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, focusing on SME lending and exiting direct NPE investments to streamline operations and align with long-term growth objectives.

• Announced a major technology partnership with Apax Partners to unlock value from fintech assets, forming a new company with a 48% stake, outsourcing IT for 10 years, and expected to generate a €54 million net capital gain and strengthen CET1 by up to 90 basis points.

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

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

Financial highlights

• Net profit for 9M24 was €31 million, with resilient underlying operating profitability and strong capital ratios.

• Operating income for 9M24 was €222.3 million, down 21% year-over-year, mainly due to lower NPE business contribution and absence of €54 million 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.

• Net customer loans grew 12% year-over-year and 3% quarter-on-quarter, with total assets at €8.3 billion, up 22% year-over-year.

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 the Apax technology agreement.

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

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

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

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