da Intermonte – BANCA SISTEMA company research report

Buon pomeriggio,

di seguito e in allegato inviamo il company research report relativo a BANCA SISTEMA a cura di Intermonte.

Rimaniamo a disposizione per ulteriori informazioni.

Un caro saluto,

Ludovica Bertola

M: +39 347 1667538

2Q24 results give visibility to improving trends

2Q24 showed the company’s proactive efforts to enhance the business, even if results were penalized by interest rate trends. The main issue for the bank remains the CQ business (income-backed loans), which is still unprofitable due to high funding costs.
We believe the bank is at a plateau and, as soon as rates decrease net income will receive a boost (see the first graph on page 3). Having said that, the other divisions are performing well, and management has a clear view on what it needs to do to get through this adverse period (i.e. trading of Superbonus credits, which is boosting total income). We believe 1H24 suffered a tough comparison but the worst seems to be over.

• 2Q24 Results: results were broadly in line with our estimates, both on the top and bottom line (+3% A/E and -3% A/E respectively). NII suffered from higher cost of funding YoY (3.6% vs. 2.84% in 4Q23) due to higher average deposits, offset in part by greater interest income (mostly factoring and guaranteed loans), while fees were higher than expected, but also lower QoQ. The surprise was on trading, up QoQ and YoY on Superbonus credits trading. The top line, combined with OpEx in line with estimates, lead to operating profit of Eu10.6mn (+43% YoY and 10.6% QoQ). A 33bp cost of risk (+10bp A/E) and the DGS contribution led to pre-tax profit of Eu3.6mn and net income of Eu1.8mn.
• Business lines: the bank’s three BUs are vastly different, both in terms of profitability and strategy. CQ is still burning profitability (Eu-8.1mn in the first half), but management is acting proactively, trying to offset older loans with new contracts at a higher margin (selective approach), and not seeking aggressive market share gains. With this approach, combined with funding costs that have probably now peaked, the outlook seems positive. Factoring, on the other hand, is already highly profitable, although it is slowing a little in terms of loans outstanding. Finally, pawnbroking is growing steadily and with high margins.
• Dividend policy and M&A: on remuneration, management confirmed its stance of re-investing the majority of the capital generated back into the business. A key aim is to maintain a managerial buffer on capital ratios (c.150-200bp at YE26), to be used for accretive acquisitions, invested in short-term assets or, in general, reinvested in the business. The remainder of this could be used to increase shareholder remuneration. There is no M&A in sight; if any deal were to be considered it would be with a view to potential accretion.
• OUTPERFORM Confirmed; TP Eu2.18 (Unch.): as the company is moving forward to enhance future profitability, we think our FY24/25/26 estimates are challenging, but achievable given management’s commitment, and consistent with our recommendation. We are leaving our estimates and TP untouched, reflecting our positive view on the stock.