Intesa's Profit Tops Forecast On Higher Rates, Trading

Italy's biggest bank Intesa Sanpaolo on Friday posted a bigger-than-expected profit for the second quarter, helped by higher interest rates and trading gains, which offset the hit to net fees from rough markets.

Intesa confirmed its financial targets for the year after net profit for April-June came in at 1.33 billion euros ($1.36 billion), down 12% from a year ago but well ahead of analysts' consensus forecast of 1.03 billion euros in a Reuters poll.

Rival UniCredit also beat expectations this week, thanks to stronger revenues and plummeting loan writedowns, doubling its net profit from the previous year and raising its 2022 earnings outlook.

Revenues at Intesa reached 5.35 billion euros, surpassing analysts' average estimate of 5.09 billion.

Rising interest rates drove income from lending up 5% from a year earlier despite large impaired loan disposals, which had led analysts to anticipate no major boost from monetary policy tightening.

Under a multi-year strategy unveiled in February, Intesa aims to keep its impaired loans at the "near zero" levels typical of Nordic rather than Mediterranean banks.

"Overall, a decent quarter from Intesa with surprisingly good net interest income," broker Autonomous said, adding the decision to approve a 1.1 billion euro interim dividend in November was positive.

Intesa, which has made a trademark of its generous payouts, deducted in full from capital in the quarter a proposed 3.4 billion euro share buyback, sending its core capital ratio down to 12.5%, though it is carrying out only half of it for now.

Profit was supported too by lower-than-expected loan loss provisions, with Intesa booking 730 million euros in charges in the period, nearly half of which related to Russia and Ukraine.

Their presence in Russia has cost Intesa and UniCredit 1.1 billion euros each in provisions against potential losses in the first half.

Italy's top two banks have been struggling to extricate themselves from Russia after it invaded Ukraine, failing to find buyers for their local businesses after international sanctions curtailed the number of potential counterparties.

Intesa, whose strong social commitment reflects the Roman Catholic values of its banking foundation shareholders, said it would pay out 500 euros each to 82,000 employees - excluding executives - to help them cope with soaring inflation.

($1 = 0.9776 euros)