Performance in 2010. Moving on to quantitative results, it is worth starting from the overall figures for the factoring sector which generally grew strongly in 2010. The data for Italy over the last three years, a period with a very poor economic performance, show marked growth in the sector in terms of turnover: it rose from 121 billion Euro in 2008 to 135 billion Euro in 2010, with overall growth of 11%.

The long-term performance of Banca IFIS saw a level of growth that was well above the market, recording over a whole decade weighted average annual growth rates of 23% in terms of the volume of traded receivables, 22% for net banking income, 25% for operating result, and 23% for profit.

While it is true that these growth rates are not impossible for a start-up or a small credit intermediary, as Banca IFIS could have been considered at the dawn of the new millennium, they are increasingly significant as the size of the Bank increases, all the more so when achieved from internal lines without adding growth through acquisitions or mergers.

And it was therefore even more important for Banca IFIS to record annual growth in volumes of 39% in 2010, yet another extraordinary year.

Results in 2010. These must be considered within the market scenario in which they were achieved. The aforementioned growth in the volumes of traded receivables of 39% to 4.8 billion Euro meant that net banking income rose by 16.9% to 94.4 million, giving a ratio of net banking income to turnover of 1.9%, one of the best performances in recent years. Profitability is almost the exclusive result of the Bank’s ability to generate profits in the business credit sector; profits, which were once generated solely by action in favour of smaller companies is today supported by the work in the sector of medium and large size companies with operations on receivables due from the Public Administration.

Profitability was affected by the allocations for adjustments to receivables, which rose by 20.9% to 24.4 million Euro. The importance of this item must be understood in the market context which caused it, with a significant impact from the poor performance of the economy and the widespread difficulties experienced by companies. The cost deriving from credit quality is 1.9% compared to the average lending on receivables. Even if the period in which the cost of borrowing reached all time lows compared to lending is well behind us, we hope that this item can return to more normal levels as from the start of 2011.

Net of adjustments, the net profit from financial activities rose by 15.5% to 70.0 million Euro. A thorough understanding of the increase in profits and of the importance of the adjustments to receivables enables us to state that, even if difficult times from the viewpoint of asset quality, the Bank manages to generate sufficient profitability to obtain a high and steady level of profit generation.

Administrative expenses rose largely in line with forecasts, both for personnel expenses (+16.9% at 25.2 million) and other administrative expenses (+14.8% at 13.9 million) due to the enlargement of the Bank’s structure mainly with regard to the departments dealing with credit assessment and management, retail funding, organisation, IT and general services. There was also an increase in local departments dedicated to the development of customer relations and risk management.

There was a positive change also in pre-tax profit (+15.0% at 29.9 million), while the increase in profit for the year was, in line with forecasts, more limited (+8.2% at 18.6 million) due to the higher tax burden on the Bank’s taxable income in the year. Nonetheless, it is a significant increase compared to 2009, and translates into a ROE of 10.9%, which is a very high figure considering that the return on capital and reserves of the 5 main Italian banking groups fell below 4%.

The trend in Statement of Financial Position items is significant. The Bank’s assets are basically represented by receivables due from customers for ordinary transactions with companies, and these increased by 26% to 1,571.6 million; by available-for-sale financial assets, which are almost entirely composed of Govenrment and banking bonds, which rapidly rose by 111.1% to 818.5 million; and by receivables due from banks which stood at 228 million Euro, up by 24.7%, and which consist mainly of unlisted banking bonds.

Among liabilities we may note the increase in direct funding: at the end of the year funding from customers accounted for 52.2% and, together with equity, covered lending to customers, while securities held as assets are covered by interbank funding which reached 15.8% and by the use of repurchase agreements which accounted for 32%.

The enhancement of the Bank’s equity, thanks to the support of shareholders who made the capital increase possible, enabled a sharp increase in the Bank’s solvency and equity ratios: Core Tier 1 capital went from 9.2% in 2009 to 11.5% at the end of 2010.

The effective and potential business developments could not and can not be separated from the enlargement of the Bank’s structure, which must respond adequately, promptly and appropriately to market needs.

In terms of this specific aspect, the Bank launched specific programs aimed at developing IT infrastructure and resources dedicated to the provision of services, constantly analysing counterparties creditworthiness, managing positions, and at internal and external communication.

Of particular importance was the investment in the Customer Relationship Management system, which was launched in the first few weeks of 2011, and which entails the rethinking of relations with customers on the one hand and with the Bank’s local structure to the other hand, to the benefit of relationships immediacy and information traceability. The objective is to enable the circulation of information and responses to external and internal needs as quickly as possible.

With the same objective of increasing speed and quality, the new local network organisational model was defined; according to this model, the traditional function of developing customer relations is coupled with a function for independent management reporting to the Head Office, thus ensuring the best possible service for customers and prompt and direct monitoring of credit risk. This entails a high level of independence in the decisions which lead to the taking on of credit risk and, once fully implemented, will allow the final decision to be brought closer to the customer, thus improving responses quality and reducing mistakes.

Outlook for 2011. The prospects for 2011 are still good. Interest rates are slowly recovering, and this is somewhat linked to the pressure on commodity prices, a potential spark for inflation. However, this is offset by a level of unemployment and use of plant which is still too low to produce a significant effect on price stability. The rates recovery will enable a reduction in the pressure which is affecting the income statements of banks which have based their operations on a “traditional” operation model. The demand for credit from companies will presumably receive a boost from the recovery in domestic product, although a particularly vigorous growth seems unlikely.

Banca IFIS, which can rely on its capital endowment following the increase in 2010, can continue to grow in terms of volumes and profitability in a context which may still see some difficulties in terms of creditworthiness.

In 2011 the takeover bid promoted by Banca IFIS with regard to Gruppo Toscana Finanza will be completed. Due to the acquisition, which has already been agreed with the reference shareholders in Gruppo Toscana Finanza and authorised by the Bank of Italy following a complex assessment process, Banca IFIS will integrate the non-performing loan management business, which shows important synergies with the Bank’s own operations, good potential profitability, and attractive growth prospects. The level of business for the Banca IFIS Group will be intense and the impact in operating terms, as well as on the product range and future development, will be stimulating.

2010 as its passes into history leaves us with uncertainty and risks, but also important opportunities.

The Bank has managed to take up the challenges over all these years and, by innovating and growing, has been able to develop quickly even in these difficult times, and it believes that it can continue to do so.

In a bank like Banca IFIS, where prudence and sound management are the key point for any strategy, innovation is necessary. If the world is changing so quickly, it is inevitable that the right way to do things cannot stay the same and will have to change too.