MILAN (Reuters) - Intesa SanPaolo on Tuesday pledged to halve its soured loans and grow revenue strongly while cutting costs under a new four-year plan to cement its position as Italy's strongest bank.
Intesa targets 6 billion euros (£5.2 billion) in net profit in 2021, up from an adjusted 3.8 billion euros in 2017, with 4 percent annual growth in operating income.
That would lift its return on equity to 12.4 percent in 2021 from 7.9 percent last year.
The bank, which rewarded shareholders with 10 billion euros in cash dividends in the four years through 2017, said it planned to pay out 85 percent of this year's profit as dividends and gradually reduce the payout ratio to 70 percent in 2021.
Gross impaired debts are forecast to fall to 6 percent of total loans in 2021 compared with 11.9 percent at the end of last year.
The reduction would bring Intesa close to an European average of 5.5 percent, while Italian banks on average hold soured debts equivalent to 16 percent of total lending.
By comparison, Italian rival UniCredit is targeting a 7.8 percent impaired debt ratio in 2019 and a net profit of 4.7 billion euros that year, with a 30 percent payout.
Yielding to regulatory pressure to cut soured debts faster, Intesa has started discussing the sale of a portfolio of them together with a stake in its debt collection unit to Sweden's Intrum Justitia.
Until now, Intesa had bet on recovering bad debts internally, shunning sales that burn through capital as they are carried out at a loss.
The bank confirmed it would move its debt recovery business into a new company and consider a partnership to boost collections.
It said it would take advantage of the introduction of the new IFRS9 accounting rule to book 4.1 billion euros in writedowns before taxes, mostly of loans, in the first quarter of 2018.
Intesa, which has led a shift among Italian banks towards fee-earning activities and last year considered a bid for insurer Assicurazioni Generali (MI:GASI), said it wanted to rapidly grow its non-life insurance business and would consider partnering with a global player in asset management.
It said it was also open to considering a partnership in China to develop its wealth management business there.
At 0822 GMT, Intesa shares were down 0.3 percent against a 1.6 percent drop in Italy's banking index.