Intesa Sanpaolo SpA reported reclassified, consolidated net income of €1.43 billion for the fourth quarter of 2017, up from €776 million in the year-ago period, and unveiled a three-year business plan under which it aims to reduce its bad loans by about half, among other targets.
The Italian lender plans to slash its nonperforming loans by nearly half to €26.4 billion in 2021, gross of adjustments, from €52.1 billion in 2017. Including the impact of the first adoption of the International Financial Reporting Standards 9, Intesa is aiming to reduce its net NPLs to €12.1 billion from €22.5 billion over the period.
The bank is also targeting €6 billion of net income in 2021, as well as return on tangible equity of 14.6% and return on equity of 12.4%.
For the fourth quarter of 2017, Intesa reported net interest income of €1.84 billion, up from €1.75 billion in the fourth quarter of 2016, while net fee and commission income rose year over year to €2.15 billion from €2.03 billion.
The bank, which acquired Banca Popolare di Vicenza SpA and Veneto Banca SpA in June 2017, booked charges for integration and exit incentives, net of tax, of €227 million in the fourth quarter of 2017, up from the year-ago €83 million.
Quarterly net adjustments to loans came in at €1.23 billion, up from €1.17 billion in the fourth quarter of 2016. Net provisions and net impairment losses on other assets rose to €135 million from €105 million over the period.
For full year 2017, net income more than doubled to €7.32 billion from €3.11 billion in 2016. The result included the €3.5 billion cash contribution Intesa received from the Italian government to offset the capital ratio impact of its acquisition of Popolare di Vicenza and Veneto Banca. Excluding the state contribution, net income for 2017 reached €3.81 billion.
Intesa noted that its 2017 figures were restated, where necessary, considering changes in the scope of its consolidation.
The group's pro forma common equity Tier 1 ratio stood at 14% on a fully loaded basis and 13.3% on a phased-in basis as of Dec. 31, 2017. Taking into account the impact of IFRS 9, the bank's pro forma fully loaded and phased-in CET1 ratios stood at 13%.
Under its new business plan, Intesa is targeting a pro forma CET1 ratio of 13.1% on a fully loaded basis in 2021, including impacts of regulatory regimes, such as Basel IV.
Intesa said it also aims to reach roughly €1.5 billion in cost savings for 2018 to 2021, and bring its cost to income ratio to 45.4% in 2021 from 55.1% in 2017. The bank also plans to achieve operating income of up to €20.8 billion in 2021, compared to €17.44 billion in 2017; net interest income of up to €8.3 billion in 2021, up from €7.26 billion in 2017; and net fee and commission income up to €10 billion in 2021, against €7.84 billion in 2017.
Intesa's board of directors will propose to distribute a dividend of 20.3 cents on ordinary shares and 21.4 cents on savings shares, before tax. Should the proposal be approved at the bank's next ordinary shareholders' meeting, the dividend will be paid May 23.
