(Bloomberg) -- Intesa Sanpaolo SpA raised its full-year profit target as higher income from lending and fees propelled second-quarter earnings past analyst estimates.
The Milan-based bank expects profit will increase above €8.5 billion ($9.2 billion) both this year and next, compared with a previous guidance of more than €8 billion, as it benefits from higher fees and commissions as well as hedges put in place to protect against declining rates.
Net income at Italy’s biggest lender rose 8.8% to €2.47 billion, according to a statement Tuesday. Analysts had expected profit of €2.3 billion.
Chief Executive Officer Carlo Messina is counting on growth in insurance, asset and wealth management to lift fee income as the benefit from higher interest rates is expected to fade. He announced a new organizational structure this year aimed at accelerating growth of fee income, by unifying the wealth management, insurance and private banking divisions.
Shares of Intesa extended gains on the report, rising 1.9% as of 1:09 p.m. in Milan. Before today, analysts polled by Bloomberg had already expect net income to reach €8.5 billion this year.
Intesa also indicated it plans to pay out more of this year’s profit to shareholders than its 70% distribution policy would dictate. The additional amount will be quantified when annual results are approved, said the lender, which has long lured investors with one of the most generous dividend policies among European banks.
Intesa released a “solid earnings beat and better outlook,” Hugo Cruz, an analyst at KBW, wrote in a note. “Outlook raised and whilst consensus is already broadly there, the NII guidance for 2024 is slightly better than expected so should be well-received.”
Total revenue rose 8.1% to €6.86 billion, boosted by a 12% increase in net interest income, which for the first time ever rose above €4 billion in a quarter. The cost to income ratio stood at 38.3% at the end of June as Messina focuses on digital transformation to help cut costs.
Intesa said it further reduced its cross-boarder exposure to Russia after writing down the entire equity value of its unit in the country. It’s trying to sell its unit in Russia amid pressure from the European Central Bank on the region’s lenders to pull back from the country. Russian President Vladimir Putin authorized a sale to local management in September but the deal has not progressed since.
(Updates with statement details starting from fifth paragraph)
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