- Nine-month profit meets year target
- To use the money for cleaning up bad loans before the new plan
- Targets the performance level of Nordic peers in the future
- Third Quarter Profit Beats F’cast Thanks to Low Loan Losses and Trading Gains
MILAN, Nov. 3 (Reuters) – Italy’s Intesa Sanpaolo (ISP.MI) has said he will get into top shape for a new business plan due in February by getting rid of problem loans, after reaching his profit target for 2021 in advance.
Italy’s largest bank by assets failed to significantly raise its full-year target after lower loan losses and higher trading income drove higher quarterly profits to market expectations.
Intesa has indicated that she will instead use the money to write down loans in the last quarter of the year, when she will focus on preparing a new business plan.
“I want to enter the new business plan without any (problem) related to (…) non-performing loans,” CEO Carlo Messina told analysts.
Under the current four-year plan, Intesa has lost 34 billion euros ($ 39.37 billion) in bad loans, exceeding its target of 8 billion euros.
Exposure to the country’s myriad of small businesses and the chronic stagnation of the Italian economy have made questionable loans the Achilles heel of Italian banks.
In the third quarter, Intesa’s provisions fell 44% more than expected from 2020, when the bank set aside nearly a billion euros to prepare for future damage to its loan portfolio from the COVID-19.
Messina noted that the outlook is now different thanks to the strong post-COVID rebound for which Italy was ready, aided by the boost from European Union stimulus funds.
“We will continue to work (…)
Net profit for the January-September period totaled 4 billion euros ($ 4.6 billion), corresponding to the minimum target that Intesa had set for the year, which it now hopes to exceed.
“A solid set of results but… maybe not enough to move the title forward from here,” said Jefferies, noting that Intesa’s shares, unlike those of several peers, offer no discount by. compared to the value of the bank’s assets.
Shares closed 0.4% lower against a 0.6% rise in the banking index (.FTITLMS3010), a performance attributed by Messina to the relatively expensive valuation of the company’s shares.
“We are one of the best banks in Europe and investors expect a lot from us,” he said.
Intesa’s profits confirmed the encouraging image of the sector portrayed by competitors such as the French BNP Paribas (BNPP.PA), the Spanish BBVA (BBVA.MC) and the British Lloyds (LLOY.L) – whose The results were also boosted either by lower provisions or by freeing up cash set aside against loan losses caused by COVID.
The less severe than expected fallout from the pandemic so far has allowed European banks like BBVA, BNP and HSBA (HSBA.L) to announce share buybacks, an option Messina said Intesa could consider in part of the new plan.
However, Intesa would first set a new payment target and a minimum capital buffer to be held above regulatory thresholds.
Intesa, whose share price relies on the bank’s high dividend yield, confirmed a 70% payout ratio on 2021 results, up from 75% this year.
Third-quarter net profit stood at 983 million euros, well above a Reuters consensus of 850 million euros.
Revenue amounted to 5.09 billion euros, higher than the 4.93 billion euros expected, mainly thanks to a strong performance of trading activities, whose revenues tripled year on year. the other.
Revenues from lending activities fell 6.1% per year due to negative interest rates, made worse by fierce competition and slowing credit growth in Italy after boom fueled by state guarantees .
Messina said, however, that companies were resuming their investments and that would boost lending in the future.
Net commissions were up 8.3% year-over-year on strong commercial banking and asset management activity in the post-containment months.
Intesa said its board of directors approved the payment of an interim cash dividend of 1.4 billion euros on November 24, bringing the dividend yield for the year to 8.3%.
($ 1 = 0.8636 euro)
Reporting by Valentina Za in Milan Editing by Agnieszka Flak, Steve Orlofsky and Matthew Lewis
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