Intesa Sanpaolo(ISNPY) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Indicators Changes - The company reported a net income of €7.2 billion for the first nine months of 2024, with €2.4 billion generated in Q3, reflecting strong growth in commissions and insurance income [5][6] - Earnings per share increased by 20% year-on-year, and the company confirmed a net income guidance of above €8.5 billion for the year, raising the guidance for next year to around €9 billion [6][15] - The common equity ratio improved to 13.9%, with a significant increase of 70 basis points since the beginning of the year [16][24] Business Line Data and Key Indicators Changes - Commissions increased by double digits in Q3, supported by positive net inflows in assets under management [12][19] - Insurance income reached a record high, with property and casualty contributions increasing by 10% quarter-on-quarter [19][91] - The Wealth Management & Protection businesses contributed significantly to profitability, with commissions from management and consultancy activities up 12% year-on-year [19][20] Market Data and Key Indicators Changes - Customer financial assets rose by €135 billion year-on-year, with €25 billion added in Q3 alone [18] - The gross non-performing loan (NPL) stock decreased by €900 million year-on-year, with NPL inflow remaining at historical lows [22][23] - The Italian economy is showing resilience, with GDP growth expected to outperform the Eurozone average [25] Company Strategy and Development Direction - The company is focusing on technology investments, having deployed €3.5 billion so far, with plans for an additional €1.5 billion in 2025 [7][36] - A significant workforce reduction of 9,000 employees is planned, with a focus on hiring 3,500 young people for wealth management and protection activities [9][36] - The company aims to leverage its strong position against fintech challengers and maintain a leading role in the market [10][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a net income of around €9 billion for next year, supported by revenue growth and cost reduction strategies [28] - The company anticipates a positive trend in net interest income despite a projected decline in Euribor rates, with expectations of maintaining strong performance [45][46] - Management highlighted the importance of internal synergies and cost reduction without the need for acquisitions, emphasizing a unique position compared to competitors [38][110] Other Important Information - The company plans to return €7.5 billion to shareholders this year, with a dividend yield of 10% [7][29] - The company is committed to maintaining a strong capital position while exploring opportunities for share buybacks [41][47] Q&A Session Summary Question: Cost and Use of Capital - The management discussed ongoing cost reduction strategies and the potential for significant buybacks, emphasizing the importance of technology investments for future efficiency [32][41] Question: Capital Distribution and Growth Opportunities - Management confirmed the potential for distributing more than 100% of profits and highlighted the focus on organic growth in wealth management rather than acquisitions [44][50] Question: Loan Growth and Economic Outlook - Management expects low single-digit growth in loans, driven by positive cash flow among Italian companies and government investments [78][81] Question: Insurance Income and Trading Gains - Management explained the recent decline in insurance income was due to life insurance trends but expects a positive turnaround, while trading gains are anticipated to offset net interest income declines [90][92] Question: Cost of Risk and NII Outlook - Management indicated a stable cost of risk around 30 basis points and provided insights into the expected decline in net interest income for Q4 [98][100] Question: M&A and Shareholder Returns - Management expressed limited appetite for M&A due to antitrust concerns and indicated a preference for share buybacks over increasing cash dividends [109][110]