INTESA SANPAOLO

THE RESULTS FOR Q1 2023 CONFIRM THAT INTESA SANPAOLO IS ABLE TO GENERATE SUSTAINABLE PROFITABILITY EVEN IN COMPLEX CONTEXTS THANKS TO ITS WELL-DIVERSIFIED AND RESILIENT BUSINESS MODEL, WITH NET INCOME OF NEARLY €2 BILLION DRIVEN BY NET INTEREST INCOME.

THE SOLID PERFORMANCE OF INCOME STATEMENT AND BALANCE SHEET IN THE QUARTER TRANSLATED INTO SIGNIFICANT VALUE CREATION FOR ALL STAKEHOLDERS, ALSO GROUNDED IN THE GROUP’S STRONG ESG COMMITMENT: SPECIFICALLY, €1.4 BILLION DIVIDENDS ACCRUED, €1.4 BILLION TAXES GENERATED (AROUND €300 MILLION MORE THAN IN Q1 2022, DERIVING FROM THE NET INTEREST INCOME GROWTH), EXPANDING THE FOOD AND SHELTER PROGRAMME FOR PEOPLE IN NEED (AROUND 24.3 MILLION INTERVENTIONS IN THE PERIOD 2022 - Q1 2023), ENHANCING INITIATIVES TO FIGHT INEQUALITIES AND FAVOUR FINANCIAL, SOCIAL, EDUCATIONAL AND CULTURAL INCLUSION (€10.5 BILLION OF SOCIAL LENDING AND URBAN REGENERATION IN THE PERIOD 2022 - Q1 2023).

INTESA SANPAOLO CONTINUES TO OPERATE AS A GROWTH ACCELERATOR IN THE REAL ECONOMY IN ITALY: IN Q1 2023, MEDIUM/LONG-TERM NEW LENDING GRANTED BY THE GROUP TO ITALIAN HOUSEHOLDS AND BUSINESSES AMOUNTED TO AROUND €10 BILLION. IN Q1 2023, THE GROUP FACILITATED THE RETURN TO PERFORMING STATUS OF AROUND 900 COMPANIES, THUS SAFEGUARDING AROUND 4,500 JOBS. THIS BROUGHT THE TOTAL TO OVER 138,000 COMPANIES SINCE 2014, WITH AROUND 691,000 JOBS SAFEGUARDED OVER THE SAME PERIOD.

THE IMPLEMENTATION OF THE 2022-2025 BUSINESS PLAN IS PROCEEDING AT FULL SPEED, WITH THE KEY INDUSTRIAL INITIATIVES WELL UNDERWAY. THE BUSINESS PLAN FORMULA IS CONFIRMED, WITH A CLEAR AND STRONG UPSIDE FOR THE €6.5 BILLION NET INCOME TARGET IN 2025 DERIVING FROM THE INTEREST RATE INCREASE.

INTESA SANPAOLO IS FULLY EQUIPPED TO CONTINUE SUCCEEDING IN THE FUTURE GIVEN THE GROUP’S KEY STRENGTHS, NOTABLY RESILIENT PROFITABILITY, A SOLID CAPITAL POSITION, THE “ZERO-NPL” BANK STATUS AND HIGH FLEXIBILITY IN MANAGING OPERATING COSTS.

THE CAPITAL POSITION WAS SOLID AND WELL ABOVE REGULATORY REQUIREMENTS: FULLY LOADED COMMON EQUITY TIER 1 RATIO WAS 13.7% AFTER DEDUCTING FROM CAPITAL THE DIVIDENDS ACCRUED IN Q1 2023 AND NOT TAKING INTO ACCOUNT A BENEFIT OF AROUND 125 BASIS POINTS DERIVING FROM THE ABSORPTION OF DEFERRED TAX ASSETS (DTAs), OF WHICH AROUND 30 BASIS POINTS WITHIN THE Q2 2023 - 2025 HORIZON.
GROSS INCOME WAS UP 58% AND OPERATING MARGIN WAS UP 22% ON Q1 2022, WITH OPERATING INCOME UP 11.9% AND OPERATING COSTS RISING SLIGHTLY (UP 0.5%).

CREDIT QUALITY:
- NPLs WERE DOWN 2.1% NET AND UP 1.2% GROSS ON YEAR-END 2022;
- NPL RATIO WAS 1.2% NET AND 2.4% GROSS, RESPECTIVELY 1% AND 2% ACCORDING TO THE EBA METHODOLOGY;
- ANNUALISED COST OF RISK IN Q1 2023 STOOD AT 17 BASIS POINTS.
EXPOSURE TO RUSSIA HAS BEEN FURTHER REDUCED, DOWN BY AROUND 70% SINCE JUNE 2022 TO 0.2% OF THE GROUP’S TOTAL CUSTOMER LOANS.

• NET INCOME OF €1,956M IN Q1 2023, COMPARED WITH €1,076M IN Q4 2022 AND €1,043M IN Q1 2022
• GROSS INCOME UP 58% ON Q1 2022
• OPERATING MARGIN UP 22% ON Q1 2022
• OPERATING INCOME UP 11.9% ON Q1 2022
• OPERATING COSTS RISING SLIGHTLY ON Q1 2022 (UP 0.5%)
• CREDIT QUALITY:
• NPL STOCK DOWN 2.1% NET AND UP 1.2% GROSS ON YEAR-END 2022
• NPL RATIO OF 1.2 NET AND 2.4% GROSS, RESPECTIVELY 1% AND 2% ACCCORDING TO THE EBA METHODOLOGY
• ANNUALISED COST OF RISK IN Q1 2023 AT 17 BASIS POINTS (FROM 70 BASIS POINTS IN 2022, 30 BASIS POINTS WHEN EXCLUDING ADJUSTMENTS FOR THE EXPOSURE TO RUSSIA AND UKRAINE, FOR OVERLAYS AND TO FAVOUR DE-RISKING, NET OF THE PARTIAL RELEASE OF GENERIC PROVISIONS WHICH WERE SET ASIDE IN 2020 FOR FUTURE COVID-19 IMPACTS)
• A SOLID CAPITAL POSITION, WELL ABOVE REGULATORY REQUIREMENTS:
• COMMON EQUITY TIER 1 RATIO AS AT 31 MARCH 2023, AFTER DEDUCTING FROM CAPITAL (°) €1.4BN OF DIVIDENDS ACCRUED IN Q1 2023: 13.7% FULLY LOADED (°°) WITHOUT TAKING INTO ACCOUNT THE BENEFIT OF AROUND 125 BASIS POINTS DERIVING FROM THE ABSORPTION OF DEFERRED TAX ASSETS (DTAs), OF WHICH AROUND 30 BASIS POINTS WITHIN THE Q2 2023 - 2025 HORIZON
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(°) Deducting from capital also the coupons accrued on the Additional Tier 1 issues. The capital ratios of the last three quarters of 2022 already recorded the deduction of the total amount of the €3.4bn buyback – equivalent to the suspended 2019 dividend – which was approved by the Shareholders’ Meeting and authorised by the ECB and executed for an initial amount of €1.7bn from 4 July 2022 to 11 October 2022 and for the remaining amount of €1.7bn from 13 February 2023 to 4 April 2023.
(°°) Estimated pro-forma fully loaded Common Equity Tier 1 ratio of 15%, taking into account the total absorption of deferred tax assets (DTAs) related to goodwill realignment, loan adjustments, the first time adoption of IFRS 9 and the non-taxable public cash contribution of €1,285m covering the integration and rationalisation charges relating to the acquisition of the Aggregate Set of Banca Popolare di Vicenza and Veneto Banca, as well as the expected absorption of DTAs on losses carried forward and DTAs related to the acquisition of UBI Banca and the agreement with the trade unions of November 2021, and the expected distribution on the Q1 2023 net income of insurance companies.

HIGHLIGHTS:
 

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(°) Deducting from capital also the coupons accrued on the Additional Tier 1 issues. The capital ratios of the last three quarters of 2022 already recorded the deduction of the total amount of the €3.4bn buyback – equivalent to the suspended 2019 dividend – which was approved by the Shareholders’ Meeting and authorised by the ECB and executed for an initial amount of €1.7bn from 4 July 2022 to 11 October 2022 and for the remaining amount of €1.7bn from 13 February 2023 to 4 April 2023.
(°°) Estimated pro-forma fully loaded Common Equity Tier 1 ratio of 15%, taking into account the total absorption of deferred tax assets (DTAs) related to goodwill realignment, loan adjustments, the first time adoption of IFRS 9 and the non-taxable public cash contribution of €1,285m covering the integration and rationalisation charges relating to the acquisition of the Aggregate Set of Banca Popolare di Vicenza and Veneto Banca, as well as the expected absorption of DTAs on losses carried forward and DTAs related to the acquisition of UBI Banca and the agreement with the trade unions of November 2021, and the expected distribution on the Q1 2023 net income of insurance companies.

Turin - Milan, 5 May 2023 – At its meeting today, the Board of Directors of Intesa Sanpaolo approved the consolidated interim statement as at 31 March 2023 (*) (**).

The results for the first quarter 2023 confirm that the Intesa Sanpaolo Group is able to generate sustainable profitability even in complex contexts thanks to its well-diversified and resilient business model, with net income of nearly €2bn driven by net interest income.
The solid performance of income statement and balance sheet in the quarter translated into significant value creation for all stakeholders, also grounded in the Group’s strong ESG commitment: specifically, €1.4bn dividends accrued, €1.4bn taxes (°) generated and increased by around €300m on Q1 2022 (°°) as a consequence of the net interest income growth which has driven the increase of around €900m in net income, expanding the food and shelter programme for people in need (around 24.3m interventions in the period 2022 - Q1 2023), enhancing initiatives to fight inequalities and favour financial, social, educational and cultural inclusion (€10.5bn of social lending and urban regeneration in the period 2022 - Q1 2023).

Intesa Sanpaolo is fully equipped to continue operating successfully in the future given the Group’s key strengths, notably resilient profitability, a solid capital position, the “zero-NPL” Bank status and high flexibility in managing operating costs.
The exposure to Russia (^) was further reduced and was down by around 70% (over €2.5bn) on end of June 2022 to 0.2% of the Group’s total customer loans. Cross-border loans to Russia were largely performing and classified in Stage 2.

The formula of the 2022-2025 Business Plan is confirmed, with a clear and strong upside for the €6.5bn net income target in 2025 deriving from the interest rate increase. The implementation of the Plan is proceeding at full speed, with the key industrial initiatives well underway:
• massive de-risking, slashing cost of risk:
- massive deleveraging, with a €4.5bn gross NPL stock reduction in 2022/Q1 2023, reducing the net NPL ratio to 1% (^^);
- focus on modular approach and sectorial forward looking, factoring in macroeconomic scenario, and on proactive credit management;
- focus on the action plan dedicated to the Banca dei Territori Division, with strong management of underlying cost of risk and NPL inflows from performing loans, and new solutions for new needs arising in the current scenario;
- risk management capabilities enhanced: comprehensive and robust Risk Appetite Framework encompassing all the key risk dimensions of the Group;
(*) In accordance with Article 65-bis and Article 82-ter of the Issuers’ Regulation, effective as of 2 January 2017, Intesa Sanpaolo opted for periodical disclosure, on a voluntary basis, of financial information as at 31 March and 30 September of each financial year, in addition to the annual report and the half-yearly report. This information consists of interim statements approved by the Board of Directors, basically providing continuity with the interim statements published in the past.
(**) Methodological note on the scope of consolidation on page 27.
(°) Direct and indirect taxes.
(°°) Entirely in direct taxes.
(^) On-balance credit exposure, both cross-border and at the Russian subsidiary Banca Intesa, net of guarantees by Export Credit Agencies and after adjustments. As at 31 March 2023, after adjustments, the on-balance cross-border credit exposure to Russia amounted to €0.97bn of which €0.93bn to customers, net of €0.8bn guarantees by Export Credit Agencies (off-balance of €0.2bn to customers and €0.1bn to banks, net of €0.5bn guarantees by ECA) and the on-balance credit exposure of the subsidiaries amounted to €0.9bn, of which €0.2bn to customers, for Banca Intesa in Russia and €0.09bn, to banks, for Pravex Bank in Ukraine (off-balance, to customers, of €0.1bn for the Russian subsidiary and €0.05bn for the Ukrainian subsidiary). The credit exposure to Russian counterparties currently included in the SDN lists of names to which sanctions apply amounted to €0.4bn.
(^^) In accordance with the EBA methodology.