The CEO of Intesa Sanpaolo SpA is expecting the Italian lender's 2019 net income to be "much higher" than that of 2018, boosted by higher revenues, cost reductions and lower levels of provisions.
Speaking after the bank published its first-quarter results, CEO Carlo Messina said the group was continuing its cost-cutting measures to obtain a 10% reduction in headcount, which in turn was slashing costs across the board as the bank closed branches and reduced its real estate and IT platforms.
"The real secret of our ability to reduce costs is that we have been able to make a strong correlation between the reduction of people and the reduction of administrative expenses," he told analysts. "In a nutshell we will be able to reduce the scale of our bank while maintaining our ability to generate revenues," he said.
The bank reduced costs by 4.5% during the first quarter. Net income fell around 16% to €1.05 billion, but adjusted for a one-off exceptional gain in the first quarter of 2018, net profit rose 4.4%.
Net interest income for the quarter stood at €1.76 billion, down 5.2% from the prior-year period, while net fee and commission income fell 7% year over year to €1.89 billion.
Intesa's first-quarter cost of risk fell to 37 basis points, ahead of the bank's 2018 to 2021 business plan target of 41 basis points, and down from 48 basis points in the year-ago period. Loss loan provisions dropped by 23.6% to €369 million, while the lender's nonperforming loans declined €15.1 billion during the quarter to €35.5 billion.
"Also on provisions I am pretty sure that we will have a very good performance with a significant reduction in comparison to 2018," Messina said.
He also said he expected revenues to rise during the year as net interest income would benefit from a reduction in the cost of funding, which would add €100 million to net interest income over the year.
Fees and commissions will start seeing a recovery in the second quarter and throughout the second half as they are seasonally low in the first quarter, Messina said.