May 8, 2018 / 3:16 PM / 4 months ago

Intesa Sanpaolo sticks to higher profit pledge after best first quarter since 2008

MILAN (Reuters) - Italy’s top retail bank Intesa Sanpaolo (ISP.MI) stuck to its pledge for better full-year results after posting its best first-quarter profit since 2008 and beating forecasts.

FILE PHOTO: The Intesa Sanpaolo logo is seen in Milan, Italy, in this January 18, 2016. REUTERS/Stefano Rellandini/File Photo

Profits in the first three months of the year rose 39 percent to 1.252 billion euros (1.1 billion pounds), lifted by fees and net interest income. That was well above a consensus forecast from four analysts of 872 million euros.

“We are well on track to deliver higher 2018 net income and so a very generous cash dividend,” CEO Carlo Messina said in a conference call.

The bank confirmed it would be paying 85 percent of profit in dividends this year and said its net income would be higher than last year’s 3.8 billion euros.

In recent years Intesa has switched from traditional lending activity to a business increasingly based on fees earned through asset management and insurance.

Messina said he expected a very positive trend in asset management this year.

“This is a business of scale and we want to be a leader. We are still looking for a possible partner,” Messina said.

In February the lender said it was seeking a partnership with a global player in asset management this year, with the aim of keeping majority ownership of the business.

Messina, who has been in charge of Intesa since 2013, also struck a positive note on asset quality.

Intesa, Europe’s third-strongest bank in terms of capital ratios with a CET1 of 13.4 percent, said bad loan flows in the first quarter were the bank’s lowest ever in a first quarter.

“This year we expect a significant reduction in (bad loan) provisioning and an increase in recoveries,” Messina said.

In April Intesa approved a plan by Swedish debt collector Intrum Justitia INTR.ST to buy 51 percent of a company made up of its debt recovery business and Intrum’s Italy operations.

Asked if the venture with Intrum could target buying the bad debt of other Italian banks, Messina said the aim was to be the leading servicing unit in Italy and not to buy sour loans.

While many Italian banks trade at a discount on fears they may have to raise capital to shed bad debts, Intesa enjoys healthier multiples thanks to its capital strength.

In the first quarter gross non-performing loans at the bank amounted to 11.7 percent of overall loans, or 9.5 percent including the bad loan disposal agreement signed with Intrum.

“A solid set of numbers (and we) expect a mildly positive reaction,” said broker Jefferies.

At 1443 GMT Intesa shares were down 0.9 percent compared with a 2.3 percent fall in the Italian banking index .FTIT8300.

Reporting by Stephen Jewkes and Gianluca Semeraro, editing by Louise Heavens/Keith Weir

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