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 revenue; Q2 net profit was €12.2 million, up 13% quarter-on-quarter, 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.

• Core business profitability driven by Corporate & Investment Banking and Specialised Credit Division, with CIB pre-tax profit up 26% quarter-on-quarter and 35% year-over-year, and cost/income ratio improved to 19%.

• 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.

• Capitalisation remains solid with CET1 ratio at 14.6% and LCR at 232%.

Financial highlights

• Operating profit for H1 2024 was €54.2 million, up 22% year-over-year excluding last year's extraordinary IT platform revenue; operating income at €158 million, up 5% year-over-year.

• Net fees and commissions rose 56% quarter-on-quarter and 44% year-over-year, driven by SME lending and higher IB activity.

• Net customer loans grew 13% quarter-over-quarter, reflecting a shift towards asset-based and SME lending.

• Operating costs decreased 2% year-over-year to €104 million, with staff and admin expenses down 4%.

• Wholesale funding increased quarter-over-quarter, with blended cost of funding at 4.1%.

Outlook and guidance

• Further cost reductions expected in H2, especially from lower NPE-related expenses and improved operational efficiency.

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

• 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.

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