illimity Bank SpA

MIL:ILTY

Earnings Call Transcript 2023-Q1

[Operator]

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the illimity Bank First Quarter 2023 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Corrado Passera, CEO of illimity Bank. Please go ahead, sir.

[Corrado Passera, executive]

Thank you. Good morning. Welcome to our Q1 2023 results presentation. We had a positive start to the year, and we have achieved a number of 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. 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 our IT platform will drive substantial profitability in 2023 and beyond. The Q1 core business trends are in line with our expectations. The impact of IT partnership deal makes this quarter not fully comparable with previous quarters.

All our 3 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. We have a very robust liquidity position with a liquidity buffer of nearly EUR 900 million in cash and government bonds. LCR is very high, exceeding 300%, NSFR at 114% is well above the minimum threshold.

illimity Bank's online platform experienced more than EUR 200 million 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. 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 unrealized losses on the hold to collect portfolio are negligible, amounting to less than EUR 15 million.

Moving to Slide 5. 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 growing 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 sectors comprising more than 10% of total gross credit book.

Moving to Slide 6 for asset quality. In Q1 '23, 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 partnerships on Slide 7. 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 pretax consideration of EUR 55.5 million will be recorded in 2023, along with an additional EUR 4.5 million for platform upgrades over the next 9 years. Additionally, we anticipate substantial royalties for at least 10 years, 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. 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 SME business. We anticipate an increase in business origination starting from the second quarter 2023.

Our net interest income and net commissions experienced a 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 year-on-year comparability of other income was affected by the termination of the previous IT agreement and lower revenue from closed positions as Q1 '22 had particularly high figures in this regard.

Our net profit for Q1 stood at EUR 7.8 million. And also here, a direct comparison with the corresponding period last year is not feasible due to the EUR 8.5 million pretax impact from the consensual resolution of our previous IT platform license agreement. We expect profitability to accelerate over the next quarters.

Slide 9. 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% year-on-year to reach EUR 2.3 billion. Despite some early loan reimbursements, the stock was up 4% on a quarterly basis.

The Investment Banking division in Q1 originated EUR 90 million in new investments, nearly half of the total volume of 2022. The total investment volume reached EUR 178 million, showing a notable 33% Q-on-Q growth.

Overall, operating leverage improved further. The increase in the Investment Banking division's cost-to-income ratio was driven by considerable higher volumes compared to Q1 last year. The combined pretax profit increased significantly by 74% year-on-year.

Moving to Slide 10. Our SME business is expected to gain further momentum in the coming months, thanks to a valuable pipeline ahead. The turnover business achieved consistent and robust business origination with a pipeline for the next months that is twice the size of Q1 '22.

Crossover and acquisition finance is also expected to accelerate with a pipeline above EUR 130 million. The factoring business saw a turnover doubling year-on-year. This drove the Q1 volumes even higher than the seasonally high fourth quarter of last year. Regarding the investment banking activity, we anticipate further growth in both the corporate solutions and structuring businesses. This is based on a remarkable pipeline we currently have in place.

Moving to Slide 11. In our Distressed Credit division, the NPE transaction market has limited activity in the first month of the year. As a result, both investments and disposals were affected leading to a lower pretax profit in the quarter, in line with our expectations.

However, the market has gained momentum since April, and we are currently involved in a pipeline valued at EUR 200 million. The notable volume of Stage 2 loans at the system level presents a continuous and profitable opportunity. Our asset quality has shown good resilience with strong cash collections.

Moving to Slide 12. A question that often arises concerns the stability of the P&L contribution from our Distressed Credit business. As evident here, the P&L contribution is not reliant on model revaluations but is supported by a robust and reliable cash flow generation that exceeds twice the amount, bolstered by various workout strategies aimed at maximizing revenue and minimizing recovery time.

Moving to Slide 13. The distressed credit portfolio maintains strong asset quality due to our asset mix and prudent pricing models. 84% of our total investment is secured with well-diversified real estate collaterals.

The net book value of our assets at EUR 700 million is significantly lower than the judicial value of real estate collateral, which is close to EUR 1 billion and to the open market value, which amounts to EUR 1.7 billion. Consequently, we possess a substantial buffer exceeding twice our net book value.

Let's look now at ARECneprix on Slide 14. Last year, the merger between neprix and AREC with approximately EUR 10 billion in assets under management resulted in the creation of Italy's third largest player in the industry of corporate UTP credit management.

ARECneprix is a trusted partner for banks and investors in managing large-scale real estate-backed credit portfolios. It offers end-to-end support from origination to due diligence and asset management for secured and unsecured corporate assets.

In terms of Q1 figures, we reported revenues of EUR 8.4 million, EBITDA margin of 23%, pretax profit of EUR 1.7 million. The profitability in 2023 is expected to benefit from an important pipeline of third-party mandates.

Slide 15, illimity SGR. We established our SGR to enhance our business capabilities and optimize capital utilization. Through the SGR, illimity essentially became limitless.

In April 2023, we introduced our third fund, illimity selective credit, targeting the financing of performing companies dedicated to sustainable growth, development, digitalization and internationalization. We achieved a successful first closing with EUR 90 million, attracting various investors, including the Italian Investment Fund as an anchor investor.

Since the creation of our SGR, our total assets under management has grown to around EUR 440 million in just 2 years. This growth is expected to continue as we launch new funds and leverage the increasing synergies with our Growth Credit division and Distressed Credit division.

Now let's move to -- on Slide 16, our tech initiatives. Our 3 tech initiatives are gaining traction. Quimmo, the leading prop-tech in the Italian real estate brokerage market is accelerating its entry into the free market through the strategic partnership we just announced with COIMA. b-ilty, the first Italian fully fledged digital offer for small corporate, is now fully operational from Q1. Hype, the Italian retail fintech leader is advancing its journey toward breakeven.

The combined negative contribution to the group P&L in 2022 that was EUR 20 million pretax is expected to reduce significantly in 2023 to then become positive from 2024. These tech initiatives will boost new equity creation for the illimity Group. And it is important to acknowledge that the true value of such assets is not solely determined by short-term financial performance.

Slide 17, moving to Quimmo. As announced last week, our prop-tech, Quimmo, has formed an important equity partnership with COIMA, a leading player in property asset investment and management of property assets for institutional investors. These partnerships accelerate our strategy to enter the open market and expand our portfolio in the real estate sector.

Under the agreement, COIMA will acquire an 18% stake in Abilio Quimmo by transferring 100% its fully controlled company, Residenza Porta Nuova, RPN, a prestigious Milan agency that specializes in marketing and leasing high-end residential properties.

Quimmo is already the top digital brokerage platform for the judicial real estate market, managing assets and capital goods worth EUR 2.4 billion with 94% coming from noncaptive business. Assets under management will further expand due to a pipeline exceeding EUR 1 billion in residential properties resulting from the partnership as well as new third-party mandates. Quimmo is nearing breakeven, and with the addition of this new partnership will accelerate toward profitability in 2023.

Slide 18, b-ilty. Our investment in b-ilty combines our expertise in SME lending with advanced technologies to address the underserved market of over 1 million small corporates in Italy alone. In Q1 '23, b-ilty launched its commercial activity after investing over a year in developing its artificial intelligence credit engine.

Customer loans have already reached EUR 70 million with a promising pipeline of more than EUR 150 million. We anticipate further volume growth in 2023 driven by expanded commercial distribution agreements. All customer loans are backed by public guarantees.

Slide 19. Hype is the leading fintech for retail clients in Italy with 1.7 million users. Unlike other international operators in the sector that expanded into multiple markets without establishing a strong national leadership, our platform retail model focuses on achieving absolute leadership in a significant market before considering selective geographical expansion.

In Q1, Hype reported an 11% year-on-year increase in its customer base with 22% paying subscriptions. Transaction numbers grew by 36% to 29 million, and the first contribution margin is steadily moving towards breakeven. With our new CEO, Hype's growth strategy is set to accelerate.

Moving to Slide 20. As a native ESG company, sustainability is the cornerstone of our operations, penetrating our targets, processes and governance rules. Our ESG-centered approach has resulted in further remarkable rating improvements on last year.

Here are just a few of our notable achievements. We obtained carbon neutrality in both Scope 1 and Scope 2 emissions. Our gender pay gap is among the lowest in the sector at just 4.6% We are proud holders of gender equality certification and have been named the Best Workplace for 4 consecutive years. We recently became signatories of the principles for responsible investments through our SGR. Moreover, we launched the illimity Foundation, supporting [indiscernible] regeneration projects.

Moving to Slide 21, the last one, our outlook. Considering the anticipated revenue from the new IT platform deal and the robust pipeline of business origination, we expect a stronger quarterly net profit progression in the second half of the year. We are confident in announcing that we project to book a net profit of over EUR 100 million in 2023. For the time being, we limit ourselves to say over.

Silvia will now provide a detailed overview of our Q1 2023 results. Silvia?

[Silvia Benzi, executive]

Thank you, Corrado. Good morning, everyone. Let's move straight ahead to the balancing figures on Slide 23. Total assets in the first quarter remained broadly stable, firmly above EUR 6 billion. Our liquidity is robust with a buffer of EUR 900 million.

Net customer loans increased further by 4% quarter-on-quarter and by a strong 39% year-on-year. The growth in volume this quarter was driven by our performing loans business. The Growth Credit division posted a nice 4% progression quarter-on-quarter with strong business origination, partly offset by other repayments.

b-ilty and the Investment Banking division reported a remarkable growth, 44% and 33%, respectively, confirming their momentum is taking off. These risk-weighted loans and investments remained broadly stable in Q1.

All our businesses present a solid pipeline for the coming quarter. Our securities portfolio remained largely stable in this quarter. And finally, looking at the liability side of our balance sheet, customer funding increased further in the quarter driven especially by the retail component while wholesale funding posted a 15% decline as a number of short-term financing came to maturity.

Moving to profit and loss on Slide 24. First of all, let me remind you that Q1 results are not fully comparable with the same period last year because of an EUR 8.5 million negative pretax impact from the termination of the previous license agreement on the illimity IT platform that was effective from December 2022. Excluding this, core business trends were in line with the projected trajectory.

Looking at the key drivers in detail. Net interest income is up by 5% quarter-on-quarter and by a strong 34% year-on-year. This trend is the result of 2 components: first, interest income advanced strongly driven mostly by business origination and partly by better market rates. Second, interest expenses reported a step-up in Q1 due to a sizable wholesale term funding issued in December last year and also higher rates on new funding. From now onwards, we expect growth in this component to be more gradual.

Net fees advanced double-digit year-on-year with all divisions contributing to the trend, while quarterly comparison is affected by seasonality. Other income comparability with the first quarter last year is affected by the above-mentioned IT termination.

Profit from closed position came in a bit soft this quarter. And this is due to the limited dynamism of the distressed credit market, which curtailed opportunities for investment and disposal.

Operating costs have decreased by 6% quarter-on-quarter while increasing by 11% year-on-year. This trend can be attributed to the annualization of costs related to the completion of the operating structure and IT investments made throughout 2022. From 2023, our operating structure will largely stabilize.

Asset quality, as expected, showed some signs of worsening. Nonetheless, our cost of risk remain contained, supported by the high share of loans with public guarantees. Finally, we booked a one-off negative component as a consequence of the settlement related to the mutual resolution of the previous IT platform agreement.

Let's now have a look at segment reporting on Slide 25. Distressed credit had a soft start in 2023 as expected due to transactions in distressed credit tending to be seasonally lower at the beginning of the year. Revenue of EUR 42 million is down 22% on Q1 last year, which benefited from a couple of very large NPE disposal transaction. [indiscernible] remains solid at below 50%.

Growth credit was the key driver of profitability at the group level with revenue doubling and costs declining compared to a year ago. That's leading to visible operating leverage gains. The pretax profit stood at EUR 18 million, nearly doubling the level recorded in Q1 '22.

Investment banking posted EUR 2.1 million pretax profit in line with Q1 last year. Revenue increased by 11% year-on-year, and increasing cost is linked to the new business origination with a large transaction structured at the end of the quarter with relevant revenue will be visible in Q2.

Taken all together, the SME business made up of growth credit and investment banking, generated a combined pretax profit of EUR 20 million, up 74% year-on-year.

b-ilty Q1 results clearly show the activity has kicked off. Revenue has increased, while costs are down compared to Q1 last year as 2022 was a setup year. Loan loss provisions are mostly related to the initial lending exposures, which were underwritten before the fine-tuning of the automated credit engine. Our asset management company benefited from the launch of new funds.

Results at the CIO division are difficult to read as comparison with the first quarter last year is affected by the termination of the previous IT platform license agreement. It's worth reminding, though that the significant revenue and royalties generated by the agreement with Engineering will be booked in forthcoming quarters.

Finally, corporate center came largely in line with Q1 last year. The headquarters setup and control functions are now largely completed. And from 2023, these costs will be highly scalable.

Let's now move to our KPIs on Slide 26. First, cost income ratio. Q1 print is affected by the deal on IT platform and by a soft distressed credit market. We expect cost income ratio for the full year 2023 to fall well below the level recorded in 2022 as a result of improving profitability at our core businesses coupled with a significant revenue related to the contract with Engineering.

Second, asset quality. As expected, some of our organic exposure moved to nonperforming, bringing the organic NPE ratio to 3.7%, 4.7% including the former Banca Interprovinciale loan book. Nearly 80% are classified as past due or unlikely to pay and are currently undergoing a restructuring process. And given the high shares of guarantee on insured loans, our cost of risk remains contained to an annualized 43 basis points. And thirdly, capital ratios and liquidity are very solid.

Looking at them in more detail on the following slides, starting from capital on Slide 27. Our capital base is very robust with common equity tier 1 ratio phasing of 15.6%. That is more than 650 basis points above our requirement, and total capital ratio is above 20%.

The decline in common equity tier 1 capital this quarter is entirely due to the removal as of the 1st of January 2023 of the positive prudential filter on the negative valuation reserve of our securities portfolio. Risk-weighted assets remained largely stable in the quarter.

Let's move to our funding on Slide 28. Since the beginning of our journey, we have accessed all funding sources, resulting in a well-diversified funding mix. During the first quarter, we successfully recorded further growth in the high-quality retail funding component, which at the end of March stood at approximately EUR 2.6 billion.

The wholesale funding component declined in Q1 as we reimbursed some short-term financing, mostly ECB. As a result of those moving parts, total funding decreased by 6% in the quarter. Retail funding represents more than half of illimity's overall funding and will play an increasingly important role in 2023.

Let's have a closer look at it. Slide 29. Retail funding advanced by 3% in Q1, but this is a result of 2 very different trends. Net funding from our domestic platform advanced by over EUR 200 million, a remarkable double-digit progression while funding from the German pan-European platform Raisin declined in execution of our strategy.

84% of retail funding stock is term funding. We recently launched our new retail banking offer. It entails new current account products. And for the first time, we introduced a remuneration inside deposits.

We expect over time this feature to become the new normal in a world with structurally high interest rates. It reflects our commitment to customer satisfaction, and we wanted to anticipate the new trends at the beginning of the quarter that we see a likely acceleration in volume growth based on a strong pipeline.

Let me conclude with a quick snapshot of our securities portfolio on Slide 30. We aim at prudent strategies for managing our securities portfolio, and this is confirmed as follows. The portfolio we hold for liquidity purposes amounted to EUR 787 million as of the first quarter and represents a touch more than 90% of the bank shareholders' equity, which is among the lowest in the Italian banking system.

Unrealized losses on securities accounted for in the hold to collect strategy are negligible, less than EUR 15 million, below 2% of our equity while the bulk of securities accounting for in the hold to collect strategy is under hedge accounting, which largely mitigates interest rate risk. Lastly, we keep an average duration relatively low at 3 years.

I now hand back to Corrado, so we can begin the Q&A.

[Corrado Passera, executive]

Exactly. We are ready for the Q&A session.

[Operator]

Thank you. This is the Chorus Call Conference operator and we will now begin the question-and-answer session. [Operator Instructions] The first question is from Manuela Meroni with Intesa Sanpaolo.

[Manuela Meroni, analyst]

I have 5 questions. The first one is on the guidance. You provided a guidance of net income over EUR 100 million. If I look at your guidance as of February this year, it was EUR 100 million. But if I add EUR 24 million that should come from the different partner in the [indiscernible] I should have EUR 124 million as a guidance.

So I'm wondering if I'm missing something or if you are seeing some potential headwinds going forward? Or if you can confirm your guidance -- previous guidance excluding the impact of the IT new partner.

The second question is on the cost of funding. You have 2.7% cost of funding this quarter. But if I remember correctly was the guidance for the full year 2023. So I'm wondering what you are expecting. So if you expect it to stabilize at this level for the remaining part of the year or we are expecting maybe some additional increase. And what is the cost of the customer deposits?

The third question is on your partnership with Engineering. You mentioned the possibility to account for significant royalties. So I'm wondering if you can give us an idea of the magnitude of the royalties that we expect to account for each year.

And last question is on the increase of the nonperforming loans, gross and performing loans ratio. Could you please provide us a guidance for the rest of the year so if we have to expect additional increases?

And actually, I have a last one on the closed position. They were quite soft this year in this quarter. I know that it's difficult to anticipate the level of income from closed position. But I'm wondering if you have added some specific items for this low level? And what is the level of income from closed position embedded in your full year guidance?

[Corrado Passera, executive]

I will start, and then I will let the stage to Silvia. We decided to correct, if I can use this word, our guidance by saying that we will obviously go beyond 100%. But we have decided not to go more in detail, and we will further illustrate our guidance in the next quarters.

Obviously, the deal we have signed with Engineering will increase our expectations for the year results. Cost of funding to Silvia. Partnership, another question I will take for myself.

Yes, we believe -- not only we believe, but we count on a flow of royalties that we expect to be certainly higher than the amount that we received this year. So many -- those in the millions, but we don't exclude even higher figures. But it will not be reasonable to be more precise in terms of figures. In any case, a significant contribution to our business plan results. NPE, I leave it to Silvia, and closed position, Silvia or Andrea will elaborate.

[Silvia Benzi, executive]

Okay. So I might start with the cost of spending. So the blended average cost of spending for the quarter was 2.7%. You're right. That was in line with the guidance we gave for the full year. It was a touch above what we were expecting at the beginning of 2023. And the reason being that we had a little bit different mix in funding in Q1 that will rebalance towards the end of the year and also the interest rate market were a bit higher.

So we can say that the outlook for the full year has moved up but not much by [indiscernible] basis points. So overall, we expect our cost of funding for the full year to remain in the region or below 3%.

In terms of the gross organic NPE ratio, we were expecting some sort of deterioration going into 2023. We are talking here about a few positions moving into the Stage 3 rate.

And let's bear in mind the overall organic NPE, more than 60% is assisted by public guarantees. And all of these exposures are currently involved in processes or procedures to restructure the financial situation with the aim of relaunching the business. So we could expect some of those positions to reduce in the overall exposure that -- we have not disclosed kind of an estimate for the overall ratio between now and the end of the year.

We might expect some volatility up and down. But overall, with the big bulk of the exposure being guaranteed or insured, we would expect the cost of risk to remain more or less in the region where -- what it was in Q1 for the rest of the year.

[Unknown Executive]

Okay. In relation to closed position, here too, if we make a comparison with the first quarter of the last year, we are lower because the first quarter of the last year was influenced by very important disposal. In relation to the full year, our estimation that we will be more or less in line with the total income from closed position that we have in 2022.

[Corrado Passera, executive]

Yes. This -- let me summarize in a way the answers on cost of funding, NPE ratio and closed position. The word is in line. We are in line with our expectations and with our budget targets. What makes the Q1 results not comparable or it's not easy to understand is because we had the effects of the consensual closing termination of the previous IT agreement, and the effect of the new one will only come from the second quarter. But all the management variables are in line with our expectations. If I can add, probably the SME business is even ahead of our expectations.

[Operator]

The next question is from Andrea Lisi with Equita.

[Andrea Lisi, analyst]

The first one is again on the revenues from distressed closed position, which were quite low in the quarter. Just to understand if, in some way, these are correlated with the acquisition of NPL in the market as also the origination was weak because of soft market. So if there is any kind of correlation between these 2 items or not?

And a second question, which I ask you if you can elaborate, is your expectation on the distressed market going on because we have seen banks that are reporting positive results that are saying that there are no signs of increased [indiscernible] rates still below 1%.

So is the environment worse with respect to what have you expected and embedded in the plan? If yes, how do you think you can offset? If not, if you can elaborate on your opportunity?

[Unknown Executive]

Okay. In relation to the first question, in terms of correlation between new portfolio and new market and closed position impact, yes, there is a sort of correlation. When you typically acquire a portfolio in the first month that you are servicing that portfolio occurs the closed position. Then with the softer market that we had in this first quarter is logic to see a lower impact in terms of closed position.

[Corrado Passera, executive]

One point we should not forget in comparing other income '22 and '23, the '23 figure and that's also the 4.3, let me use the word loss, related to the termination of the previous IT agreement. And that has to be reminded.

[Unknown Executive]

In relation to the evolution of the NPE market, we see our first quarter very soft, as we said, but we see as well a very important pipeline for the next months. And we are sure that we'll get in line with our budget expectation for the full year.

[Operator]

[Operator Instructions] The next question is from Anna Benassi with Kepler.

[Anna Maria Benassi, analyst]

I'm calling to ask an update on the new strategic projects that are not so new, but just an update, in particularly on Hype but also Quimmo. So what is the progression? And I've seen that in the Investment Banking division, which is small all in all, but things are going well, and the pipeline look rich. Can you also please comment on that?

[Corrado Passera, executive]

As far as Hype, we gave the last -- the latest figures. The leadership of Hype is confirmed. But what is even more important, we are demonstrating that the safest way for managing this kind of ventures is accumulating a clear, strong national leadership first, move to selling products that are not only limited to payments and only at that point, move to other geographical markets.

What is happening with many other players, international players that have decided to move very differently is proving that our strategy is the right one. So we first invested very significantly on technology. We developed the customer base. We will certainly -- passed 2 million very early, very, very, very rapidly.

And now progressively, we are adding new products to serve those customer base. Breakeven will be reached between probably next year, but we will make this kind of guidance later in the year. The new team is almost completely onboard. So we are very confident that Hype will result at the European level as one of the most solid, most resilient kind of retail platform, digital retail platform.

Quimmo as we said very, very clearly, it wants to reinforce its position on the digital market where we are already the leading player. But the most interesting potential is the free market. In order to enter the free market, that is a very fragmented market. No real national player has been created yet, just a number of franchising kind of networks.

So we are moving in that market to leverage on our strong platform set of services and create a national player of this single market made of judicial and private components. In order to do that, we needed the skills, the experience, the credibility of a player in the market, in the free market.

And we were lucky enough to convince one of the strongest player, one of the best reputed player on the market, the COIMA Group, to join our effort. It might be that already in 2023, Quimmo, the new Quimmo reaches breakeven. As far as the Investment Banking division, I leave it to Fabiano, who is the boss of that division.

[Unknown Executive]

Thank you, Corrado. So basically, as you have seen in the presentation, the pipeline is very strong, both in terms of mandates already signed and investment opportunities. We will go ahead with our strategy of high ROE and capital-light business. And we expect for the 2023 to have a better profit before taxes compared with 2022.

[Operator]

Ms. Benassi, do you have any further questions?

[Anna Maria Benassi, analyst]

Sorry. No, I was on mute.

[Operator]

[Operator Instructions] Gentlemen, Ms. Benzi, there are no more questions registered.

[Corrado Passera, executive]

Okay. If nobody else presses star and 1, let me just thank all the participants and confirm the overall message of this presentation. The first months of the year demonstrate, I believe, the resilience of illimity, but even more its ability to continually respond to market opportunities.

At present, we have communicated that our project profit of 2023 will surpass the previously stated guidance of EUR 100 million. And that's what we believe, and we believe it's prudent that we await further developments before disclosing the exact extent of this increase.

We are confident that this is very important because it's not only '23, but our business plan targets, we are confident to achieve our long-term profitability targets. Thanks a lot to everybody.