Intesa lifts profit outlook after record first-half

By Valentina Za

MILAN (Reuters) -Intesa Sanpaolo, Italy's biggest bank, on Friday lifted its profit outlook for the current year and beyond, saying higher rates would continue to boost revenue after leading to record first-half earnings.

Intesa posted a 2.27 billion euro net profit for April-June, above a Reuters analyst consensus of 1.82 billion euros ($2 billion), with lower than expected loan loss provision also helping to offset rising costs.

CEO Carlo Messina told analysts companies in Italy were dealing with the rising cost of credit better than elsewhere in Europe thanks to the restructuring the country's economy has undergone since the global financial crisis.

"If you look at the financial conditions of companies in Italy, we are talking about ... close to 400 billion euros in deposits," Messina said when asked about low loan impairments.

Intesa now sees its full year profit "well above" a previous forecast of 7 billion euros, with further growth projected in 2024 and 2025.

Under the strategy unveiled in February last year Intesa had originally aimed for a 6.5 billion euro 2025 net profit.

It said the 2025 figure would benefit to the tune of 0.5 billion euros from the digital operations it recently launched in both commercial and private banking to cut costs.

BETTING ON TECH

Intesa is investing heavily in technology aiming to shift its IT infrastructure on to the cloud and offer low-cost banking and wealth management services to its least profitable clients.

It said more than 10,000 accounts had been opened with its mobile app Isybank which it launched in June. It set a goal of getting to more than 2.5 million by the first quarter of 2024, a figure which it aims to double by end-2025, including by migrating 4 million of its existing clients.

The European Central Bank's rate hike cycle has yielded record profits at Italian banks in recent quarters, while payments on deposits remain low and the damage to borrowers from the higher cost of credit is yet to materialise.

Rival heavyweight UniCredit also beat expectations this week, leading to a profit upgrade.

Intesa said revenues jumped 19% annually to 6.34 billion euros, ahead of an average 6.14 billion in analyst forecasts, with income deriving from the gap between lending rates and interest paid on deposits, up 71% year-on-year.

Intesa expects to reap more than 13.5 billion euros in 2023 from its net interest margin, and grow it further in 2024 and 2025.

Net fees also proved buoyant in the second quarter, showing an unexpected 3.7% rise from the first three months.

"(Intesa's) '24/'25 profit guide is supported by growing net interest income, recovery in commissions, cost reduction and low cost of risk," Jefferies said.

Core capital was steady at 13.7% of risk-weighted assets.

($1 = 0.9115 euros)

(Reporting by Valentina ZaEditing by Keith Weir and Gavin Jones)