Intesa CEO 'not worried' about a wave of defaults on loans under moratoriums

Intesa Sanpaolo SpA CEO Carlo Messina said that he is "not worried" about a wave of defaults on loans that have been put on ice as borrowers contend with the fallout of the coronavirus crisis.

As of the end of December 2020, a total of €33 billion of loans were under moratoriums, representing 7% of Intesa's portfolio. Near the beginning of the pandemic, Intesa offered struggling borrowers a grace period on the repayment of their loans, as did all other major Italian banks.

So far, the performance of borrowers under moratoriums gives cause for optimism, Messina said.

Moratoriums have already ended on €28 billion of loans, with a default rate of around 1%, he said. Intesa anticipates that the default on the remainder of loans under moratoriums will be in the region of 2% to 3%.

"So, net-net ... I do not consider this as an area in which we can have some massive negative surprise," he told analysts during the call.

Out of the €33 billion of loans that remain under moratoriums, €5 billion relate to clients from Unione di Banche Italiane SpA, which Intesa acquired in 2020.

These remaining moratoriums will expire in June this year, and Messina said that he is "not worried at all" about a large number of defaults, adding that the situation is "absolutely under control."

Intesa is on track to pay a "high" dividend when the European Central Bank gives the green light for them to do so. Although the ECB removed a de facto ban on dividend payments in December 2020, it has asked banks to ensure that payouts remain below 15% their combined 2019-2020 profits, and no greater than 20 basis points of their common equity Tier 1 ratios, until end-September 2021. Intesa will pay a dividend of €694 million in respect to the 2020 financial year, which is the maximum amount that it is allowed to distribute under ECB rules.

Intesa reported a consolidated net loss of €3.10 billion for the fourth quarter, compared with a profit of €872.0 million a year earlier. The loss was mainly linked to charges related to its acquisition of UBI.

The bank ended 2020 with a pro forma fully loaded common equity Tier 1 ratio of 15.4%.