Milano, 13 May 2003

• Consolidated net income closed at 313 million euro
  
• Operating margin grew by 12%
  
• Cost/income ratio improved significantly: down to 63% from 68%
  
• Capital ratios strengthened further: Core Tier 1 ratio at 6%
  
• A binding offer for Banque Sudameris S.A.’s operations in Chile from Banco del Desarrollo has been accepted

Banca Intesa’s Board of Directors, which met today under the chairmanship of Giovanni Bazoli, examined and approved the consolidated quarterly report at 31^st March 2003.

 

The firm actions taken to reduce costs effectively faced revenue weakness due to the still unfavourable financial market trend. These actions led to a 12.3% increase in operating margin which was up to 921 million euro in the first quarter of 2003 compared to 820 million of the first quarter of 2002, with a marked improvement in cost/income ratio which dropped to 63% from 68% of the corresponding period of 2002. Consolidated net income amounted to 313 million euro, after provisions for 355 million euro. Capital ratios have continued to improve: as at 31^st March 2003 the Core Tier 1 ratio rose to 6%.

 

The 2003 first quarter consolidated statement of income recorded an interest margin which equalled 1,422 million euro, down by 6.9% compared to 1,527 million of the 2002 first quarter; net of foreign exchange effects from the South American currencies, the decrease rate would be contained to 3.2%. Net commissions showed a 6% decline to 804 million euro from 855 million due to the contraction in securities trading (-32%) and asset management (-22%), not offset by the positive trend of commercial banking activities (+8%). Profits on financial transactions increased to 194 million euro compared to 94 million in the corresponding quarter of 2002. On the whole, net interest and other banking income totalled 2,514 million euro, down by 3% compared to 2,593 million in the first quarter of 2002; net of foreign exchange effects, this would result in an 0.5% increase.

 

Total operating costs amounted to 1,593 million euro, down by 10.2% compared to 1,773 million in the 2002 first quarter; net of foreign exchange effects, the decrease rate would equal 6.9%. As part of it, personnel costs declined by 9.3% (net of foreign exchange effects, by 6.6%); other administrative costs went down by 13.5% (net of foreign exchange effects, by 9.6%); depreciations and amortisations decreased by 2.4% (net of foreign exchange effects, this would mean a 1.3% increase).

 

As a result, operating margin increased to 921 million euro, up by 12.3% compared to 820 million of the first quarter of 2002; net of foreign exchange effects, the increase rate would equal 16.6%.

 

Total provisions and net value adjustments (excluding goodwill amortisation) amounted to 355 million euro, compared to 270 million in the first quarter of 2002: 67 million euro were due to Latin America and 21 million euro to the write-down of the stake in Bayerische Hypo-Vereinsbank.

 

Therefore, ordinary income increased to 534 million, up by 1.3% compared to 527 million of the first quarter of 2002; net of foreign exchange effects, the increase rate would equal 3.9%.   

 

Extraordinary items resulted in a 30 million euro net income, compared to 239 million of the corresponding quarter of 2002. Extraordinary income included 25 million euro from the sale of IntesaBci Bank Suisse and 6 million euro from the mark to market of the treasury shares held by Banca Intesa.

 

Due to lower extraordinary income, the quarter closed with a consolidated net income of 313 million euro, compared to 425 million euro of the first quarter of 2002, with the Parent Company’s net income at 253 million euro compared to 401 million of the corresponding period of 2002.

 

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With regard to consolidated balance sheet figures as at 31^st March 2003, loans to customers amounted to 165 billion euro, down by 1.8% with respect to 31^st December 2002 and by 7.8% with respect to 31^st March 2002. This decline is mainly due to the decision to reduce exposure to Large Corporates and, when comparison is drawn with the 2002 first quarter, also to the securitization transaction for about 2 billion euro of residential mortgage loans. Customer deposits under administration amounted to 472 billion euro, down by 1.8% with respect to 31^st December 2002 and by 7.5% with respect to 31^st March 2002. At the end of the first quarter of 2003, Gruppo Intesa’s operating structure was made up of 4,293 branches - of which 3,251 in Italy and 1,042 abroad - and 71,052 employees, 336 lower than at 31^st December 2002.

 

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The implementation of the actions set forth in the Business Plan to reduce risk profile and strengthen capital adequacy continued.

 

In the first quarter of 2003, exposure to Large Corporates declined further with a reduction of 4.1 billion euro compared to 31^st December 2002 (from 38.5 billion to 34.4 billion) which was wholly related to international corporate business.

 

As for credit derivatives the open positions in the banking book were reduced by 20% in the first quarter 2003, down to 2.4 billion euro from 3 billion.

 

Compared to year-end 2002, net doubtful loans registered a 1.3% decrease, down to 5,279 billion euro from 5,348 billion, with a coverage ratio of 63%.

 

Net interbank funding decreased by 23% in the first quarter 2003, down to 11.4 billion euro from 14.7 billion.

 

As concerns capital ratios, at 31^st March 2003 the Core Tier 1 ratio reached 6% (5.9% at year-end 2002), the Tier 1 ratio was at 6.8% (unchanged with respect to year-end 2002) and the total capital ratio equalled 11.2% (11.1% at year-end 2002).

 

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In the frame of its disengagement from Latin America, Gruppo Intesa - while carrying out the sale of Banco Sudameris Brasil to Banco ABN AMRO Real - accepted a binding offer from Banco del Desarrollo for Banque Sudameris S.A.'s operations in Chile. Banco del Desarrollo is a Chilean bank and its shareholders include Chile-based Inversiones Norte y Sur, Italy's San Paolo IMI and France's Crédit Agricole.

 

According to the proposal, Gruppo Intesa is due to receive a counter value approximately

  equal to the book value of said operations (about USD 30 million) in newly-issued shares of Banco del Desarrollo, representing approximately 16% of Banco del Desarrollo's share capital.

 

A mechanism of gradual monetization of these shares is envisaged, under which Gruppo Intesa is due to receive at least 30% of the agreed counter value in cash by 31^st December 2003.

 

The closing of the deal is expected to take place by July this year and is subject to the relevant authorisations. UBS Warburg is acting as advisor to Gruppo Intesa on this transaction.

 

* * *

 

As regards this year’s outlook, in the coming quarters a progressive spreading of effects is expected to stem from the actions taken on the revenue and cost side and, consequently, a substantial recovery in profitability, as set forth in the Business Plan,.

 

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In order to present more complete information regarding the quarterly results, the consolidated statement of income and balance sheet are attached (reclassified and in a summarised format). The latter are included in the report on operations approved by the Board of Directors. It must be pointed out that this quarterly report has not been subject to control by the auditing firm.

 

Banca Intesa notifies that - pursuant to provisions set forth in Art. 82, par.2  of Consob resolution 11971 of 14th May 1999 as amended - the Half-Year Report as at 30th June 2003 will be available for shareholders and the market within the maximum term of  75 days, instead of the quarterly report as at 30th June 2003.
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