The outlook for 2013 is positive for the Group, against the backdrop of a changing market marked by economic uncertainty.
The Bank is always able to promptly adjust the economic conditions governing relations with customers in terms of both funding and lending. This responsiveness is particularly important in an economic environment where planning for the medium-term is challenging due to market trends and, recently, the influence of domestic politics.
Many credit positions have very short maturities, and the economic conditions of many of them are indexed and can be revised up or down with due legal notice. Likewise, the Bank can also adjust from time to time the risk cost indirectly passed on to customers through variations in the interest rate and other fees on the loans according to the economic outlook.
This flexibility ensures the Group can continue to achieve good margins (and appropriate rewards for risk) while meeting demand in the markets in which it operates.
Operations in support of businesses could be positively influenced by both the opportunities to acquire new customers and new loans, and the still scarce availability of credit on the market in the light of the caution of non-specialist banks' in supporting companies with traditional credit instruments. There is still the risk that economic conditions could further deteriorate, resulting in an increased credit risk and lower lending volumes. The performance in the new year will in any case be affected by the trend in credit quality, a key variable for the banking market in challenging economic times. The profitability generated in the sectors in which the Bank operates will presumably be able to guarantee, in any case, significant margins, including net of adjustments.
Specifically, based on available information and as far as the Bank's traditional and newly added operating sectors are concerned, we expect a positive profitability trend in the trade receivables area, which requires a thorough assessment of credit risk but offers also enticing opportunities for the Bank to increase its market share; growing operational effectiveness and profitability in the non-performing loans segment, where we expect to see gradually improved credit management, a key variable in achieving excellent margins, with risks related essentially to a further significant deterioration in households' ability to repay their debts ; additional profitability gains in the operations of the tax receivables sector (the only sector in which the medium-term fixed-rate loans made in previous years partially affected returns), with risks related essentially to further delays in payments from the public sector; further direct funding, which will continue to generate cash flows exceeding the Bank's core commitments, with risks related to new competitors and/or abrupt changes in the cost of this funding form; and, finally, further interventions in the government bonds portfolio, so as to seize fresh opportunities to bolster the Bank, with risks mainly connected to the possibility of continuing refinancing at favourable conditions and without limits on size, as well as fluctuations in mark to market values.
Therefore, the Group can reasonably expect a positive profit trend in 2013.
In all likelihood, the liquidity position will be confirmed as solid, with a ratio of retail funding to loans other than bond purchases constantly well over 100%. It is reasonable to predict a further improvement in solvency, which is already solid, due to the capitalisation of profits which, on a like-for-like basis, are expected to grow at a faster rate than lending capacity.