Illimity Bank S p A : 1Q23 Results presentation script

illimity - 1Q23 Results Corrado Passera - CEO

Good morning and welcome to our 1Q 20/23 results presentation.

We had a positive start to the year, achieving key strategic milestones.

I will discuss these milestones and the main trends, followed by our CFO, Silvia, who will provide more details.

Our division leaders are here to answer any questions during the Q&A session.

Let's move on to slide 2.

Slide 2 - Key strategic milestones driving a positive start to 2023

This quarter, was marked by dynamism and solid progress. Four highlights:

• Our robust liquidity profile, solid capital position, and diversified asset mix - enabled us to effectively address the concerns raised by the banking market turmoil at the beginning of 2023.
• The transformative long-term partnership we just signed with Engineering Group for the IT platform, will drive substantial profitability in 2023, and beyond.
• The Q1 core business trends - are in line with our expectations. The impact of the IT partnership deal makes this quarter not fully comparable with previous quarters.
• All our three tech ventures have made important progress in their own strategic development, and of great interest, a strategic partnership was signed in the real estate sector between Quimmo and Coima.

Let's review the milestones, beginning with our liquidity position on slide 3

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Slide 3 - Robust Liquidity Position with positive inflow of Retail Deposits in 1Q23

We have a very robust liquidity position with:

• A liquidity buffer of nearly 900 million euro in cash and government bonds.
• LCR is very high exceeding 300%.
• NSFR at 114% is well above the minimum threshold
• illimitybank's online platform experienced more than 200-million-euro growth in retail deposits during the quarter, with term deposits accounting for 84% of total retail funding.
• Our goal has always been to maintain a mainly balanced asset and liability structure in terms of maturities.

Moving to capital, Slide 4

Slide 4 - Solid capital position supports future business growth

Our position is rock-solid and will support our growth pipeline:

• Core Tier 1 ratio is 15.6%, exceeding SREP targets by 650 basis points.
• Total Capital Ratio is also strong, standing at 20.3%.
• Moreover, the unrealised losses on the Hold to Collect portfolio are negligible, amounting to less than 15mln euro

Moving to slide 5

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Slide 5 - Cyclical stability through asset diversification

Here is the breakdown of our resilient asset mix, demonstrating illimity's adaptability across the cycle:

• A significant portion of our assets are customer performing loans, with nearly half supported by public guarantees.
• The majority of the purchased UTPs are associated with going concern positions, either with well-defined repayment plans or undergoing restructuring to restore them to performing status.
• NPL purchases represent less than 10% of our total assets, distinguishing illimity from NPL players whom we are often compared to.
• The rest of our assets include liquidity, financial assets - such as government bonds - and other assets like tangible and intangible assets, as well as fiscal assets.
• Furthermore, our loan book is well-diversified across 30 plus economic sectors, with no sector comprising more than 10% of the total Growth Credit book.

Moving to slide 6 for asset quality.

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Slide 6 - Expected Asset quality trend with contained cost of risk at 43bps

In 1Q23, our loan portfolio's asset quality met expectations with a contained cost of risk. Key points:

• 56% of our loans have public guarantees or insurance facilities.
• Stage 2 loans represent only 2% of the portfolio.
• The organic NPE ratio increased, as anticipated, to 3.7%, mainly due to some exposures moving to the UTP category.
• Excluding loans with public guarantees, our NPE ratio is 1.5%, that includes several exposures that are actively undergoing a restructuring process that could result in either being restored to performing status or having to repay the loan.

Moving to the strategic IT partnership on slide 7

Slide 7 - Game-changing partnership with Engineering Group to bolster 2023 and beyond

In April, we signed a significant long-term industrial agreement with Engineering Group, a global leader in digital transformation.

This game-changing move unlocks the full potential of our advanced IT assets, propelling our growth trajectory forward.

The pre-tax consideration of 55.5 million euros will be recorded in 20/23, along with an additional 4.5 million euros for platform upgrades over the next 9 years.

Additionally:

• We anticipate substantial royalties for at least 10 years from Engineering Group's IT platform offerings to third parties, bolstering the bank's profitability over the long term.
• As a preferred partner, Engineering Group will provide IT services to illimity for 10 years, with the cost already factored into our Plan.

Overall, this partnership adds significant value to illimity.

Moving to Slide 8 - to look at our Q1 net profit.

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Slide 8 - 1Q23 trends as we expected, comparability affected by IT platform deal

Q1 results were in line with our expectations.

• In the first quarter, the distressed credit market remained soft, but we maintained a comparable origination volume to the previous year thanks to our diversification in other SME business segments. We anticipate an increase in business origination starting from the second quarter of 2023.
• Our net interest income and net commissions experienced double-digit growth in Q1 2023 compared to the same period last year, with a combined growth of over 30%. Core revenue is expected to continue growing in the upcoming quarters due to a strong pipeline and ongoing repricing actions.
• The YoY comparability of "other income" was affected by the termination of the previous IT agreement and lower revenue from closed positions, as 1Q22 had particularly high figures in this regard.

Our net profit for Q1 stood at 7.8 million euro - and also here - a direct comparison with the corresponding period last year is not feasible - due to the 8.5-million-europre-tax impact from the consensual resolution of our previous IT platform license agreement.

We expect profitability to accelerate over the next quarters.

Slide 9

Slide 9 - SME businesses profitability up 74% YoY

Our SME business has shown an impressive performance with strong contributions from both our Growth credit and Investment Banking divisions

• Net customer loans surged by an impressive 49% YoY to reach 2.3 billion euro. Despite some early loan reimbursements, the stock was up 4% on a quarterly basis.

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