Banca Sistema (BST) Q1 2025 earnings summary

Executive summary

• Net profit surged to €11.6 million in Q1 2025, up 180% year-over-year, driven by strong income growth in factoring, collateralised lending, and accruals on late interest from legal cases, with all divisions showing improved profitability.

• Total income rose 60% year-over-year to €42.8 million, or 21% net of LPI accruals, mainly from factoring, Superbonus trading, and higher government bond yields.

• Adjusted interest income more than doubled year-over-year, reaching €33.3 million, driven by wider asset spreads and lower funding costs, offsetting a 34% drop in net commissions.

• Operating costs increased 9% year-over-year due to higher FTEs, administrative expenses, Portugal consolidation, and compliance costs.

• Factoring turnover fell 20% year-over-year, with stable public sector volumes but sharp declines in private and Ecobonus segments.

Financial highlights

• Net interest income more than doubled to €24.5 million; net fee and commission income fell 34% to €5.7 million.

• Pre-tax profit nearly tripled year-over-year to €19 million, despite higher cost of risk at 57bps (up from 17bps), with impairment losses on loans rising to €3.7 million.

• Total assets decreased 4% quarter-on-quarter to €4.5 billion, mainly due to lower financial portfolio and customer loans.

• Retail funding accounted for 75% of total funding, with term deposits up 2% quarter-on-quarter and 80% sourced from abroad.

• Cost of funding fell to 3.16% (down 46bps year-over-year and 34bps quarter-on-quarter); wholesale funding cost at 2.9%.

Outlook and guidance

• Adjusted income margin expected to remain robust and stable, with Q1 positively impacted by LPI accruals unlikely to repeat at the same magnitude.

• Management expects trends of lower funding costs and strong commercial performance to continue in 2025, with SRT actions and active portfolio management to offset increased past due loans.

• Factoring outstanding expected to remain flat for the year, with more exposure to central government and less to NHS.

• Cost of funding targeted to average around 3% for 2025, improving from previous estimates.

• CQ division expected to remain loss-making in 2025, despite lower funding costs and a shift to higher-yield new production.