By Valentina Za
MILAN (Reuters) -Italy's biggest bank Intesa Sanpaolo (BIT:ISP) on Friday lifted its 2023 profit goal after higher interest rates drove quarterly income above expectations, and pledged to increase rewards for shareholders barring a deep recession.
CEO Carlo Messina told analysts he would propose using excess capital to buy back Intesa (LON:0HBC)'s shares when the board approves full-year results in February.
He said he would also consider boosting shareholder returns at the end of 2024 and of 2025, on top of the 70% payout ratio that gives Intesa one of Europe's highest dividend yields.
"Excess capital will definitely be there also in 2024 and 2025," Messina said, adding the only threat to the bank's outlook could be an economic recession.
"If we don't have a deep recession we'll be able to compensate [any problems] with contingency plans," he said.
At the end of September core capital was little changed at 13.6% of risk weighted assets, well above a self-imposed 12% minimum threshold.
Messina said he had no intention of letting core capital slide towards 12% in the short term, adding, however, that even that level would mean excess capital compared to Intesa's risk profile given a reduction in bad loans and Russia exposure.
Italian banks have boosted shareholder remuneration and lifted their annual targets as higher interest rates help them exceed quarterly profit expectations.
Net interest income (NII) has risen sharply as deposit costs in Italy continue to lag lending rates.
Intesa said NII grew 6% from the previous quarter and 60% year-on-year. It is now forecast to be "well above" 14 billion euros in 2023, and rise further in 2024-2025.
Finance Chief Stefano Del Punta said the bank is using financial products such as deposit certificates to reward savers, rather than raising deposit rates.
Intesa, which also has insurance and wealth management businesses, is passing on around 22% of the rise in official rates to commercial banking customers, he added.
With NII more than offsetting weaker fees, net profit totalled 1.90 billion euros in the three months to end-September, above a 1.77 billion euro LSEG estimate.
Intesa now expects 2023 net income to exceed 7.5 billion euros, from previous guidance of "well above" 7 billion.
After coming under fire by politicians and competition authorities in recent weeks for shifting thousands of clients to its new mobile-only service Isybank, Intesa said investments in technology would add 500 million euros to its 2025 gross income.