Intesa Profit Drops Less Than Estimated, Led by Commissions

Updated on
  • Net income drops 4.1% to 901 million euros in second quarter
  • Intesa posts capital gain tied to sale of Visa stake sale

Intesa Sanpaolo SpA’s second-quarter profit dropped less than analysts estimated, boosted by an asset sale and commission income.

Net income fell 4.1 percent to 901 million euros ($1 billion) from a year earlier, the Milan-based bank said in a statement on Tuesday. That beat the 738 million-euro average estimate of 11 analysts surveyed by Bloomberg. Italy’s second-biggest bank posted a capital gain of 170 million euros from the sale of its stake in Visa Europe Ltd.

Chief Executive Officer Carlo Messina, 54, is cutting costs to shore up earnings as record-low interest rates and a faltering recovery undermine income from deposits and lending. While Intesa emerged one of the best-capitalized lenders in the region’s latest stress tests, the company has lost about 38 percent of its market value this year, reflecting concerns about the health of Italian lenders, burdened by a pile of non-performing loans.

“These results position Intesa Sanpaolo at the very top in Europe in terms of profitability, driven by contributions from across all our divisions,” Messina said in a statement. The bank is moving toward a wealth management model and has “substantial upside in a very low interest rate environment,” he added.

The shares fell 2.7 percent to 1.85 euros at 2:47 p.m. in Milan after dropping as much as 4.6 percent in earlier trading, reflecting a wider market selloff. Italian lenders are among the worst performers on the 39-member Bloomberg Europe Banks and Financial Services Index, which has declined 31 percent this year.

Revenue increased to 4.61 billion euros in the second quarter from 4.51 billion euros a year earlier. Trading revenue rose 23 percent to 467 million euros, while commission income slipped 5 percent to 1.85 billion euros, less than analyst estimated. The lender’s loan-loss provisions rose to 923 million euros from 847 million euros a year earlier.

Intesa’s common equity Tier 1 ratio, a measure of financial strength, fell to 12.9 percent on a fully loaded basis from 13.1 percent at the end of March. The bank reiterated that it expects “an improvement” in pretax profit this year, with a commitment to distribute 3 billion euros in cash dividends.