Intesa Sanpaolo SpA (ISP) Chief Executive Officer Carlo Messina targets a return on equity for Italy’s second-biggest bank higher than 10 percent in the new business plan he’s preparing.
“My main priority is to prepare a bottom-up business plan,” Messina said in an interview with Francine Lacqua on Bloomberg Television at the World Economic Forum in Davos, Switzerland. “The target is a ROE in excess of the cost of equity, so higher than 10 percent.” Intesa had a 3.3 percent ROE in 2012.
Messina, who replaced Enrico Cucchiani in September, expects to reach the ROE target at the end of a three or five-year business plan that will be released by spring. The CEO faces the challenge of bolstering profit after Italy’s longest recession in two decades and low interest rates squeezed profit margins.
“We will work again on cost control as the main target is to increase revenue through the potential in our retail network,” Messina said. “There is also a lot of potential in private banking, wealth management, corporate and investment banking as well as in the foreign network.”
The bank already meets fully applied Basel III capital rules, Messina said. The bank’s core Tier 1 capital ratio, a key measure of financial strength, rose to 11.5 percent at the end of September, with an estimated common equity Tier 1 ratio of 11.2 percent, Intesa said Nov. 13.
Intesa, which is one of the 15 Italian banks that will be reviewed by the European Central Bank this year, will emerge strongly from the assets review, according to Messina.
“The exercise has to be rigorous and carried out without mercy,” he said. “In Italy, there will be banks that will pass easily and others with difficulty.”
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