Intesa Dividend Tops Target Despite Decline in Profit

  • Intesa plans to distribute a dividend of 14 cents a share
  • Earnings hurt by 376 million euros of one-time charges

Intesa Sanpaolo SpA said fourth-quarter profit dropped 73 percent after it factored in its contribution to winding down four smaller Italian lenders. It proposed a dividend that exceeds its target.

Net income at Italy’s second-biggest bank fell to 13 million euros ($14.6 million) from 48 million euros a year earlier, missing the 78 million-euro average estimate of eight analysts surveyed by Bloomberg. Intesa doubled its annual dividend to 14 cents a share from a year earlier. That amounts to a payout of 2.4 billion euros compared with a target of 2 billion euros, the Milan-based bank said in a statement Friday.

“The proposed dividend was better than expected,” Luigi Tramontana a Milan-based analyst at Banca Akros SpA, wrote in a note to clients. Given the higher dividend payout, capital is lower than forecast, while results are in line with expectations, he said.

Chief Executive Officer Carlo Messina is looking to improve asset quality and expand businesses such as asset management and insurance as low interest rates erode income from deposits and lending. With Italy’s economy expanding, the bank expects to exceed targets set out in a four-year business plan that runs through 2017.

Higher Costs

Shares rose as much as 4.8 percent after earnings, and were up 1.2 percent to 2.51 euros as of 2:20 p.m. in Milan trading, giving the bank a market value of about 42.1 billion euros. The stock has declined about 19 percent this year.

Intesa expects higher revenue this year, driven by fees and customer loans, it said in the statement. The lender reiterated its commitment to distribute 3 billion euros in cash dividends for 2016.

Net income from fees and commissions rose to 1.92 billion euros from 1.81 billion euros, while net interest income declined to 1.95 billion euros from 2.06 billion euros.

Operating costs rose 6 percent to 2.49 billion euros, driven by personnel expenses, the bank said.

“Results are below consensus expectations mainly due to higher staff costs,” said Azzurra Guelfi, an analyst at Citigroup Inc. “The market will look for an explanation of the higher costs.”

Intesa booked 376 million euros in one-time charges, amounting to its share of the country’s cost of rescuing four regional banks. It set aside 923 million euros to cover loan losses in the quarter, compared with about 1 billion euros booked a year earlier.

The bank’s common equity Tier 1 ratio, a measure of financial strength, fell to 13.1 percent as of Dec. 31, from 13.3 percent at the end of 2014.

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