U.S. Markets open in 4 hrs 9 mins

Edited Transcript of IF.MI earnings conference call or presentation 2-Aug-19 3:00pm GMT

Half Year 2019 Banca IFIS SpA Earnings Call

Mestre Aug 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Banca IFIS SpA earnings conference call or presentation Friday, August 2, 2019 at 3:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Andrea Martino Da Rio

Banca IFIS S.p.A. - Head of IR & Corporate Development

* Luciano Colombini

Banca IFIS S.p.A. - Director, MD & CEO

================================================================================

Conference Call Participants

================================================================================

* Andrea Lisi

Equita SIM S.p.A., Research Division - Research Analyst

* Benjamin Pesquier; Tikehau Capital;Credit Research Analyst

* Christian Carrese

Intermonte SIM S.p.A., Research Division - Research Analyst

* Luigi Tramontana

Banca Akros S.p.A., Research Division - Analyst

* Manuela Meroni

Banca IMI SpA, Research Division - Research Analyst

* Simonetta Chiriotti

Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca IFIS First Half 2019 Results Conference Call. (Operator Instructions)

At this time, I would like to turn the conference over to Mr. Luciano Colombini, CEO of Banca IFIS. Please go ahead, sir.

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [2]

--------------------------------------------------------------------------------

Good afternoon, and welcome everybody to our call on second quarter results. Today, the Board of Directors under the chairmanship of Mr. Sebastien Fürstenberg has approved the second quarter results. Before going to the results, I would like to update you on the main management initiatives.

We are working on an industrial plan to be presented in autumn. The industrial plan will focus on NPLs and lending services to SMEs, streamlining capital and cost allocation per business, cost control without impacting investments in digitalization, IT and NPL. As we anticipated in our first quarter conference call, the other key priority is capital strengthening. In second quarter, the CET reached 10.81%, 0.52% up versus first quarter, driven by organic capital generation. This level is well above the 8.12% SREP requirement.

We are working on the potential disposal of other real estate in Milan. The disposal has an industrial rationale. We currently occupy about 8,000 square meters for just 300 employees. We're looking for more work efficient and modern premises with open spaces to facilitate smart working. In addition, we expect to realize a capital gain from the disposal.

As regard NPLs, we continued to focus on cash recovery. In second quarter, cash recovery came in at EUR 67 million, plus 19% versus first quarter and plus 66% versus second quarter 2018. In the first 6 months, we acquired about EUR 0.7 billion unsecured NPLs including forward flows contracts.

In this context, following today's press release about our potential partnership with Fond S.p. A., I would like to clarify that NPLs remain part of the core business for Banca IFIS. Also the NPL market is changing due to consolidation, regulation, amount and type of NPLs to be sold.

The potential transaction is aimed at considering the creation of an NPL business operating alongside the entire value chain of the NPL management across all asset classes, secured, unsecured, NPLs, UTP, leasing, real estate, consumer credit and able to compete in terms of size and efficiency with the main Italian and European players.

As part of potential transaction structure, we want to highlight Banca IFIS will retain full ownership of its portfolio and cash proceeds. We have informed the market in order to be fully transparent, although there are several issues to be agreed. We are now in preliminary talks and we are working on this potential transaction.

In terms of second quarter results, we reported a net income of about EUR 38 million. The contribution from PPA came in at EUR 21 million plus EUR 4 million quarter-over-quarter mainly due to the early repayment of the performing loan and the settlement of a nonperforming loan.

Net banking income came in at EUR 145 million (sic) [EUR 149 million]. Operating costs came in at EUR 64 million due to the closing tax proceeding from Interbanca with no impact on Banca IFIS net income. Cost of risk of EUR 22 million included further provision towards the construction sector to reflect the update evolution of this restructuring processes.

I would like to highlight Page 7 of our presentation. In the second quarter, cash recovery came in at EUR 67 million versus P&L contribution of EUR 60 million. In second quarter, cash collection includes the release of EUR 6 million accrued cash on a EUR 1.5 billion GBV NPL portfolio. In fact, payment during the onboarding phase, which on average last about 6 months and relates to the inclusion of all NPL documentation into our system, are accrued and released when the onboarding is complete.

In first quarter, we reported about EUR 0.8 billion growth of secured and corporate due to release of some NPL portfolios. The other grew by about 8%. In order to provide greater transparency, I'll ask to include in the presentation additional data in our NPL portfolio. I would like to stress and underline that in the second quarter, cash repayments came in higher than internal model estimates.

Now I will leave the word to Martino to describe some details of our results over this quarter.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [3]

--------------------------------------------------------------------------------

Thank you very much. And in, I assume, Page 9 of our presentation, there is a segment breakdown which shows that the nonperforming represented 52% of our net banking income minus loan loss provision; trade receivable, about 23%; and leasing, about 10%.

On Page 10, I wanted to highlight the breakdown of our clients. As you can see, we have 6,700 clients in trade receivables and about 67,000 (sic) [76,000] in leasing and rental, for a total of 83,000. On one hand, the client in trade receivables factoring continue to grow. On the other hand, we haven't exploited much of the cross-selling among leasing and factoring. Less than 15% of factoring clients have leasing products. Less than 2% of leasing clients have factoring products of Banca IFIS. So we plan also to grow into this category.

In terms of trade receivable, turnover was up 3% quarter-on-quarter, net banking income divided average customer loan at 4.9% and loan loss provision at 18% (sic) [EUR 18 million], which was -- which included some additional provision on a few large construction companies to reflect the evolution of these restructuring processes.

Then on the other 2 page, on Page 12 and 13, we wanted to provide you with, let's say, some additional breakdown of our portfolio diversification and client segmentation. As you can see, we are quite -- we have a very strong focus on SMEs. We have currently -- about more than -- more than 50% of our loans are towards companies with less than EUR 50 million and on the other categories, they, let's say, around 50% of the other category refers to clients that are transferred debtors from very small enterprises.

On Page 13, you can see the client segment, let's say the customer -- net customer loan segmentation. You can see that there is no particular concentration in a sector, and that also we have the strongest exposure in the north, with 51% we are trending and the center with 27%. So all together, it's a quite strong, let's say, geographical diversification.

In the leasing, we are relatively stable, EUR 15 million -- net banking income of EUR 15 million, loan loss provision at about EUR 3 million. And on Page 15, we provided additional breakdown on the leasing segmentation where also you can see that the average exposure per client is between EUR 15,000 and 50,000 -- EUR 60,000. And let's say that 8 more of than -- about 85%, 90% of our outstanding is -- of the net customer loans is in the northern and central region of Italy.

Let's move to the nonperforming on Page 16. As you can see, we have acquired this -- in this quarter, we have acquired EUR 0.4 billion and with an additional EUR 300 million of forward flow contracts, and we have disposed EUR 0.6 billion. The EUR 0.6 billion created the -- this disposal create the capital gain of around EUR 8 million. We dispose queues -- gains of our portfolio, the disposal price was about 1.8% and -- against a book value of -- a net book value 0.5%. And about this, 68% were acquired before December 2006 (sic) [2016] and about 90% of them had a default date before December 2013.

Let's move to Page 17. We just provide a very quick update on our ERC, EUR 1.4 billion in the first -- expected in the next 5 years and EUR 1 billion afterwards.

Then let's move to Page 19, where we wanted to provide an additional breakdown. This was -- let's say, the CEO was quite, let's say, open to provide additional breakdown of the portfolio. This is not, let's say, the entire portfolio, but shows you the portfolio that was acquired in 2015 and '18 and show the average price. The average price has increased slightly. That's true that also the quality of this portfolio has increased in terms of better vintage, better -- lower vintage, better documentation and also sometimes better collateral. In terms of type of nonperforming loans, as you see, the bank successfully switched from consumer nonperforming to banking. As you see, the large acquisition in 2015 were on consumer and then 2017 and '19 (sic) ['18], we were acquiring more banking nonperforming, banking overdraft.

Finally, Page 20. In terms of Page 20, I would like to highlight that one question that many of you asked many times, in how many years you get cash back? And basically in about 4 years, we are able to get the cash -- the full cash back. And this is a quite, let's say, good, let's say, stock record in my view, considering that it takes depending on the court for sure, but between 16 months and 28 months to get to the order of assignments.

Final, before leaving the word to the CEO, I would like to stress that the expected price of recovery that we did after -- when -- let's say, when we bought the portfolio, for example, '17 and '18, is confirmed today. So basically, there is no significant difference from our price calculation at the beginning, when the expected price that we -- the expected cash that we expect the pricing from the expected cash that we have today.

I leave the word to the CEO.

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [4]

--------------------------------------------------------------------------------

In conclusion, I would like to highlight some positive trends in our second quarter results. CET1 of 10.81%, plus 0.52% organic capital generation and the use of DTA on first half 2019. Net income of EUR 38 million in first quarter (sic) [second quarter] 2019. NPL cash collection of EUR 67 million versus P&L contribution of EUR 60 million.

We are working, let me say, night and day on the business plan to be presented this autumn and on the potential disposal of some real estate to be completed by year-end of this year. And talking about the potential deal with Fond S.p. A. I have to say that we are just in preliminary talks, and we don't have any other information to give you except what we said in our communiqué.

Thanks very much for your attention, and we are at your disposal for the Q&A section.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions)

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [2]

--------------------------------------------------------------------------------

Yes. We take one analyst at a time, please, with 3 question each time. Okay. Thank you.

--------------------------------------------------------------------------------

Operator [3]

--------------------------------------------------------------------------------

The first question is from Manuela Meroni of Banca IMI.

--------------------------------------------------------------------------------

Manuela Meroni, Banca IMI SpA, Research Division - Research Analyst [4]

--------------------------------------------------------------------------------

Three questions on my side. The first one is on the nonperforming loans. You say that you are changing your focus from consumer to banking nonperforming loans and overdraft. So I'm wondering what is the reason behind this change. Is that just an opportunistic move? Or you believe that there is more value there.

The second question again on nonperforming loans. I'm wondering what is the pipeline of nonperforming loans that you see. Also how much nonperforming loans do you expect to buy in the second half of this year?

And third question on the common equity Tier 1. Good result in this quarter. I'm wondering if you can provide us with a guidance on the level of common equity Tier 1 that you expect by the end of the year.

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [5]

--------------------------------------------------------------------------------

Go ahead.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [6]

--------------------------------------------------------------------------------

All right. In terms of consumer for banking, it's -- it is just the amount of the dispose, and we want to just to pass the message that we are able. We started the consumer, then there was this massive sale of consumer, then it was more banking nonperforming and we were able to switch. So we were able to evolve and achieve positive results in different segments. This doesn't mean anything, just the disposal has been changed, and we adapted to it -- to that. They have changed, but there is still, let's say, good flow in that, that made us acquiring EUR 0.8 billion in 2018, EUR 1 billion in 2017. So this provides a stable flow on that.

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [7]

--------------------------------------------------------------------------------

And anyway, we're still buying about 50% of consumer credit in the market on unsecured.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [8]

--------------------------------------------------------------------------------

50% of the unsecured was us in the first half 2019. In terms of pipeline, that's quite difficult to make an assessment. We are, let's say, we are confident to do the -- our acquisition because for sure, the nonperforming pipeline will remain there in place. We don't expect probably going forward over the next 2, 3 years are significant, let's say, the same flow that probably came up into the market in the last, let's say, 3 years, but for sure for good quality. And please consider also that we became much more efficient than in the past in recovering. So that's another argument, and we are making forward flow contracts. So as soon as, let's say, we buy the forward nonperforming that meets certain characteristics, and let's say, that's provide us on, let's say, a good flow to our business, the nonperforming -- the flow of nonperforming will remain there. In terms of CET1, I'm afraid we cannot provide a guidance, but we can say that we work to have a strong CET1, but we don't provide a guidance for now.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

The next question is from Simonetta Chiriotti of Mediobanca.

--------------------------------------------------------------------------------

Simonetta Chiriotti, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [10]

--------------------------------------------------------------------------------

I have 2 questions. The first is about the collection rate, which was very good this quarter, this half. Do you see any risk from the ongoing macroevolution in terms of collection rate going forward? And the second question on the partnership with Credito Fondiario. I understood that you don't want to add much more details. But just on the philosophy behind this, both you and -- both IFIS and Credito Fondiario are debt purchasers and credit managers. So what is basically the aim of this partnership? And what is the philosophy behind it?

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [11]

--------------------------------------------------------------------------------

About the -- we are not worried about the collection rate. We are not yet worried about it. For the moment, we don't have any signal of this. So we are confident that our capacity of collection will still remain the same -- about the same.

Talking about our possible partnership with Credito Fondiario, let me say that our intention is to create a business in all asset classes and able to compete in terms of size, quality of services, efficiency with the leading market players. And so we think that our totalization and our dimension fits very well with Credito Fondiario, and we hope that we'll be able to create a big player for the moment in the Italian market, but in the future maybe also in the European market.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [12]

--------------------------------------------------------------------------------

Just -- if I can add one thing. We want to move and play a key role in the future in the Italian market. And we'll carry out this transaction only if there is value creation for our shareholders, okay? So we took 60 days to reach -- to see and assess this transaction, to assess the value creation for our shareholders. Up to now, let's say, we're studying as it is, as the CEO was saying.

--------------------------------------------------------------------------------

Simonetta Chiriotti, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [13]

--------------------------------------------------------------------------------

Okay. So it is basically something that relates to the collection platforms, not the investment side of the business.

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [14]

--------------------------------------------------------------------------------

Both of them, but by 2 different vehicles. But obviously, the portfolio that we are actually managing still remains on our books so...

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

The next question is from Andrea Lisi of Equita.

--------------------------------------------------------------------------------

Andrea Lisi, Equita SIM S.p.A., Research Division - Research Analyst [16]

--------------------------------------------------------------------------------

Just 2 questions from my side. The first one is on loan loss provision. I see that, in this quarter, there is a bit acceleration with respect to the first quarter. I just want to ask you, whether -- if you see -- what is your -- the trend you see in loan loss provision? And if it is reasonable to expect a run rate in terms of basis point with -- comparable to the one that we have in the first half, also for the full year.

And the second question is on the NPL business. I just want to ask you if it is possible to know what is the capital allocated to the NPL area? I have seen that this NPL has around if -- and I might be wrong, [EUR 362 million] allocated. If -- can we take it as a good proxy or it is higher, lower?

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [17]

--------------------------------------------------------------------------------

Okay. With regard the loan loss provision, you have to consider that Q1, but especially Q2, included some, let's say, some additional provision to reflect the evolution of some of our exposures towards the construction sectors, okay? And of course, in the second half, we cannot provide a guidance because it really depends on our book on -- 1 or 2 or 3 large position can really change our cost of risk if they go well or bad. What we can say is that for sure there is a -- let's say, we'll increase the monitoring of our underwriting and credit department. That's what the CEO is focused on in this part of the industrial plans.

Regarding the capital allocated, the CET1 allocated to the nonperforming unit, we don't disclose it yet.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

The next question is from Christian Carrese of Intermonte.

--------------------------------------------------------------------------------

Christian Carrese, Intermonte SIM S.p.A., Research Division - Research Analyst [19]

--------------------------------------------------------------------------------

I have one quick question on the P&L. I see a big increase in the other operating income/expenses year-on-year, so from EUR 11 million to EUR 53 million this year. So if you can elaborate a little bit, also the change quarter-on-quarter.

The second question is on the strategic partnership I see. So if I understand correctly, you are saying that investment you did until now will be kept on your books, and you're going to try to find a partnership in which you should have a minority stake, because I see from the press release that Gruppo Fondiario will consolidate the assets combined, so the new production that will be done by the partnership. So I was wondering what is the aim of this partnership apart from to compete with other players, and maybe also in Europe. If you are assuming some synergies, maybe also some reduction in personnel that will be sent to the new partnership to the newco. And also in terms of capital, if you think that this could free up some capital, maybe through capital gain, depends on the structure of the deal, cash preference on.

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [20]

--------------------------------------------------------------------------------

I'm sorry, but all these details is too early to talk about. And as I said before, we are in preliminary talks and didn't share the numbers yet. And so it is too early to give you further information. But to give you an idea, we think that it is a good idea, an industrial idea. We won't compete on the market, which is changing day-by-day in this sector. And we want a part of a bigger player, and a player able to compete in every field of NPL sector. So this is all we can say now, and obviously, this is a tool to be more efficient in our market. And we now will consider all the figures and all the details of this possible partnership. But for the moment, I'm not able to give you more information.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [21]

--------------------------------------------------------------------------------

We made a press release just to be fully transparent with the market of any ongoing discussion. Regarding the question on the...

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [22]

--------------------------------------------------------------------------------

Excuse me, and you understood very well, we will keep on our book the -- our portfolio and then possible partnership we look to the future. But we still stay in this market and we still remain invested on our portfolio.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [23]

--------------------------------------------------------------------------------

Yes. Regarding the other part of your question, there is -- on Page 5 of the presentation, you can see that there is, let's say, a sort of normalization. Let's say that the movement that you see between other administrative expense and other net income/expenses are due to the closing of a tax proceeding from Interbanca, which by the way, does not provide any impact on Banca IFIS' net income. So as you see, there are some changes in other administrative expenses, other net income/expenses, taxes were provided this sort of normalization. But let's say, the final result is that the net income is -- has 0 impact.

--------------------------------------------------------------------------------

Operator [24]

--------------------------------------------------------------------------------

Your next question is from Luigi Tramontana of Banca Akros.

--------------------------------------------------------------------------------

Luigi Tramontana, Banca Akros S.p.A., Research Division - Analyst [25]

--------------------------------------------------------------------------------

Again on the potential agreement with Credito Fondiario. For sure, you're just starting the negotiations, so no details. What the market would like to understand is the strategic rationale of your negotiations. So what is the final objective in opening these negotiations? Do you want to become a pure NPL investor? So keeping the approximately EUR 1.5 billion, EUR 1.6 billion RWA on your books and offload the NPL servicing activity by -- because here, you see that scale is becoming a strategic element in this specific activity given that consolidation is ongoing in the Italian market. Do you see any pressure in terms of commissions for the NPL servicing activity? And so in the future, you will rather continue to invest in NPL portfolios, while the servicing activity will no longer be consolidated in the group.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [26]

--------------------------------------------------------------------------------

Let's say that -- thanks for that. As you said, it's too early to enter and to go into all detail -- these details. I would like to stress that the nonperforming market is changing due to consolidation, amount of change -- amount of portfolio being sold, regulation and many, many aspects. So in this context, there was an opportunity to open a discussion with a player and we pursue that. But let's say that all the pictures need to be, let's say, clarified going forward. So up to now, we don't want to enter into so much details. What I would like to stress is that the portfolio will remain in our book and nonperforming will remain a key priority -- the nonperforming business will remain a key priority for us. Of course, we'll continue to buy portfolios. And of -- if that is the rationale, let's say, we want to keep a presence and just be part of a larger player. That is nothing, but at the present we cannot say anything more.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

(Operator Instructions) The next question is from Benjamin Pesquier of Tikehau Capital.

--------------------------------------------------------------------------------

Benjamin Pesquier; Tikehau Capital;Credit Research Analyst, [28]

--------------------------------------------------------------------------------

Can you please give us an update on the capital structure of the group and the review going on with the holding company, La Scogliera?

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [29]

--------------------------------------------------------------------------------

No, no, sorry. This is Martino. I think that it was clear that we -- in Q1 we stated -- let's say that up to now, we're not considering anymore the merger -- reverse merger of La Scogliera. We -- on the other hand, we understand that we have to focus on our common equity Tier 1, and let's say, that's also that you can see in our results. We -- the CEO in the previous call was saying that we were 10.29%, and he wants to focus on the CET1 and to increase it. And now we brought this number to 10.81%. And I would like to also to stress that there are also some -- let's say, we are also -- potentially considering some transactions such CET1 and real estate, which can create a potential capital gain. And -- so we take a very strong consideration the common equity Tier 1. Also, we have a sound buffer compared to the SREP, which is 8.12%. And our SREP is among the lowest among Italian banks.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

(Operator Instructions) Gentlemen, there are no more questions registered at this time.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [31]

--------------------------------------------------------------------------------

So thank you very much.

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [32]

--------------------------------------------------------------------------------

Thank you very much, everybody.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [33]

--------------------------------------------------------------------------------

And of course, if you have any questions, feel free to contact us. And otherwise, we will look forward to meet you in September or in our business plan presentation that we're expecting, as the CEO was saying, in autumn.

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [34]

--------------------------------------------------------------------------------

Okay. We don't know exactly when, but certainly in autumn. Thank you very much, everybody, and good evening.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [35]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Luciano Colombini, Banca IFIS S.p.A. - Director, MD & CEO [36]

--------------------------------------------------------------------------------

And good holidays.

--------------------------------------------------------------------------------

Andrea Martino Da Rio, Banca IFIS S.p.A. - Head of IR & Corporate Development [37]

--------------------------------------------------------------------------------

Bye.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for joining the conference. It's now over. You may disconnect your telephones.