Intesa Latest European Bank to See Positive Trading Surprise

(Bloomberg) -- Intesa Sanpaolo SpA became the third European bank to post better-than-expected trading revenue, helping profit rise despite lackluster income from lending and fees.

Net income increased to 1.22 billion euros ($1.36 billion) in the second quarter, beating the 908 million-euro average analyst estimate. Trading income drove an increase in revenue when analysts had expected a decline.

The Italian bank’s boost comes after both Credit Suisse Group AG and BNP Paribas SA reported gains in debt trading. That helps the banks weather an extended run of low interest rates that has hurt income from lending for years. Intesa’s second-quarter net interest income fell from a year earlier.

Chief Executive Officer Carlo Messina is riding cost reductions, higher deposits and improving asset quality to keep his promise of higher annual profits. The CEO, who seeks to grow higher-margin businesses like wealth management, private banking and insurance, said in May that the market environment is “less supportive for revenue.”

Intesa rose in Milan trading after the earnings release, reversing an earlier decline. The stock was up 0.5% as of 2:39 p.m.

Best in Decade

Despite difficult markets, Intesa posted the best first-half net income since 2008, Messina said on Wednesday. The bank reiterated that it expects full-year net income to increase compared with last year and confirmed its policy of paying out 80% of net income in dividends.

Improving credit quality has helped Intesa reduce costs as it sets aside less money against non-performing loans. Writedowns of loans fell by 20% in the second quarter from a year earlier. On Wednesday the bank agreed to sell about 3 billion euros ($3.3 billion) of troubled debt to Prelios SpA and form a partnership with the Italian debt-servicing company to manage another 6.7 billion euros.

Intesa also struck an agreement with Sisal Group to offer banking and payment services through more than 50,000 distribution points across Italy. Intesa was advised by Banca IMI and Sisal was assisted by UBS Group AG.

The new company will be 70%-owned by Sisal’s SisalPay and 30% by Intesa’s Banca 5 and will became operational in the beginning of 2020, Intesa said in a statement earlier Wednesday.

To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen, Marion Dakers

©2019 Bloomberg L.P.