By Valentina Za
MILAN – Falling loan losses and a higher trading income helped Italy’s biggest bank, Intesa Sanpaolo, beat market expectations with its quarterly results on Wednesday, meeting its full-year profit goal ahead of time.
Intesa said net profit in the January-September period totalled 4 billion euros ($4.6 billion). The figure represents the minimum goal Intesa had set for the year, which it now expects to surpass.
The lack of “meaningful change to the full-year 2021 profit guidance … may raise eyebrows,” Jefferies said in a note.
“Overall, a solid set of results but … may not be enough to push the stock on from here,” the broker added, noting that Intesa’s shares, unlike those of several peers, offer no discount compared with the value of the bank’s assets.
Intesa’s earnings confirmed the encouraging picture for the sector painted by rivals such as France’s BNP Paribas, Spain’s BBVA or Britain’s Lloyds – whose results were also boosted by either shrinking provisions or the release of cash set aside against COVID-driven loan losses.
The more benign than expected fallout from the pandemic so far has allowed European banks like BBVA, BNP and HSBA to announce share buybacks.
Intesa, whose share price draws support from the bank’s high dividend yield, confirmed a 70% payout ratio over 2021 results.
“In a European context where more banks are applying more proactive remuneration policies, we’d think Intesa would benefit from management rising the bar again on this front,” UBS analysts said.
Intesa is expected to present a new business plan in February 2022.
Third-quarter net profit came in at 983 million euros ($1.1 billion), well above analysts’ estimate of 850 million euros compiled by Reuters.
Revenue totalled 5.09 billion euros, above the expected 4.93 billion euros, thanks mostly to a strong performance from trading activities, where income tripled year-on-year.
Income from the lending business was little changed quarter-on-quarter, while falling 6.1% annually due to negative interest rates, compounded by intense competition and slowing credit growth in Italy.
Net fees, on the other hand, rose 8.3% year-on-year thanks to robust commercial banking and asset management activity in the post-lockdown months, while easing 1.9% from the second quarter.
Provisions against loan losses fell a larger-than-expected 44% from July-September 2020, when the bank put aside nearly 1 billion euros to prepare for future damage on its loan book from COVID-19.
Shares retreated slightly after the results, falling 0.6% by 1325 GMT, against a 0.2% drop in the banking index.
Intesa said its board had approved paying a 1.4 billion euro cash interim dividend on Nov. 24, bringing the dividend yield for the year to 8.3%.
($1 = 0.8636 euros)
(Reporting by Valentina Za; editing by Agnieszka Flak and Steve Orlofsky)
