Italian lender Intesa Sanpaolo SpA swung to a net loss in the fourth quarter of 2020 from a year-ago profit, driven by charges associated with its acquisition of Unione di Banche Italiane SpA.
The group booked a fourth-quarter 2020 consolidated net loss of €3.10 billion, compared with a profit of €872.0 million a year earlier, as it booked a negative effect of purchase price allocation of €1.20 billion and integration charges of €1.37 billion in relation to the deal with UBI.
Consolidated net interest income for the quarter came in at €2.19 billion, up from €1.75 billion a year ago, while net fee and commission income dropped year over year to €2.59 billion from €2.17 billion.
Profits on financial assets and liabilities designated at fair value came in at €189 million in the period, compared to €356 million a year earlier.
Net adjustments to loans amounted to €1.48 billion in the quarter, compared to €693 million a year ago. Other net provisions and net impairment losses on other assets were €122 million, compared to €168 million a year ago.
Operating costs amounted to €3.01 billion in the quarter, down from €2.56 billion a year ago.
For full year 2020, Intesa's consolidated net income was €3.28 billion, down from €4.18 billion in 2019.
The bank said the fourth-quarter and full-year 2020 consolidated figures included contributions from UBI Banca. Excluding UBI, Intesa's fourth-quarter net loss was €902 million and its full-year net income was €2.17 billion.
As of Dec. 31, 2020, the group's pro forma fully loaded common equity Tier 1 ratio stood at 15.4% after the deduction of proposed dividend of €694 million, at 16.9% excluding the acquisition of UBI Banca and 15.9% including the acquisition but excluding the assets of the going concern to be sold to BPER Banca SpA.
Intesa said the proposed dividend for 2020 is the maximum amount allowed under the ECB's guidelines, which were aimed at preserving bank capital during the coronavirus pandemic. The dividend will be paid out in May.
2021 outlook
For 2021, Intesa expects net income of no less than €3.5 billion, with a cost of risk below 70 basis points. The bank's cost of risk — the main metric for calculating loan loss provisions — was 50 basis points in 2020, excluding the impact of loan adjustments for future COVID-19 effects, which is equivalent to 54 basis points. Cost of risk in 2019 was 53 basis points.
Subject to approval from the ECB, the bank intends to distribute cash dividends equivalent to a payout ratio of 70% for 2021.
Taking into account the dividend policy, the bank expects its capital ratios to remain strong, projecting a minimum pro forma fully load CET1 ratio of 13% for 2021.
