Italian bank Intesa SanPaolo on Tuesday reported a 22 percent increase in first-quarter earnings due to higher trading profits and cost-cutting, and maintained its targets despite political and economic uncertainty in Europe.
Net income for the first three months of the year was (EURO)804 million ($1.03 billion), up from (EURO)661 million in the first quarter of 2011 and the highest in seven quarters.
Trading profit more than doubled to (EURO)716 million from (EURO)280 million in the same period last year, supported by higher customer deposits and new loans.
The bank's shares rose to positive territory after the results were announced, trading 0.1 percent higher at (EURO)1.03, before sinking in an overall down market to (EURO)0.98.
`'Despite being based in what is labeled as the European periphery, it is comforting to see our bank performing in line or better than international peers across Europe on several metrics," CEO Enrico Cucchiani told an analyst conference call. He said Intesa SanPaolo had the lowest leverage among European banks, as well as the best top line growth.
But he said the economic outlook remained uncertain.
`'The market environment remains extremely volatile and the Italian outlook, well, I am not sure it has made all the improvements that we thought," Cucchiani said.
The bank said its Core Tier 1 ratio, a key measure of a bank's health, had risen to 10.5 percent, above the 9 percent minimum set by the European Banking Authority. The capital ratio was 10.1 percent at the end of 2011.
Cucchiani said the bank would retain its target for a Core Tier 1 ratio above 10 percent, maintain strong liquidity and pay a dividend at least at the level of that for 2010. To keep the targets, Cucchiani said the bank would keep a conservative strategy.
He said that given the `'gravity of the economic outlook," the bank raised its provisions for bad loans by 43 percent to (EURO)970 million.
`'We are going through a recession and we don't see it ending any time soon. It will likely generate credit quality deterioration and put the eurozone under stress and European banks under pressure, while the European political landscape is evolving in an unclear direction," Cucchiani said.
Intesa was one of 26 Italian banks that saw its ratings downgraded on Monday by Moody's, which cited Italy's weak economy and austerity measures hitting loan demand.
The bank used (EURO)14 million of the (EURO)36 million in low-interest loans it took from the European Central Bank to buy short-term sovereign debt.