Intesa Hurt By Slowing Italian Economy

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Intesa Sanpaolo reported a net loss of EUR 83 million for the fourth quarter of 2012 and a net income of EUR 1,605 million for the full-year 2012. Both numbers were dramatic improvements from the same time last year as Intesa took EUR 10.2 billion in goodwill write-downs during the fourth quarter of 2011, which led to sizable net losses for the fourth quarter and full-year 2011.

Operating margin for the fourth quarter of 2012 was EUR 2,197 million, an increase of 12% from the same time last year and operating margin for the full year was EUR 8,968 million, an increase of 17% as compared to last year. The operating margin was boosted by EUR 2,182 million in trading gains for the year, which were driven from liability management and LTRO usage.

Growth in nonperforming loans was still an issue for Intesa in the fourth quarter. Gross total nonperforming loans increased 18% from the same time last year. To combat the growth in nonperforming loans, Intesa increased its loan loss provisioning by 11% in 2012, as compared to 2011. Still, however, Intesa did experience a drop in its nonperforming loan coverage, which fell slightly to 44.9% from the 45.7% from last year.

Intesa does, however, have a lower percentage of nonperforming loans to total loans, and a higher nonperforming loan coverage ratio, as compared to Italian peers. Intesa continues to improve its regulatory capital position. The Core Tier 1 capital ratio increased 110 basis points to 11.2%, as compared to last year, and its Basel III Common Equity ratio increased 70 basis points to 10.6%.

The estimated full-loaded Basel III results would place Intesa well-above average as compared to other large European banks. Counter-acting this sound regulatory capital position is not only the growth in non-performing loans, but also Intesa’s over EUR 100 billion in debt and loan exposure to the Italian government. Any significant write down in Italy sovereign debt would have a severe negative impact to Intesa’s balance sheet.

 

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