Intesa sees 2022 profit at top of range after cutting Russia risks

By Valentina Za

MILAN (Reuters) -Intesa Sanpaolo on Friday said its 2022 profit would be at the upper end of the range it had previously provided, after it beat forecasts with its third-quarter earnings and sharply cut exposure to Russia in the period.

Higher official interest rates have played a key role in helping major European banks post stronger than expected third quarter results.

Italy's biggest bank was no exception and CEO Carlo Messina said rising rates would also provide a buffer next year if the impending economic slowdown turned out to be worse than the anticipated mild recession.

Intesa expects to earn more than 11 billion euros ($10.91 billion) next year from the gap between lending and deposit rates.

"Net interest income is again a clear engine of growth and a driver for overdelivering on our promises," Messina said, pledging to beat a 2025 profit goal of 6.5 billion euros.

For the current year, Intesa said net profit would be above 4 billion euros, a level it had previously indicated as the top end of a range.

In August, it had said net profit would be above 3 billion euros if it had to raise provisions against losses on its Russian and Ukrainian assets.

Together with domestic rival UniCredit, Intesa is among European banks most exposed to Russia and analysts welcomed a 2.3 billion euro reduction in its Russian exposure, representing around 65% of that business, in the quarter.

Clearing Russian risks from its balance sheet cost Intesa 1.1 billion euros out of this year's profits, Messina said, including some 200 million euros in provisions in the quarter.

"We can now be considered a bank with zero exposure towards Russia: we'll keep working to cut our limited residual exposure," he said.

Net income totalled 930 million euros in July-September, down 5% from a year earlier, due to weaker fees, but significantly above a Reuters forecast of 829 million euros.

With a business model strongly geared towards asset management and insurance, Intesa's net fees declined 7% annually amid the current financial market turmoil.

But net interest margin grew by 19% year-on-year, driving revenues to 5 billion euros, marginally ahead of expectations.

Net profit also benefited from lower than expected loan-loss provisions.

Intesa, which has made of a generous dividend policy its trademark and on Friday confirmed its 70% payout ratio, said its board had approved paying interim dividends worth 1.4 billion euros on 2022 earnings - above an earlier indication of "at least 1.1 billion euros".

As for a proposed second buyback worth 1.7 billion euros approved by regulators which Intesa has postponed, Messina said he wanted to see first how serious next year's economic recession will be.

"It's not a good idea to payout out capital during a recession," he said.

At 12.4% at the end of September from 12.5% three months before, core capital in the period edged fractionally closer to the 12% minimum threshold set by the bank.($1 = 1.0205 euros)

($1 = 1.0082 euros)

(Reporting by Valentina Za, editing by Keith Weir and Jane Merriman)