February 11, 2021

Corrado Passera's editorial

CEO in illimity

illimity is continuing to grow, and it has done so even in 2020, despite it being one of the most challenging years the economy has seen recently. Everyone has been hit by the Coronavirus pandemic in a way that, twelve months ago, we could not have possibly imagined. From small to large businesses, and from families to those just starting out on their professional lives. In this difficult context, we have always been there, offering the support and the solutions necessary to carry on and look ahead.

In as complex a year as 2020, illimity has demonstrated not only great resilience, but that it is also capable of reaching objectives and of implementing new strategic initiatives.

We surpassed our net profit goal of €30 million, registered strong revenue growth, and broke into promising new business areas, overseeing the UTP (Unlikely To Pay) portfolio market and setting up our asset management company (SGR). Through investing in new projects, we have created the basis for the further development of illimity in 2021 and beyond.

Profits rise to €31 million

We fully matched our net profit guidance, reaching €31 million of net profit for 2020, an amount which corresponds to over 5% return on equity (ROE) for our first full year of activity. We reached over €2.2 billion of net customer loans and investments, increasing 35% on 2019. Our services activities have also grown substantially. neprix, our servicing platform, ended the financial year well ahead of targets, with over €9.1 billion of assets under management.

The high quality of illimity’s loans and investments portfolio has also been confirmed. SME loans show no signs of deterioration, and we continue to see strong cash flows of our distressed credit portfolios. The high quality of these assets is the result of our highly selective approach in underwriting, which combines financial and industrial expertise with the most advanced data analytics technology.

We ended the year with a very strong capital and liquidity position. The key regulatory capital measure, Common Equity Tier 1 Ratio, stands at 17.9% (18.4%, if one includes special shares) – one of the highest figures in the banking industry – and we have a particularly robust liquidity position, of more than €980 million.

illimity continues to grow

We are really proud of our ability to grow in all areas of the business. After the initial shock of the pandemic, and the subsequent economic rebound, we saw a strong recovery in new business, with volumes booked in 2020 of over €900 million.

Since the beginning of our activity at the end of 2019, we have originated nearly €2.7 billion of business across all our core businesses in the Distressed Credit Investment and Service (DCIS) and Small and Medium Enterprise (SME) divisions. Moreover, we are finalising further terms of agreement of loans and investments for €130 million, and an additional €400 million are in the pipeline. This totals over €3 billion of customer loans and investments, in line with our target for 2020, though with a partially different mix.

In the first stage of illimity’s life, we aimed to balance our energetic desire to grow and quickly reach a good level of profitability with the commitment to build, from scratch, a real new paradigm bank – a fully digital, fully modular, data centric bank, able to capitalise on new technology and with no legacy from the past.

Starting to unlock further growth potential

We can now start to untap further growth potential in the different business areas.

For example, we entered a promising new segment of market, that of UTP portfolios.

We have built a unique position in the market, thanks to an operating model built on the complementary capabilities of our Distressed Credits and SME Divisions. We have already won one of the biggest tenders of 2020, but for now, we have only recorded costs and investments in our income statement, while revenues will start to accrue only in 2021.

We also established illimity SGR, our asset management company, which will soon launch its first UTP fund. The funds which we will initiate over the next few months and years will play an important role in illimity’s future strategy, because they will support the further growth of our bank in the next few years – in particular, income from commissions – with very limited capital consumption.

We have also accelerated our Open Banking strategy, thanks to our joint venture in HYPE, the largest platform of its kind in Italy and set to grow further rapidly in the years ahead, thanks also to illimity’s contributions. The current costs and investments that illimity dedicates to this sector should be converted, thanks also to the projects currently being prepared, into a significant contribution to the profits of the Group.

To further support our future growth, the end of 2020 saw us make our debut in the debt capital market, with the successful placement of our first corporate bond issue.

We will present our new projects, together with the revised business plan, in May.

Revenue and profit growth in 2021

Illimity’s business sectors are already sizeable today and several are set to grow further. The non-performing loan market – both UTPs and NPLs – will increase significantly, and more and more SMEs with ambitious development plans will need financial support. And digital financial services will continue their exponential growth.

We expect solid growth in the course of 2021, also in the light of the positive momentum in volume growth recorded in the fourth quarter of 2020 and notwithstanding the costs we will incur for the launch of new strategic initiatives, we foresee a significant rise in profitability.