There was a small one-off provision in the first quarter but, that aside, trading was in line with management expectations and Banca Sistema Spa (LON:0R9Hmi) continues to focus on delivery of its recently published three-year plan which, on our estimates, points to substantial growth in receivables and earnings between 2018 and 2020. The shares in this specialist lender remain modestly valued, both in relative and absolute terms.
Q118 shows strong loan and income growth
Factoring receivables and pension and salary-back loans continued to show good year-on-year growth at 35% and 68%, respectively. As expected, the shift in loan mix towards lower-risk/lower-yield assets, including VAT receivables, is resulting in a reduction in the interest income margin, but this is coupled with low impairment levels (22bp) and longer duration. The growth in pension and salary backed (CQ) loans also contributes to this mix change at group level. Interest cost was amplified by a one-off €0.8m provision related to the TLTRO funding rate applied in prior periods and, while reported net earnings growth was limited to 7% year-on-year (to €4.7m), adding back the provision would result in growth of 18% (to €5.2m).
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