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The bank revises its 2020 targets downward: estimated profit “not less than 3 billion”
by Luca Davi
3 ‘reading
The impact of Covid-19 is there and it is inevitable, but despite this, Intesa Sanpaolo confirms its capital solidity and its ability to generate profits even in a difficult moment like the current one.
Say are the first quarter numbers, which stand out a profit of 1.15 trillion euros: a much higher figure than market expectations (equal to 751 million) and which, in any case, seems to be growing 9.6% compared to 1.05 billion in the first quarter of 2019. But the earnings would be 1.36 thousand million – the best first quarter in history, if we do not consider the provision of approximately 300 million before taxes due to the Covid-19 impact that the bank decided to make.
The results for the first quarter of 2020 “strengthen Intesa Sanpaolo’s ability to effectively deal with the complexity of the context resulting from the Covid-19 epidemic,” explains CEO Carlo Messina in a statement.
The credit security buffer
With a provision of 300 million euros, Intesa is preparing to contain the credit losses that the pandemic outbreak is inevitably destined to generate, at least as regards the first quarter. It must be said that the crisis account will increase and the effects will gradually develop during the quarters. This is also why the group is considering a downward revision to earnings, lowering the target to at least $ 3 billion by 2020 (compared to more than 4.18 previously estimated) and 3.5 by 2021.
But precisely in view of the higher price to pay for the loans, whose perimeter is currently uncertain, the institution gives a clear message to the market. The available capital buffer is and is broad: if in addition to the provision already made, in addition to the net capital gain of approximately 900 million derived from the sale of Nexi, the bank can free up a buffer of approximately 1.5 billion extra provisions to manage the potential impacts of the Covid-19 epidemic in 2020. “It is our ability to be profitable and efficient that allows us to look ahead and strengthen the budget,” adds Messina.
More benefits and less impaired loans
The safety mattress is also the result of significant improvements in operational management and asset quality, as well as cost control. In the first quarter of 2020, Intesa Sanpaolo recorded a reduction in impaired loans, gross value adjustments, of approximately € 1.3 billion, from approximately € 35 billion since the September 2015 peak (from approximately € 22 billion excluding the sale of impaired accounts receivable in Intrum and Prelios) and around 23 billion since December 2017 (around 9 billion excluding Intrum and Prelios operations) that have already reached 88% of the reduction target foreseen for all the four-year period of the 2018-2021 Business Plan. The impact of impaired loans on total loans in March 2020, therefore, decreased to 7.1% gross of value adjustments and 3.5% net.
