need now. We all need to get to take away uncertainty on the bank. But again, I think you should take comfort from what we said before. In terms of mitigating actions, because we are talking about a portfolio and there are a lot of legal tools for considering the past due calculation, and there are a number of mitigating factors that can be applied, we haven't used all of them to do so. So to reduce the again, what is the issue that we face, which is let's bring it back to what is relevant, is the classification in past due of something which does not have an underlying credit risk, which is in itself a bit of a contradiction, but is following the regulations that have been issued. The interpretation of that regulation is something we'll work through with Bank of Italy. As I said, we can bring on board the LPI. I think that will happen only in the most extreme scenarios. We always have that option. I will not disclose the historical rate of LPI collection, but that will generate significant capital. It's also worth noting, by the way, that we have already quite a lot of excess capital. You mentioned 150 basis points of buffer. In generality, it's 150 basis points plus the EUR 41 million of dividends sorry, of capital we have generated in this quarter, which is equal to another 125 basis points. Overall, we are quite confident that the impact will not be dramatic. Thank you. The next question is from Fabrizio Bernardi of Intermonte. Hi, everybody. I have a few, let's say, qualitative questions. The first is if you can remind us how the RWA weightings are moving from performing to non-performing and how much time it takes to see the change in the weightings. The second is very, let's say, qualitative questions because, to be honest, I've never seen that a compliance finding makes the regulator put to zero the dividend policy, the further expansion abroad, and the payment of variable remuneration. So the market reaction today is very worried about this kind of profile in the decision of the regulator. So maybe I know that you answered many questions about this situation, but maybe you can guide us about how much fear I don't know how to say we should have about this kind of findings because compliance issues are usually not that impacting on the numbers. As far as I can remember, you have a very good payout policy. The street is very interested in this policy. So I would like you to share your color on how comfortable you are with the current situation to be addressed in a very favorable way. Thank you. Yeah, let me answer the two questions. First, how RWA are moving from performing to non-performing. They moved to roughly 20%-150% on average. So that's the RWA impact. But the major issue for us is by using the standard model, we have a facility we don't have a facility-level approach, so we don't calculate the past due on a single invoice, but on the portfolio of the debtor. And that's actually the issue it creates, potentially, contagion in the portfolio and an increase in RWA. So that's the impact. On why a compliance finding should make the regulator stop the dividend, that's really not for us to opine. It's their decision. I think here what we are reading into that is that we all agree that there is no credit risk associated with the portfolio, no incremental credit risk, but by following rules that have been drafted as they've been drafted and can be interpreted, then we might have an increase in RWA and therefore then more capital might be needed. I take some comfort from the fact that actually the inspection was completed in January. The report internally was issued in March. We paid the dividend, and then Bank of Italy came on the 29th of April. Certainly, it's a strong measure, and that's a good incentive for all of us to get to the bottom of it fairly quickly. As I said, we think having done an analysis and presented to the board that this one, given the other levels we have, does not change our economic and financial outlook over the plan horizon. Sorry, if I can ask another question. I know maybe it is too early to talk about this, but do you see any possible potential change in the dividend policy following this compliance finding? Not really. I mean, we have a dividend policy that states that we pay our capital beyond our capital generated here beyond our target capital level. Okay, thank you. The next question is from Luigi Tramontana of Banca Akros. Yes, good afternoon. Thanks for taking my questions. Once again, trying to figure out this potential size of this compliance finding. Out of your EUR 5.5 billion loan portfolio, the findings are referred only to the Italian portfolio or also to the loans abroad? Is it referred to non-NHS debtors or potentially also to NHS credits? Or are there other elements we have to look at? Then second question is on the fact that you are indicating the Bank of Italy also made some findings on the bank's governance and on your compensation practices. Can you be more precise on that, please? Thank you. Yes, look, we are communicating what is material to the market, and it's mostly within the dividend so that we maybe address also another question might come. There is a reference to our international expansion. We can continue to operate in the markets where we operate. We can continue to operate in France in freedom of service. We don't see an impact on the business plan there. And I will not provide details because it's fairly complex. We will not be able anyway from the outside to determine what is the numerical impact because, as I said, there are moving parts, and we are still in discussion with Bank of Italy on how to interpret it. I think you should take comfort from the fact that we are saying that the board, having done some analysis, believes that our targets in terms of earnings and dividend distribution, which is the economic and financial outlook we have given to the market, should be maintained. The next question comes from Antonio Reale of Bank of America. Hi, good afternoon. Antonio here from Bank of America. Just a follow-up, please. Could you remind us, if I'm not mistaken, you benefited in 2021 from the moving from the implementation of the DoD. I think risk weighting went to 20% on any exposure to the public sector, which had a duration below three months. Can you maybe then share what is the size of this exposure today? So public sector exposure below three months duration. And maybe remind us also what was the capital benefit you had in 2021. And give us a sense, please, if possible, of what the adequate risk weighting would be, if not 20%, on this exposure. Thank you. Thank you, Antonio. Let me clarify one thing. The implementation of the new definition of default meant in 2021 that all invoices towards the public sector at large were risk weighted at 20% because either they were within the due period risk weighted at 20% or in the 180 days before becoming past due, which then we were still weighting at 20%, or in a period which was longer than that provided there was a stop in the counting of days for various reasons which are allowed under the regulation. So it's either 20% or it's a past due exposure at 150. We have some exposures in our books that are at 50% in certain countries. And in a variety of those, I think they are in, I think, in some of our reporting. Before that, we were risk weighting at 100% all the book, but we were benefiting from the fact that we were considering the due date, the expected collection date, instead of the invoice date. So that's the difference. The next question comes from Simonetta Chiriotti of Mediobanca. Hello. So a few questions from my side. So the first is on one of your last statements. You said that it is not a profit warning and the targets on earnings and dividends are maintained. Official targets are on 2026. So I'm wondering how do you see the current consensus on earnings and dividends, which is more than EUR 200 million in terms of adjusted earnings and EUR 1 per share of DPS, if I'm correct. Second question, one of the measures that can be taken is to increase the percentage of LPI recognized upfront. If you can remind us which was the impact of the increase in 5%, if I remember well, that you applied in 2023, so in terms of million. And the question is also if there is a limit because I know that the percentage is much higher. The actual collection rate is much higher than 50%. But how close can we get to the actual level of collection? And yeah. And finally, if there is a higher RWA, the capital absorbed would be higher also in the future. So you will have to work with higher capital. And so the question is if there is any impact in terms of competition, so from the commercial point of view. Thank you. Thank you. Well, first of all, clear rules, the rules for everybody. So if it applies to us, it applies to everybody too, hopefully. Now, we believe that's the case or it will be the case, and therefore we expect that the regulator will apply the same rules. And so we don't expect a change in the overall competitive dynamics. As I mentioned, most of the issues that we are debating relate to the older part of the portfolio. So if we have solved that, we don't think the overall structure of the capital absorption of the business will move massively. We're still in early stages on that, but that's directionally where we are. In terms of the consensus, well, remember, we never gave the targets for 2024 nor 2025. We gave two important targets. One was the profit of 2024. The other, the cumulative dividends, which was EUR 720 million, of which we have paid already EUR 183 million this year. So that's the other important measure. I think it's an important measure because it gives you a sense of what we're indicating in terms of capital impact of what might happen in various scenarios. In terms of LPI recognition, back of the envelope, now you have EUR 638 million of balance sheet. That is recognition 50%. Now, every 10% increase is therefore 20% of that. You need to tax it. And so it gives you a sense of what is the capital impact of changing that. I think, as I said before, because we keep deferring income, actually changing the profit recognition does not impact much our running profitability. It simply brings forward something which we'll never catch up to provided we continue to grow in the future. In terms of millions, the last time that you increased the percentage from 45%-50%, if I remember well, how much was the impact on the capital? And would the measure regard also the recovery costs or just the LPI? It will be both. I think when you look at the historical data, which you don't have in front of me, unfortunately, I think you should also look at the fact that the absolute amount of LPI and recovery cost fund is substantially higher. So the increase, the impact will be substantially higher than it has been in the past simply because we are dealing with a substantially higher fund. I don't have maybe the team has the data in front of me, but in general, that's the thing you need to look at. It's easier, frankly, simply to look at the current size of the fund. We account at 50%, and you can do the proportion if you assume a 60% or 70% recovery rate, which would be both in line with our historical collections. Thank you. The next question is from Andrea Lisi of Equita. Hello. The first question is if the indications by Bank of Italy are limiting your current activity, your current business now. So if you have some limitation in what you are doing, also pending the uncertainty, so you prefer maybe to do less business than usual, pending final answer by Bank of Italy. The second, if you can provide us some split of your portfolio, so the average duration of your book in terms of days. And so also if there is given the portfolio as of today, which is the percentage of receivables that are before 90 days and after 90 days, which is the proportion of your portfolio that theoretically will be impacted by the new indication by Bank of Italy. Just to understand if I have understood correctly, is it correct to say that for the new business you do, it will be more expensive in terms of capital when the position goes to past due? You have to put aside more capital than you put currently as of today. The profitability of the business in terms of business when the receivable accrue LPIs becomes lower than in the past. Last, if it is reasonable to assume that as it happened last time, we would observe a surge in the level of past due, then that will come back to book when recovered, but at time zero, a surge in the amount of past due and so of the impairment. Thank you. On the last question, we don't know the final outcome. I believe Bank of Italy's indicated observation, which have the impact of increasing past dues. We need to see where we end up at the end of the debate. Also bear in mind that we have an inspection done on last year's numbers, the portfolio changes. And so that's, and again, the issues refer mostly to the old portfolio. That's important also to your second last question. There's no absolute change in terms of the profitability of the new business. As I said, because most refers to the old portfolio, in any case, and if we solve that problem, then the new business profitability is unchanged. The capital absorption shouldn't change either. We're still moving from 20% risk weighting to 150% risk weighting from a past due and non-past due. There's no change in there, to be clear. In terms of past due and duration, I think we have data in our annual report, both in terms of DSOs by country and overall days outstanding of the portfolio. Importantly, again, the past due is driven not only by how many days have passed since the invoice is due, but also what are the characteristics of that invoice, what has happened to disputes around that invoice, so the number of factors that actually determine if an invoice is past due even after 180 days have passed since the invoice due date. So that's why there are different interpretations. In terms of new business, no, we don't expect impact on new business for the same reason that I indicated before. Thank you. The next question is from Julian Roberts of Jefferies. Hi there. Thanks very much for taking my call. My first couple of questions have been answered already. I was going to ask just, is there any direct link between their querying of remuneration and the questions about compliance with credit classification? No. No. Frankly, there are more questions around things which are not actually related at all. There's no link between the two. Thanks very much. The next question is from Filippo Prini of Kepler. Yes. Good afternoon. A couple of questions. Should we expect that with the reporting of Q2 result, we have basically a new classification, temporary classification of credit according to the indication of Bank of Italy? And second, you have spent a lot of time talking about the remedies to address this request of Bank of Italy about the classification of credit. But could you tell something about what you'll do to address also the other points related to governance and variable remuneration? Many thanks. Yes. It depends on the first point. It's a good question. It depends also on the level of disclosure that we decide with the regulator to give to the market in terms of classification of default, where we expect that to happen for Q2, which will be communicated in August. But it's a decision that will be taken in due course. In terms of, can you repeat the second question? Yes. What you'll do basically to address the other challenges that is raised by Bank of Italy, that is about governance and variable remuneration. Thank you. First of all, again, let's put things in context. This is an inspection done in the fall of last year and at the beginning of this year, in January. We think that the change in the Board of Directors. It's already a strong answer to some of the issues that Bank of Italy had raised. There are a number of other governance improvements, certainly, we can make. I don't think those would be necessarily disruptive in terms of remuneration. It will require some renegotiation around my contract, which I, given my availability, clearly to discuss. The next question comes from Louisa Miles of Morgan Stanley. Hi. Good afternoon. Thanks for taking my questions. I've just got a few follow-ups to begin with on some of the other questions that the other analysts have asked. So first of all, can you just remind us what is the average duration of the loan book? I just want to think about how that's churning over time because you did mention that this is only impacting the back book. You also noted that and it's in the slides as well that you don't think that there's not going to be much of an economic effect because it's likely that you'll have to increase the reserve, but then that will just get released over time. And that's your interpretation of no economic effect. I mean, that does sound like to me that potentially, you might need capital in the short term. So can you just clarify that statement again, if possible? And then can you also clarify I think you said that the new definition of defaults is the definition of days past due - sorry - is 60 days for NHF. And previously, you had 180 days as your assumption. Can you clarify that point as well? And then just finally, you've got a CET1 company target of 12%. How comfortable would you be going below that 12% given that the threat requirement is 9%? Are you happy to operate below 12% for a short period of time, or is that a hard hurdle? Thanks. No. The 12% is the capital target to pay dividends. So that's an important consideration. So we pay dividends when we are beyond 12% CET1 ratio. And to clarify, the Late Payment Directive, which is the law that regulates the payment times of the public sector, 30 or 60 days, is different from the definition of default, which indicates that the public sector doesn't go in past due if not beyond 180 days after the due date. So 180 + 30 to 210 for the public administration, 180 + 60 to 240 for the NHF. In terms of how much capital may be needed in the short term, as I said, there's a lot of moving parts. I think what we indicated to the market is the fact that over the plan horizon and the plan is not to 2030. It's actually to 2026. Now, we expect to be able to fulfill our targets in terms of profitability and capital distribution, given what we know today. And therefore, that is what we say. In terms of average duration of the portfolio, if you exclude the portfolio in Poland, which has a loan book which also has a longer duration, our portfolio churns on average within six months. The issue is not what it churns in the six months. Again, because we use a facility not a facility-level approach, but a counterparty approach by regulation, if I have a lot of old invoices that are not being paid, while the due invoices are paid, then I may run the risk of being in past due anyway towards that debt. That will then translate into more RWA. Those RWA will be released over time. But it's that issue that generates the contagion. And that's part of the discussion we're having. We need to help with the regulator. Thanks. The next question comes from Giovanni Razzoli of Deutsche Bank. Thank you. My question has already been asked. Thank you. The next question comes from Dave Storms of Stonegate. Good morning. Just two quick questions for me and apologies if they've already been asked. With the LPR proposal gaining traction over the last seven months, are you seeing any borrowers change in their patterns in repayment? I'm just thinking about DSO kind of in advance of this adoption. And then also, with your low exposure to the private sector, would there be a point or a market environment when BFF gains an appetite to increase exposure to the private sector? Thank you for the questions. On the private sector exposure, look, we think our strength really is in dealing with the public sector. Buying private sector exposure makes sense for us when we buy a residual portion on large NHS portfolios or we buy some private sector as well, but not necessarily to expand that business. The reason is also you are really taking on credit risk, and that's not something we want to do. On the Late Payment Directive, look, we think that the drivers of payment times are only partially linked to the mandatory payment time of the public administration. Certainly, there has been over the last decade more emphasis on paying on time that has driven down payment times, particularly in the early parts of last decade. What will change towards the public sector in the directive is the shift from 60 to 30 days in the NHS. I don't think that such a massive shift will change behavior, particularly at the point where cost inflation on one side and higher cost of funding from the government, tighter finances will make it more difficult to expand expenditure in the healthcare system. Overall, we don't expect a sudden shift. We think, actually, as we indicated to the market in the adoption of our business plan, the increase in interest rates should push up payment times. That's also what we are managing already in 2023 compared to 2022 in a number of geographies, as you can see from our annual report. The next question is from Ebrahim Said of JP Morgan. Hi there. Just to clarify, I think you responded earlier to this point on talking about what the amount of the balance is in scope for this analysis. And is that correct in saying that you responded as EUR 653-odd million or sorry, EUR 638 million? And secondly, you're referring to the breakdown in your annual report. Just looking at it now, I see under public administrations, you've got stage one and stage two sort of categorized together. And then I see EUR 293 million in stage three. So just if you could guide us to where those numbers are coming from. But essentially, just trying to understand the notional balance that is in scope. Yes. Now, I think we're mixing a few things, but let me try to explain. So if you go to page eight of our presentation, you can see there on the bottom table what is our LPI and recovery cost fund at the date of the quarter. So at the end of the quarter, 31st of March, we have accrued but uncollected EUR 1,174 million of late payment interest and recovery cost that the debtor owe us. Accounting-wise, we book only a portion of that. We don't book which we call off-balance sheet EUR 495 million of LPIs and EUR 134 million of recovery cost fund. So the total of off-balance sheet rights in terms of interest and recovery cost that we have at the end of March is EUR 628 million. So if we were to move to a higher accrual rate instead of the 50%, a higher rate which is closer to our actual collection rate, then we will bring on balance sheet a portion of that. So to make the numbers simple, let's say increase by 10%, my recovery rate increase, therefore because I'm at 50%, roughly 20% of EUR 628 million, so EUR 120 million pre-tax. I need to tax it. That's another accounting effect, but roughly, that gives you a sense. If I move to a 60% accounting, and then you can double that if you move to a 70% accounting. So that's one thing. Then what you were referring to is instead the staging allocation of the credit portfolio, so of what is actually on page nine, the loans and receivable, the EUR 5.4 billion, which is actually a different item altogether in our balance sheet. There you see the classification between stage 1 and 2 and stage 3, which are the numbers you're referring to, I believe. Okay. Understood. Thanks a lot for that. The next question is from Alexei Gogolev of Bank of America. Good afternoon. Thank you very much for taking my question. It is a quick one and technical. Just wanted to double-check that the dividend for 2023 is already fully paid. The demands from Bank of Italy apply only for 2024 and maybe onwards. Also, in the light of this paper from Bank of Italy, will you continue accruing dividend this year? Let me answer the first question. Absolutely, yes. The dividend has been paid already. Bank of Italy came with the report and the order after the payment of the dividend. What is being accrued is a temporary stop on dividends. I will stress the item temporary. Because we have a policy that unless we are below 12%, we don't capitalize any of our earnings. As it has been reported, we still represent our earnings generated in the period as free capital beyond what has been considered in our ratios. As we said, our ratios are actually, if you include the earnings of the period, higher than what you see. I see. On compensation practices, is it a time-limited ban, or what's the process around restriction on variable compensation? Is it possible to discuss which compensation practices Bank of Italy was reviewing? Yes. I think the logic of the ban on compensation is similar to the logic of the ban on variable compensation. The same logic as the payment of dividend. So shareholders don't receive the dividend till temporarily, and therefore, employees don't receive the variable compensation temporarily applies. And that's the same logic. It's a temporary measure. We have 60 days to respond to Bank of Italy. So we hope the issues can be solved fairly quickly. And it's a ban on not paying out. I see. I see. Okay. Thank you very much. The next question is a follow-up from Simonetta Chiriotti of Mediobanca. Hi. Thank you for taking my question. So I'm going back to the possibility of increasing the collection rate on LPIs and recovery costs. So the point is, can you help us to understand how much that could be increased? So we are now at 50%. Do you think that the regulator would accept a 10% increase, or we can even imagine a 20% increase from 50%- 60% or to 70%? And the second point is, so this is the main remedy. And apparently, from my understanding, it would be enough to offset the heat on the capital that could come from the higher RWA. So is this correct? So my point is, could you help us to understand the worst-case scenario because the stock is reacting really badly? And any broad indication of a worst-case scenario would help. Thank you. I think you need to take comfort from the fact that from the outside, right, that we've been able to pay the 2023 dividend, that the AT1 coupon is being paid, and that I think gives you an indication of how serious is the situation or not. I will not give an indication of what is the impact because we have yet to discuss it with the regulator. The board believes that given the assessment we've done on a number of scenarios, no, this does not result in a material change in our economic and financial outlook, which I think is a fairly strong statement given the fact that we are in a dialogue with the regulator on a number of points which are also highly technical in nature. I understand the market does not like uncertainty, but I think you should take comfort from the fact that the board, which is majority new, has reviewed the current status and has put forward a statement without issuing a profit warning. Okay. Thank you. This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Belingheri and Mr. Bicci for any closing remarks. Thank you very much for attending today. Clearly, an intense Q&A with plenty of things to discuss. I appreciate your closeness to the company, and I'm sure we'll continue the dialogue over the next few days and weeks. Thank you very much. Thank you.