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Operating Profit: Improvement before systemic charges due to positive commercial dynamics and asset repricing.
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Factoring Turnover: Increased by 13% year-on-year.
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Pawn Loans Outstanding: Grew by 10% year-on-year.
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CQ Loans Turnover: Increased by 42% year-on-year.
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Total Income: Grew by 10.8% year-on-year in the first six months.
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Adjusted Net Interest Income: Declined by 9.4% year-on-year.
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Cost of Funding: Stabilized at 3.6%, up 120 basis points year-on-year.
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Operating Costs: Grew 15.3% year-on-year, with a 5.3% increase net of systemic charges.
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Adjusted Pretax Profit: EUR15.7 million, up 19% year-on-year.
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Adjusted Net Profit: EUR9.4 million, up 10.6% year-on-year.
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Assets Growth: Increased by 1.9% year-on-year.
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CET1 Ratio: 12.4%, with a transitional basis of 13.1%.
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Total Capital Ratio: 15.5%, with a transitional basis of 16.2%.
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Factoring Division Turnover: Grew 13% year-on-year.
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Pawn Loans Turnover: Increased by 15% year-on-year to EUR113 million.
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Total Gross Income: Grew 43% year-on-year in the first half.
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Personnel Costs: Increased by 11.2% year-on-year.
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Retail Funding: Increased to EUR2.7 billion from EUR1.8 billion year-on-year.
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Cost of Risk: Increased to 24 basis points from 19 basis points year-on-year.
Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Banca Sistema SpA (STU:B2S) reported a 19% year-on-year increase in adjusted pretax profit, reaching EUR 15.7 million.
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The factoring division experienced a 13% year-on-year growth in turnover, indicating strong commercial performance.
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Pawn loans business showed a 10% year-on-year increase in outstanding, with total turnover rising by 15% year-on-year.
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The bank’s CET1 ratio and total capital ratio improved year-on-year to 12.4% and 15.5%, respectively.
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Retail funding increased significantly, with term deposits growing to EUR 2.7 billion from EUR 1.8 billion in the previous year.
Negative Points
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Adjusted net interest income declined by 9.4% year-on-year, despite an improvement from the previous quarter.
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Operating costs, including systemic charges, grew by 15.3% year-on-year, partly due to the deposit guarantee scheme provisions.
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The CQ division reported a loss of EUR 8.1 million for the half-year, negatively impacting overall profitability.
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Cost of risk increased to 24 basis points from 19 basis points in the first half of 2023.
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The tax rate rose significantly, reaching 38% in the first half, impacting net profit negatively.
Q & A Highlights
Q: Can we expect a similar trend in loan impairments for the full year, given the erratic nature of impairments from quarter to quarter? A: The provisions in Q1 and Q2 are in line with expectations and the cost of risk in 2024 is expected to be higher than in 2023. This aligns with historical averages and future projections, so there is no cause for concern.
Q: What are the expectations for the tax rate, which has been significantly higher compared to last year? A: The higher tax rate is related to the cancellation of shares. We expect it to remain unchanged unless there are changes in government policy.
Q: Can you provide insights on the factoring business and its future trends? A: Factoring continues to show strong performance across various business lines. We expect the current levels of growth to continue, with a focus on maintaining profitability rather than aggressively pursuing market share.
Q: What is the outlook for the CQ business, particularly regarding its profitability? A: The CQ business is expected to reach its peak negative contribution this year due to legacy portfolios. However, it will turn positive in terms of total income by 2025, with potential upside if the interest rate environment improves.
Q: Is there any potential for more shareholder-friendly payout policies in the future? A: While we aim to maintain a guaranteed stream of dividends, any excess funds will first be allocated to high-return investments like pawn broking. If there are no further opportunities, additional funds may be returned to shareholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
