GuruFocus -
- Net Income: EUR7.2 billion for the first 9 months, EUR2.4 billion in Q3.
- Net Income Guidance: Above EUR8.5 billion for the year, around EUR9 billion for next year.
- Earnings Per Share Growth: 20% increase on a yearly basis.
- Total Shareholder Distribution: EUR7.5 billion, including EUR3 billion interim dividend.
- Dividend Yield: 10%.
- Technology Investment: EUR3.5 billion deployed, 55% of applications cloud-based.
- Operating Costs: Down over 3% excluding labor contract renewal and tech depreciation.
- Common Equity Tier 1 Ratio: 13.9%, up 70 basis points since the beginning of the year.
- Net Interest Income Guidance: More than EUR15.5 billion for the year.
- Customer Financial Assets: Increased by EUR135 billion yearly.
- Commissions Growth: Up 12% in the first 9 months, 10% in Q3.
- Property & Casualty Contribution: Up 10% quarter-on-quarter.
- Administrative Costs: Decreased by 2% on a yearly basis.
- Gross NPL Stock: Down EUR900 million yearly.
- Annualized Cost of Risk: 25 basis points.
- Common Equity Ratio Increase: More than 30 basis points in Q3.
- Liquidity Ratios: Well above targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Intesa Sanpaolo (BIT:ISP) (IITSF) delivered a record net income of EUR7.2 billion in the first nine months of the year, with EUR2.4 billion in Q3 alone.
- The company confirmed its net income guidance of above EUR8.5 billion for the year and increased its guidance for next year to around EUR9 billion.
- Intesa Sanpaolo (IITSF) has a strong dividend yield of 10%, with a total distribution of EUR7.5 billion, including a EUR3 billion interim dividend.
- The bank is heavily investing in technology, with EUR3.5 billion already deployed, and plans to invest an additional EUR1.5 billion by 2025.
- Asset quality remains strong, with NPL ratios at historical lows and a common equity Tier 1 ratio of 13.9%.
- Net interest income showed resilience but faced challenges due to a 30 basis point drop in Euribor and weak loan volumes.
- Operating costs are down only when excluding the impact of the national labor contract renewal and depreciation for tech investments.
- The company faces potential risks from significant Q4 managerial actions aimed at strengthening future profitability.
- There is a need for further internal synergies and cost reductions, with plans for 9,000 exits over three years.
- The insurance income experienced quarterly declines, particularly in the life insurance segment, which had negative inflows earlier in the year.
A: Carlo Messina, CEO, explained that the bank has anticipated cost reduction actions, including a significant reduction of 9,000 employees, which will also reduce administrative and real estate costs. The bank plans to invest an additional EUR1.5 billion in technology by 2025, which will further enable cost reductions. Messina emphasized that Intesa Sanpaolo is in a unique position to achieve synergies without acquisitions, leveraging internal potential and technology investments.
Q: Is Intesa Sanpaolo comfortable with distributing more than 100% of profit, and how does it view capital deployment in Wealth Management?
A: Messina indicated that the bank is generating significant capital and has room for share buybacks, which will remain a primary method of capital distribution. He confirmed that the payout ratio will remain at 70%, but there is potential for significant buybacks, possibly using a portion of retained earnings. The bank is focused on organic growth in Wealth Management rather than acquisitions.
Q: Can Intesa Sanpaolo replicate high single-digit growth in fees and commissions with lower interest rates?
A: Messina expressed confidence in achieving high single-digit growth in fees and commissions, driven by Wealth Management and protection activities. He noted that the bank's outlook is conservative and that there is potential for double-digit growth if interest rates average around 2%.
Q: How does Intesa Sanpaolo view the strategic optionality of expanding asset management versus organic growth and share buybacks?
A: Messina acknowledged the theoretical opportunity for expansion but stated that the bank currently has no targets for acquisitions. Instead, Intesa Sanpaolo is focused on accelerating results through internal synergies and increasing market share in asset management and insurance.
Q: What are the expectations for loan growth and deposit conversion in Italy?
A: Messina expects loan growth to pick up due to fiscal incentives and the deployment of EU funds, projecting low single-digit growth in the loan book. He also anticipates a significant portion of deposits to be converted into assets under management, driven by improved economic conditions and interest rate reductions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.