Milano, 06 September 2004

• Consolidated net income at 876 million euro, up 23% on the 710 million of the 2003 first half
• Ordinary income at 1,341 million euro, up 30% on the 1,030 million of the corresponding period of 2003
• Cost/income ratio decreased significantly to 59.6% from 63%
• Capital ratios strengthened further: Tier 1 ratio at 8.3%

 

Banca   Intesa’s Board of Directors, which met today under the chairmanship of Giovanni Bazoli, approved the half-yearly consolidated report as at 30^th June 2004.

 

2004 half-yearly results

The 2004 first-half consolidated income statement recorded a net interest and other banking income of   4,866 million euro,   up 2.1%   compared to 4,765 million   in the first half of 2003.

As part of it, net interest income totalled 2,450 million euro, down 1.6% compared to 2,491 million of the first half of 2003.   The decrease is due to the decline in market interest rates and to the decision to structurally reduce loans to large corporates, mainly international ones (curtailed by nearly 7 billion euro in the last twelve months).

Net commissions showed a 4.6% rise to 1,676 million euro from 1,603 million mainly due to growth in dealing and placement of securities (+40%), bancassurance (+29%), debit and credit cards (+9%) and current    accounts (+6%). Profits on financial transactions recorded an 8.6% increase reaching 429 million euro compared to 395 million of last year’s corresponding period also determined by the sustained revenue trend of the sale of structured bonds.

Total operating costs amounted to 2,900 million euro with a 3.4% decrease compared to 3,002 million in the first half of 2003. As part of it, personnel costs decreased 4.2% and other administrative costs registered a 1.3% increase attributable to advertising (+80%) and training (+42%) expenses; depreciation and amortisation were down     14.5%, despite the heavy investments under way, owing to both the rationalisation of real estate assets and the extinguishing of the depreciation period of past investments.

As a result, operating margin rose to   1,966 million euro, up 11.5% compared to 1,763 million of last year’s first half with a marked improvement in the cost/income ratio, down to 59.6% from 63% of the 2003 corresponding period.

Total provisions and net value adjustments (excluding goodwill amortisation) amounted to 561 million euro down 16.1% with respect to 669 million for the first half of 2003 and included 28 million euro of additional provisions on the Parmalat exposure to increase the relevant coverage (now 88%) on the basis of the latest possible arrangement drawn up by the Extraordinary Commissioner of Parmalat.

Therefore, ordinary income rose to 1,341 million euro up 30.2% from 1,030 million registered in the first half of 2003.

Extraordinary items showed a negative result of 9 million euro compared to the 97 million income of last year’s corresponding period.

The first half of 2004 closed with a consolidated net income of 876 million euro, compared to 710 million of the first half of 2003 (+23.4%), with the Parent Company’s net income at 869   million euro with respect to 674 million of the corresponding period of 2003.

2004 second quarter results

The 2004 second-quarter consolidated income statement registered a net interest and other banking income of   2,454 million euro, up 1.7% with respect to the previous quarter and up 1.5% to the second quarter of 2003.

As part of it, net interest income amounted to 1,205 million euro, unchanged with respect to the previous quarter excluding the seasonal impact (approximately -3%) of the cost of carry of equity swaps, generating positive entries in other items of the income statement and usually taking place in the second quarter of the year. A 1.6% decrease was registered with respect to the 2003 second quarter, due to the reasons already mentioned with reference to the half-yearly results, namely the decline in market interest rates and the reduction in loans to large international corporates.

Net commissions rose to 856 million euro up 4.4% with respect to the previous quarter and up 3.8% to last year’s corresponding period mainly due to the sustained trend recorded by bancassurance (+63% on the previous quarter and +27% on the 2003 second quarter).

Profits on financial transactions totalled 209 million euro with respect to 220 million of the previous quarter and 204 million of the 2003 second quarter.

Total operating costs reached 1,468 million euro with a 2.5% increase on the previous quarter due to expenses other than personnel costs, largely on advertising, and with a 3.3% decrease on the 2003 second quarter determined by a reduction of 3.8% in personnel costs and 15.9% in depreciation and amortisation while other administrative costs registered a 1.3% increase.

As a result, operating margin increased to   986 million euro, up 0.6% with respect to the previous quarter and up 9.6% to the second quarter of 2003.

Total provisions and net value adjustments (excluding goodwill amortisation) equalled 301 million euro with respect to 260 million of the previous quarter and to 352 million of last year’s corresponding period and included the already mentioned additional provisions of 28 million euro set aside on the Parmalat exposure.

Ordinary income equalled 653 million euro with respect to 688 million of the previous quarter and to 516 million recorded in the 2003 second quarter (+26.6%).

Extraordinary items showed a negative result of 13 million euro with respect to the 4 million income of the previous quarter and the 57 million income of the corresponding quarter for 2003.

The quarter closed with a consolidated net income of 458 million euro, compared to 418 million of the previous quarter and to 397 million of the second quarter of 2003 (+15.4%), with the Parent Company’s net income at 558   million euro with respect to 311 million of the previous quarter and to 421 million of the corresponding period for 2003.

 

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As regards the consolidated balance sheet figures as at 30^th June 2004, loans to customers amounted to 154 billion euro, unchanged with respect to 31^st December 2003 and down 4% to 30^th June 2003 due to the reduction in the exposure to large corporates - mainly international ones with no business links with Italy - and to the securitisation transaction for about 1.5 billion euro of lease receivables. Doubtful loans net of adjustment decreased to 4.3 billion euro, diminishing 5.5% with respect to 31^st December 2003 and 11.4% to 30^th June 2003 with an incidence of 2.8% on total loans and a 67% coverage equalling the target set out by the Business Plan for 2005.

Customer deposits under administration amounted to 466 billion euro, with a 1.8% increase with respect to 31^st December 2003 and unchanged with respect to 30^th June 2003. As part of it, direct customer deposits reached 179 billion euro increasing by 3.9% compared to 31^st December 2003 and unchanged with respect to 30^th June 2003, and assets under management amounted to 118 billion euro, down 2.7% compared to 31^st December 2003 and 4% compared to 30^th June 2003.

As concerns capital ratios, at 30^th June 2004 the Core Tier 1 ratio reached 7.3% (6.9% at year-end 2003), the Tier 1 ratio was at 8.3% (7.8% at year-end 2003) and the total capital ratio equalled 11.7% (unchanged with respect to year-end 2003).

 

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At the end of the first half of 2004, Gruppo Intesa’s operating structure was made up of 3,720 branches - of which 3,091 in Italy and 629 abroad - and 57,412 employees, 1,987 lower than at 31^st December 2003.

 

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In the framework of the more than 100 projects on which the Bank’s platforms for growth are being built, a lot of new products have been launched in the first six months of this year specially devised to suit the household segment and greatly welcomed, particularly:

1. Conto Intesa with the opening of over 170,000 new current accounts over the period, of which 40% are new current accounts and the remaining 60% are switched current accounts;
2. Carta Intesa, the debit card with online checking of payments, with nearly 350,000 cards sold over the first half of the year;
3. PrestIntesa, the personal loan for a maximum of 30,000 euro available within 48 hours, with 700 million euro granted in the first half of the current year, thus doubling the 2003 half-yearly figures;
4. Mutuo Protetto, the new “capped” floating rate mortgage, which led to a 19% increase in the amount of mortgages granted in the current year’s first half on the corresponding period for 2003;
5. life insurance policies, via Intesa Vita (the new insurance company set up as a joint-venture between Gruppo Intesa and the Generali group fully operational as of 1^st January 2004) which recorded new premiums for a total of 2.6 billion euro in the first half of the current year, up 47% with respect to the corresponding period for 2003.

 

As for private banking, Banca Intesa acquired 100% of Crédit Agricole Indosuez Private Banking Italy, a bank which will be part of the Private Banking Department of the Retail Division and will allow to further improve services to the relevant customer segment and take advantage of both the synergies deriving from available complementary distribution channels and those from interactions among different business areas and particularly from the close relationships of Gruppo Intesa with more than 800,000 Italian companies.

 

The relationship management with companies has been strengthened through:

1. the setting up of the new Corporate Department under which the former Large Corporate Department and Mid-Corporate Department have been grouped in order to make our high value-added services for large corporates easily available also to mid corporates;
2. the strengthening of the Enterprise Centre network and the gradual launching of products especially tailored for SMEs (with a turnover up to 50 million euro) aimed at supporting their growth, with a focus on innovation and internationalisation.

 

The activity of the State and Infrastructure Department continued to register a constant development. To be mentioned, in particular, project finance interventions for the link road of Mestre and the garbage disposal system in Sicily, the financing of the construction of the third lane of the Rome ring road (raccordo anulare), the securitisation of sanitary receivables of the Regions of Lazio and Campania, the structuring of municipal bond (BOC) issues by some municipalities in the Province of Reggio Emilia and in the Region of Lazio, the mandate to privatise part of the real estate assets of the Municipality of Rome.

As regards operations abroad, negotiations for the acquisition of a controlling interest in Garanti Bank in Turkey ceased. Gruppo Intesa continues to pursue its strategy aimed at strengthening its business in Central-Eastern Europe, confirmed by the sustained growth of the subsidiaries in Croatia, Slovakia and Hungary also favoured by the accession of Slovakia and Hungary to the EU.

 

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As regards this year’s outlook, also in the light of the results achieved so far, Banca Intesa confirms its Business Plan targets aimed at a tangible increase in net income for the whole year with respect to 2003.

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In order to present more complete information regarding the half-yearly results, the consolidated statement of income and balance sheet are attached (reclassified and in a summarised format) included in the report on operations approved by the Board of Directors. Please note that the Auditing company in charge of performing the limited review of the half-yearly report has not yet completed its analysis.

 

The Half-Yearly Report as of 30th June 2004 is disclosed according to the terms provided for by Art.82, par. 2, of Consob Regulation 11971 of 14th May 1999 (as subsequently modified) instead of the Quarterly Report as of 30th June 2004.

>> Financial Statements as at 30th June 2004