Monte dei Paschi upgrades profit outlook and payout ratio

Shares in Monte dei Paschi rose strongly on Tuesday after the Italian bank upgraded its payout ratio following a strong second quarter, and signalled it was close to selling its French arm MP Banque.

The bank, formally known as Banca Monte dei Paschi di Siena, said it would give shareholders 75% of its pre-tax profit this year, up from an earlier payout ratio of 50%.

MPS reported a gross operating profit of €1.11bn for the first half of 2024, up 18% year-on-year, with net interest income rising 8.3% and net fee and commission income up 9.8%.

Net interest income was boosted by higher contributions from transactions with central banks, hedging derivatives and the securities portfolio, while net fee and commission income was helped by a strong performance in wealth management.

Net profit swelled to €827m from €383m the year before due to €457m in tax credits, surprising analysts who expected a slight decline on last year.

MPS, which is partly owned by the Italian government following multiple bailouts since 2009, said total revenues were 9.7% higher than last year at €2.03bn.

Looking ahead, the bank upgraded its new medium-term growth strategy, saying it now expects pre-tax profit to rise to €1.3bn in 2024 and €1.42bn by 2026, well ahead of the €705m and €909m guidance given its previous 2022-26 business plan.

In other news, Banca MPS is currently in discussions to offload MP Banque, according to comments made by chief executive Luigi Lovaglio in a call with analysts following the results.

The stock was up 6.4% at €4.62 by 1235 in Milan.