Illimity Bank S p A : 1Q24 Results Presentation Script

illimity Bank S.p.A.

1Q24 Results Conference Call

Friday, 10 May 2024, 09:00 a.m. CEST

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Corrado Passera - CEO

Good morning, everyone. Welcome to the presentation of illimity's first quarter 2024 results.

Let's start from slide 3.

Slide 3 - 1Q24: Positive seasonal quarter progress with strong balance sheet

This quarter, we completed the strategic shift away from direct investments in NPE portfolios.

Despite the short-term effects of this strategy, we achieved an increase in profits compared to the same period last year.

• Our net profit for Q1 stood at €10.8 million euro, marking a 38% year-on-year increase.
• Corporate and investment banking showcased continuous growth in revenue and profits up 13% year- on-year
• We successfully reduced our NPE direct investments to just 2% of total assets. Most of those assets have been transformed into senior financing positions or fund units, with lower risk profile.
• ARECneprix, our asset manager, specialising in managing large UTP positions, had a strong start to the year, driven by non-captive business.
• Our balance sheet remains very robust, showing high capital, a low NPE ratio and ample liquidity.
• Our tech ventures are nearing breakeven, with HYPE achieving profitability already this quarter.

Moving to slide 4

Slide 4 - Profitability up with strong capital and liquidity

Our results demonstrate the successful balance of profitability and solidity:

• A net profit of €10.8 million euro, representing a 38% increase from the same period last year.
• A reinforced capital position, with a Core Tier 1 ratio at 14.9% well above SREP targets.
• Robust liquidity, supported by a 1 billion euro liquidity buffer, with regulatory ratios comfortably surpassing minimum thresholds.

Slide 5

Slide 5 - CIB profitability up with strong pipeline

Our corporate and investment banking business has demonstrated robust growth, with:

• A Pre-tax profit increase to 23 million euro, reflecting a 13% year-on-year increase, driven by SME lending.
• A 13% year-on-year surge on Net customer loans, despite early repayments.
• An overall operating leverage that continues to stay very low at 21%.
• We expect volumes and profitability to accelerate in Q2, supported by a promising pipeline.

Slide 6

Slide 6 - CIB: Good Asset quality confirmed

We maintain our commitment to asset quality:

• 56% of total loans are backed by public guarantees or credit insurance.
• The organic NPE ratio, excluding state guaranteed positions, remains at a contained level 1.7%.
• The total organic NPE ratio, including those with public guarantees, is slightly down Q/Q to 4.8%, with minimal positions classified as bad loans.
• Our cost of risk stands at 84 basis points, half of it attributed to reinforcing the coverage ratio for a single position already under restructuring.
• We expect the cost of risk to normalise to a lower level in the coming quarters.

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Let's move to slide 7

Slide 7 - Specialised Credit Division: Reduction in NPE portfolio direct investments completed

• The strategic shift toward asset-based financing was successfully completed.
• NPE direct investments decreased by 67% quarter-on-quarter and 81% annually, now totalling only €100 million euro, less than 2% of total assets.
• Short-termprofitability of this Division was affected by the strategic shift. However, we anticipate a gradual improvement in the medium term due to revenue growth from an expanded loan book.

Moving to slide 8

Slide 8 - ARECneprix : Profitability surge from non-captive business growth

• ARECneprix is now a well-recognised key asset manager of large UTP positions.
• Total assets under management stand at €10 billion euro, with approximately 90% non-captive business, up from 30% in 2023.
• ARECneprix had a strong start to the year. EBITDA reached 5.5 million euro, significantly up compared to 1.8 million euro in Q1 last year.

Slide 9

Slide 9 - illimity SGR: Profitability growth trajectory confirmed with PBT +75% Y/Y

• Our SGR pre-tax profit is up 75% year-on-year due to increased volumes.
• Total AUM surpasses 500 million euro, up 47% year-on-year, with new funds in preparation.

Now, let's move from core businesses to other activities, our "tech ventures.

Slide 10

Slide 10 - Leveraging tech for further core business growth

Allow me to emphasise once again the different roles of our various activities.

• On the left, our core business activities.
• In the center, our Digital Division, illimity Technology, that functions as a profit center for the Group and not only as an enabler of the best technologies available for internal use .
• On the right, our main tech ventures.

In Q1, our Tech Ventures continued to make progress toward breakeven.

We anticipate that some of them will generate additional capital in the coming years, supporting our core business growth and potentially increasing shareholder remuneration.

Starting with HYPE on slide 11

Slide 11 - HYPE: First quarterly profit

HYPE, Italy's leading retail fintech platform, has achieved a significant milestone:

• Profitability turned positive for the first time this quarter, with a contribution margin of €9 million euro a significant rise from the previous 3 million.
• Steady growth in annual transactions demonstrates the success of the strategy implemented by the new CEO, despite an intensely competitive market.

Moving to b-ilty on slide 12

Slide 12 - b-ilty: Approaching breakeven with record business origination quarter

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• b-ilty,our lendtech for small corporates, maintains steady growth in volumes.
• Profitability is steadily improving, nearing breakeven.
• Q1 records the highest business origination at €120 million euro.
• Net customer loans, all backed by public guarantees surge to €400 million euro. 6 times Q1 last year, reaching 2,800 customers.

Slide 13 Quimmo

Slide 13 - Proptech leader in judicial market with advancements in open market strategy

Quimmo, Italy's leading proptech innovator, provides competitive end-to-end digital solutions for real estate brokerage.

• It leads the judicial market, managing €1.7 billion euro in assets and consistently increasing its market share each year.
• Through its partnership with COIMA, Quimmo is rapidly entering the non-judicial market, focusing on high quality residential properties.
• Q1 results closely mirror Q4 23, both impacted by halved national bankruptcy figures in the last two years. However, this trend is reversing with positive effects on future profitability.

Silvia will now provide a comprehensive review of our Q1 2024 results.

Silvia Benzi - CFO

Thank you, Corrado, and good morning, everyone.

Let's move straight ahead to the Balance Sheet figures on slide 15.

Slide 15 - Reduction in NPE direct investments largely completed

We completed the strategy to reduce our direct investments in distressed credit portfolio, striking a major transaction in the quarter. This brings our overall direct exposure to this asset class to just above 100mln euro.

Direct distressed credit investments are down 67% quarter-on-quarter and 81% year-over-year.

Excluding this component, net customer loans would have increased by 8% quarter on quarter, despite low seasonal business origination across all our desks, and early repayments in the Turnaround business. Key driving force of growth in the quarter was the strong momentum in b-ilty.

As a result, our loan book mix is increasingly shifted on SME lending and asset base financing.

Our securities portfolio grew this quarter following the increase in Government bonds.

All in all, total assets stood at 7.6 billion euro, up 4% quarter-on-quarter and 24% on a yearly basis.

Our funding also increased this quarter, by 5%, driven by wholesale component, while retail funding remained flat. We will provide more details shortly.

Moving to Profit & Loss on slide 16.

Slide 16 - 38% YoY net profit growth despite strategy shift

P&L dynamics are positive in the first quarter, printing a 38% progression on an yearly basis, despite the near term negative impact of the change in distressed credit strategy.

Point 1. Net interest income was down year-on-year mainly due to the increasing cost of funding, while the quarterly dynamics reflect shrinking of our direct distressed credit investments. Net interest income is set to gradually benefit over the next quarters from the stabilization of the cost of funding and the expected increase in volumes driven by a robust pipeline.

Point 2. Net fees showed a 19% growth year-on-year driven by an increase in SME lending business and new third-party mandates received in the servicing business. Comparison on a quarterly trend is made less significant as affected by strong seasonality in Q4 23.

Point 3. Other income - made of net results from trading and assets at FV, profits from closed positions and other profit - made a solid contribution to this quarter's trend, supported by Investment Banking activity with

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customers and trading, while profit from closed positions decreased, owing to the change in strategy on the distressed credit business.

Point 4. Operating costs slightly up year-on-year due to the increase in D& A following IT investments, with the aggregate of Staff costs and other administrative expenses remained flat. On quarterly basis costs are significantly down from a seasonally high Q4.

Operating costs are set to decline over the next quarters.

Point 5. Loan loss provision charges are up this quarter as we increased coverage ratios on some selected exposures based on the evolution of their restructuring plans, and we expect to normalize to a lower level over the next quarters.

Now, let's move to slide 17.

Slide 17 - Solid CET1 ratio at 14.7% up 20bps Q/Q

Our capital base is solid, with Common Equity Tier 1 ratio at 14.9% up 20 bps quarter-on-quarter and Total Capital ratio at 19%.

The increase in the last quarter came from the profit generated during that period, with risk weighted assets flat.

Finally, let's move to our funding, on slide 18

Slide 18 - Funding increase with diversified mix

Funding was up 5% with a well-diversified mix.

Retail funding was flat quarter on quarter with the bulk of it coming from our online platform illimitybank.com.

The competitive arena is stabilising. We gathered over 430m deposits while reducing the rate of remuneration by 50bps, in anticipation of lower expected market rates.

Wholesale funding was up quarter-on-quarter driven by a few short-term financing transactions.

Our blended average cost of funding stood at 4%, in line with 4Q23, and is expected to remain at this level for the remainder of the year.

I now hand back to Corrado, so we can begin the Q&A.

CEO - FINAL REMARKS

As we conclude, let me close by saying that:

• Q1 unfolded as anticipated, aligning with our typical seasonal patterns and in line with our expectations.
• We expect business origination to accelerate in 2Q, driven by a robust pipeline.
• Our balance sheet remains resilient, maintaining a low risk profile.
• Tech ventures are advancing toward breakeven, with HYPE already turning a profit.

Thank you for your attention and let's now move to the Q&A.

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