illimity Bank (ILTY) Q3 2024 earnings summary

Executive summary

• Net profit for the first nine months of 2024 was €31 million, down from €39 million year-over-year, mainly due to the absence of last year's non-recurring income and higher funding costs, reflecting the strategic exit from direct NPE portfolio investments.

• Strategic shift completed, exiting direct NPE investments to focus on SME lending, cost efficiency, and long-term growth.

• Announced a major technology partnership with Apax Partners, expected to generate a €54 million net capital gain, strengthen CET1 by up to 90 basis points, and deliver long-term IT cost savings.

• Total assets grew to €8.33 billion (+15% vs. December 2023, +22% y/y), driven by increased loans, investments, and government bonds.

• Business model simplification and divisional streamlining to enhance clarity and efficiency.

Financial highlights

• Net operating income was €222.3 million, down 21% year-over-year, mainly due to lower NPE business contribution and the absence of €54 million in non-recurring income from 2023.

• Net interest income fell 21% to €116.4 million due to higher funding costs and asset transformation.

• Net fee and commission income rose 24% to €63.1 million, supported by increased business activity and servicing fees.

• Operating expenses decreased slightly to €154.4 million, with personnel and administrative costs both down year-over-year.

• Cost/income ratio increased to 69% for 9M24.

• EPS for the period was €0.37, down from €0.90 in the prior year.

Outlook and guidance

• Profitability in Q4 and beyond will be affected by the strategic exit from NPE portfolio investments, with future benefits expected from the Apax technology partnership and ongoing cost savings.

• New business plan postponed to 2025 to incorporate recent tech transactions and further asset valorizations.

• Cost savings from technology partnership and business model simplification expected to accelerate in Q4 2024.

• Lending will focus on specialised performing and reperforming SME loans, leveraging strong capital and liquidity positions.

• Asset quality expected to remain strong, supported by high levels of public guarantees on loans.