Core Viewpoint - Intesa Sanpaolo continues to achieve record financial results, outperforming European financial peers with a return of approximately 28% since January, compared to around 7% for the peer group [1][3]. Financial Performance - The first half of 2024 saw Intesa Sanpaolo report a return on tangible equity (ROTE) exceeding 20%, although this may represent a peak due to falling Eurozone interest rates [2]. - The bank's shares have appreciated over 20% since the last coverage, with the tangible book value per share (TBVPS) multiple increasing from around 1x to 1.3x [3]. - Net interest income (NII) grew by 2% sequentially to just over €4 billion in the last quarter, supported by a €160 billion structural hedge [6]. Market Position - Intesa Sanpaolo is the largest bank in Italy, holding market-leading shares in loans (approximately 18%), deposits (around 22%), and asset management (about 23%) [4]. - The bank's significant non-interest income generation accounts for over 40% of total revenue, with net fee and commission income increasing by 5% sequentially to €2.38 billion [8][9]. Cost Management - Operating expenses were reported at €2.65 billion, down approximately 1.5% year-over-year, contributing to a cost/income ratio below 40%, one of the best in its peer group [9][10]. - Loan loss charges were around 30 basis points in Q2, aligning with the medium-term target of 30-40 basis points, indicating stable asset quality with gross non-performing loans around 2% [10]. Valuation and Future Outlook - Shares are currently trading at €3.34 in Milan, with a target price of €3.90 (~$25.55 per ADS) in three years, suggesting a pre-tax total return of around €4.90 ($32.10 per ADS) inclusive of dividends [11][12]. - Management's capital returns policy is heavily dividend-focused, with approximately 70% of net income allocated to dividends and a €1.7 billion buyback initiated in June [11].
Intesa Sanpaolo: Still Making Hay While The Sun Shines