Italy's Illimity strikes deal with ION, says to double net profit in 2023

MILAN (Reuters) -Italian challenger bank Illimity said on Tuesday it expected to roughly double its net income in the next two years as it announced a strategic partnership with ION, a privately-owned financial data and technology group.

Illimity, founded in 2018 by veteran banker Corrado Passera, specialises in lending to small businesses and in managing bad loans which are expected to further increase as the economic damage wrought by the pandemic becomes apparents.

A portion of existing 130 billion euros ($154.7 billion) of corporate loans under moratorium could turn non-performing as borrowers may be unable to resume payments when debt holiday ends, CEO Passera said in press conference.

“We are ready to play our part”, he said, adding that he expects that 35 billion-40 billion euros could turn on ‘unlikey-to-pay’ (UTP) loans between 2021 and 2025.

UTP loans, unlike bad loans, are not yet in default and can be recovered by returning borrowers to health.

Under a new business plan through 2025, Illimity said it expected this year’s net income of 60 million-70 million euros to double to around 140 million in 2023 and further rise above 240 million euros in 2025.

The bank said it planned to pay dividends for a total amounts of 180 million euros over the five-year plan, with a first dividend to be paid on 2022 results.

Illimity said it had struck a wide-ranging agreement with ION, which would become a shareholder by subscribing to reserved capital increase and warrants, taking an up to 9.99% stake.

Under the accord with ION, Illimity will add 90 million euros in revenues by 2025 by licensing its IT platform.

While expecting the partnership with ION could extend in different IT areas to deliver more significant synergies, Passera ruled out that group will hold more than 10% of Illimity’s stake.

($1 = 0.84 euros)

Reporting by Valentina Za and Andrea Mandalà, editing by Angus MacSwan