Sergio Delle Vedove/iStock Editorial via Getty Images Italian bank Intesa Sanpaolo S.p.A. (OTCPK:ISNPY)(OTCPK:IITSF) has performed strongly since I first covered it in early 2022. The ADSs have returned almost 70% in that time, justifying the initial Buy rating thanks to a surge in profitability on the back of higher interest rates and strong credit quality. Data by YCharts Where we go from here is an interesting question. Intesa stock has since re-rated up to around the 1x tangible book value per share ...

Financial Data and Key Metrics Changes - The company reported a net income of €6.1 billion for the first nine months of 2023, with €1.9 billion in Q3, marking the best nine-month and Q3 results in 16 years [7][14][19] - Net interest income increased by 65% year-over-year, with total revenues up nearly 20% [19][20] - The company improved its net income guidance for 2023 to above €7.5 billion [8][44] - The common equity ratio stands at 13.6%, with a projected increase in net income for 2024 and 2025 [10][44] Business Line Data and Key Metrics Changes - In Q3, net interest income rose over 6% quarter-over-quarter, contributing to record quarterly revenues, which were up 27% year-over-year [20][21] - Direct customer deposits increased by €3.5 billion in Q3, reaching the highest level ever [13][22] - The property and casualty insurance segment contributed more than €480 million in the nine-month period [23] Market Data and Key Metrics Changes - Customer financial assets exceeded €1.2 trillion, with an increase of almost €40 billion in the nine months [22] - The net NPL ratio is at 1%, with NPL inflows at historical lows, driving the cost of risk to just 28 basis points [25][28] Company Strategy and Development Direction - The company is focused on a tech transformation with over €2 billion invested, aiming to enhance efficiency and customer service through digital channels and artificial intelligence [5][34] - A strong commitment to ESG initiatives is evident, with a €1.5 billion contribution planned by 2027 to address social inequalities [12][18] - The company aims to maintain a high dividend yield of 11.5%, with a 70% cash payout on stated net income [8][45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Italian economy's resilience, projecting growth close to 1% for the year [41] - The company remains committed to supporting families and businesses facing challenges, emphasizing its role in social impact [11][12] - Future net income is expected to be higher than in 2023, with a focus on maintaining a strong capital position [8][44] Other Important Information - The company has a strong liquidity position, with a liquidity coverage ratio well above regulatory requirements [30][31] - The company is actively reducing its exposure to Russia, nearing zero [10][28] Q&A Session Summary Question: Capital distribution and profitability outlook for 2024 - Management confirmed that 12% CET1 ratio is adequate, with plans for share buybacks as part of capital distribution [51][55] - For 2024, net interest income is expected to increase, driven by higher Euribor rates and improved commission income [59][66] Question: NII assumptions and cost trends - Management expects stable deposit trends and a slight increase in loan volumes, with a focus on cost reduction [70][74] - The company aims for a reduction in costs excluding technology investments, while managing personnel costs effectively [75][76] Question: Stage 2 loans and Isybank migration - Management highlighted proactive measures to monitor and improve Stage 2 loans, with a successful migration to Isybank [78][89] - The migration has seen minimal disruption, with a high level of customer satisfaction [88][90] Question: Digital euro risks and opportunities - Management has not budgeted for digital euro investments in 2023 but plans to assess its impact in 2024 [97][100] Question: Impact of labor contracts on P&L - Management indicated that while personnel costs will increase, reductions from workforce adjustments will help mitigate overall cost increases [108]

Financial Data and Key Indicators Changes - The company reported a net income of EUR4.2 billion for the first half of 2023, with EUR2.3 billion in Q2, marking the best six months and quarter since 2007 for net income [6][14] - Full-year net income guidance has been raised to well above EUR7 billion, with expectations for 2024 and 2025 to exceed 2023 levels [6][16] - The common equity ratio stands at 14% before Q2 impacts, with a ratio above 15% when considering Deferred Tax Assets (DTA) [8][24] Business Line Data and Key Indicators Changes - Net interest income increased by almost 70% year-on-year, with a quarterly increase of 10% in Q2 [17][18] - Commissions began to recover, with a 4% increase in Q2, while insurance income rose by 16% [18][20] - Customer financial assets increased by EUR37 billion to EUR1.3 trillion, with direct customer deposits rising by EUR20 billion [9] Market Data and Key Indicators Changes - The net Non-Performing Loan (NPL) ratio is at 1%, with NPL inflows remaining at historical lows [22][23] - The annualized cost of risk stood at just 25 basis points, indicating strong asset quality [23] Company Strategy and Development Direction - The company is heavily investing in technology, with EUR1.8 billion already deployed, focusing on digital transformation through initiatives like IsyBank and Fideuram Direct [10][29] - The digital strategy is built on three pillars: Isytech as the technological backbone, new digital channels, and artificial intelligence to enhance efficiency and unlock new business opportunities [29][41] - The company aims to maintain a well-diversified and resilient business model, primarily focusing on wealth management and protection [28][46] Management's Comments on Operating Environment and Future Outlook - The management remains positive about the macroeconomic environment, citing better-than-expected growth and easing inflationary pressures [12][44] - The company is committed to supporting families and businesses facing economic challenges, emphasizing its role in social and climate initiatives [12][26] - The management expressed confidence in achieving significant net income and excess capital generation in the coming years [66][70] Other Important Information - The company has the highest dividend yield in Europe at 11%, with a commitment to a 70% cash payout ratio [7][47] - The liquidity coverage ratio and net stable funding ratio are well above regulatory requirements, indicating a strong liquidity position [25] Q&A Session Summary Question: What makes Isybank different from other online banks? - The CEO highlighted that the strategic focus is on Isytech, which supports Isybank, allowing for a unique and efficient banking experience [53][56] Question: What is the capital distribution policy going forward? - The CEO stated that the minimum capital ratio is 12%, with excess capital evaluated for distribution at the end of the year [63][80] Question: Can you specify your deposit beta assumptions for this year? - The CEO mentioned that the net interest income is expected to exceed EUR13.5 billion this year, with a strong outlook for 2024 and 2025 [68][81]

A strong bank for a sustainable world 1H23 Results The best six months ever with €4.2bn Net income A leading bank with a fintech approach: significant tech investments already deployed to continue to succeed in the future July 28, 2023 MIL-BVA362-03032014-90141/VR ISP delivered the best six months ever, while making significant tech investments to continue to succeed in the future 1 €4.2bn Net income in H1 (+80% vs 1H22(1)), the best six months since 2007 (€4.4bn when excluding the final Resolution Fund con ...

Financial Data and Key Metrics Changes - The company reported a net income of €2 billion for Q1 2023, marking the best quarter since 2007, with a nearly 19% year-over-year increase [3][9] - The common equity ratio increased to 13.7%, with expectations to reach close to 14% post Basel IV in 2025 [4][19] - The cost of risk was reported at a historical low of 17 basis points, with no release of overlays [9][18] Business Line Data and Key Metrics Changes - Net interest income rose by almost 70% year-over-year and 6% quarter-over-quarter, driven by an increase in market interest rates [12][13] - Customer financial assets increased by €11 billion in Q1, indicating strong growth in wealth management [14] - Operating costs remained stable year-over-year, with the lowest cost-income ratio recorded [9][16] Market Data and Key Metrics Changes - The company has a strong liquidity position with over €100 billion in excess medium/long-term liquidity and a liquidity coverage ratio well above regulatory requirements [5][11] - Direct deposits saw a slight decline, but there was a €4 billion growth in April, indicating a positive trend [15] Company Strategy and Development Direction - The company aims to exceed its €6.5 billion net income target by 2025, supported by rising interest rates and a strong focus on wealth management and advisory services [5][24] - The digital bank, Isybank, is set to launch by summer 2023, highlighting the company's commitment to technology evolution [6][21] - The company is focused on maintaining a strong capital position while rewarding shareholders through dividends and buybacks [4][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic recovery in Italy, driven by lower energy prices and easing inflation [6][22] - The company is committed to supporting families and businesses facing economic challenges, with €400 billion in lending to the real economy [8][20] - The outlook for 2023 has been upgraded to a net income guidance of €7 billion, reflecting strong performance and market conditions [5][25] Other Important Information - The company has reduced its NPL stock by €54 billion since 2015, achieving a net NPA ratio of 1% [17] - The company is actively involved in social initiatives, contributing to community support and job preservation [20] Q&A Session Summary Question: Capital usage and net interest income assumptions - The management discussed the capital position, indicating a comfortable range between 13.5% and 14% for 2023, with significant excess capital expected in the coming years [29][30] - Regarding net interest income, a deposit beta of 40% is anticipated by year-end, with a conservative estimate for the total amount of deposits [41][42] Question: Fee and commission outlook - Management acknowledged weak fee and commission performance in Q1 but expects a rebound in 2024, focusing on structural improvements rather than immediate revenue increases [46][64] Question: Regulatory headwinds and cost of risk - The cost of risk is projected to be between 35 and 40 basis points for the year, with a positive outlook on asset quality and economic conditions [54][56] Question: Windfall tax implications - Management expressed willingness to comply with any government-imposed taxation, emphasizing the importance of using such funds to address social inequalities [70][72]

Financial Data and Key Metrics Changes - For 2022, the company reported a net income of €5.5 billion excluding provisions for Russia de-risking, which is well above the business plan target. Including Russia de-risking, net income was €4.4 billion, marking the best result in 15 years [6][15][33] - The company achieved the best-ever year for operating income, operating margin, and gross income, with Q4 being the best quarter ever for revenues [8][15] - The common equity ratio increased to 13.5%, up 110 basis points in Q4, reflecting a strong capital position [9][27] Business Line Data and Key Metrics Changes - Net interest income grew by 20% in 2022, with a significant acceleration in Q4, where it was up almost 60% year-on-year [19][20] - Commissions were resilient, with a slight increase of 3% on a quarterly basis despite the absence of performance fees [20] - Insurance income reached a record high, driven by strong growth in non-motor P&C revenues [19] Market Data and Key Metrics Changes - Customer financial assets reached €1.2 trillion, with a €26 billion increase in Q4, indicating strong growth in wealth management [23] - The company provided €400 billion in lending to the real economy, highlighting its commitment to supporting families and businesses [14] Company Strategy and Development Direction - The company aims to exceed its €6.5 billion net income target for 2025, driven by interest rate increases and a strong focus on cost management [7][18] - The execution of the 2022 business plan is proceeding at full speed, with 70% of initiatives ahead of schedule [29] - The company is committed to being a zero-Russia and zero-NPL bank, having reduced its gross NPL by €4.6 billion and its Russia exposure to below 0.3% of group exposure [10][24] Management's Comments on Operating Environment and Future Outlook - Management remains positive about the macroeconomic environment, expecting a quick recovery for the Italian economy by 2024 [12] - The company anticipates significant operating margin growth in 2023, driven by net interest income and a focus on cost management [33] - Management emphasized the importance of maintaining a conservative approach to guidance and capital distribution [66][69] Other Important Information - The company plans to distribute cash dividends of €3 billion, maintaining a 70% payout ratio, and will launch a second tranche of share buybacks [5][34] - The company has a strong capital position, with expectations to maintain a Common Equity Tier 1 ratio above 12% [10][35] Q&A Session Summary Question: What are the regulatory headwinds expected in 2023? - Management indicated an updated impact of approximately 70 basis points related to regulatory headwinds, with additional impacts from IFRS 17 [52][53] Question: Guidance for 2023 net income? - Management expects net income to be well above €5.5 billion, with a strong increase in net interest income of €2.5 billion [37][41] Question: Capital returns and payout mix? - Management confirmed a 70% payout ratio and indicated that decisions on excess capital distribution will be made at the end of 2023 [60][66] Question: Deposit betas and competition? - Management stated a conservative deposit beta assumption of 35% to 40%, emphasizing their market leadership in Italy [62][63] Question: Clarification on cost of risk? - Management noted a cost of risk of 30 basis points, with particular attention on commercial real estate and energy sectors [75][86]

Financial Performance - FY22 Net income reached €55 billion excluding Russia de-risking, exceeding the >€5 billion Business Plan target[3] - FY22 Stated Net income was €4354 million, the best year since 2007[3] - Operating income increased by 33% compared to FY21[3] - Net interest income grew significantly by 202% compared to FY21, with a strong acceleration in Q4 (+284% vs Q3)[3] - Operating costs decreased by 04% compared to FY21, with the Cost/Income ratio down to 509%[3] Capital Position and Distribution - The fully phased-in Common Equity ratio increased to 135%[3] - €3 billion in cash dividends are planned for 2022, representing a 70% payout ratio[3] - A second tranche of buyback worth €17 billion will be launched, bringing the total additional distribution to €34 billion[3] Asset Quality and Risk Management - Gross NPL stock was reduced by €46 billion in FY22, reaching the lowest-ever NPL stock and ratio at 10%[3] - Russia exposure was reduced by 68% in H2, down to below 03% of Group customer loans[3] Customer Financial Assets - Customer financial assets exceeded €12 trillion, with a €26 billion increase in Q4[18]

Financial Data and Key Indicators Changes - In Q3 2022, the company achieved a net income of €4.4 billion, excluding provisions for Russia de-risking, marking the best nine-month performance since 2008 [4][11] - The net interest income grew by more than 8% year-on-year, with a quarterly increase of 14% despite lower benefits from TLTRO [14][15] - The net NPL ratio reached a record low of 1%, with a reduction in NPL stock by almost €7 billion year-on-year [22][24] Business Line Data and Key Indicators Changes - Insurance income reached a record high, driven by strong growth in non-motor P&C revenues [14] - Operating costs decreased by almost 2% year-on-year, demonstrating effective cost management despite inflation [21][32] - The company reported a total contribution from net interest income, commissions, and insurance income up over 6% year-on-year [15] Market Data and Key Indicators Changes - Customer financial assets were around €1.2 trillion, with short-term direct deposits increasing by €12 billion year-on-year [20] - The company allocated €30 billion to assist families and businesses facing high energy costs, reflecting its commitment to the real economy [10] Company Strategy and Development Direction - The company is focused on delivering high-quality results in the short term while building a strong bank for the next decade through ongoing execution of its business plan [6][26] - The rollout of Isybank, the new digital bank, is accelerating with significant investments and hiring of around 300 specialists [7] - The company aims to exceed its €6.5 billion net income target for 2025, supported by strong net interest income and a zero-NPL status [6][36] Management's Comments on Operating Environment and Future Outlook - The management remains positive about the Italian economy, citing stronger fundamentals compared to previous crises [8][30] - Despite potential economic slowdowns in 2023, the company expects a quick recovery in 2024, supported by government interventions and EU financial support [30] - The management upgraded the net income guidance for 2022 to more than €4 billion, reflecting strong operating performance and reduced Russia exposure [33][34] Other Important Information - The company has already accrued €2.3 billion in dividends and plans to distribute €1.4 billion as an interim dividend [5][34] - The company is committed to a 70% cash payout ratio and has completed the first tranche of its share buyback program, repurchasing around 5% of shares [5][34] Q&A Session Summary Question: What is the reasonable level of cost of risk considering a mild recession in 2023? - The management expects a cost of risk between 25 and 30 basis points, with a potential increase of 10 basis points if non-performing loans are disposed of [46][47] Question: What is the guidance for net interest income for 2023? - The expectation is for net interest income to be well above €11 billion, with an increase of €2 billion at a Euribor rate of 2% [44][45] Question: What is the company's view on the potential introduction of a banking tax in Italy? - The management has no evidence of a banking tax being introduced in Italy and believes the current taxation is already significant compared to other European countries [59][60] Question: How will the company manage the share buyback program? - The management will wait for the final results of the group before deciding on the second tranche of the buyback, emphasizing the importance of maintaining capital during uncertain economic conditions [50][56] Question: What is the impact of TLTRO on the company's financials? - The management indicated that TLTRO will not have a significant impact going forward, and they plan to repay it in a relatively short period depending on loan volumes [86][87]

Financial Data and Key Metrics Changes - The company reported a net income of €2.4 billion for the first half of 2022, with a provision of €1.1 billion for Russia-Ukraine exposure. Excluding these provisions, it would have been the best first half since 2008 [7][8] - The net income for the first semester, excluding provisions for Russia and Ukraine, was €3.3 billion, achieving the best-ever half-year operating income and margin [10][11] - Net interest income grew by 2.5%, with a strong acceleration of 7% in the second quarter, compensating for a slight decline in commissions [11][12] Business Line Data and Key Metrics Changes - The second quarter was the best ever for insurance income, which increased by 60% [12] - Customer financial assets reached €1.2 trillion, with short-term direct deposits increasing by €16 billion year-on-year [13] - The company achieved a gross NPL stock reduction of over €4 billion in the first six months, with a net NPL stock now at just €6 billion and a net NPL ratio of 1% [15][24] Market Data and Key Metrics Changes - The company’s exposure to Russia and Ukraine represents just 1% of group customer loans, with a decrease of €400 million since the beginning of the conflict [15][16] - The Italian economy is described as stronger than in previous crises, with solid fundamentals and lower debt levels among households and corporates [5][24] Company Strategy and Development Direction - The company is committed to a €6.5 billion net income target by 2025, with a focus on maintaining a zero-NPL status and a low underlying cost of risk [21][25] - Significant investments are being made in technology and digital banking, with the rollout of the new digital bank Isybank well underway [9][18] - The company is actively managing costs, achieving a 2.5% reduction in operating costs [12][13] Management's Comments on Operating Environment and Future Outlook - Management remains positive about the Italian economy despite potential challenges from inflation and geopolitical tensions, citing strong fundamentals [5][6] - The outlook for 2022 is expected to align with the excellent first-half performance, with a commitment to delivering best-in-class profitability [26] - Management expressed confidence in the ability to navigate potential economic slowdowns, emphasizing the resilience of the business model [21][24] Other Important Information - The company has allocated €1.1 billion for Russia-Ukraine provisions and still holds €400 million in generic provisions related to COVID [25] - A one-off contribution of €50 million was made to support employees facing inflationary pressures [6][20] Q&A Session Summary Question: NII sensitivity and future outlook - The first question focused on the net interest income (NII) sensitivity and the conditions for the second phase of the buyback program. Management highlighted the importance of monitoring the economic environment and ECB policies [28][34] Question: NPLs and cost of risk - A follow-up question addressed the NPL ratio and its impact on the cost of risk in 2023. Management indicated that the cost of risk would likely remain low, even in a recession scenario [46][50] Question: Government bonds and TLTRO strategy - Questions were raised regarding the strategy for government bonds and TLTRO, with management indicating a cautious approach to managing liquidity and interest income [47][56] Question: Client behavior and lending trends - Inquiry about client behavior in lending and investment spaces revealed a positive outlook for corporate lending, with companies expected to finance investments through self-cash flows [64][67] Question: Overlays and future provisions - Questions about the use of overlays confirmed that the company does not expect to utilize additional overlays this year, maintaining a cautious stance on future economic conditions [64][69]

Financial Performance - H1 Net income reached €3.3 billion, excluding €1.1 billion in provisions/writedowns for Russia-Ukraine exposure, marking the best first half since 2008[6] - Q2 saw a strong acceleration of Net interest income, increasing by 6.9% compared to Q1[6] - Operating costs decreased by 2.5% compared to 1H21, resulting in a Cost/Income ratio of 47.5%[6] - Net income excluding provisions/writedowns for Russia-Ukraine exposure in Q2 was €1.6 billion, a 6.6% increase[17] Asset Quality - Gross NPL stock was reduced by €4.1 billion in H1, with €3.2 billion reduction in Q2[6] - The gross NPL ratio reached a record low of 1.8%, and the net NPL ratio was at 1.0%[6] - The bank's exposure to Russia is limited to approximately 1% of Group customer loans[49] Capital and Liquidity - Customer financial assets exceeded €1.2 trillion[22] - The fully phased-in CET1 ratio stood at 12.5%, including the impact of a €3.4 billion buyback[67] Strategic Initiatives - The 2022-2025 Business Plan is proceeding at full speed, with key industrial initiatives well underway[6] - The bank is committed to ESG, with a focus on social impact and climate[81]