ILTY Illimity Bank SpA

illimity Ends the Third Quarter of 2022 With Solid Results in Line With Budget Forecasts
Chaired by Rosalba Casiraghi, the Board of Directors of illimity Bank S.p.A. (“illimity” or the “Bank”) yesterday approved the illimity Group’s results at 30 September 2022.

illimity continues its growth path in the third quarter of 2022 as well, with a solid financial performance and in line with budget forecasts, posting a net profit of 19.1 million euro (+21% q/q and 2% y/y), for a total of 50.6 million euro in the nine months of 2022, representing an increase of 10% over the corresponding period of 2021. Growth is expected to accelerate further in the fourth quarter of 2022, taking net profit for 2022 to at least 75 million euro with an ROE of ca. 10%. The expected results for the year include pre-tax losses of approximately 20 million euro arising from the launch of the initiatives b-ilty, Quimmo and Hype.

More specifically, the quarter was characterised by the following factors:

• net customer loans reached 3.3 billion euro at 30 September 2022, a rise of 4% over the previous quarter and 34% over the same period of 2021. The growth in volumes was mainly driven by the Growth Credit Division, and by the activities of the Investment Banking Division. The Distressed Credit Division maintained volumes broadly stable in the period, as the new investments were offset by significant reimbursements, collections and disposals. Strong volume growth is expected for the last part of the year driven by the generation of new business, which in the month of October alone reached a level exceeding that for the whole third quarter;
• the quality of the organic loan book continues to stand at excellent levels: at 30 September 2022 the ratio between gross doubtful organic loans and total gross organic loans originated since the start of illimity’s operations stood at 0.7%, a decrease over the previous quarter. This becomes 2.0% if the loan portfolio of the former Banca Interprovinciale, which is gradually decreasing, is included;
• a robust capital base, with ratios positioned at the top levels of the system – a phased-in CET1 ratio of 18.0% (17.5% fully loaded) and a phased-in Total Capital Ratio of 23.6% (23.1% fully loaded);
• a sound liquidity position of around 0.6 billion euro as at September 2023 and well diversified funding between retail, corporate and institutional funding sources, with a largely stable average cost of funding of 1.6%;
• revenue totalled 74.5 million euro in the third quarter (-8% q/q and +12%y/y) driven by the Group’s recurring activities and in particular by the net interest income component. Revenue rose to 233.6 million euro in the first nine months of 2022, representing an increase of 21% over the first nine months of 2021.The Distressed Credit Division was confirmed as the main contributor, generating approximately 66% of total revenue in the first nine months of 2022. The Growth Credit Division continued its advance by reaching an increase of almost 60% of its revenue over the same period of 2021 and taking its contribution to consolidated revenue to ca. 21%, to which should be added the Investment Banking Division, which also posted significant growth and contributed a further 5%;

• operating costs decreased to 46.9 million euro in the third quarter (-3% q/q, +32% y/y) taking the total for the nine months to 140.4 million euro, representing an increase over the same period of the previous year (+25% y/y) as the result of the substantial completion of the organisational structure and the investments in the new initiatives;
• a Cost income ratio amounting to 63% in the third quarter of 2022, (60% in the previous quarter) and 60% in the first nine months of 2022, a rise of around two percentage points over the same period of the previous year. This dynamic is the result of the investments made in the new initiatives which will begin to generate tangible revenue in 2023, producing a positive effect on the Group’s operating leverage;
• as a result of the above dynamics, operating profit reached 27.6 million euro in the third quarter of 2022 (-14% q/q and -11% y/y). This result discounts the effects of the investments made to launch the high-tech initiatives – b-ilty, Quimmo and Hype. Operating profit accordingly reached 93.2 million euro in the first nine months of 2022, representing an increase of 15% over the first nine months of 2021;

• net write-downs of organic loans for the third quarter totalled 0.6 million euro, corresponding to an annualised cost of risk3 of 11 bps, and arise from generic provisions on customer loans. The rather contained cost of risk is based on the excellent quality of the Bank’s loan portfolio, which also arises from the involvement of specialists (Tutors) in every important loan transaction, and the high guaranteed component that characterises the loans disbursed during the quarter. Net write-downs of organic loans totalled 3.7 million euro in the nine months of 2022, with an annualised cost of risk of 22 bps;
• positive credit revaluation on purchased distressed credit positions amounting to 7.3 million euro were posted in the quarter, arising from a series of events such as: the increase in the value of collaterals on the basis of binding offers received on certain portfolios for which a sales process is in progress; write-backs on certain loans originally classified as UTP on acquisition and now returning to performing status; the review of expected cash flows from certain portfolios due to an enrichment of the available data for the respective collaterals;
• a pre-tax profit of 29.6 million euro was posted in the quarter, representing a significant rise of 23% on a quarterly basis and 9% on an annual basis; pre-tax profit for the first nine months of 2022 accordingly reached 77.7 million euro, an increase of approximately 13% over the first nine months of the previous year.

Corrado Passera, CEO and Founder of illimity, commented: “Growth continued with the results for the third quarter. These are solid and in line with our forecasts, despite the fact that the scenario in which we operate has undergone a profound change since when we originally approved the budget. illimity has been able to continue along its planned growth trajectory which has enabled it to profitably affirm its various synergic core businesses on the market over a short period of time. The positive trend seen in 2022 will accelerate in the current quarter: October began with great momentum in terms of business origination and the advances in profitability dynamics will make it possible for us to end the year with a profit of at least 75 million euro, once again confirming our budget estimates. This is a result of particular interest because it includes important investments for the future. The three technological initiatives - b-ilty, Quimmo and Hype - have a combined effect of approximately 20 million euro in pre-tax losses; we expect that this negative result will drastically fall starting from 2023 and that the three initiatives will contribute to consolidated profit from 2024, creating significant value for the Group. We are also looking confidently at 2023: illimity has just successfully completed its fourth year of activity, and substantially completed its organizational structure. The business model has now become much more scalable thanks to the investments made and the critical size reached. Of particular satisfaction for all illimiters is the Best Place to Work certificate achieved at European level, as well as the flattering recognitions in ESG ratings.”

For more details view the full press release: Press Release

For further information:

Investor RelationsSilvia Benzi: +39.349.7846537 - +44.7741.464948 - silvia.benzi@illimity.com

Press & Communication illimity
Vittoria La Porta, Elena Massei	Sara Balzarotti, Ad Hoc Communication Advisors
+39.393.4340394 press@illimity.com	+39.335.1415584 sara.balzarotti@ahca.it

Wire Service Contact:InvestorWire (IW)Los Angeles, Californiawww.InvestorWire.comEditor@InvestorWire.com

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1 Related to the business originated by illimity, excluding the loan portfolio of the former Banca Interprovinciale. 2 Phased-in CET1 ratio.3 Calculated as the ratio between loan loss provisions and net organic loans to customers at 30 September 2022 (2,215 million euro) for the Factoring, Cross-over, Acquisition Finance, Turnaround, b-ilty and Alternative Debt segments, and for loans purchased as part of investments in distressed credit portfolios that have undergone a passage of accounting status subsequent to acquisition or disbursement (excluding loans purchased as bad loans), for the loan portfolio of the former Banca Interprovinciale and for Senior Financing to non-financial investors in distressed loans.