Rate cut, Veneto Bccs strengthen asset revenues from services

Less interest margin but more relief for the economy: Veneto's cooperative credit banks are not looking with fear at the ECB rate cuts, which, while on the one hand will reduce support for credit institutions' revenues, on the other will give confidence to an entrepreneurial system that is beginning to show signs of fatigue.

"It had been too long since rates were high: the economy needs an injection of confidence," confirms the president of the Federazione Veneta, which brings together the regional Bccs belonging to the Iccrea group, Flavio Piva. The member banks, as emerged at the annual general meeting held in June at the Teatro Olimpico in Vicenza, closed a brilliant 2023, benefiting, as did the entire sector, from the boost that came from interest rates, as well as from the initiatives put in place to strengthen the service revenue component. Last year, the Federation's 10 Bccs (which later became nine following the merger between Bcc Verona and Vicenza and Bcc Patavina, which gave rise to Bcc Veneta, headed by Piva) recorded an aggregate profit of EUR 293 million, up 51.1% on the previous year.

Operating efficiency also improved, with the expense ratio falling to 55.3% from 60.4% at the end of 2022. Net interest and other banking income rose 17.3% to EUR 788m, with net interest income up 24.2% to EUR 572m. Adjustments to loans fell sharply, down 80.2% to EUR 11.3m. With regard to the commercial dynamics of the institutions, which can count on 378 branches, over 105,000 members and 2,800 employees, funding from customers amounted to €16.2 billion and total funding to €27.5 billion, up 7.1% compared to 2022, while lending stood at €18 billion.

The year 2023 was therefore 'excellent' in terms of both economic results and credit quality performance, emphasises Piva, with 'average NPLs below the target of 3.5% gross, which is the commitment made to the Supervisory Authority', but it was also an important year for 'continuing to ground the business plan and ensuring that the service revenue component, which was our Achilles' heel, grows and is enabled to grow in perspective'. From this point of view, the commercial agreements entered into by the group and the strengthening of internal competencies are therefore crucial: levers from which it expects an important contribution in terms of commissions in the years to come, also to compensate for the inevitable drop in the interest margin in the wake of the reduction in rates.

As for business performance during 2024, which will in any case be another 'very good' year, Piva notes that we are beginning 'to see an erosion of the spread'. "We will no longer return to previous eras with zero rates," he explains, "but rates will certainly come down, so having a good chance to make service revenues can help.