Financial Data and Key Metrics - Net income for H1 2024 reached €4.8 billion, with Q2 contributing €2.5 billion, marking the best performance in 17 years [4] - EPS grew 15% year-on-year, with total shareholder distribution exceeding €7.4 billion, including a €3 billion interim dividend and a buyback program [6] - Common equity ratio increased to approximately 13.5%, and NPL stock was further reduced [6] - Net interest income grew 2% quarterly and 12% yearly in Q2, with commissions increasing 5% quarterly [12] - Operating margin increased by 15% year-on-year, and net income grew 70% yearly excluding capital gains from the previous year [13] Business Line Performance - Wealth Management and Protection contributed 44% of gross income in H1 2024, with double-digit growth in commissions from management and consulting activities [14] - Commissions and insurance income accounted for over 40% of revenues, the highest in Europe after UBS [15] - Advisory services supported by digital tools saw commissions increase over 40% year-on-year [16] - Property and casualty insurance was driven by non-motor business, with significant upside potential due to low penetration rates [21] Market Performance - Customer financial assets increased by €100 billion year-on-year and €20 billion in Q2, with positive net inflows in asset under management reversing previous trends [20] - Gross NPL stock decreased by €800 million year-on-year and €400 million in Q2, with NPL inflows at historical lows [24] - NPL ratio stood at 1%, among the best in Europe [25] Strategy and Industry Competition - The company is leveraging its fully-owned product factories and a single oversight unit to strengthen its Wealth Management, Protection, and Advisory leadership [22] - Significant investments in technology (€3.2 billion) have positioned the company as a leader in social impact and efficiency [7] - The company expects to benefit from a potential reduction in Euribor, with net interest income projected to reach €15.5 billion in 2024 [13][36] Management Commentary on Operating Environment and Outlook - Management highlighted the strong Italian economy, with GDP growth expected between 0.7% and 1% in 2024 [29] - The company increased its net income guidance to above €8.5 billion for 2024 and 2025, driven by strong performance and sustainable profitability [31] - Management emphasized the importance of maintaining a conservative approach to asset quality and cost of risk, targeting 30-40 basis points [69] Other Key Information - The company deployed €500 million of a €1.5 billion program to address social needs and promote inclusion [8] - Public sector tax revenues increased by €500 million year-on-year, with 40% of cash dividends going directly to households and foundations [18] - The cost/income ratio reached a record low of 38%, the best in Europe [23] Q&A Session Summary Question: Key drivers of net profit guidance for 2024 [34] - Management explained that net interest income is the primary driver, with expectations of €15.5 billion in 2024, supported by hedging facilities [36][37] - The company plans to maintain buffers for future profitability, including potential integration charges and NPL disposals [35] Question: Capital return and buyback plans [43] - Management indicated a positive attitude toward capital return, with potential for additional buybacks in 2024, subject to board approval [45][46] Question: Net interest income outlook for 2025 [49] - Management projected a positive contribution from hedging facilities, with net interest income expected to remain strong even if Euribor declines [50][52] Question: Cost of risk sustainability in the Italian banking sector [61] - Management emphasized a conservative approach, targeting a cost of risk between 30-40 basis points, which they consider sustainable given the low NPL inflows [69][70] Question: Cost/income ratio improvement potential [77] - Management expects the cost/income ratio to stabilize between 40%-45%, driven by technology investments and operational efficiencies [78] Question: Insurance income trends and Wealth Management strategy [80] - Management highlighted seasonality in insurance income and plans to accelerate Wealth Management growth, particularly with the conversion of deposits into asset management products [81][86] Question: Trading income and consolidation in the Italian banking sector [89] - Management downplayed the significance of trading income, focusing instead on core revenues [89] - They expressed skepticism about consolidation in the Italian banking sector, citing limited value creation opportunities [92]
Intesa Sanpaolo(ISNPY) - 2024 Q2 - Earnings Call Transcript