Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Illimity Bank SpA (FRA:53D, Financial) reported a first-half net profit of EUR23 million, marking a 43% increase year on year, excluding extraordinary revenue from the previous year.
- The bank's corporate and investment banking pretax profit rose by 26% quarter on quarter and 35% year on year.
- Specialized credit business origination increased by 79% from the previous quarter, indicating strong growth potential.
- The bank maintained a robust capital and liquidity position with a Core Tier 1 ratio of 14.6% and a liquidity buffer of EUR900 million.
- Asset quality improved significantly, with the gross NPE ratio, excluding public guarantees, more than halving to 0.6%.
Negative Points
- Net interest income slightly decreased quarter on quarter due to the exit from the traditional NPE portfolio business.
- The bank faced a EUR7 million deposit guarantee scheme contribution, impacting net profit.
- Operating costs, although starting to decline, still require further reductions, particularly in due diligence and servicing costs.
- The cost of risk was higher than expected, primarily due to the disposal of two non-state guaranteed positions.
- The profitability of Quimmo, the bank's proptech initiative, is still affected by the reduction in national bankruptcy figures.
Q & A Highlights
Q: Can you explain the strategic shift from NPL investment to asset-based financing and its profitability?
A: Andrea Clamer, Head of Specialized Credit, explained that the shift to asset-based financing maintains a similar yield to previous investments, with an ROE around 20% and IRR between 10-12%. They plan to book EUR350-400 million this year, aiming for a EUR1 billion portfolio in three years.
Q: How will costs change with the new business model, and what were the costs related to NPL due diligence and servicing?
A: Andrea Clamer noted that costs will reduce significantly as the new financing model does not require expensive due diligence like NPL acquisitions. The due diligence cost was about 2% of the net book value.
Q: What is the status of the partnership with engineering, and its contribution to revenues?
A: Corrado Passera, CEO, stated that royalty flows from the partnership will start in the second half of the year, contributing to revenues as planned.
Q: Why was the tax rate low this quarter, and can you provide guidance for the full year 2024?
A: Silvia Benzi, CFO, explained the low tax rate was due to a EUR2.2 million Patent Box benefit. Guidance will be provided with the business plan presentation by year-end, focusing on efficiency improvements.
Q: Can you elaborate on the cost of risk, given the significant NPE ratio reduction?
A: Enrico Marzocchi, Head of Corporate Banking, explained that the cost of risk increased due to provisions for two non-state guaranteed positions before their sale, which helped reduce the NPE ratio.
Q: What is the NII sensitivity to rate changes, and expectations for capital by year-end?
A: Silvia Benzi noted low single-digit NII sensitivity, with limited impact expected in 2025 due to hedging. They aim to maintain a CET1 ratio around 14%, with expected business growth consuming some capital.
Q: Are there updates on asset valorization and potential joint ventures?
A: Corrado Passera mentioned ongoing efforts for asset valorization, aiming for extraordinary revenues annually to enhance growth and potentially increase shareholder remuneration.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
