DALLAS, TX -- May 10th, 2024 -- BFF Bank S.P.A (BIT: BFF): Stonegate Capital Partners updates their coverage on BFF Bank S.P.A (BIT: BFF).
Company Summary
- Financial Results: BFF reported Net Banking Profit, EBT, and Net Income of €89.2M, €52.5M, and €39.3M, respectively. This compares to our/consensus estimates of €103.0M/€94.5M, €68.6M/€57.8M, and €50.1M/€40.7M. Net income for the quarter declined year over year due to the ~€19.8M in gains on disposals the Company recorded in 1Q23. Net interest income declined 1.9% y/y with a 37.7% margin while net fees and commission income grew 12.9% y/y with a 70.9% margin. These strong results drove €41.5M in excess capital generated in the quarter.
- Strong Balance Sheet: BFF ended the quarter with a solid balance sheet that includes a cash balance of €116.1M, or €0.62 per share. On its own, this accounts for 5.4% of BFF’s current stock value. The loan book was €5.5B at quarter end, an increase of 9% year over year and a historical 1Q high. Cost of funding for the quarter was 3.8%, which is lower than the average market reference rate. Liquidity coverage ratio for the quarter was 256.0%, net stable funding ratio was 178.3%, and leverage ratio was 4.8%.
- Asset Quality: BFF only saw €0.7M of impairment losses in the quarter, which is in-line with the impairment losses of €0.6M that the Company recorded in 1Q23. Excluding Italian municipalities in conservatorship, net non-performing loans were €6.7M, or 0.1% of net loans. This included a coverage ratio of 77%, which improved from 74% in 1Q23. Cost of risk was 5.4bps at year end 2023. Net past due decreased from €219.9M at FY23 end to €211.9M at the end of 1Q24.
- Ratios: Common equity tier 1 (“CET1”) ratio was 13.5% and total capital ratio (“TCR”) was 18.2% at the end of the quarter. These were measured excluding the €41.5M of excess capital generated in the quarter. Recently the Company announced that its target capital ratio has moved from 15% TCR to 12% of CET1, which is more in-line with other banks’ capital targets.
- Late Payments Regulation Updates: The Late Payments Regulation that is still under revision would result in a favorable scenario for BFF as it is currently proposed. Of note the recovery costs would increase to at least €50.00 from €40.00 per invoice in the European Commission proposal or up to an average of €100.00 per invoice as per the European Parliament Draft Report. This is in addition to the payment terms being set at 30 days across all sectors.
- Valuation: We use a Dividend Discount Model and a P/E comp analysis to guide our valuation. Our Dividend Discount Model assumes that both the TCR and CET1 Ratio remain above 15% for the foreseeable future. Additionally, we agree with the Company stated potential for medium term growth. This arrives at a valuation range of stated range of payout ratios on 2024E Net Income to arrive at a valuation range of €14.08 to €15.91 with a mid-point of €14.89. Our P/E comp analysis valuation results in a range of €13.78 to €16.29 with a mid-point of €15.04. Lastly, we note that BFF pays one of the highest dividend yields of the comp set.
About Stonegate
Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.
