Intesa Sanpaolo declines despite smaller than expected quarterly loss

The lender said net income decreased 4.1% to €901m from a year earlier even as revenues grew 2.1% to reach €4.61bn.

Analysts had forecast profits after tax would come in at €738m.

Profits benefitted from the €170m capital gain realised on the back of the sale of its stake in Visa Europe.

Turin-based Intesa had emerged as one of the stronger of its ilk from the European Banking Authority´s latest 'stress' tests.

"Intesa also emerges well, having the second-lowest base-to-adverse CET1 delta (-2.6%) after DNB and amongst the highest adverse capital levels outside of the Nordics," analysts at Macquarie said in a research note dated 1 August.

Carlo Messina, the lender´s chief, emphasised that Intesa Sanpaolo was transitioning towards a wealth management model and had "substantial upside in a very low interest rate environment”.

Revenues from trading jumped 23% to €467m while those income from commissions dipped 5% to €1.85bn.

Loan loss provisions increased from €847m one year ago to €923m.

The common equity Tier 1 ratio, a key gauge of a bank´s financial strength, declined from 13.1% at the end of March to 12.9%.

Management reaffirmed expectations of "an improvement" in the bank´s full-year profits before tax together with a commitment to distribute €3bn in cash dividends.

"ISP's capital strength implies (i) better control over an "orderly" reduction of existing NPLs and (ii) flexibility to deal with potential higher coverage needs, where we would see (valuation) merit in upfronting rather than spreading any impact over time (despite capital impact). That said, upside is now more limited (c10% or c20% including €0.21 DPS), with Q2 results appearing as an important event to assess how recent volatility has impacted the bank's underlying earnings capacity, the key share driver, in our view," UBS analyst Ignacio Cerezo said in an extract of a research report published on 2 January.

As of 14:21 BST shares in Intesa Sanpaolo were down by 2.84% to €1.85 while the Stoxx 600´s gauge of bank shares was off by 0.84% to 337.01.