2020 Financial Results
2020 RESULTS
STRONG INCREASE IN PROFITABILITY AND BUSINESS GROWTH
- Assets under Management to €34 billion at end of 2020 (+46% y/y).
- New business for €11.9 billion, including the MPS transaction, confirming AMCO’s ability to complete complex transactions.
- Balanced business mix between NPLs and UTPs (58%/42%). Confirmed the approach aimed at supporting companies’ business continuity, fostering the country’s economic system.
- Team showing strong growth: 287 employees at end 2020, 54 more than in 2019.
- Cash collections at €857m (+14% y/y) despite the impacts of COVID-19, representing 3.7% of average AuM.
- EBITDA at €158.9m (+210% y/y), thanks to strong revenue growth, up to €214.1m (+126% y/y), and a careful cost management and economies of scale; EBITDA margin at 74.2%.
- Net profit at €76m (+80% y/y), despite net impairment losses on loans caused by delays in collections due to the pandemic and a single name exposure.
- Strong capital position: CET1 ratio at 37.4%, supporting future business growth.
- Established reputation in the debt capital markets following the July issuance of €2 billion senior unsecured bonds.
Milan, 11 March 2021. – The Board of Directors of AMCO – Asset Management Company S.p.A. met today and approved the Company’s separate and consolidated results for the year 2020.
“In 2020, we achieved important results, successfully concluding the transaction with MPS, the purchase of 5 major portfolios as part of competitive processes and managing innovative multi-originator platforms such as Cuvée. Our management approach fosters corporates’ sustainability; we aim to relaunch worthy businesses, thereby revitalising resources and giving new energy to the country’s economic system. We pursue our growth objectives together with our people: the team continues to strengthen with new professionals with a wide range of skills. Operating profitability is high, driven by business growth and accompanied by a limited increase in costs, thanks to careful costs management and economies of scale.” stated Marina Natale, AMCO’s CEO.
2020 RESULTS
Business development
In 2020, AMCO continued to grow, bringing Assets under Management (AuM) to €34.0bn by the end of the period, of which 58% non-performing (NPLs) and 42% unlikely to pay (UTPs) loans.
AMCO generated new business for a total of €11.9bn, including 5 new portfolios acquired through competitive processes, in addition to €7.7bn NPEs through the MPS transaction. More specifically:
- purchased from Credito Valtellinese (12 March 2020) a portfolio of impaired loans with a Gross Book Value of approximately €177m, consisting entirely of NPLs;
- purchased from Banca del Fucino and IGEA Banca (15 June 2020) a portfolio of impaired loans with a Gross Book Value of approximately €30m. The portfolio consists of UTPs and NPLs;
- purchased from Banca Popolare di Bari (29 June 2020) a portfolio of impaired loans with a Gross Book Value of approximately €2bn, 60% of which consisting of UTPs and the remainder of NPLs;
- purchased from Credito Valtellinese (5 August 2020) a portfolio of impaired loans with a Gross Book Value of approximately €270m, mainly to corporate customers, 60% of which NPLs and 40% UTPs;
- purchased from Banco BPM (12 December 2020) a portfolio of impaired loans with a Gross Book Value of approximately €600m, mainly to corporate customers classified as UTP.
During the year, AMCO also acquired two new portfolios from Banca Carige: on 18 July 2020, a second tranche of UTP loans was acquired, relating to a single borrower group, with a value of approximately €227m; on 16 December, a portfolio of impaired loans with a value of approximately €54m was acquired, mainly to corporate customers and entirely classified as non-performing.
On 18 April 2020, for the third time Intesa Sanpaolo exercised the option for the transfer to the LCAs (Compulsory Administrative Liquidation) of High Risk assets (performing at the time of the purchase by ISP), originating from the former Veneto Banks, amounting to approx. €110m. On 13 June 2020, Intesa Sanpaolo exercised its last option to transfer High Risk assets totalling €200m. These positions were simultaneously transferred from the LCAs to the respective AMCO-managed Segregated Accounts. No more transfers are planned going forward.
Furthermore, on 8 December 2020, the second stage of the Cuvée project was launched, with the contribution of additional files worth €400m. The deal is based on the innovative multi-originator platform for management of UTP loans in the real estate sector. AMCO acts in the deal as Master and Special Servicer.
Cash collections in 2020 increased by 14% and amounted to €857m[1], accounting for 3.7% of average AuM[2] and only slightly below the 3.9% booked in 2019, despite the lock-down and thanks to the greater knowledge of the portfolios and strengthening of the business divisions.
The lock-down – with the court closures in March and April – and the economic slow-down had a major impact on the first half of the year, in particular on cash collections on NPLs, given the suspension of property enforcement orders. The third quarter showed a recovery, whilst the fourth saw significant collections, particularly in relation to big files.
Information on the effects of the COVID-19 pandemic
AMCO has limited the impacts of the COVID-19 pandemic on its operations thanks to the complete adoption of remote working; by using the company’s existing IT facilities, all employees had access to smart working solutions.
Close attention was paid to employees’ health and well-being with dedicated video calls and training sessions, constantly providing useful information, particularly to those in more fragile situations. Additional benefits provided during the year included the continued payment of meal vouchers throughout the period of smart working, as well as COVID-19 tests, the costs of which were borne by the Company. A corporate welfare plan for employees and their families was also introduced.
Other training activities included the successful completion of a pilot project called “Perform”, now being implemented for all employees, which aims to help people in changing their working procedures as a result of smart working, improving operations by bringing teams together, even when working from remote positions, and increasing personal well-being.
The Decree Laws of 17 March 2020 (“Cura Italia”) and of 14 August 2020 (“Decreto Agosto”) provided for an extraordinary moratorium on loans until 31 January 2021, subsequently extended to 30 June 2021. In this context, as of 31 December 2020 AMCO had received moratorium requests from 739 counterparties totalling €510m, of which approximately 84% were “individual voluntary moratoriums”. Only 6% of the moratorium applications were rejected.
Data and comparisons
AMCO’s 2020 consolidated results are detailed below, along with a comparison with the previous year’s consolidated results.
Income Statement
In 2020 AMCO reported a consolidated net profit of €76.0m, showing strong growth (+80% y/y) thanks to the strong increase in operating profitability, which more than offsets on the one hand the impairment losses due to the delay in collections, as a result of the COVID-19 pandemic and of a single name exposure and, on the other hand, the increased interest from financial activities, which reflects the cost of financing growth.
EBITDA is up 210% y/y to €158.9m, driven by the strong revenue growth (+126% y/y) as a result of the increase in interest income and careful cost management; the progression of costs (+27% y/y) supported business growth leveraging existing economies of scale. EBITDA margin reaches 74.2%.
| Income statement (Data €/000) | 3112/2019 | 31/12/2020 | Var % |
| Servicing fees | 47,139 | 48,007 | 2% |
| Interest and fees from customers | 32,382 | 101,570 | 214% |
| Other operating income/expenses | 15,320 | 64,569 | 321% |
| TOTAL REVENUES | 94,841 | 214,145 | 126% |
| Personnel expenses | (23,580) | (29,987) | 27% |
| Other administrative expenses | (19,915) | (25,231) | 27% |
| TOTAL COSTS | (43,496) | (55,218) | 27% |
| EBITDA | 51,345 | 158,927 | 210% |
| EBITDA MARGIN | 54.1% | 74.2% | 20.1% |
| Net impairment gains/losses from loans and financial assets | (3,581) | (42,671) | 1,092% |
| Depreciation and amortization | (1,514) | (2,065) | 36% |
| Provisions | (3,611) | 227 | -106% |
| Other operating income/expenses | (12,054) | (26,496) | 120% |
| Net result of financial activities | 20,845 | 18,669 | -10% |
| EBIT | 51,430 | 106,592 | 107% |
| Net Interest and fees from financial activities | (6,095) | (36,358) | 497% |
| PRE-TAX INCOME | 45,335 | 70,234 | 55% |
| Income tax | (3,024) | (5,775) | -291% |
| NET PROFIT | 42,321 | 76,009 | 80% |
Revenues show strong growth (+126% y/y) reaching €214.1m, with revenues from debt purchasing driving growth and accounting for 78% of the total, compared to 50% in 2019. The remaining revenues are originated from servicing activities. Servicing fees derive almost entirely from the management of the loan portfolio of the former Veneto banks, and their slight growth (+1.8% y/y) is linked to the entry of new High Risk assets into the former Veneto banks’ portfolio and to the fees relating to the Back2Bonis fund (“Cuvèe” transaction).
Interests and fees from customers amount to €101.6m (+214% y/y), thereby driving the growth in revenues. The increase in interests was mainly due to the accounting of the Carige portfolio for the entire year (accounted only for the 2nd half of 2019) and the portfolios acquired in 2020. Other operating income/expenses refer to cash recoveries from on-balance sheet portfolios and benefit from collections made on single name files. The contribution made by the former Banco di Napoli run-off portfolio leads to cash recoveries of €13.3m (-13.3% y/y).
Total costs amount to €55.2m, showing a 27% y/y increase due to the business expansion and the company’s growth in size. Personnel expenses are up 27% y/y due to staffing increase.
As of 31 December 2020, there are 287 employees, 54 more than at the end of 2019, thanks to new hires finalised even during the lock-down periods. At the end of December 2020, 73% of staff is employed in business roles, and the remaining 27% in central functions. In addition to AMCO personnel, 88 employees seconded from MPS are operating as of 1 December 2020. New hires are expected during the 2020-2025 plan to support further growth.
Other operating expenses amount to €25.2m, rising by 27% y/y, mainly due to ordinary operating costs (€12.7m, +20% y/y) linked to the company’s growth, the development of solutions to support the business and the central functions and due to costs linked to handling the COVID-19 emergency. Legal and credit recovery expenses (€8.1m, +19% y/y) rose as a result of the new portfolios acquired, whilst costs decreased in relation to portfolios that already existed in 2019, in particular to the former Banco di Napoli portfolio. Operational costs from new business (€4.4m, +75% y/y) refer to the acquisitions of new portfolios completed in 2020 or still under analysis.
EBIT is up by 107% y/y to €106.6m, due to the negative effect of net impairment losses of €42.7m linked to the economic impact of COVID-19, which led to collection delays, and to a single name exposure. EBIT also benefits from the positive contribution of the net result of financial activity totalling €18.7m thanks to the sale of Government bonds (€23.2m) and the write-down of AMCO’s equity investment in the Italian Recovery Fund (IRF)[3] of €4.5m.
Interest and fees from financial activities include interest income and proceeds from financial assets, mainly BTPs, and interest expenses on bonds issued that reflect the cost of financing growth through the issuance of new bonds.
Income taxes are positive for €5.8m and benefit from the recognition of Deferred tax Assets (DTAs) of €19.0m previously unrecognized from the MPS compendium, partially offset by the use of previously recognized tax assets and by the IRAP for the year.
Balance Sheet
The structure of the balance sheet shows strong growth: assets and liabilities have grown by 2.4 times in a year, from €2.8bn at the end of 2019 to €6.9bn at the end of 2020. The change is to a large extent explained by the consolidation of the assets and liabilities of the MPS compendium, following completion of the partial demerger.
At the end of 2020, on the asset side, loans to customers total €5.7bn, compared to €1bn in 2019, and include loans to customers relating to the following portfolios: former MPS for €3.5bn, former Bari for €0.5bn and former BdN for €0.1bn[4].
Financial assets amount to €0.7bn and include the equity investment in IRF of €471m, and Government bonds worth €56m. Cash and cash equivalents amount to €308m.
Financial liabilities at the end of 2020 amount to €4.0bn, comprising €2.9bn unsecured debt and €1.1bn secured debt.
The unsecured debt relates to the following issuances, under the Euro Medium Term Note Programme (EMTN): the first of €250m placed in February 2019, maturity date 13.2.2024, the second of €600m issued in October 2019, maturity date 27.01.2025, and a senior unsecured bond issued in July 2020, split into two tranches: one worth €1,250m, maturity date 17.07.2023, and one worth €750m, maturity date 17.07.2027, all listed on the Luxembourg regulated market. The issue, within the EMTN programme, has been assigned a rating of BBB (Standard & Poor’s) and BBB- (Fitch).
The secured debt includes the debt of €1bn due to banks, used to refinance the liabilities of the MPS compendium and guaranteed by securitization of the MPS compendium portfolio. This debt has already been partially reimbursed in January 2021 for €250m against cash generated by the MPS portfolio, thereby reducing the current exposure to €750m.
| Balance Sheet Assets (€/000) | 31/12/2019 | 31/12/2020 | Var % |
| Loans to banks | 324,338 | 251,585 | -22% |
| Loans to customers | 979,400 | 5,686,223 | 481% |
| Financial assets | 1,404,511 | 718,836 | -49% |
| Equity investments | 14 | 10 | -28% |
| Tangible and intangible assets | 6,816 | 4,677 | -31% |
| Tax assets | 79,912 | 210,687 | 164% |
| Other assets | 24,717 | 28,355 | 15% |
| Total assets | 2,819,708 | 6,900,371 | 145% |
| Balance Sheet Liabilities (€/000) | 31/12/2019 | 31/12/2020 | Var % |
| Financial liabilities at amortized cost | 912,507 | 3,952,065 | 332% |
| Tax liabilities | 8,201 | 6,075 | -26% |
| Provisions for specific purposes | 20,784 | 20,811 | 0% |
| Other liabilities | 52,353 | 97,367 | 86% |
| Shareholders’ equity | 1,822,863 | 2,824,052 | 55% |
| Capital | 600,000 | 655,154 | 9% |
| Own shares | 0 | (70) | |
| Share premiums | 403,000 | 604,552 | 50% |
| Reserves | 779,011 | 1,498,311 | 92% |
| Valuation reserves | (1,460) | (9,903) | 579% |
| Profit/loss for the year | 42,311 | 76,009 | 80% |
| Total liabilities and net equity | 4,642,571 | 6,900,371 | 49% |
Net equity increases from €1.8bn at the end of 2019 to €2.8bn at the end of 2020, benefiting from the equity imbalance included in the MPS compendium.
The CET1 ratio is 37.4% and the Total Capital Ratio is also 37.4%, as there are no subordinated bonds in the balance sheet. Therefore, the company has a strong capital position, which allows it to manage potential risks and creates flexibility for further business growth. Note that the reduction of the capital ratio, as compared with the 63.7% in 2019, is due to the effects of the transactions concluded during the year.
The debt/equity ratio is 1.4x, but it decreases to 1.3x considering the partial repayment of the secured debt made in January 2021.
RATINGS
On 1 July 2020, Fitch Ratings confirmed the Investment Grade LTIDR (Long-Term Issuer Default Rating), corresponding to BBB- with a Stable outlook, and the F3 Short-Term Foreign Currency IDR. Confirmation came following the announcements of the transactions with Banca Popolare di Bari and MPS, which reinforced AMCO’s closeness to the Italian Government. Fitch Ratings has thus maintained the alignment between the long-term rating of the parent company and the rating attributed to Italy.
On 27 October 2020, S&P Ratings confirmed the Investment Grade rating of AMCO S.p.A., with a Long-Term Issuer Credit Rating of ‘BBB’. In addition, S&P has improved the outlook to Stable from Negative, in line with that of the Italian Government. The rating agency stated that, with the transactions relating to Banca Popolare di Bari and MPS, AMCO has confirmed that it plays a crucial role and is closely tied to the Government in derisking the balance sheets of troubled banks. S&P thus maintained the alignment between the Long-Term rating of AMCO and the Long-Term rating attributed to Italy.
On 14 January 2021, Fitch Rating upgraded AMCO’s commercial, residential and asset-backed special servicer ratings to ‘CSS2’, ‘RSS2’ and ‘ABSS2’ from ‘CSS2-’, ‘RSS2-’ and ‘ABSS2-’. Fitch mentions AMCO’s business growth through multiple sources, demonstrating its ability to successfully pursue its business strategy.
OTHER SIGNIFICANT EVENTS AFTER 31 DECEMBER 2020
Starting from January 2020, the national and international scenario was characterized by the spread of Coronavirus and the consequent restrictive measures for its containment, implemented by the public authorities of the countries concerned. These circumstances, extraordinary in nature and extent, have direct and indirect repercussions on economic activity and have created a context of general uncertainty, the evolution of which and its effects are not predictable. Any support measures defined by the national authorities (such as, but not limited to, moratoriums on the payment of mortgages and loans) might have an impact on the Group’s future collections and, consequently, on its profitability.
The events summarized below are also specified, in addition to those previously discussed.
In the first few months of 2021, the transfer agreement between AMCO and Banca Carige S.p.A. is expected to be finalized for the sale by the latter to AMCO of a non-performing leasing portfolio.
NEW OPERATIONAL DEVELOPMENTS
As of 1 January 2021, the Real Estate Division was created, operating in close collaboration with the Workout and UTP Divisions. Thanks to a team of specialists, AMCO has the skills necessary to implement targeted strategies to enhance collaterals’ value of secured loans and competences to manage proprietary real estate assets (Reoco/Leasing) through a wide range of activities.
On 1 February 2021, AMCO announced the conclusion of a competitive procedure for the outsourcing of NPEs amounting to approximately €3.3bn, following the acquisition of the MPS portfolio. The competitive process was launched in October 2020 and involved a total of approximately 40 servicers. AMCO thus consolidated its partnership with 12 leading Italian servicers that manage specific clusters of NPEs in outsourcing on behalf of AMCO. The active collaboration with an increasing number of leading servicers in the Italian market allows AMCO to continue leveraging its operating model.
STATEMENT BY THE MANAGER IN CHARGE OF PREPARING THE COMPANY’S FINANCIAL REPORTS
I, Silvia Guerrini, in my capacity as the Manager in charge of preparing the company’s financial reports, do hereby declare, pursuant to paragraph 2 of Article 154-bis of the Consolidated Finance Act, that the accounting information contained in this press release corresponds to the documented results, financial accounts and accounting records.
[1] Collections for legal effect, i.e. starting from the date on which AMCO legally obtains ownership of the credit and starts to manage its collection. In addition to these collections, there are €411m for economic effectiveness, relative to portfolios acquired during the year
[2] Net of the former Veneto Banks “baciate”, i.e. loans to finance securities purchases
[3] Italian Recovery Fund – previously called Atlante Fund – is a closed-end alternative investment fund regulated by Italian law, reserved to professional investors, set up for the purchase of financial instruments of different seniority, issued by one or more vehicles set up and/or to be set up for the purchase of bank NPLs. The fund’s maturity date is 31/12/2026.
[4] Other loans relate to the Carige, BBPM, Creval, ICS, Igea Banca – Banca del Fucino portfolios
