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Intesa Sanpaolo: 2014-2017 business plan

The new business plan of Intesa Sanpaolo envisages solid and sustainable value creation and distribution driven by: 11.8% rote, 10% roe and €4.5bn net income in 2017, about €10bn of total 2014-2017 cash dividends, 12.2% common equity ratio in 2017.

In 2017, the return on equity will be above the cost of capital for the group and for each business unit.
The plan reflects contributions from the whole bank and addresses all business drivers (revenues, costs, risk, capital and liquidity).

The plan prioritises more fee-intensive businesses, ready for a potentially prolonged period of low interest rates.

Profitability increase will be ensured, preserving a low risk profile, through new growth engines (“new growth bank”) and full value extraction from existing business (“core growth bank”).

The plan envisages efficient use of capital and liquidity (“capital light bank”).
People and investments are key enablers.
Significant excess capital and high growth / high value businesses with a european scale allow ample strategic flexibility.

Sharp increase in profitability, solid and sustainable shareholder value creation and distribution:

  • ROTE(1) up to 11.8% in 2017 from 3.4% in 2013
  • ROE(2) up to 10% in 2017 from 2.9% in 2013
  • Net income up to €4.5bn in 2017 from €1.2bn in 2013(3)
  • About €10bn total cash dividends for 2014-2017(4):

€1bn for 2014, €2bn for 2015, €3bn for 2016, €4bn for 2017

  • 12.2% common equity ratio(5) in 2017
  • Excess Capital available for additional distribution from 2016-2017: about €8bn with a 9.5% common equity ratio(6)

Solid revenue creation:

  • Operating income up to €19.2bn in 2017 from €16.3bn in 2013 (+4.1% cagr(7))
  • Net Interest income up to €9bn in 2017 from €8.1bn in 2013 (+2.6% cagr)
  • Net Fee and commission income up to €8.2bn in 2017 from €6.1bn in 2013 (+7.4% cagr)

Continuous cost management:

  • Cost/Income improving to 46.1% in 2017 from 51.3% in 2013 (-5.2pp)
  • Around €800m cost savings
  • +1.4% cagr in operating costs, increase due to costs to support growth

Dynamic credit and risk management:

  • Net adjustments to loans down to €3bn in 2017 from €7.1bn in 2013 (-€4.1bn)
  • Cost of risk down to 80bps in 2017 from 207bps in 2013 (-127bps)
  • Gross inflow of new non-performing loans from performing loans down to €8.2bn in 2017 from €15.6bn in 2013 (-47%)
  • Loans to customers(8) up to €369bn in 2017 fr0m €322bn in 2013 (+3.5% cagr)

Significant investments:

  • €5bn investments, cumulative for the 2014-2017 period:
    • €2.9bn for growth
    • €1.2bn for efficiency improvement
    • €0.9bn for credit and risk management
  • Excess capacity (about 4,500 people) absorbable through priority initiatives
  • About 5m cumulative training days in 2014-2017

Highlights in 2017:

Capital ratios: Common equity ratio at 12.2%(9)
Operating income: Up 4.1%(10) At €19.2bn vs €16.3bn in 2013
Operating costs: Up 1.4%(10) At €8.8bn vs €8.4bn in 2013
Operating margin: Up 6.8%(10) At €10.3bn vs €7.9bn in 2013
Income before tax from continuing operations: Up 29.6%(10) At €7bn vs €2.5bn in 2013
Net income: Up 38.3%(10) At €4.5bn vs €1.2bn in 2013(11)

Value creation for all stakeholders, more than €200bn contribution to the economy: (total 2014-2017)

Shareholders: Cash dividends Of about €10bn (12) About €10bn available for Consumption/investments
Families and Businesses: Medium/long-term new lending to the real economy Of about €170bn • about 350,000 new investments Financed
•Lending growth well above the gdp growth
Employees: Personnel expenses Of about €21bn About €1bn invested in training •More than 90,000 households
•Absorbable excess capacity
•About Five million training days
Suppliers: Purchases and investments Of about €10bn More Than 40,000 households
Public sector: Taxes (13) Of about €10bn Comparable to an italian annual Budget bill (“legge di stabilità”)
Social sector: Medium/long-term new lending to support social ventures of about €1.2bn Banca Prossima the largest social Sector lender in italy

 

(1) ROTE: net income (pre goodwill and other intangibles impairment) / tangible net shareholders’ equity (net shareholders’ equity excluding net income, goodwill and other intangibles)

(2) ROE: net income (pre goodwill and other intangibles impairment) / net shareholders’ equity (excluding net income)

(3) Excluding impairment of goodwill and other intangibles

(4) Subject to regulatory requirements

(5) Pro-forma fully phased-in Basel 3 including estimated benefits from optimisation of sources and capital requirements and from sovereign risk shock absorption (one basis point), from Danish compromise (13bps) and from the stake in the Bank of Italy (86bps); after ordinary dividends

(6) Basel 3 compliance level for Global SIFIs: 9.5% (4.5% Common Equity + 2.5% conservation buffer + 2.5% current maximum Global SIFI buffer)

(7) CAGR: compounded annual growth rate

(8) Excluding loans to customers belonging to “Capital Light Bank” (9) Pro-forma fully phased-in Basel 3 including estimated benefits from optimisation of sources and capital requirements and from sovereign risk shock absorption (one basis point), from Danish compromise (13bps) and from the stake in the Bank of Italy (86bps); after ordinary dividends

(10) 2013-2017 CAGR (compounded annual growth rate)

(11) Excluding impairment of goodwill and other intangibles

(12) Does not include additional pay-backs, which could be distributed subject to regulatory evolution

(13) Direct and indirect

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