illimity Bank (ILTY) Q2 2024 earnings summary

Executive summary

• Net profit for H1 2024 reached €23 million, up 43% year-over-year excluding last year's extraordinary IT platform income; Q2 net profit was €12.2 million, up 13% sequentially, with profitability impacted by a €7 million Deposit Guarantee Scheme contribution.

• Strategic shift completed from NPE direct investments to asset-based financing and SME lending, with NPE direct investments now only 1.6% of total assets and business origination in asset-based financing up 79% quarter-over-quarter.

• Tech ventures (HYPE, b-ilty) and asset management (ARECneprix, SGR) showed strong profitability improvements, with HYPE posting H1 net profit of €1.5 million and b-ilty achieving breakeven.

• Operating profit rose 22% year-over-year in H1, with costs starting to decrease and further reductions expected in H2, especially from lower due diligence and servicing costs.

• Capitalisation remains solid with a phased-in CET1 ratio of 14.6% and LCR at 232%.

Financial highlights

• Operating income for H1 2024 was €158 million, up 5% year-over-year excluding extraordinary IT platform revenue; net interest income declined 20% year-over-year to €78.5 million due to higher funding costs and reduced NPE investments.

• Net fees and commissions rose 56% quarter-over-quarter and 44% year-over-year, driven by SME lending, business origination, and strong performance in asset management.

• Total assets reached €8.1 billion, up 7% quarter-over-quarter and 21% year-over-year; net customer loans grew 13% in the quarter.

• Operating costs decreased 2% year-over-year to €103.6 million, with staff and admin expenses down 4%.

• Funding increased 9% in the quarter, mainly from wholesale sources; blended cost of funding at 4.1%.

Outlook and guidance

• SME lending volumes expected to grow, supported by robust origination pipelines across divisions.

• Net interest income anticipated to stabilize in H2 2024; operating costs to decline due to reduced NPE management.

• Profitability guidance for full year 2024 to be provided with the new business plan by year-end.

• Cost of risk expected to normalize to a lower level in coming quarters after one-off provisions in Q2.

• Credit quality will remain high, with a large share of new loans backed by public guarantees and cost of credit expected to stay low.