BFF Banking Group (AO) | Hold | BankItalia inspection report: UNFAVOURABLE

Research evidence excerpt

BFF Banking Group (AO) | Hold | BankItalia inspection report: UNFAVOURABLE

irms the findings behind the 28 March Regulatory Measure across the full waterfront, like

corporate governance, accounting processes, credit activities, organisational structure and internal controls. The Commissioners

remain in place, the remedial programme continues, and the supervisory relationship remains. Therefore, this is a continuation,

not a conclusion, and investors hoping the report would let the discussion move on to earnings will be disappointed.

The report requires additional provisions on two specific pockets, invoices originated before 2016, and the classification of

certain Polish public hospitals, with the quantified damage somewhat small (in a normal context) of c.EUR17m of CET1, partly

offset by c.EUR25m of RWA relief.

On Q1 capital base, the mechanics net out to c.-23bps CET1 and c.-22bps TCR (decomposition below). On a normally capitalised

bank, this would be a non-event and would not merit a note. But BFF does not have a normal buffer. At Q1 results formally in own

funds, TCR stood at 13.41% against a 13.36% requirement. The current impact should lead to a Pro-forma TCR to fall to 13.19%,

i.e. c.17bps below the requirement.

Table 1:BFF's capital

CET1 capital Own funds RWA CET1 ratio TCR

Q1 26 base (Mar-26) 683.9 833.7 6,217 11.00% 13.41%

+ EUR17m capital hit (RWA held) 666.9 816.7 6,217 10.73% 13.14%

impact -27bps -27bps

+ EUR25m RWA relief 666.9 816.7 6,192 10.77% 13.19%

impact of RWA step alone +4bps +5bps

Net pro-forma 666.9 816.7 6,192 10.77% 13.19%

SREP requirement (incl. CBR) 9.86% 13.36%

Distance to requirement +91bps (17bps)

Source: Kepler Cheuvreux

IMPORTANT. Please refer to the back of the report for important keplercheuvreux.com