Understanding St. Paul ha closed the first nine months of 2024 with numbers beyond expectations, and look at the 2025 with a net profit target revised on the upside, pointing to 9 billion euros. A goal higher than the “over 8,5 billion” initially forecast, and which the group intends to achieve through a series of management and operational interventions. “We generate significant synergies by leveraging internal potential, without the need for acquisitions,” underlined the CEO Charles Messina during the conference call to present the accounts. Good news for shareholders: the bank announced that in the first nine months of 2024 it had accrued a good 5 billion dividends to be distributed to members, in addition to the buyback 1,7 billion completed in October. “We have significant excess capital that gives us flexibility for additional distributions to shareholders this year and in subsequent years, in addition to the 70% payout,” the banker explained.
The market reaction was modest: Business Square il title rises by 0,66%, trading at 3,97 euros.
“The results of the first nine months of 2024 confirm Intesa Sanpaolo as a leader at European level: the stock market value achieved places us in the same group as Bnp Paribas and Santander, banks with a balance sheet size much larger than ours,” added the CEO. “Intesa Sanpaolo has developed a unique model in Europe for the consolidated leadership of its divisions serving families and businesses, the significant wealth management, protection and advisory component, the management of international activities focused on efficiency, the technologically advanced digital offering, the Banca Zero Npl status and an ESG profile of great international importance.”
Intesa Sanpaolo's accounts exceed expectations
The net profit of 7,2 billion euros in the first nine months of 2024, up 17,1% compared to the 6,1 billion recorded in the same period of 2023, Intesa Sanpaolo shows growing profitability. revenues netti rose 8,5% compared to the same period in 2023, driven by a Net interest rate jump of 11,5%, a increase in net commissions of 7,9% and a positive result from the insurance business, which increased by 2,8%.
Only in third quarter,Net income Intesa Sanpaolo's net assets stood at 2,4 billion euros, slightly down from 2,465 billion in the second quarter and 1.900 billion in the same period last year. Looking at the main items: net interest reached 3,942 billion euros, down 2,1% compared to the second quarter but up 3% on an annual basis, the commissions nice were 2,307 billion euros, down 3,4% compared to the previous quarter, but up 9,9% compared to the third quarter of 2023.
Asset performance and capital strength
Among the strengths highlighted by the bank, theoperational efficiency has remained high, with a relationship cost/income of 39,1%, placing the institute among the best European banks on this front. The cost of risk annualized is contained at 0,25 percentage points, with extra provisions for prudence of 900 million euros.
La credit quality remains robust in the first nine months of 2024, with an incidence of credits deteriorated equal to 1,1% of total credits net of adjustments and 2,2% gross. Applying the eba methodology, these percentages drop to 0,9% and 1,9% respectively.
THEexposure of the banking institution towards the Russia continues to decline dramatically: since June 2022, it has decreased by more than 87%, or approximately €3,2 billion, and now represents only 0,1% of the group's total customer loans. The majority of these cross-border loans to Russia are still classified as “performing” and placed in Stage 2, signaling a focus on solidity.
On the front of the capital, Intesa Sanpaolo confirms its solidity: as of September 30, the Common Equity Tier 1 stands at 13,9%. This figure includes accrued dividends (5 billion euros) already deducted, but does not include a potential benefit of approximately 120 basis points from the absorption of deferred tax assets, of which approximately 20 are expected between the fourth quarter of 2024 and 2025.
Dividend Coming: 17 Cents Per Share in November
The board of directors of Intesa Sanpaolo has approved an advance payment dividend of 17 cents per share, which will be distributed on November 20, 2024, with a coupon date of November 18. Overall, the bank expects to distribute a significant cash return, with 5 billion euros in dividends accrued in the first nine months and 3 billion of this amount already earmarked for the interim dividend in November. In addition, these dividends are added to a buyback of 1,7 billion euros, completed in October 2024. Messina stressed: "Our procedure involves waiting until the end of the year to propose the amount of the buybacks to the Board of Directors, but I am convinced that the proposal could be for a significant buyback. It is clear that we will have many options in terms of distribution to shareholders, and the payout will remain at 70%".
Intesa Sanpaolo: positive forecasts for 2025
For 2025, Intesa Sanpaolo forecast for 2025 a growth of the revenues, supported by stable net interest and an increase in fees related to wealth management and insurance services. The bank also expects a reduction in operating costs, despite investments in technology and a union agreement.
Il cost of risk remains content, supported by a high-quality credit portfolio and a low stock of impaired loans. In addition, it is expected lower tax burdens, as there will be no more contributions to the deposit guarantee fund.
The bank also commits to ensuring a strong distribution of value, with a payout ratio of 70% of consolidated net profit, and expects an increase in the dividend for 2024 and 2025 compared to 2023. Finally, the bank confirms its capital strength, with a target of Common Equity Tier 1 ratio above 12%, expected to be around 15% in 2025. “We are ready to outperform in any interest rate environment,” Messina concluded.
Messina: “No acquisition planned in asset management”
“Looking at the targets on the market, for us I don't see any type of target on which a transaction can be completed”. Responding to those who asked about opportunities for acquisition in asset management through the insurance subsidiary, taking advantage of its status as a financial conglomerate – as recently done by BNP Paribas – the CEO stressed that, although there are potential opportunities for capital savings, “I am sorry, but we will not use this opportunity” due to the lack of targets.
Messina expressed caution regarding potentials acquisitions, stressing that, at the moment, “today, to buy a bank that relies on the interest margin, you risk paying a value that can be reduced in the future. In terms of valuations, I think it is better to wait until the beginning of 2025, when the impact of the rate cut will be clearer.” This cautious approach is further justified by the fact that, in Europe, the only banks that focus on wealth management and protection are Intesa and Ubs. He highlighted how the group's options in Italy are “absolutely limited by the Antitrust”, suggesting that growth opportunities through acquisitions are currently constrained and require careful evaluation.
Technological transition and generational renewal
The company is accelerating the generational change , transformation digital, with a plan that includes 4.000 voluntary exits and 3.500 new hires by 2028, with particular attention to consulting roles in wealth management. In detail, the union agreement on voluntary exits and generational turnover will lead to costs in the order of 500 million gross of taxes and 350 million net of taxes to be accounted for in the fourth quarter of 2024
On the innovation side, Intesa Sanpaolo has invested 3,5 billion euros in IT and introduced Isybank, the digital bank that aims to reach one million customers by 2025. This project is part of a cloud-based technology model to improve efficiency and reduce operating costs.
Focus on wealth management and new digital channels
The bank continues to expand its business wealth management, protected & advisory, with digital tools such as Fideuram Direct, a digital Private Banking platform, which has already collected 74.200 clients and 2,84 billion euros in financial assets. In addition, a strategic coordination has been launched to encourage the growth of commission revenues.
Updated at 16.10 on Thursday 31 October
