Intesa Sanpaolo Reports Double the Net Profit Due to High Interest Rates in the Eurozone

The Italian bank Intesa Sanpaolo reported on Friday a net profit that is double and a strong revenue growth in the third quarter, thanks to a surge in net interest income in an environment of raised interest rates in the eurozone.

Intesa closed the third quarter with a net profit of 1.9 billion euros, nearly double that of the same period last year, according to the report from the owner of Privredna banka Zagreb (PBZ).

Operating income amounted to 6.37 billion euros, which is 27 percent higher than in the third quarter last year.

Net interest income jumped by 60 percent to 3.8 billion euros. The European Central Bank has raised interest rates by 4.5 percentage points since July last year to curb inflation.

Intesa’s net income from fees and commissions, however, decreased by 2.7 percent to approximately 2.1 billion euros, reflecting reduced fees in commercial banking.

The CET 1 capital adequacy ratio slightly decreased to 13.6 percent at the end of September. Three months earlier, it was 13.7 percent, and at the end of last year, it was 13.5 percent, the report shows.

Intesa now expects its net profit in 2023 to exceed 7.5 billion euros, slightly improving its previous estimate, which anticipated an amount ‘significantly above’ seven billion.

The improvement is mainly attributed to earnings from the difference between interest rates on loans and those on deposits, and they now estimate that their net interest income this year will significantly exceed 14 billion euros.

They also emphasize that their new digital bank Isybank should increase gross income by about 200 million euros by 2025, with a business model having a cost-to-income ratio of less than 30 percent. They expect around five million clients by 2025.

Isybank is a low-budget cloud-based digital bank and plays a key role in the plan of Intesa’s CEO Carlo Messina, which aims to reduce the bank’s costs and focus operations on value-added services, such as asset management and insurance.

According to a strategy presentation published in February last year, Intesa is expected to save 600 million euros in 2025 thanks to the new digital bank and about 800 million euros annually from 2026 to 2027.

Isybank has already attracted around 50 thousand new clients, and the ‘first group of about 300 thousand’ has already been transferred from Intesa’s traditional retail banking operations.

The ‘migration’ has triggered a wave of dissatisfaction among clients in Italy, and the Italian regulator announced on Thursday that it has launched an investigation into Intesa’s communication with citizens regarding the transition to Isybank.

The Competition Protection Agency wants to determine how Intesa informed account holders about the migration, adding that it has received more than 2,000 client complaints.

Many Intesa clients complained that, partly due to summer vacations, they only saw the notice after the deadline for applying to retain traditional banking services had expired.

An Intesa spokesperson stated that the bank complied with applicable regulations and would cooperate with the regulator and clients to address their needs.