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Intesa to Use ECB Funds for Credit, Government Bonds, CEO Says

Intesa Sanpaolo SpA Chief Executive Officer Enrico Tommaso Cucchiani said funding from the European Central Bank will be used to provide credit and to purchase Italian government bonds.

“We will use part of the ECB funds to buy Italian government bonds, considering that there are significant amounts expiring this year,” he said today at a Milan conference.

Intesa, Italy’s second-biggest bank by assets, requested 12 billion euros ($16 billion) in the last ECB’s auction Dec. 21, using bonds guaranteed by Italy as collateral. The lender expects to participate at the next ECB’s refinancing operation, Cucchiani said, adding that the amount of its request will depend on the conditions offered.

The ECB, which gave Italian banks about 116 billion euros of 1-percent three-year loans in December, will offer unlimited funding on Feb. 29 in its second longer-term refinancing operation.

“The ECB contributed to easing the access to the liquidity, being essential for some banks and useful for other banks, including Intesa,” Cucchiani told reporters.

Bond Buyback

Intesa isn’t considering additional repurchases of bonds after announcing a buyback of as much as 3.8 billion euros yesterday, Cucchiani said. The offer is part of the lender’s effort to boost capital.

Cucchiani, who replaced Corrado Passera in November, said that the bank received a high request of unsecured bonds sold by the bank last week, a positive signal from investors. “Intesa’s core Tier 1 ratio is enough to face the crisis,” he said.

Intesa, which is the only Italian bank under the European Banking Authority’s review that doesn’t need additional capital, had a core Tier 1 ratio of 10.2 percent as of Sept. 30. The Milan-based-bank posted third quarter profit of 527 million euros, and expects net income of 4.2 billion euros by 2013 and 5.6 billion euros in 2015.

“The bank is international enough, and already has what it needs,” he said.

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