Intesa Sanpaolo SpA (ISP), Italy’s second- biggest bank, posted a smaller-than-estimated 37 percent decline in second-quarter profit after a tax gain cushioned the impact of rising bad loans and lower revenue.
Intesa rose as much as 8.6 percent in Milan trading after posting net income of 470 million euros ($575 million), above the 323 million-euro average estimate of 13 analysts surveyed by Bloomberg. Intesa benefitted from a 173 million-euro credit that helped cut its taxes by 67 percent to 152 million euros.
“The beat is mostly coming from trading and a one-off tax benefit,” Alberto Cordara, an analyst at Bank of America Merrill Lynch, wrote in a note to clients. “The capital position has also come in stronger, which is a positive,” he said.
Intesa, the only Italian lender among the top five that hasn’t needed additional capital to comply with European Banking Authority requirements, said its core Tier 1 ratio rose to 10.7 percent on June 30 from 10.5 percent at the end of March. The bank is eliminating jobs and reducing costs to strengthen finances. Chief Executive Officer Enrico Tommaso Cucchiani is reviewing the company’s five-year business plan as Italy’s third recession in a decade affects credit quality and profitability.
The shares were up 6.3 percent to 1 euro by 1:38 p.m. in Milan, valuing Intesa at 16.2 billion euros. The stock has declined 23 percent this year. That compares with a 35 percent decrease in UniCredit SpA (UCG), Italy’s largest bank, which will also publish results today.
“Intesa ended the period with an extremely solid balance sheet,” said Cucchiani, 62, in a statement. “Our liquidity is high, the provisions against doubtful loans are sufficiently robust and reflect a prudent and conservative strategy,” he said.
Loan-loss provisions increased to 1.08 billion euros in the quarter from 823 million euros a year earlier, as the recession reduced the ability of borrowers to repay loans, forcing lenders to set aside more funds.
Trading income, which includes a 105 million-euro gain from the sale of Intesa’s stake in London Stock Exchange Group Plc, fell 70 percent to 161 million euros in the quarter, above analysts’ estimate of 87 million euros. Net fees declined 6 percent to about 1.32 billion euros.
“In the light of the positive revenue performance in the first half of the year, operating performance for 2012 is expected to remain broadly stable, net of last year’s non- recurring items,” the bank said in the statement, confirming the outlook published three months ago.
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