Intesa Sanpaolo Presents New Business Plan Until 2021, Reports Surge in Quarterly Profit

The Italian bank Intesa Sanpaolo on Tuesday presented a new four-year business plan that includes a significant reduction in the share of non-performing loans, increased revenues, and cost savings, and reported a surge in profit in the fourth quarter. Intesa has set a net profit target of up to six billion euros in 2021 with operating revenues of 20.8 billion euros under the new four-year plan. This would increase the return on equity to 12.4 percent, up from 7.9 percent last year.

During the specified period, they expect, among other things, cost savings of around 1.5 billion euros, as stated in the four-year business plan.

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The owner of Privredna banka Zagreb (PBZ) intends to cement its position as the strongest Italian bank with the new plan for the period from 2018 to 2021.

After rewarding shareholders with a total dividend payout of 10 billion euros in cash as part of the previous plan ending in 2017, the new plan anticipates that 85 percent of this year’s profit will be paid out as dividends, gradually reducing that share to 70 percent by 2021.

The share of non-performing loans in the total amount of loans is expected to be halved, from 11.9 percent at the end of 2017 to six percent in 2021. This would bring their share closer to the European average of 5.5 percent, compared to the average share of bad loans in the Italian banking system of 16 percent.

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Under pressure from regulators to expedite the reduction of non-performing loans, Intesa has initiated discussions about selling the relevant portfolio along with the bank’s stake in the Swedish debt collection company Intrum Justitia. Initially, they prioritized internal solutions to the problem of bad loans.

They also confirmed that they would transfer debt collection operations to a separate new company and consider forming partnerships to improve their collections.

They will also take advantage of the introduction of a new accounting regulation in the international financial reporting system IFRS9 to record an amount of 4.1 billion euros in write-offs before tax, mostly related to loans, in the first quarter of 2018.

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According to the business results published on Tuesday, Intesa Sanpaolo’s net profit in the fourth quarter of 2017 amounted to 1.344 billion euros, compared to 776 million euros in the same period the previous year.

The quarterly results include capital income of 811 million euros related to the sale of a stake in the Italian fund Allfunds.

Net interest income remained at the same level as the previous year, amounting to 1.742 billion euros. Net fees and commission income increased by 10.9 percent to 2.1 billion euros, the business results report showed.