Banca Sistema (BST) H1 2024 earnings summary

Executive summary

• Operating profits before systemic charges improved in H1 2024, driven by positive commercial dynamics and asset repricing, with factoring turnover up 13% year-over-year to €2,793 million and pawn loans outstanding up 10% year-over-year.

• Adjusted net profit rose 11% year-over-year to €9.4 million, while stated net profit declined 20% to €6.0 million due to the timing of systemic charges and higher taxes.

• Total income increased 11% year-over-year to €54.8 million, driven by factoring, pawn loans, and fee growth, despite higher funding costs and a negative CQ contribution.

• CQ loans turnover rose 42% year-over-year, but outstanding loans fell 11% due to prepayments and disposals, resulting in a net loss of €8.1 million.

• The 2024-2026 Strategic Plan focuses on strengthening the multi-specialist model, expanding factoring, retail, and collateralised lending.

Financial highlights

• Adjusted net interest income declined 9% year-over-year to €32.5 million, while net fees and commissions grew 58% to €15.9 million, mainly from factoring.

• Total operating costs rose 15% year-over-year to €40.3 million, mainly due to higher systemic risk provisions booked earlier in the year.

• Cost of funding stabilized at 3.6% in Q2 2024, up from 2.4% in H1 2023.

• Total assets grew 3.7% year-to-date to €4.74 billion, mainly from replenished government bond portfolio.

• Loan loss provisions totaled €3.9 million, with a cost of risk of 24bps (up from 19bps in H1 2023).

Outlook and guidance

• Factoring turnover and Superbonus Factoring contribution are expected to remain strong in H2 2024.

• CQ division's negative contribution is expected to peak in 2024, with improvement from 2025 as the legacy portfolio impact wanes.

• No further Deposit Guarantee Scheme charges are expected after H1 2024, positively impacting Q4 results.

• Funding costs are projected to remain stable in H2 2024.

• Kruso Kapital is set to complete a Portuguese acquisition by year-end, expected to contribute to net income.