Intesa Sanpaolo: Consolidated 1H 2020 Report
Turin - Milan, 4 August 2020 – At its meeting today, the Board of Directors of Intesa Sanpaolo approved the consolidated half-yearly report as at 30 June 2020.
Results for the first half of 2020 confirm Intesa Sanpaolo’s ability to effectively face the challenging aftermath of the COVID-19 epidemic. They reflect the Group’s sustainable profitability, which derives from a solid capital base and a strong liquidity position, a resilient and well-diversified business model and the strategic flexibility in managing operating costs. The results also reflect the support provided to Italy by the Group, which is also committed to becoming a reference model in terms of sustainability and social and cultural responsibility.
Sustainable value generation for all stakeholders will be accreted by the combination with UBI Banca, which has low execution risk also due to Intesa Sanpaolo’s proven track record in managing integrations, enhancing local economies and UBI Banca people and achieving further reduction of risk profile and significant synergies with no social costs.
Compared with the first half of 2019, Intesa Sanpaolo, specifically, recorded improvement in capital ratios, efficiency and asset quality. The cost of risk, too, improved when excluding loan adjustments for future COVID-19 impacts, booked mainly as generic coverage of performing loans.
The capital position was solid and well above regulatory requirements. Pro-forma fully loaded common equity tier 1 ratio was 14.9%, taking the dividends accrued in H1 2020 into account.
In H1 2020, net income was €2,556 million (up 13.2% on H1 2019), including loan adjustments of around €880 million for future Covid-19 impacts, mainly for generic coverage of performing loans.
Gross income was up 7.1% on H1 2019, operating margin was up 2.8%, operating income was stable, operating costs were down 2.8% and cost/income was 48.5%.
Credit quality improved. Gross NPLs were reduced at no extraordinary cost to shareholders by 4.6% on year-end 2019, and by around €23 billion since the end of 2017 achieving as much as 90% of the target set for the entire four-year period of the 2018-2021 business plan. NPL ratio was 7.1% gross and 3.5% net. Annualised cost of risk in H1 2020 was at 46 basis points excluding the impact of loan adjustments for future covid-19 impacts (equivalent to 43 basis points, of which 36 basis points for generic coverage of performing loans and 7 basis points for specific coverage of NPLs).
The ISP Group’s press release of 1H 2020 financial results is available in full at: https://group.intesasanpaolo.com/en/investor-relations/press-releases/2020/08/20200804-ris-1h20-uk
1H 2020 results: statement by Carlo Messina, CEO of Intesa Sanpaolo
Commenting on Intesa Sanpaolo’s First Half 2020 results, CEO Carlo Messina stated:
“In an exceptionally challenging moment marked by the consequences of the COVID-19 pandemic, Intesa Sanpaolo once again demonstrated its ability to achieve its objectives and meet its commitments. The teamwork of our top management and the professional quality of our people make all this appear easy; but it isn’t. My thanks go to them for how they have supported families and businesses with exceptional lending measures, for the continuous care given to protecting our customers' savings and for the extraordinarily strong results achieved.
Faced with this very challenging environment, we achieved the best first-half Net income since 2008 – at €2.6 billion – meaning we have already delivered 86% of the €3 billion minimum Net income target for this year. If we exclude the nearly €900 million in provisions to cover possible future impact from COVID-19, then Net income actually increased 39% compare to the first half of 2019.
Revenues were very resilient, with growth in the insurance business. Commissions, hit by the sharp slowdown in the economy and by market volatility, began to recover in June; growth in assets under management accelerated in the second quarter. Costs continued to decline, confirming our leadership position in terms of efficiency among Europe banks. We further strengthened our balance sheet, improving our rock-solid capital position and deleveraging NPLs to the lowest level since 2008, reducing the stock by around €6 billion over the past twelve months. New first-half NPLs were at their lowest level ever. So it is safe to say that we are very well positioned to continue delivering best-in-class profitability and maintain our rock-solid capital position.
Without counting the contribution from UBI, we expect to deliver a Net income of at least €3.5 billion in 2021. Now we are opening a new chapter in our Group’s history. Last week, we successfully concluded our offer to UBI shareholders. Launched five months ago, we completed the offer right on time. We are proud that UBI shareholders representing 90.2% of the share capital chose to become part of Intesa Sanpaolo. Intesa Sanpaolo and UBI have similar business models and share similar corporate cultures and values. Together, we can reinforce a Group that is a national champion and a leader in Europe, with over €1.1 trillion in customer financial assets. Together we are stronger and together we have greater potential for growth. Through this operation, we rank at the very top of Eurozone banking: our combined group is #2 by market capitalization, #6 by operating income and #8 by total assets”.
The full statement by Carlo Messina, CEO of Intesa Sanpaolo is available at: https://group.intesasanpaolo.com/en/newsroom/news/all-news/2020/ceo-statement-results-1h-q2