Milano, 05 September 2005
- 2005 half-yearly results compared to 2004 under IAS/IFRS:
- net income at 1,200 million euro, up 40% (2004 first half: 857 million)
- operating income at 4,977 million euro, up 9% (2004 first half: 4,565 million)
- operating costs at 2,672 million euro, down 2.2% (2004 first half: 2,731 million)
- operating margin at 2,305 million euro, up 25.7% (2004 first half: 1,834 million)
- income before tax from continuing operations at 1,901 million euro, up 42.1% (2004 first half: 1,338 million);
- Doubtful loan / loan ratio, net of adjustments, at 0.7% as at 30th June 2005, also following the sale of 70% of the Group’s doubtful loans;
- Capital ratios at 30th June 2005: Tier 1 ratio at 7.8%.
The Board of Directors of Banca Intesa, which met today under the chairmanship of Giovanni Bazoli, approved the consolidated half-yearly report as at 30th June 2005 drawn up in accordance with the new international standards IAS/IFRS.
The 2005 half-yearly results highlighted an improvement in profitability in line with the targets set forth in the 2003-2005 and 2005-2007 Business Plans. The first half of 2005 closed with a consolidated net income of 1,200 million euro, up 40% from 857 million in the 2004 first half.
In the 2005 first-half figures, the contribution from the items affected by the sale, without recourse, of approximately 70% of Gruppo Intesa’s gross doubtful loans and the sale of 81% of the loan servicing business of Intesa Gestione Crediti which manages doubtful loans was allocated to the specific caption related to discontinued operations required by IAS/IFRS. This transaction was approved by the Board of Directors on 30th May 2005; its relevant framework agreement was signed in August 2005 and is expected to be finalised by year-end. In particular, the economic effects connected with discontinued operations were extracted from the various profit/loss items and their balance was recognised, net of the related fiscal effect, to the “income/loss from discontinued operations” caption. In the 2005 first half, this caption registered a 16 million euro income. The capital gain from the loan servicing business will be included in the 2005 second-half figures (49 million euro). The effects from the strategic agreement with Crédit Agricole for asset management activities, approved by the Board on 30th May 2005 as well, and, in particular, the resulting capital gain for approximately 750 million euro will be comprised in the 2005 second-half figures.
The 2004 figures were restated, in the comparative analysis with the 2005 first half, under IAS/IFRS, including the estimated effects
of IAS 39 and the items from the above-mentioned sale accounted for on a consistent basis.
2005 half-yearly income statement
The 2005 half-yearly consolidated income statement registered operating income of 4,977 million euro, up 9% with respect to 4,565 million of the 2004 corresponding period.
As part of it, net interest income amounted to 2,597 million euro, up 6.7% with respect to 2,434 million of the 2004 corresponding period; the increase would be 6.2% excluding IAS/IFRS impact related to higher interest income from the recovery of time value on non-performing loans and lower interest expenses due to the reallocation, over the product residual life, of up-front revenues from structured bonds issued by the Group (derecognised from the shareholders’equity under the first-time adoption of the new accounting standards as at 1st January 2005).
Net fee and commission income amounted to 1,924 million euro, up 13.6% with respect to 1,694 million of the 2004 first half, driven by commissions from bancassurance (more than doubled to 183 million euro from 84 million) and placement of third-party structured bonds (for approximately 160 million euro, whereas not present in the 2004 first half, expected to diminish significantly in the 2005 second half) versus the decrease registered in commissions from assets under management (down 13.5% to 364 million euro from 421 million). Commissions from tax collection almost halved (to 74 million euro from 128 million) following the cessation of the Government compensation for tax collection activities expected to be restored in the coming quarters. Profits on trading reached 362 million euro, 22.3% higher than 296 million realised in the 2004 first half, while keeping very low daily average levels of VaR (19 million for Banca Intesa and 2 million for Caboto).
Operating costs equalled 2,672 million euro with a 2.2% decrease with respect to 2,731 million of the 2004 corresponding period. Lower costs referred to personnel expenses (down 1.3%), other administrative expenses (down 2.5%) and amortisation (down 6.2%).
Consequently, operating margin amounted to 2,305 million euro, up 25.7% on the 1,834 million in the 2004 first half with a marked improvement in the cost/income ratio which went down from 59.8% to 53.7%; the declining trend of the cost/income ratio, on track to the achievement of the 2005-2007 Business Plan’s target, was positively affected by favourable situations.
Total provisions and net value adjustments (net provisions for risks and charges, net adjustments to loans and receivables, net impairment losses on other assets) equalled 492 million euro, down 4.8% with respect to 517 million for the 2004 first half, and comprises the strengthening of the allowance for risks and charges – consistently with the Group’s customary conservative criteria – to face Parmalat’s revocatory actions with provisions proportioned to statistic data related to charges historically borne from revocatory actions. Profits/losses on investments held to maturity and on other investments registered a positive balance for 88 million euro, mainly deriving from real estate asset disposals, compared to a 21 million positive balance in the 2004 first half.
Income before tax from continuing operations amounted to 1,901 million euro, up 42.1% compared to 1,338 million for the 2004 first half.
Consolidated net income totalled 1,200 million euro, up 40% compared to 857 million in the 2004 first half, after the registration of income taxes for 670 million (which have already taken into account, on a prudential basis, possible tightening of tax regulations on dividend collection), income after tax from discontinued operations for16 million and minority interests for 47 million.
The indicator EVA® (Economic Value Added) - which basically measures the value creation resulting from the difference between the return and the cost of capital employed - increased significantly and reached 474 million euro from 187 for the 2004 first half.
2005 second-quarter income statement
The 2005 second-quarter consolidated income statement registered operating income of 2,520 million euro, up 2.6% with respect to the previous quarter and up 7.9% to the 2004 second quarter.
As part of it, net interest income amounted to 1,312 million euro, up 2.1% on the previous quarter and up 9.5% on the 2004 second quarter; the increase on the previous quarter would be 4.7% excluding the seasonal impact of the cost of carry of equity swaps.
Net fee and commission income equalled 970 million euro, with a 1.7% increase with respect to the previous quarter, driven by commissions from bancassurance (up 32.6%) and tax collection (up 57.3%) whereas, as planned, commissions on placement of third-party structured bonds halved; net fee and commission income increased 12.1% with respect to the 2004 second quarter, driven by commissions from bancassurance which doubled while those from tax collection halved. Profits on trading amounted to 177 million euro, slightly down with respect to 185 million for the 2005 first quarter and 186 million for the 2004 corresponding period.
Operating costs equalled 1,365 million euro, up 4.4% on the previous quarter - mainly attributable to advertising expenses (up 55.6%) concentrated, as planned, in this quarter - and in line with respect to the figure for the same period of 2004.
Consequently, operating margin registered 1,155 million euro, in line with the figure of the previous quarter and up 19.8% with respect to that for the same period of 2004.
Total provisions and net value adjustments amounted to 261 million euro, up on the 231 million of the previous quarter and down on the 386 million of the 2004 second quarter. Profits/losses on investments held to maturity and on other investments showed a positive balance for 27 million euro with respect to the positive balance for 61 million in the 2005 first quarter and 22 million in the 2004 second quarter.
Income before tax from continuing operations totalled 921 million euro, with a 6% decrease on the previous quarter and a 53.5% increase on the 2004 corresponding period.
This quarter closed with a consolidated net income of 580 million euro with respect to 620 million for the previous quarter and 431 million for the 2004 second quarter (up 34.6%) after the registration of income taxes for 316 million, loss after tax from discontinued operations for 2 million and minority interests for 23 million.
Balance sheet as at 30th June 2005
As regards the consolidated balance sheet figures, as at 30th June 2005 loans to customers amounted to 158 billion euro, in line with the figure as at 31st December 2004 restated to take into account IAS/IFRS and the items related to the sale of doubtful loans accounted for on a consistent basis; there would be a 1.7% increase if repurchase agreements (which halved from 6 to 3 billion euro) were not taken into account. Doubtful loans net of adjustments amounted to around one billion euro - also as a result of the sale of approximately 9 billion euro of gross doubtful loans, corresponding to 2 billion of net doubtful loans - and kept unchanged from 31st December 2004 restated on a consistent basis, with an impact of 0.7% on total loans and a coverage degree of 73%, both in line with 2004 year-end on a consistent basis.
Customer deposits under administration amounted to 483 billion euro, with a 2.4% rise on 31st December 2004. As part of it, direct customer deposits equalled 182 billion with a 1.6% increase and indirect customer deposits reached 301 billion, up 3%, with assets under management equalling 118 billion, unchanged from 2004 year-end. In the 2005 first half, Gruppo Intesa placed approximately 4 billion of third-party structured bonds and 3.6 billion of life insurance policies. The forthcoming finalisation of the agreement with Crédit Agricole for asset management activities will imply a roughly 20 billion euro decrease in the Group’s indirect customer deposits, all other things being equal, due to the deconsolidation from Gruppo Intesa’s assets under management of the portion of assets under management by Nextra currently collected via non-captive networks. Instead, the portion of assets under management by Nextra currently collected via captive networks - which represents the most significant portion - will in any case remain under Gruppo Intesa’s deposits under administration though no longer included in assets under management.
As at 30th June 2005, capital ratios resulted in: Core Tier 1 ratio at 6.9% (6.7% at 31st December 2004), Tier 1 ratio at 7.8% (7.6% at 31st December 2004) and total capital ratio at 10.8% (11% at 31st December 2004). Taking into account the forthcoming finalisation of both the sale of doubtful loans and 81% of the loan servicing business of Intesa Gestione Crediti and the strategic agreement with Crédit Agricole for asset management activities, capital ratios - all other things being equal - will improve as follows: Core Tier 1 ratio to around 7.3-7.4%, Tier 1 ratio to 8.2-8.3% and total capital ratio to 11.2-11.3%.
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As at 30th June 2005, Gruppo Intesa’s operating structure was made up of 3,679 branches – of which 3,055 in Italy and 624 abroad – and 57,713 employees, 81 higher than at 31st December 2004.
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Results by business areas
The Retail Division serves Households, Affluent and Private customers, SMEs with turnover up to 50 million euro, Religious and Non-Profit Entities and includes product companies in the fields of wealth management, industrial credit and leasing. In the first half of 2005, the Division showed a sustained trend in profitability, owing to the significant revenue growth and the cost reduction. Operating income rose by 12.4% to 2,705 million euro from 2,406 million in the 2004 first half, accounting for 54% of consolidated operating income (53% in the 2004 first half). Revenue increase was fostered in particular by mortgages (up 12%), personal loans (up 53%) and Intesa Vita’s premiums (up 26%). Operating costs registered a 4.5% decrease to 1,448 from 1,517 million and led to a 41.4% increase in operating margin, which rose to 1,257 million euro from 889 million and a decrease in the cost/income ratio from 63% down to 54%, a level which benefited from favourable situations. Total provisions and net value adjustments rose by 13.2% to 163 million euro from 144 million. Income before tax from continuing operations was up 46.8% to 1,094 million euro from 745 million.
The Italian Subsidiary Banks Division, which includes subsidiary banks, all of them strongly rooted in regional markets, highlighted a significant growth in profitability owing to the revenue increase. Operating income rose by 10.4% to 762 million euro from 690 million in the 2004 first half, with a 15% contribution to consolidated operating income (unchanged with respect to the 2004 corresponding quarter). With operating costs up 1.1% to 368 million euro from 364 million, operating margin was up 20.9% to 394 million euro from 326 million and the cost/income ratio went down to 48% from 53%. Total provisions and net value adjustments increased by 2.5% to 81 million euro from 79 million; after profits on investments held to maturity and on other investments of 15 million euro, income before tax from continuing operations increased by 32.3% to 328 million euro from 248 million for the first half of 2004. In July 2005, the acquisition of Carifano was finalised; this bank has approximately 65,000 clients and 40 branches mostly located in the Marche region.
The International Subsidiary Banks Division, which is in charge of subsidiary banks abroad providing retail and commercial banking services, showed an improvement in profitability determined by revenue growth. Operating income rose by 12% to 540 million euro from 482 million in the 2004 first half, making a 11% contribution to consolidated operating income (the same as in the 2004 first half). Operating costs rose by 4.9% to 299 million euro from 285 million in the 2004 first half; operating margin, therefore, went up 22.3% to 241 million euro from 197 million and the cost/income ratio decreased to 55% from 59%. Total provisions and net value adjustments rose by 22% to 61 million euro from 50 million; after profits on investments held to maturity and on other investments of 5 million euro, income before tax from continuing operations increased by 25.2% to 184 million euro from 147 million for the first half of 2004. In August 2005, the acquisition of Delta Banka was finalised. Delta Banka is the second largest bank in Serbia and Montenegro in terms of total assets and has a nationwide network of around 150 branches serving over 400,000 clients. Moreover, Banca Intesa is operational in Central-Eastern Europe with Hungary’s fourth largest bank Central-European International Bank (CIB), Croatia’s second largest bank Privredna Banka Zagreb (PBZ) and Slovakia’s second largest bank Vseobecna Uverova Banka (VUB) and is completing the acquisition of KMB in the Russian Federation where the Bank has already a presence with ZAO Banca Intesa - the only Italian banking subsidiary licensed to operate in Russia - and a representative office in Moscow. Banca Intesa is also active in the Czech Republic through VUB, in Slovenia with the operations of its Italian banking subsidiary Banca Popolare FriulAdria and in Poland with a representative office in Warsaw.
The Corporate Division serves companies with a turnover exceeding 50 million euro and is responsible for relations with Mid Corporates, Large Corporates, Financial Institutions and Public Administrations; it includes Caboto, product companies in the fields of factoring and tax collection and the international network made up of branches, representative offices and subsidiaries specialised in corporate banking. In the 2005 first half, this Division showed an improvement in profitability. Operating income amounted to 895 million euro, up 0.8% compared to 888 million in the 2004 first half, accounting for 18% of consolidated operating income (compared to a 19% contribution in the 2004 first half); there would be an 8.4% increase excluding tax collection. With operating costs totalling 389 million euro, in line with 388 million in the 2004 first half, operating margin amounted to 506 million euro, up 1.2% compared to the 500 million for the 2004 first half and the cost/income ratio kept steady at around 44%. Total provisions and net value adjustments dropped by 36.8% to 79 million euro from 125 million; after profits on investments held to maturity and on other investments of 2 million euro, income before tax from continuing operations increased by 14.4% to 429 million euro from 375 million for the first half of 2004.
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As concerns the forecasts for 2005, also in the light of the trend registered in the first half of the year, a significant improvement in the trend of income statement and balance sheet is expected compared to 2004, in line with the indications of the 2005-2007 Business Plan.
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In order to present more complete information regarding the half-yearly results, the reclassified consolidated statement of income and the consolidated balance sheet included in the report on operations approved by the Board of Directors are attached. 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 at 30th June 2005 is disclosed according to the terms provided by Art.82, par.2 of the Consob Regulation 11971 of 14th May 1999 (as subsequently modified) instead of the Quarterly Report as at 30thJune 2005.
>> Financial Statements as at 30th June 2005
Last updated 5 September 2005 at 00:00