Banca Sistema (BST) Q3 2024 earnings summary

Executive summary

• Revenues and total income grew 19% year-on-year in the first nine months, driven by strong factoring and pawn lending, with factoring turnover up 12% to €4,000 million and CQ new volumes up 16% year-on-year, though CQ outstanding declined 10% due to repayments and disposals.

• Adjusted net interest income increased 11% year-on-year to €55.7 million, and adjusted net profit rose 27% year-on-year to €15.8 million, with consolidated profit reported at €12.3 million (+8.5% year-on-year) and adjusted pretax profit at €26.2 million (+37% year-on-year).

• Retail funding accounted for 69% of total funding, with total assets up 9% year-on-year to approximately €4.8 billion, supported by an expanded government bond portfolio.

• The 2024-2026 Strategic Plan focuses on consolidating leadership in factoring, expanding collateralised lending, and transforming the CQ division into a Private Division.

Financial highlights

• Total gross income rose 39% year-on-year, driven by factoring (+€43.7 million), pawn loans (+€4.6 million), and SMEs state-guaranteed loans (+€4.7 million).

• Operating costs increased 17.6% year-on-year to €58.9 million, mainly due to earlier booking of Deposit Guarantee Scheme charges and higher personnel expenses; net of this, costs rose 11%.

• CET1 ratio phased-in at 12.91% and total capital ratio at 15.86%, both well above regulatory requirements.

• Cost of funding improved to 3.59% in Q3 from 3.63% in Q2, up 91 bps year-on-year; cost of risk at 20 bps, with a further uptick expected in Q4 and targeting around 25 bps for 2024.

• Factoring net profit up 31% year-on-year to €23.2 million; pawn lending net profit up 63% year-on-year to €2 million; CQ business contribution negative at €-12.2 million.

Outlook and guidance

• Factoring is expected to maintain current turnover trends, with a growing contribution from Superbonus Factoring in 2H24 and peak trading income in 2024 at over €30 million, then declining in subsequent years.

• Retail financing (CQ) stock is projected to decrease due to amortisation and targeted sales, with losses anticipated to increase in 2024 but improve from 2025.

• Funding costs are expected to remain stable, with a decrease anticipated from next year; Q4 funding cost expected below 3.5%, with 2024 average at 3.6%.

• Portugal pawnbroking acquisition expected to contribute over €1 million to net income in 2025 and nearly €1.5 million in 2026.