Earnings call transcript: Banca IFIS posts 9M 2026 loss as stock falls 6.6%

Banca IFIS announced a net loss of approximately EUR 67 million for the first nine months of 2026. The loss was primarily driven by one-off charges related to its strategic overhaul and the process of disposing of its non-performing loan (NPL) business. Despite the overall loss, the bank's ordinary operations remained profitable, with a profit of EUR 5 million, excluding the significant one-off items.

The stock price fell by 6.62%, closing at $9.74 from the previous level of $10.43, positioning the shares near the lower end of its 52-week range of $8.95 to $27.72. Banca IFIS reported a headline loss of EUR 67 million for the period, but emphasized that the core operations continued to be profitable.

Key highlights include:

- A EUR 72 million valuation adjustment on the NPL business under the IFRS 5 standard.

- Potential release of around EUR 2 billion in risk-weighted assets and a CET1 ratio improvement of over 2 percentage points upon completion of the NPL disposal.

- Illimity integration is proceeding as planned, with EUR 50 million in annual cost synergies already realized.

- Commercial banking revenues remained stable year-on-year, with pricing discipline maintained and average spreads above 330 basis points.

- SME and private customer lending production grew by 23% year-on-year, while salary-backed lending reached EUR 400 million in the first nine months.

- NPL cash collections amounted to EUR 280 million, surpassing internal expectations.

- The bank's CET1 ratio at the end of the period was 12.8%, including the NPL valuation adjustment.

Management outlined a transformative plan for 2026, focusing on restructuring, the NPL disposal, and remediation efforts following Bank of Italy inspection findings. The bank expects binding offers for the NPL business by mid-December and anticipates completion of the illimity merger and technology migration by early December. The NPL disposal is projected to release EUR 2 billion in risk-weighted assets and enhance CET1 by more than 2 percentage points, excluding any capital loss.

Investors analyzed the results, with the stock trading at a low P/E ratio of 2.34 and a Price/Book multiple of 0.31, indicating significant undervaluation relative to European banking peers. Despite the negative sentiment, the stock remains a potential value opportunity, as highlighted by InvestingPro's Most Undervalued list.