Last close As at 05/08/2026
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Market capitalisation
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Research: Financials
Banca Sistema (BST) is an Italian speciality finance provider with factoring as its main activity. The long payment times that characterise public administrations (PAs) in Italy, together with EU-mandated late payment interest, create an attractive opportunity with low credit risk for a specialist lender such as BST. In consumer finance, BST has established a strong position in salary and pension-backed lending and has a small but growing pawnbroking business, providing alternative sources of growth and diversification.
Written by
Banca Sistema |
Resilient, specialist finance provider
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Financial services |
Deutsches Eigenkapitalforum 2020
7 October 2020 |
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Banca Sistema is a client of Edison Investment Research Limited |
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Banca Sistema (BST) is an Italian speciality finance provider with factoring as its main activity. The long payment times that characterise public administrations (PAs) in Italy, together with EU-mandated late payment interest, create an attractive opportunity with low credit risk for a specialist lender such as BST. In consumer finance, BST has established a strong position in salary and pension-backed lending and has a small but growing pawnbroking business, providing alternative sources of growth and diversification.
Addressing attractive and niche markets
Banca Sistema’s factoring business (63% of customer loans, 79% of total income in H120) focuses on purchasing trade receivables owed by Italian PAs or the tax authority, mainly to leading multinationals and corporates. Established in 2011, BST has strong analytical capabilities and knowledge of the PA obligors and their suppliers, which supports pricing decisions, new business wins and the yield achieved. Pension and salary loans (34% of loans, 19% of total income) are mainly purchased but BST now also originates these directly. Over 80% are backed by PA salaries or by pensions. The gold and jewellery-backed (pawnbroking) business is still small but, following an acquisition from Intesa Sanpaolo in July, loans rose from €13m in H120 to c €75m with 12 branches. There was some impact on loan growth from COVID-19 in H120, but this was largely confined to tax receivables and football industry receivables. Since end 2016, group customer loans as shown on the balance sheet have grown at a compound annual rate of 21% to €2.6bn.
Financial position
BST funding is balanced (50/50) between retail and wholesale, with the latter including full utilisation of ECB funding. The H120 total funding cost was 0.6%. Even after adjusting for the pawnbroking acquisition, the capital position has a good level of headroom with the CET1 ratio at 11.7% and total capital ratio at 15.2% compared with requirements of 7.75% and 11.9% respectively. Reflecting the nature of the loan book, the cost of risk has been low and broadly stable in recent years, and in H120 was 0.37% (0.36% for FY19). Net bad loans were 1.1% of total loans.
Valuation
Using an ROE/COE model (with assumed long-term growth of 4%, a 10% cost of equity), the current share price implies an assumed ROE of c 8.5%: cautious when compared with an H120 ROE of 13.5% and FY21e consensus of 13.9%.
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Consensus estimates
Source: Refinitiv |
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Research: Financials
S&U H121 results were substantially affected by the COVID-19 pandemic but the company has remained profitable and there are clear signs of improvement. While profitability over our forecast period looks set to be relatively subdued, the benefits of tighter credit criteria, increased new business and work to enhance aspects of Advantage’s activities should become more apparent in FY23 and FY24.