Intesa Sanpaolo beat analysts' expectations and posted a profit of 503 million in the first quarter, against expectations of 281,5 million and the highest in the last eight quarters. Numbers that CEO Carlo Messina affirmed, "show the first positive signs of an economic context and of our business improving" and that offer a "positive starting point for the entire launch year of the 2014 Business Plan- 2017 presented just a few weeks ago”.
Profits were supported by good performance in net interest income and fee income. “We have also acted quickly – said Messina – to launch the first initiatives in the three areas defined in our Business Plan, New growth bank, Core growth bank and Capital light bank, including the creation of Mediocredito Italiano as a new financial hub for SMEs and the launch of Banca 5, which already has 1.800 relationship managers in the area”. The objective of the plan, however, wanted to remind Messina, is sustainable growth and profitability.
Also for Intesa Sanpaolo the coupons are back in the spotlight. According to analysts, in many European countries the authorities seem oriented towards not allowing the banks to allocate a portion of the profit as large as that envisaged by Intesa to dividends. A restrictive position of the national regulators which could invite to limit the remuneration of the capital and push for capital strengthening, creating problems for the dividend policy.
"We have a Common Equity Tier (Cet1) of 12,6% considering the pro-rata allocation of the dividend, I don't see any problem", replied Messina who recalled that Intesa Sanpaolo is "among the most capitalized banks in Europe, different story if for example we had values between 9% and 9,5%. The only constraint is the Cet1 level. If we ever need regulatory approval, it would be about distributing excess capital."
The fully loaded pro-forma Basel 3 Common Equity ratio rose to 12,6% from 12,3% at the end of 2013, the top level among the major European banks and equivalent to around €9 billion of excess capital and around €12 billion euros of capital buffer for the exercise of Asset quality review.
Returning to the accounts, it should be noted that impaired loans are slowing down and provisions are being reduced. In the period, the institute experienced an improvement in the credit trend with the flows of new non-performing loans deriving from performing loans decreasing: net flows amounted to €1,5 billion, against €3,6 billion in the fourth quarter of 2013 ( -58%).
In any case, 1,07 billion was allocated to cover credit risks, although down from 3,09 in the fourth quarter of 2013. To compensate for the drop in yields, Intesa then increased the duration of the government bond portfolio from 2,1 to 2,78 ,25 years old. "But - Messina specified - consider that no less than XNUMX billion government bonds expire during the year".
