Intesa Sanpaolo BP: from bank to asset manager

As reported by Reuters  Intesa SanPaolo set an ambitious goal to almost halve its stock of bad loans and boost net income. The new business plan that will be released on Tuesday targets 6 billion euros ($7.4 billion) in profits in 2021 on rising interest and fee income. This is consistent with the recent  history of the bank that has led a shift among Italian banks towards fee-earning businesses and last year considered a bid for insurer Assicurazioni Generali.

Intesa, which reported a 3.8 billion euro net profit for 2017 net of an extraordinary state contribution, said it would halve its gross impaired debts to 6 percent of total loans in 2021 compared with 11.9 percent at the end of last year.

Yielding to regulatory pressure to cut soured debts faster, Intesa in January started discussing the sale of a portfolio together with a stake in its debt collection unit to Sweden’s Intrum Justitia.

The bank confirmed it would move its debt recovery and real estate businesses into a new company and consider a partnership.

Until now the bank had bet on recovering bad debts internally, shunning sales that burn through capital as they are carried out at a loss.

The bank said it would take advantage of the introduction of the new IFRS9 accounting rule to book 4.1 billion euros in writedowns before taxes, mostly of loans, in the first quarter of 2018.

Also Rachel Sanderson at Financial Times commented on this topic

The long-awaited strategy reboot aims to rebuild investor confidence after a turbulent period for Italy’s banking industry in which Intesa has remained profitable but has seen momentum slow.

Shares in Intesa, one of Italy’s most healthiest banks, rose 1.8 per cent despite volatility on global markets, as Carlo Messina, the chief executive, revealed the new business plan.

In recent quarters, net income has been boosted by taxpayer funds Intesa received as part of a deal to take control of the good assets of two failed Venetian banks and help shore up confidence in the fragile banking system last summer.

On Tuesday, Intesa said it would cut its net non-performing loans to €12.1bn from €22.5bn by 2021, with its cost of risk falling to 41 basis points from 81bp in 2017. Net income ratio would rise 12 per cent to €6bn over the period of the plan from €3.8bn in 2017, and its payout ratio would fall from 85 per cent for 2018 to 70 per cent for 2021.

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GLG – Gerson Lehrman Group – Council Member

About Massimo Famularo

Investment Manager and Blogger Focus on Distressed Assets and Non Performing Loans Interested in Politics, Economics,
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