Milano, 8th March 2004

• Consolidated net income: 1,214 million euro (200 million in 2002)
  
• Ordinary Income up to 1,810 million euro (11 million in 2002)
• Dividends: 4,9 euro cents to circulating ordinary shares and 6 euro cents to saving shares for a total amount of 330 million euro; 318 million treasury shares distributed (2 every 41) to all shareholders for a counter-value of approximately 1 billion euro
• Capital ratios strengthened: Tier 1 ratio up to 7.8%
• Cost/Income ratio improved substantially: down to 63.2% from 68.7%
• In the framework of the strengthening strategies set out in the Business Plan negotiations started for acquiring control of Garanti Bank in Turkey and 100% of Crédit Agricole Indosuez Private Banking Italia 

 

Banca Intesa’s Board of Directors met today, chaired by Giovanni Bazoli, and approved the Parent Company’s 2003 draft financial statements and the consolidated financial statements for 2003.

Results highlighted a marked turnaround, in line with the 2003-2005 Business Plan forecasts, with 2003 consolidated net income growing to 1,214 million euro from 200 million of the previous year. 

The Board will be proposing for the approval of the Shareholders the distribution of a dividend per share of 4.9 euro cents to circulating ordinary shares, 6 euro cents to saving shares (with respect to 1.5 and 2.8 euro cents respectively for 2002) for a total amount of 330 million euro (with respect to 108 million for 2002) and the distribution to all shareholders of treasury shares still held by Banca Intesa, i.e. approximately 318 million treasury shares (with respect to 159 million treasury shares distributed for 2002).

More precisely, the proposal will regard the assignment of 318,486,977 treasury shares (proceeding, according to the resolution of the Ordinary Shareholders’ Meeting of 17th December 2002, with the sale of the remaining 727,771 treasury shares held by Banca Intesa) at the ratio of two Banca Intesa ordinary shares, which start to accrue rights as of January 1st 2004, every 41 Banca Intesa ordinary shares and/or saving shares in circulation. The Bank’s treasury shares reserve will thus be reduced by 3.18 euro for each share assigned, a value corresponding to the unit carrying value in the financial statements as at December 31st 2003.

Considering this carrying value (3.18 euro), the assignment of treasury shares to shareholders will be the equivalent of a total dividend per share of 20.4 euro cents to ordinary shares and 21.5 euro cents to saving shares (respectively 6.6 and 7.9 euro cents for 2002, considering the unit carrying value of 2.049 euro of the last assignment of treasury shares).

The ratio between this total dividend per share and the average annual stock price of Banca Intesa in 2003 returned a dividend yield of 7.8% for ordinary shares and 11.4% for saving shares. The dividend yield calculated on the stock price of Banca Intesa as at 5th March 2004 (which is considered also for the total dividend per share) is 6.5% for ordinary shares and 9.1% for saving shares.

The high total pay-out of 1,343 million euro, compared to 434 million euro of the previous year, is not prejudicial to the ongoing strengthening of capital ratios: the Tier 1 Ratio, calculated on the basis of the above-mentioned proposal, rose to 7.8%, as at 31st December 2003 in respect to 6.8% at 2002 year-end.

The Board summoned the Ordinary Shareholders’ Meeting for 14th April 2004 on first call and 15th April 2004 on second call. Payment of dividends and assignment of treasury shares, if approved by the Shareholders’ Meeting, will take place starting from 22nd April 2004 (with presentation of the coupons on 19th April 2004).

2003 full-year results

The 2003 consolidated income statement recorded an interest margin equalling 5,160 million euro, down 6.3% compared to 5,506 million in 2002, mainly as a result of structural decisions such as the reduction in the securities portfolio linked with the strategic repositioning of capital market activities from interest to non-interest based business and the reduction in exposure to Large Corporates in addition to the narrowing spread between market rates and cost of funding. These factors were only partially offset by growth in lending to individuals and SMEs.

Net commissions showed a 3% increase up to 3,331 million euro from 3,233 million, mainly due to growth in revenues from tax collection (+42%), bancassurance (+35.4%), dealing and placement of securities (+17.4%) and current accounts (+7.8%) while a contraction was registered in revenues from mutual funds and segregated managed accounts (-11.5%). Profits on financial transactions went up to 830 million euro, with respect to 166 million of the previous year, also due to the sale of structured bonds and corporate derivatives almost non-existent in year 2002.

On the whole, net interest and other banking income totalled 9,708 million euro, up 4.1% compared to 9,324 million for 2002.

Total operating costs amounted to 6,135 million euro with a 4.2% decrease compared to 6,403 million in 2002. As part of it, personnel costs decreased 4.6% and other administrative costs went down 5%, with depreciations and amortisations unchanged with respect to the previous year.

As a result, operating margin rose to 3,573 million euro, up 22.3% compared to 2,921 million in 2002 with substantial improvement in the cost/income ratio, down to 63.2% from 68.7% of the previous year.

Total provisions and net value adjustments (excluding goodwill amortisation) amounted to 1,633 million euro, down 41% with respect to 2,770 million in 2002: 288 million euro were due to 80% coverage on exposure to Parmalat, 152 million to the write-down of the stake in Banco Comercial Portugues (BCP) and 135 million to Latin America.

Therefore, ordinary income rose to 1,810 million euro from 11 million in 2002.

Extraordinary items showed a net positive result of 202 million euro (228 million in 2002). Extraordinaries included income of 361 million euro from the marking to market of the treasury shares held by Banca Intesa, 134 million from the contribution of Banca Primavera’s operations to Banca Generali and 112 million from the setting up of new IntesaVita. Extraordinaries also included charges of 287 million euro related to the “Solidarity allowance” for planned layoffs, approximately 140 million for disengagement from Latin America and 60 million from the disposal of Bankhaus Loebbecke.

In 2003 consolidated net income increased to 1,214 million euro, compared to 200 million in 2002, with the Parent Company’s net income at 1,359 million euro (12 million in 2002).

2003 fourth-quarter results

The 2003 fourth-quarter consolidated income statement registered a net interest income equalling 1,217 million euro, with a 2.3% decrease with respect to the previous quarter due to the foreign component and down 8.2%  with respect to 1,326 million of the corresponding quarter of 2002 owing to the structural decision of reducing the non-core loan book and the securities portfolio in addition to the decline in market interest rates.

Net commissions reached 881 million euro up 5.3% with respect to the previous quarter and up 10.4% to the corresponding quarter of 2002, mainly due to the sustained trend in dealing and placement of securities and tax collection.

Profits on financial transactions amounted to 140 million euro, compared to 187 million registered in the previous quarter and to the negative 18 million of the corresponding period of 2002, benefiting from the sale of structured bonds and corporate derivatives and from the structural improvement of the Group’s operations in capital markets and securities portfolio management. They were negatively affected by approximately 70 million euro of mark to market.

On the whole, net interest and other banking income totalled 2,374 million euro, down 1.4% compared to the previous quarter and up 3% to the corresponding period of 2002.

Total operating costs amounted to 1,599 million euro up 6.5% compared to the previous quarter, due to seasonality effects from expenses other than personnel costs and depreciations and amortisations, and down 4.1% compared to the 2002 corresponding period  thanks to decreases in personnel costs (down 2.9%), other administrative costs (down 5.6%) and  depreciations and amortisations (down 4.2%)

As a result, operating margin totalled 775 million euro, down 14.4% compared to the previous quarter and up 21.7% with respect to the 2002 corresponding period.

Total provisions and net value adjustments (excluding goodwill amortisation) amounted to 706 million euro with respect to 249 million for the third quarter 2003 and to 1,167 million of the fourth quarter of 2002: as specified above, 288 million euro were due to 80% coverage on Parmalat exposure and 152 million to BCP stake write-down.

Extraordinary items showed a net positive result of 103 million euro (compared to 12 million euro net extraordinary charges of the previous quarter and 560 million euro net extraordinary income of the 2002 fourth quarter). Extraordinaries included income of 126 million euro from the marking to market of the treasury shares held by Banca Intesa, in addition to the aforementioned 134 million from the contribution of Banca Primavera’s operations to Banca Generali and 112 million from the setting up of new IntesaVita. They also included  charges of 277 million euro related to the “Solidarity allowance” for planned layoffs, besides the above-mentioned 60 million from the disposal of Bankhaus Loebbecke.

The 2003 fourth quarter closed with a consolidated net income of 176 million euro, compared to 328 million of the previous quarter and 144 million of the 2002 corresponding quarter, with the Parent Company’s net income at 371 million euro with respect to 314 million of the previous quarter and 64 million for the corresponding period of 2002.

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As regards the consolidated balance sheet figures, as at 31st December 2003 loans to customers amounted to 155 billion euro, down 5.7% with respect to 31st December 2002. This decline is mainly due to the decision to reduce exposure to Large Corporates - mainly international ones with no business links with Italy - and to the securitisation transaction for about 2 billion euro of residential mortgage loans completed at the beginning of 2003. Doubtful loans net of adjustments decreased below 4.6 billion euro, diminishing 9.8% with respect to December 31st 2002,  and represented 3% of total loans; the degree of coverage was 65%.

Customer deposits under administration amounted to 459 billion euro, with a 2.3% decrease with respect to 31st December 2002. As part of it, direct customer deposits reached 172 billion euro decreasing 2.4% compared to 31st December 2002 and assets under management amounted to 121 billion euro, in line with  figures as at 31st December 2002. 

As at 31st December 2003 capital ratios resulted in: Core Tier 1 ratio at 6.9% (5.9% at 31st December 2002), Tier 1 ratio at 7.8% (6.8% at 31st December 2002) and total capital ratio at 11.7% (11.1% at 31st December 2002).

As at 31st December 2003 Gruppo Intesa’s operating structure was made up of 3,730 branches - of which 3,087 in Italy and 643 abroad - and 60,040 employees, 4,565 lower than at 31st December 2002.

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As regards this year’s outlook, Banca Intesa confirms its Business Plan targets aimed at further improving profitability, with expectations of an adequate return on capital.

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Financial statements as at 31st December 2003 mark the close of the first year of Gruppo Intesa’s 2003-2005 Business Plan with the achievements of the main targets in terms of financials, restructuring and re-launching.

The objectives set out as regards risk profile reduction, asset quality improvement, disengagement from Latin America and capital base strengthening were reached through scheduled restructuring actions.

At the same time as the restructuring actions, re-launching initiatives were put in place including more than 100 projects on which the Bank’s platform for growth is being built. The most crucial project of this phase - the realisation of an integrated single IT system to serve the Bank’s network in place of the three pre-existing ones - was duly completed in October 2003. Since then all branches have been using the Target system.

A lot of projects and investments are addressed to substantially improve customer service quality and involve three main areas of action:
1. new products. Following the unification of the IT system, a lot of products were launched: Conto Intesa; the credit card with on line checking of expenses; Prestintesa, the personal loan for maximum 30,000 euro available within 48 hours; a new type of mortgage and several investments products. In particular, a bancassurance joint venture in life business between Gruppo Intesa and Gruppo Generali, the “new” IntesaVita, has been fully operative since January 1st 2004.
2. New branch model. Service and accessibility model of the branches is being significantly reviewed. Currently eight pilot branches are testing radically innovative design and lay-out which is going to be adopted by approximately 150 branches already in 2004.
3. Training. In 2003 over 255,000 man/days of training, out of 800,000 indicated by the Business Plan in a three-year period, were delivered. As part of it, 3,000 people out of 10,000 have been involved in the sales training project “Arcobaleno”.

In the framework of the strategies set out in the Plan aiming at strengthening Gruppo Intesa, which include the Group’s presence both in Central-Eastern European and Mediterranean areas and in the private banking sector, today the Board of Director authorised negotiations on an exclusivity basis, respectively with Dogus Holding for acquiring control of Garanti Bank in Turkey and with Crédit Agricole Indosuez for purchasing 100% of  Crédit Agricole Indosuez Private Banking Italia.   
          
Through the acquisition of Garanti Bank, Gruppo Intesa would be able to take advantage of the opportunities offered by a region which is at the crossroad of Europe, Middle East and Central Asia and substantially strengthen its presence in Central Eastern Europe where the Group already counts on three subsidiaries in Hungary, Croatia and Slovakia. Garanti Bank is the fourth Turkish bank in terms of deposits, holds high market shares in the most attractive sectors and has financials meeting the Business Plan requirements which contemplate selected investments abroad if in compliance with the Group’s overall profitability targets.

The purchase of Crédit Agricole Indosuez Private Banking Italia is one of the actions included in the Plan to reinforce the private banking activities of Gruppo Intesa in Italy also through the strategic partnership with Crédit Agricole Group. This alliance aims at realizing the best economies of scale and scope in order to offer specialised and integrated services to customers of both groups, relying on Gruppo Intesa services in the Italian market and on Crédit Agicole in other markets. In this light at the beginning of 2003 IntesaBci Bank (Suisse) was sold by Gruppo Intesa to Crédit Agricole Indosuez.

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The consolidated statement of income and balance sheet and the Parent Company’s statement of income and balance sheet (reclassified in condensed format) included in the Report approved by the Board of Directors are attached in order to provide more complete information of results generated in 2003. It must be pointed out that the auditing firm in charge of auditing the 2003 Annual Report has not yet completed its examination.



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