Italian bank Intesa SanPaolo returns to full-year profit on better trading results, cost cuts

MILAN – Italian bank Intesa SanPaolo has returned to a full-year profit as higher earnings from trading and cuts offset lower interest income.

Italy’s second-largest bank by assets reported profits of €1.6 billion ($2 billion) in 2012, compared with a 2011 loss of €8 billion that was due to heavy writedowns on the value of investments.

“Intesa SanPaolo is strong and healthy, stronger and healthier than a year ago despite the ongoing recession,” CEO Enrico Cucchiani told a conference call.

Trading profit for the year more than doubled to €2.2 billion, with the insurance business contributing significantly. Net fees and commissions remained stable year-on-year at €5.4 billion.

Net interest income was down 3.6 per cent to €9.4 billion.

The bank posted its highest operating margin in five years, which Cucchiani called “a clear sign of resilience in a challenging market environment.”

In general, Italian banking’s more conservative way of doing business, its focus on commercial banking as opposed to riskier investment banking and the relative high rate of personal wealth has helped the country’s banks weather the financial crisis better than many of their European peers.

However, Intesa SanPaolo lost €83 million in the fourth quarter due to losses in Hungary and the Ukraine totalling €350 million, a €107 million loss on the Telco investment and €16 million in extraordinary taxes in Slovakia.

Cucchiani said the bank would have posted a small profit for the quarter if it weren’t for the negative impacts.

Still, the loss was minor compared with the €10 billion loss booked on writedowns in the same period a year earlier.

The bank said its Core Tier 1 ratio, a key indicator of a bank’s health where capital is measured against riskier assets, had been strengthened to 11.2 per cent, putting it in compliance Basel III requirements.

Management is proposing a dividend of €0.05 a share.

Shares in the bank rose 1 per cent to €1.267 in Milan trading.