Milano, 11 November 2005
- Results for the first nine months of 2005 compared to 2004 under IAS/IFRS:
- net income at 1,845 million euro, up 36.3% (first nine months of 2004: 1,354 million)
- income before tax from continuing operations at 2,936 million euro, up 39.2% (first nine months of 2004: 2,109 million);
- operating margin at 3,500 million euro, up 31.6% (first nine months of 2004: 2,659 million)
- operating income at 7,519 million euro, up 12% (first nine months of 2004: 6,713 million)
- operating costs at 4,019 million euro, down 0.9% (first nine months of 2004: 4,054 million);
- Assets under management up 6.4% compared to 31st December 2004;
- Capital ratios at 30th September 2005: Tier 1 ratio at 8%.
The Board of Directors of Banca Intesa, which met today under the chairmanship of Giovanni Bazoli, approved the consolidated quarterly report as at 30th September 2005 drawn up in accordance with the new international IAS/IFRS standards.
The results for the first nine months of 2005 highlighted an improvement in profitability in line with the targets set forth in the 2003-2005 and 2005-2007 Business Plans. The first nine months of 2005 closed with a consolidated net income of 1,845 million euro, up 36.3% from 1,354 million in the first nine months of 2004.
In the figures of first nine months of 2005, the contribution from the items affected by the sale, without recourse, of approximately 70% of Gruppo Intesa’s gross doubtful loans and that of 81% of the loan servicing business of Intesa Gestione Crediti 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, in the “income/loss from discontinued operations” caption. In the first nine months of 2005, this caption registered a 7 million euro income. The capital gain on the sale of the loan servicing business will be included in the fourth quarter figures of 2005. The effects from the strategic agreement with Crédit Agricole for asset management activities, also approved by the Board on 30th May 2005 and expected to be finalised by year-end, including in particular the related capital gain will be comprised in the fourth quarter figures of 2005.
The 2004 figures were restated, in the comparative analysis with the first nine months of 2005, under IAS/IFRS, including the estimated effects of IAS 39 and the items from the above-mentioned sale accounted for on a consistent basis.
Statement of income for the first nine months of 2005
The consolidated statement of income for the first nine months of 2005 registered operating income of 7,519 million euro, up 12% with respect to the 6,713 million of the corresponding period of 2004. This increase would be 9.4% if the figure of the 2004 period excluded the 160 million euro charges related to the Parmalat settlement for the “Nextra bond” which were accounted for in last year’s third quarter under the “other operating income/expenses” caption.
As part of it, net interest income amounted to 3,936 million euro, up 6.3% with respect to the 3,702 million of the corresponding period of 2004; this increase would be 6% excluding the 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 registered 2,900 million euro with a 13.7% rise compared to the 2,551 million of the first nine months of 2004, driven by commissions on bancassurance (almost doubled to 289 million euro from 153 million), placement of third-party structured bonds (for approximately 160 million euro made entirely in the first half of the year, whereas no amount was present in the first nine months of 2004) and dealing and placement of other securities (up 53%, to 236 million euro from 154 million), versus the decrease in commissions on assets under management which were down 9.4% to 556 million euro from 614 million. Profits on trading reached 541 million euro, up 29.4% with respect to the 418 million of the first nine months of 2004.
Operating costs equalled 4,019 million euro with a 0.9% decrease with respect to the 4,054 million of the corresponding period of 2004. Lower costs referred to personnel expenses (down 0.2%), other administrative expenses (down 1%) and depreciation (down 4.4%).
Consequently, operating margin amounted to 3,500 million euro, up 31.6% on the 2,659 million in the first nine months of 2004 (this increase would be 24.2% excluding from the latter figure the above-mentioned charges related to the Parmalat settlement) with a marked improvement in the cost/income ratio which went down to 53.5% from 60.4% (from 59%, excluding the charges related to the Parmalat settlement).
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 696 million euro, up 2.4% with respect to the 680 million for the corresponding period of 2004. Profits/losses on investments held to maturity and on other investments registered a positive balance of 132 million euro, in line with the 130 million for first nine months of 2004.
Income before tax from continuing operations amounted to 2,936 million euro, up 39.2% compared to the 2,109 million for the first nine months of 2004.
consolidated net income of 1,845 million euro, up 36.3% compared to the 1,354 million in the first nine months of 2004, after the registration of income taxes for 1,018 million, income after tax from discontinued operations for 7 million and minority interests for 80 million.
basically measures the value creation resulting from the difference between the return and the cost of capital employed - more than doubled reaching 760 million euro from 349 million for the first nine months of 2004.
Statement of income for the third quarter of 2005
The consolidated statement of income for the third quarter of 2005 registered operating income of 2,542 million euro, up 0.9% with respect to the previous quarter and up 18.3% compared to the corresponding period of 2004 (up 10.1% excluding the charges related to the Parmalat settlement registered in the “other operating income/expenses” caption of the third quarter of 2004).
As part of it, net interest income amounted to 1,339 million euro, up 2.1% with respect to the previous quarter and up 5.6% compared to the corresponding quarter of 2004.
Net fee and commission income equalled 976 million euro, in line with the previous quarter. In the third quarter 2005, approximately 50 million euro were accounted for as income from tax collection activities pertaining to the first half of the year, following the restoration of annual fixed compensation for companies licensed to collect taxes. On the other hand, as planned, no commissions on placement of third-party structured bonds were generated in this quarter while an amount of approximately 50 million euro had been recorded in the previous one. Commissions on credit and debit cards (up 17.1%) and assets under management (up 6.8%) were the components which increased the most compared to the second quarter of the year. Net fee and commission income was up 13.9% with respect to the third quarter of 2004 (this increase would be 8% excluding the above-mentioned income from tax collection activities related to the first half of 2005), driven by commissions on dealing and placement of securities (up 77%), bancassurance (up 53%) and credit and debit cards (up 20%). Profits on trading amounted to 179 million euro, with respect to the 177 million for the previous quarter and 122 million for the corresponding period of 2004.
Operating costs equalled 1,347 million euro, down 1.3% on the figure of the previous quarter and up 1.8% on that for the same period of 2004.
Consequently, operating margin registered 1,195 million euro, up 3.5% on the figure of the previous quarter and up 44.8% on that of the corresponding period of 2004 (the increase would be 21.3% excluding the charges for the Parmalat settlement from the latter period).
Total provisions and net value adjustments amounted to 204 million euro with respect to the 261 million of the previous quarter and 163 million of the third quarter of 2004. Profits/losses on investments held to maturity and on other investments showed a positive balance of 44 million euro with respect to the positive balance of 27 million in the previous quarter and 109 million in the third quarter of 2004.
Income before tax from continuing operations totalled 1,035 million euro, up 12.4% on the previous quarter and up 34.2% on the corresponding period of 2004.
This quarter closed with a consolidated net income of 645 million euro with respect to the 580 million for the previous quarter and 497 million for the third quarter of 2004 (up 29.8%) after the registration of income taxes for 348 million, loss after tax from discontinued operations for 9 million and minority interests for 33 million.
Balance sheet as at 30th September 2005
As regards the consolidated balance sheet figures, as at 30th September 2005 loans to customers amounted to 159 billion euro, up 0.8% on 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; excluding repurchase agreements (which halved from 6 to 3 billion euro), loans to customers would have recorded a 2.6% rise. Doubtful loans net of adjustments totalled 1.1 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 – compared to one billion euro as at 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 the figures at the end of 2004 on a consistent basis.
Customer deposits under administration amounted to 492 billion euro, with a 4.3% rise on 31st December 2004. As part of it, direct customer deposits equalled 179 billion in line with 31st December 2004 and indirect customer deposits reached 313 billion, up 7.2% on year-end 2004. Assets under management reached 125 billion euro, with a 6.4% rise with respect to the figure at the end of 2004 due to individual portfolio management schemes (up 7.3%) and insurance products (in the first nine months of 2005, Gruppo Intesa placed approximately 6 billion euro of life insurance policies).
As at 30th September 2005, capital ratios resulted in: Core Tier 1 ratio at 7.1% (6.7% at 31st December 2004), Tier 1 ratio at 8% (7.6% at 31st December 2004) and total capital ratio at 10.6% (11% at 31st December 2004).
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As at 30th September 2005, Gruppo Intesa’s operating structure was made up of 3,682 branches – of which 3,055 in Italy and 627 abroad – and 57,628 employees, almost unchanged from the end of 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 nine months of 2005, the Division showed a sustained trend in profitability, owing to the significant revenue growth and the cost reduction. Operating income rose by 10.9% to 4,016 million euro from 3,621 million in the first nine months of 2004, accounting for 53% of consolidated operating income (54% in the first nine months of 2004). Revenue increase was fostered in particular by mortgages (up 12%), personal loans (up 60%) and Intesa Vita’s premiums (up 29%). Operating costs registered a 1.8% decrease to 2,177 from 2,218 million and led to a 31.1% increase in operating margin, which rose to 1,839 million euro from 1,403 million and a decrease in the cost/income ratio down to 54% from 61%. Total provisions and net value adjustments rose by 8.8% to 248 million euro from 228 million. Income before tax from continuing operations was up 35.4% to 1,591 million euro from 1,175 million.
The Italian Subsidiary Banks Division, which includes subsidiary banks all strongly rooted in regional markets, highlighted a significant growth in profitability owing to the increase in revenues. Operating income rose by 8.1% to 1,131 million euro from 1,046 million, with a 15% contribution to consolidated operating income (16% in last year’s corresponding period). With operating costs of 557 million euro, in line with the 556 million of the first nine months of 2004, operating margin was up 17.1% to 574 million euro from 490 million and the cost/income ratio went down to 49% from 53%. Total provisions and net value adjustments amounted to 111 million euro, in line with the 110 million of last year’s corresponding period; after profits on investments held to maturity and on other investments of 15 million euro, income before tax from continuing operations increased by 25.7% to 479 million euro from 381 million for the first nine months of 2004. In July 2005, Banca Intesa finalised the acquisition of Carifano which has approximately 65,000 customers and 41 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 the revenue growth. Operating income rose by 11.2% to 824 million euro from 741 million, making a 11% contribution to consolidated operating income (the same as in the first nine months of 2004). Operating costs rose by 5.4% to 452 million euro from 429 million; operating margin, therefore, went up 19.2% to 372 million euro from 312 million and the cost/income ratio decreased to 55% from 58%. Total provisions and net value adjustments rose by 23.3% to 90 million euro from 73 million; after profits on investments held to maturity and on other investments of 6 million euro, income before tax from continuing operations increased by 21% to 288 million euro from 238 million for the first nine months of 2004. In August 2005, Banca Intesa finalised the acquisition of Delta Banka, the second largest bank in Serbia and Montenegro in terms of total assets, with a nationwide network of 143 branches serving around 650,000 customers. September 2005 saw the completion of the acquisition of KMB, a leading bank in the Russian Federation in lending and leasing activities addressed to small enterprises which has 52 branches in all the important cities and around 35,000 customers. Banca Intesa is also present in the Russian Federation with ZAO Banca Intesa, set up in 2003, the only Italian banking subsidiary licensed to operate in the country and a Representative Office in Moscow. Moreover, the acquisition of UPI Banka, the fifth largest bank in Bosnia and Herzegovina in terms of total assets, is under way. Banca Intesa is already operational in Central-Eastern Europe with Croatia’s second largest bank Privredna Banka Zagreb (PBZ), Slovakia’s second largest bank Vseobecna Uverova Banka (VUB) and Hungary’s fourth largest bank Central-European International Bank (CIB). 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.
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 first nine months of 2005, this Division showed an improvement in profitability due to revenue growth. Operating income amounted to 1,481 million euro, up 9.9% compared to the 1,347 million in the first nine months of 2004, accounting for 20% of consolidated operating income (the same as in the first nine months of 2004); this increase would be 12% excluding tax collection activities. With operating costs totalling 605 million euro, in line with the 601 million in the first nine months of 2004, operating margin amounted to 876 million euro, up 17.4% compared to the 746 million for the first nine months of 2004 and the cost/income ratio decreased to 41% from 45%. Total provisions and net value adjustments halved to 95 million euro from 191 million; after profits on investments held to maturity and on other investments of 6 million euro, income before tax from continuing operations increased by 41.5% to 787 million euro from 556 million for the first nine months of 2004.
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As concerns the forecasts for 2005, also in the light of the performance of the first nine months of the year, a significant improvement in the statement of income and balance sheet is expected compared to 2004, in line with the guidelines of the 2005-2007 Business Plan.
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In order to present more complete information regarding the results of the first nine months of 2005, 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. 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 draft Parent Company’s financial statements and Banca Intesa’s consolidated financial statements as at 31st December 2005 will be available for shareholders and the market within the maximum term of 31st March 2006, instead of the quarterly report as at 31st December 2005.
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>> Financial Statements as at 30th September 2005
Last updated 11 November 2005 at 00:00
