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Introduction & Market Context
illimity Bank SpA (BIT:ILTY) released its Q1 2025 consolidated results on May 9, 2025, revealing a significant decline in profitability despite strong business origination growth. The specialist credit company is navigating what management describes as a "year of transition and realignment" following a strategic shift away from NPE investments and amid an ongoing tender and exchange offer from Banca Ifis.
The bank’s share price closed at €3.71 on June 6, 2025, trading well below its 52-week high of €5.18 but above its 52-week low of €2.69.
Quarterly Performance Highlights
illimity’s Q1 2025 net profit plummeted to just €0.3 million, compared to €10.8 million in the same quarter last year. This dramatic decline occurred despite a 50% year-over-year increase in business origination, which reached €262 million in Q1 2025 compared to €175 million in Q1 2024.
The bank’s operating income decreased by 8.3% year-over-year to €68.2 million, primarily due to lower net interest income, which fell from €39.6 million to €32.1 million. Meanwhile, operating costs remained relatively stable at €51.1 million compared to €50.8 million in Q1 2024.
As shown in the following chart of business origination and profitability metrics, the bank’s core business demonstrated resilience despite the overall profit decline:
Loan loss provisions nearly doubled to €13.9 million from €7.5 million in Q1 2024, with the increase primarily attributed to the non-core business. The core business maintained a controlled cost of risk at 41 basis points (annualized).
The following chart illustrates how market rates and loan loss provisions in the non-core business affected the group’s profitability:
Strategic Initiatives
illimity is executing a strategic pivot away from NPE investments toward high-potential business segments including Corporate & Investment Banking, Turnaround, and Asset Based Financing. The bank has implemented a clear separation of non-core assets, which are being gradually run off to free up capital for reinvestment in core business growth.
The company’s strategic roadmap through 2028 includes four key pillars, as illustrated in this chart showing the expected recovery in profitability:
The bank’s holdings across subsidiaries, IT partnerships, and tech ventures are expected to generate significant capital through potential disposals and new partnerships in the second half of 2025 and into 2026, with an estimated CET1 ratio impact exceeding 200 basis points.
Detailed Financial Analysis
illimity maintained a strong capital position with a CET1 ratio of 14.7% in Q1 2025, representing a 466 basis point buffer above regulatory requirements. The total capital ratio stood at 18.9%.
The bank’s funding mix remained well-diversified, with retail deposits growing 6% quarter-over-quarter to €4.0 billion. The blended cost of funding decreased to 3.7% and is expected to decline further in upcoming quarters.
Asset quality metrics showed some deterioration, with the gross NPE ratio (including public guaranteed positions) increasing to 7.9% in Q1 2025 from 6.5% in Q4 2024. However, approximately 60% of total gross loans are guaranteed or insured, providing some risk mitigation.
The bank’s loan portfolio remains specialized across four key business segments, with Corporate Banking representing the largest portion at €1.6 billion:
Forward-Looking Statements
Management characterized 2025 as a transitional year focused on implementing measures to lay the foundation for the 2026-2028 strategic guidelines. Profitability is expected to be impacted by both positive factors (potential disposal of non-core shareholdings) and negative ones (one-time costs related to the tender and exchange offer, non-core asset reduction, and organizational simplification).
The bank’s long-term growth strategy leverages three key factors: strong core business resilience with high growth opportunities, significant cost reduction potential through improved efficiency, and potential value generation from shareholdings, joint ventures, and partnerships.
Management expects recurring profitability to fully recover by 2028, with projected net results of approximately €80 million, compared to the €68.3 million reported in 2024 and the dramatically reduced figures in the current transitional period.
Despite near-term challenges, illimity’s business origination momentum and strong capital position provide a foundation for executing its strategic transformation, though investors will need to weather significant profitability volatility during this transition period.
Full presentation:
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