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Intesa Sanpaolo: consolidated results at March 31st 2014

Turin - Milan, May 21st 2014 – At its meeting today, the Intesa Sanpaolo Management Board approved the consolidated interim statement as at March 31st 2014.

Significant improvement in profitability despite a still difficult market environment.

Net income at the highest level of the past eight quarters.

Pre-tax income at the highest level of the past six quarters.

Recovery in net interest income and strong increase in commissions with robust performance of assets under management.

Rigorous and conservative provisioning and npl coverage further increased with a reduction in npl inflow from performing loans.

Very strong balance sheet: Intesa Sanpaolo, “not addicted” to the ECB and one of the few banks in the world already Basel 3 compliant in terms of capital ratios and liquidity, further improves its leading position.

2014-2017 business plan initiatives already under way.

In the first quarter of 2014, the Group delivered a strong improvement in profitability, despite prolonged market difficulties, while continuing to strengthen its balance sheet and maintaining a rigorous and conservative provisioning policy even amid stabilising credit trends:

- robust net income:

  • €503m, the highest of the past eight quarters
  • up 64.4% vs q1 2013

- significant increase in pre-tax income:

  • €953m, the highest of the past six quarters
  • up 22.5% vs q1 2013

- recovering net interest income:

  • up 3.3% vs q4 2013
  • up 4.1% vs q1 2013

- strong performance of net commissions:

  • up 6.2% vs q4 2013, excluding performance commissions
  • up 8.3% vs q1 2013

- operating costs under close control:

  • down 4.7% vs q4 2013
  • up 0.1% vs q1 2013

- rigorous and conservative provisioning, in the presence of improving credit trend:

  • €1,077m vs 3,098m in q4 2013 and €1,158m in q1 2013
  • total NPL cash coverage further strengthened up to 46.7%, with a сoverage of the doubtful loan component up to 62.9% (129% and 128%, respectively, including collateral)

- lower NPL inflow from performing loans:

  • net inflow down 58% vs q4 2013 and down 24% vs q1 2013
  • gross inflow down 41% vs q4 2013 and down 18% vs q1 2013

- strong capital base, which continues to improve and is well above regulatory requirements. Common equity ratio, net of €250m dividends accrued in the first quarter of 2014:

  • 12.6% on a fully loaded basis, approximately €9bn of excess capital and
    Approximately €12bn capital buffer ahead of the aqr
  • 12.2% on a transitional basis for 2014 (“phased in”),

Highlights:

Operating income: up 4.5% at €4,108m vs €3,931m in q4 2013;
Unchanged vs €4,108m in q1 2013

Operating costs: down 4.7% at €2,086m vs €2,188m in q4 2013;
Up 0.1% vs €2,083m in q1 2013

Operating margin: up 16% at €2,022m vs €1,743m in q4 2013;
Down 0.1% vs €2,025m in q1 2013

Income before tax from up 42.9% at €953m vs €667m in q4 2013;

Continuing operations: Up 22.5% vs €778m in q1 2013

Net income: €503m vs -€5,190m in q4 2013;
Down 13% vs €578m in q4 2013 excluding
Impairment of goodwill/intangibles;
Up 64.4% vs €306m in q1 2013

Capital ratios: pro-forma common equity ratio after pro-quota dividends(5) :
12.6% fully loaded;
12.2% phased in,
12.1% excluding q1 2014 net income after pro-quota dividends

Business Plan inititives already under way, with strong involvement of the Group’s people:

- New Growth Bank: Banca 5® already launched, with 1,800 dedicated relationship managers in place since the beginning of May (out of 3,000 planned by 2017); the SME Finance Hub (new Mediocredito Italiano) set up, and integration plans kicked off for the Private Banking Hub, the Asset Management Hub and the Insurance Hub;

- Core Growth Bank: Asset Light model launched in Corporate and Investment Banking; proactive credit management fully operational in all the seven Regions; cost control initiatives ongoing (74 branches closed in the first quarter of 2014);

- Capital Light Bank: set up of the Capital Light Bank completed; a Re.o.Co. (Real Estate Owned Company) created to manage repossessed assets, with a new management team in place and the participation in May at the first auction;

- people and investments: broad-based shareholding plan reserved for all Group employees agreed with the Unions and approved at the Shareholders’ Meeting.

«This strong first quarter represents a good start to 2014 and provides a positive platform for the year as we continue the roll-out of the 2014-2017 Business Plan we presented just a few weeks ago», - Intesa Sanpaolo CEO Carlo Messina affirmed.

«In the first three months we delivered not only a strong increase in the Bank's profitability but also a clear improvement in the quality of those earnings. At €503 million net income was the highest in eight quarters, thanks to a strong performance in net interest income and in fees and commissions. Just as important has been the continued discipline we have applied to cost control and in our robust provisioning policies even as the inflow of non-performing loans is reducing.

Finally we have moved quickly to launch the first initiatives across all three of the areas we defined in our Business Plan - the New Growth Bank, the Core Growth Bank and the Capital Light Bank. This included the establishment of Mediocredito Italiano as new finance hub for SMEs and the launch of Banca 5 which already has 1,800 relationship managers on the ground.

These results provide positive early signs of an improving economic and business environment and further confirmation of Intesa Sanpaolo's ability to capitalise in this context on its position as one of the world's strongest banks. But we still have much to do and our clear focus continues to be on the efficient and consistent execution of our plan, driving new growth by building, thanks to our 90,000 people, an even better, even stronger bank for our 20 millions of customers».

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