Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Intesa Sanpaolo (IITSF, Financial) reported a record net income of EUR 4.8 billion for the first half of 2024, marking the best six months in 17 years.
- The company increased its net income guidance to above EUR 8.5 billion for both 2024 and 2025, reflecting strong financial performance.
- Earnings per share grew by 15% year-over-year, with plans to distribute over EUR 7.4 billion to shareholders, including a EUR 3 billion interim dividend.
- The common equity ratio improved to approximately 13.5%, indicating a strong capital position.
- Asset quality remains excellent, with non-performing loan (NPL) stock and inflows at historical lows, and a best-in-class cost-income ratio of 38%.
Negative Points
- Despite strong performance, there is caution regarding future profitability due to potential managerial actions and economic uncertainties.
- The company faces potential regulatory headwinds, including a 40 basis points impact from Basel IV in 2025.
- There is a noted decline in insurance income and deposits, attributed to seasonality and a shift in customer preference towards asset management products.
- The cost of risk is expected to be between 30 and 40 basis points, which may impact future profitability.
- Intesa Sanpaolo (IITSF) is limited in participating in further consolidation within the Italian banking sector due to its significant market share.
Q & A Highlights
Q: Can you walk us through the key P&L drivers for your net profit guidance of above EUR8.5 billion for this year?
A: Our net income profitability is accelerating, and we could exceed our outlook. Key drivers include a significant increase in net interest income, even with a reduction in Euribor, thanks to our hedging facilities. We expect net interest income to reach EUR15.5 billion this year. Commissions are also growing, supported by our wealth management and advisory services. Costs will remain flat, and the cost of risk is expected to be between 30 and 40 basis points. We maintain reserves to support future profitability.
Q: Given your strong capital position, why remain cautious about capital return?
A: We have sustainable profitability and a strong capital position, with no further regulatory impacts expected apart from Basel IV. We plan to propose a further share buyback at the end of the year, following our policy. Our dividend yield is above 10%, and we are confident in our ability to continue rewarding shareholders.
Q: Can you provide more details on the net interest income outlook for 2025?
A: Assuming a 3.6%-3.7% Euribor, we expect an increase of EUR900 million from hedging facilities compared to last year. Markup will remain positive, and we anticipate slight loan growth. In 2025, we expect further positive contributions from hedging facilities and loan growth, positioning net interest income between 2023 and 2024 levels.
Q: What are your thoughts on the sustainability of the cost of risk in the Italian banking sector?
A: We maintain a conservative approach to asset quality, with a sustainable cost of risk between 30 and 40 basis points. Italy's corporate sector is strong, and we see no signs of asset quality deterioration. We focus on maintaining coverage and derisking to ensure long-term sustainability.
Q: How much scope do you see for improving the cost-to-income ratio?
A: We aim to maintain a cost/income ratio between 40% and 45%. We are investing in technology while reducing other costs. We expect further branch reductions and IT cost savings as we move to the cloud. Our focus is on sustaining revenue growth and managing costs effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
