illimity Bank (ILTY) Q3 2024 earnings summary

Executive summary

• Strategic shift completed, focusing on SME lending and exiting direct NPE investments to streamline operations and align with long-term growth objectives, resulting in a reduction of NPE assets from 9% to 1.6% of total assets year-on-year.

• Announced a major technology partnership with Apax Partners to unlock value from fintech assets, forming a new company, outsourcing IT for 10 years, and generating a €54 million net capital gain with a 70–90 basis point boost to CET1 ratio.

• Operating profitability remained resilient, supported by 24% year-on-year growth in commissions and a 1.4% year-on-year decrease in operating costs.

• Business plan presentation postponed to 2025 to incorporate recent tech asset transactions.

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

Financial highlights

• Net profit for the first nine months of 2024 was €31 million, with resilient underlying operating profitability and strong asset quality.

• Operating income for 9M24 was €222.3 million, down 21% year-on-year, mainly due to lower NPE business contribution.

• Net fees and commissions rose 24% year-on-year to €63.1 million, driven by SME financing and third-party mandates.

• Net customer loans grew 12% year-on-year to €4.7 billion, with total assets at €8.3 billion, up 22% year-on-year.

• HYPE posted €1.3 million net profit (vs. €5 million loss last year); b-ilty and Quimmo showed improved business origination and market share.

Outlook and guidance

• Short-term profitability impacted by strategic exit from NPE investments and peak funding costs, but medium-term growth expected from SME lending, cost reductions, and technology partnership.

• Further cost reductions anticipated, especially in 2025, driven by IT outsourcing and business mix changes.

• Gradual decline in blended cost of funding expected from 2025.

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

• AUM expected to rise further with the launch of two new funds.