Net profit from financial activities of the Group totalled 69,986 thousand Euro compared to 60,592 thousand Euro at 31 December 2009, up by 15.5%. This positive result confirms that the higher charges to customers adequately support the increased risk in loan commitments, even in an extremely difficult economic and financial period.

FORMATION OF NET PROFIT FROM FINANCIAL ACTIVITIES

(in thousands of Euro)

YEAR

ABSOLUTE

31.12.2010

 

31.12.2009

 

CHANGE

%

Net banking income

94,430

80,810

13,620

16.9%

Net impairement losses on:

 

Receivables

(24,209)

(20,218)

(3,991)

19.7%

Available for sale financial assets

(235)

-

(235)

n.a.

Net profit from financial activities

69,986

 

60,592

 

9,394

15.5%

Net banking income passed from 80,810 thousand Euro to 90,430 thousand Euro, up by 16.9%. Net banking income is made up of commission income (70.8%), interest income (28.9%) and other components (0.3%). The development of products with a significant service component, income from which is represented by commission income only (i.e. without separate payment of interest income), leads to marked volatility between net interest income and commission income, such as to make comparisons between periods meaningless. For information purposes, however, a detailed analysis is provided below.

NET BANKING INCOME (in thousands of Euro)

YEAR

ABSOLUTE

31.12.2010

 

31.12.2009

 

CHANGE

%

Net interest income

27,293

22,171

5,122

23.1%

Net commission income

66,844

52,278

14,566

27.9%

Dividends and similar income

17

17,325

(17,308)

(99.9)%

Net loss (profit) from trading

(218)

(16,880)

16,662

(98.7)%

Profit (loss) from sale or buyback of receivables

-

2,243

(2,243)

(100.0)%

Profit (loss) from sale or buyback of financial assets

494

3,693

(3,199)

(86.6)%

Profit (loss) from buyback of financial liabilities

-

(20)

20

(100.0)%

Net banking income

94,430

 

80,810

 

13,620

16.9%

Net interest income fell from 22,171 thousand Euro at 31 December 2009 to 27,293 thousand Euro at 31 December 2010 (+23.1%).

This increase was caused, among other things, by the rise in market rates during the second half of the year which produced two effects: on the one hand, it enabled an increase in the profitability of corporate customers; on the other, it enabled the increase in the cost of retail funding, which is not directly linked to market rates to be mitigated. In addition, there was a positive impact from the increasing contribution from profits on the securities portfolio (+78.2% compared to 31 December 2009) due to the increase in its volumes.

Interest income includes interest for late payment, which are likely to be recovered for around 4.5 million Euro, relating to some transactions to finally take over receivables due from the Public Administration.

Please note that at 31 December 2010, interests on arrears accrued on amounts due from the Public Administration relate to invoices already paid (3 million Euro) and to invoices not yet paid (12 million Euro). Such amounts, which are calculated based on the rules in force and contract law, were not recorded in the financial statements, because, as of today, the bank does not have the necessary information to ascertain their recoverability.

Net commission income performed well and was up by 27.9% compared to the previous year. This result is due both to the increase in the number of operative customers (+6.4% compared to 31 December 2009), and to the higher charges for the receivables management and guarantee service offered by the Group, owing to the complexity involved, as well as to offset the increase in credit risk.

Commission income, totalling 70,543 thousand Euro compared to 56,070 thousand Euro at the end of 2009, came primarily from factoring commission on the turnover generated by individual customers (with or without recourse, in a flat or monthly formula) as well as other fees usually charged to customers for services.

Commission expense, totalling 3,699 thousand Euro compared to 3,792 thousand Euro at 31 December 2009, came primarily from intermediation activities of designated banks, the work of other credit brokers, and commission paid to correspondent factors.

NET COMMISSION INCOME(in thousands of Euro)

YEAR

ABSOLUTE

31.12.2010

 

31.12.2009

 

CHANGE

%

Endorsement credit

(115)

(30)

(85)

283.3%

Management and brokerage services

(149)

(100)

(49)

49.0%

Collection and payment services

1,076

882

194

22.0%

Factoring services

66,677

51,286

15,391

30.0%

Other services

(645)

240

(885)

(368.8)%

Total net commission income

66,844

 

52,278

 

14,566

27.9%

Net impairment losses on receivables stood at 24,209 thousand Euro compared to 20,218 thousand Euro at 31 December 2009 (+19.7%).

The relevance of this item is to be read within its specific market scenario, with strong constraints due to the economic situation and company difficulties. The cost of the banking activity risk is 1.9% compared to average loans (2.1% in 2009). Although the period when the cost of credit reached low levels compared to loans is far behind us, we hope that this item may improve further in 2011.

The Banca IFIS Group has continued to be rigorous in its assessment of assets, also given the generally difficult economic conditions, recognising value adjustments in the income statement in a timely manner as soon as conditions to do so arise.

Net impairment losses on available for sale financial assets totalled 235 thousand Euro and refer to the adjustment to fair value of a minority investment held.