Banca Sistema plummets at Piazza Affari, stops dividends after Bankitalia findings

(Il Sole 24 Ore Radiocor) - Thud for Banca Sistema at Piazza Affari after the suspension of dividend and bonus distribution as a result of the inspection conducted by the Bank of Italy between July and October 2024. The Bank of Italy inspection - the findings of which were published on 20 December - contains the formalisation of some compliance findings relating to rules and practices adopted by Banca Sistema to mitigate the effects of the application by the European Banking Authority of the new definition of default (with the guidelines coming into force in 2021).

Specifically, the implementation of the Bank of Italy's findings would lead to the ineffectiveness of certain credit protection tools used by Banca Sistema in the context of the classification of non-recourse factoring receivables as 'past due'. As a result, the supervisory authority has ordered the abstention from both the distribution of dividends, starting with those from 2024 profits, and the payment of bonuses. In a note, the company pointed out that the vast majority of the disputed exposures are to solvent counterparties: these are mainly exposures to government or other public entities whose risk of default appears highly unlikely if not non-existent. Furthermore, the bank claims that the content of the inspection report does not alter the bank's risk profile. According to Intermonte, the decision and the findings of the inspection by the Bank of Italy are 'unexpected' and above all 'seem to indicate a much more restrictive approach on the eligibility of mitigants adopted by companies operating in the factoring sector'.

It should be recalled that Banca Sistema had already been the subject of an audit by the Bank of Italy in 2021, from which no particular criticalities had emerged on these issues, while today the regulator, reiterates the sim, "seems to have a more restrictive approach with respect to some mitigants inherent in the definition of default". The analysts speak of an orientation that had already emerged on the occasion of the findings at Bff Bank, which had suffered the same fate, with the request to suspend dividend and bonus payments. "On the basis of preliminary assessments and pending the company's counter-deductions," explains Intermonte, "we believe that the findings expressed by the Bank of Italy and the Supervisory Authority should not have significant effects on our estimates at the income statement level, while they will impact the prospects for the distribution of dividends and, in particular, the capital ratios. Abstention of judgement therefore, pending 'more visibility on the actions that will be put in place to overcome the remarks made'.

The SIM expects Banca Sistema to systematically resort to taking legal action against delinquent customers, as opposed to the previous approach, which involved greater recourse to credit recovery through out-of-court procedures. The stock's negative reaction in the short term, analysts note, is therefore to be attributed to the uncertainty effect generated by the findings and the impact on capital. However, it should be noted that, unlike Bff, Banca Sistema is not a "dividend stock" and therefore the suspension of the distribution should be "less impactful". In light of this, Banca Akros analysts reduce the price target from EUR 2.1 to EUR 1.6, deducting from the previous valuation the impact that, in terms of capital, is estimated to be equivalent to almost EUR 40 million or EUR 0.5 per share. The impact, the sim notes, 'could be reabsorbed in the future with the progressive reduction of overdue loans resulting from new issuance and collection practices'.