Milano, 12 May 2006
- Consolidated net income for first quarter 2006 at 751 million euro, up 21.1% (first quarter 2005: 620 million).
- Income before tax from continuing operations at 1,197 million euro, up 21.4% (first quarter 2005: 986 million).
- Operating margin at 1,422 million euro, up 23.4% (first quarter 2005: 1,152 million).
- Operating income at 2,753 million euro, up 13.6% (first quarter 2005: 2,423 million).
- Operating costs at 1,331 million euro in line with the Business Plan targets, up 4.7% (first quarter 2005: 1,271 million).
- Capital ratios at 31st March 2006: 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 quarterly report as at 31st March 2006.
The first-quarter results of 2006 highlighted a further significant improvement in profitability, after the progress made in 2005. Consolidated net income rose to 751 million euro (up 21.1% from 620 million of the corresponding quarter of 2005).
For comparison purposes, the statement of income of the four quarters of 2005 were restated following the change in the full consolidation area though net income generated in the referred quarters pertaining to the Group remained unchanged. On one hand, Nextra and Banco Wiese Sudameris, the companies which in the first quarter of 2006 exited the full consolidation area, were deconsolidated line by line and their contribution in terms of net income was allocated in profits from investments carried at equity (as for Nextra, which is being carried at equity in 2006 after the sale of 65% to Crédit Agricole in December 2005, 35% of its net income is included in the first quarter of 2006 and 100% in the restatement of 2005). On the other hand, UPI Banka, the company which entered the full consolidation area in the first quarter of 2006, was consolidated line by line and its contribution in terms of net income allocated in minority interests.
Also the balance sheet figures as at 31 December 2005 were restated on a consistent basis following the change in the full consolidation area.
Statement of income for the first quarter of 2006
The consolidated statement of income for the first quarter of 2006 registered operating income of 2,753 million euro, up 13.6% with respect to the 2,423 million of the corresponding period of 2005 and up 12.5% with respect to fourth quarter 2005.
As part of it, net interest income rose to 1,344 million euro, up 4.8% compared to 1,283 million of the same period of 2005; this increase would be 4.4% excluding the IAS/IFRS impact related to higher interest income from the recovery of time value on non-performing loans and lower interest expense due to the reallocation, over the product’s residual life, of up-front revenues from structured bonds issued by the Group (derecognised from the shareholders’ equity under the first-time adoption of IAS/IFRS in 2005). Net interest income rose by 1.9% compared to fourth quarter 2005.
Net fee and commission income registered 1,012 million euro with an 11.1% rise compared to 911 million in first quarter 2005, driven by commissions on insurance products (up 36.7%), portfolio management (up 23.7%), credit and debit cards (up 11.3%), dealing and placement of securities (up 4.2%) and tax collection activities. The latter more than doubled, from 29 to 63 million, because in the first quarter of 2005 the annual fixed compensation for tax collection services - which was restored by law with retroactive effect in the third quarter - was not in effect. Net fee and commission income rose 8.2% compared to fourth quarter 2005, driven by dealing and placement of securities (up 61.4%), whereas commissions on tax collection decreased due to seasonal effects (down 27.1%). Commissions on dealing and placement of securities were generated as follows in approximated figures: 45 million euro on placement of third-party structured bonds (110 million in first quarter and not generated in fourth quarter 2005); 190 million euro on placement of mutual funds (120 million in first quarter and 140 million in fourth quarter 2005) and 60 million euro on dealing and placement of other securities (55 million in first quarter and 40 million in fourth quarter 2005). The trend of commissions on placement of mutual funds was sustained by the placement of Intesa Garanzia Attiva, the first guaranteed-capital mutual fund in Italy and the first product launched in the framework of the strategic agreement with Crédit Agricole. Profits on trading amounted to 364 million euro increasing significantly with respect to the 188 million of the corresponding period of 2005 and the 129 million of fourth quarter 2005. This result also included the valuation effect of the stakes held in Fiat and Parmalat (which totalled approximately 100 million euro).
Operating costs amounted to 1,331 million euro, in line with the Business Plan targets, up 4.7% compared to 1,271 million of first quarter 2005 when the cost level had been exceptionally low. This increase was determined by growth in personnel expenses (up 3.8%), administrative expenses (up 5.8%) and adjustments to property, equipment and intangible assets (up 7.3%). With respect to fourth quarter 2005, which had registered charges of 63 million euro related to the stock granting plan and a seasonal increase in other costs, a 9.9% decrease was instead recorded with personnel expenses down 6%, other administrative expenses down 12% and adjustments down 25%.
Consequently, operating margin rose to 1,422 million euro, up 23.4% with respect to the 1,152 million in first quarter 2005, with a market improvement in the cost/income ratio, down from 52.5% to 48.3%, a level which benefited from particularly favourable seasonal effects. Operating margin increased by 46.6% with respect to fourth quarter 2005.
Net provisions and adjustments (net provisions for risks and charges, net adjustments to loans, net impairment losses on other assets) amounted to 230 million euro, in line with the 227 million of the corresponding period of 2005 and down with respect to the 432 million of fourth quarter 2005. Profits/losses on investments held to maturity and on other investments registered a positive balance of 5 million euro compared to 61 million of first quarter 2005 and 710 million of fourth quarter 2005 (the latter determined by the capital gain on the sale of the 65% stake in Nextra as part of the strategic agreement for asset management activities with Crédit Agricole).
Income before tax from continuing operations registered 1,197 million euro, with a 21.4% rise compared to 986 million euro for first quarter 2005 and a 3.6% decrease compared to fourth quarter 2005 (which had benefited from the above-mentioned capital gain on Nextra).
Consolidated net income equalled 751 million euro with respect to the 620 million for the corresponding period of 2005 (up 21.1%) and the 1,180 million in fourth quarter 2005 (which had benefited from the above-mentioned capital gain related to the strategic agreement for asset management activities with Crédit Agricole) and reflected the deduction of income taxes (418 million euro) and the attribution to minority shareholders of the income pertaining to them (28 million euro).
Balance sheet as at 31st March 2006
As regards the consolidated balance sheet figures, as at 31st March 2006 loans to customers amounted to 177 billion euro, up 4.5% on the figure as at 31st December 2005; excluding repurchase agreements (up 74% to 6.4 billion euro from 3.7 billion), loans to customers would have risen by 2.9%. Doubtful loans, net of adjustments, totalled 1,361 million euro compared to 1,229 million as at 31st December 2005, with an impact of 0.8% on total loans (0.7% at year-end 2005) and a degree of coverage of 69% (the same as at year-end 2005). Total net substandard loans and loans past due by over 180 days (the latter is a category of non-performing loans introduced by the Bank of Italy at year-end 2005 in the preparation of the banks’ financial statements drawn up under IAS/IFRS) amounted to 3,870 million euro with respect to the 3,849 million as at 31st December 2005. As part of it, substandard loans rose to 3,319 million euro from 3,134 million and positions past due by over 180 days decreased to 551 million euro from 715 million.
Customer deposits under administration amounted to 496 billion euro, with a 4.2% rise compared to 31st December 2005. As part of it, direct customer deposits equalled 188 billion, unchanged compared to those of 31st December 2005, and indirect customer deposits reached 307 billion, up 6.8% with respect to those of year-end 2005. Assets under management, in which mutual funds are no longer included after the finalisation last December of the agreement for asset management activities with Crédit Agricole, reached 59 billion euro, in line with the figure at year-end 2005, as a result of placement of life insurance policies in the quarter for approximately 2.1 billion euro counterbalanced by a 3% decrease in individual portfolio management schemes.
As at 31st March 2006, capital ratios resulted in: Core Tier 1 ratio at 7% (7.1% at 31st December 2005), Tier 1 ratio at 7.8% (7.9% at 31st December 2005) and total capital ratio at 10.7% (10.3% at 31st December 2005).
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As at 31st March 2006, Gruppo Intesa’s operating structure was made up of 3,879 branches - of which 3,123 in Italy and 756 abroad - and 57,927 employees, 443 higher than at 31st December 2005. If we take into account the acquisition under way of Ukrsotsbank in Ukraine the number of branches would increase to approximately 4,400 and that of employees to approximately 68,000.
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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 industrial credit and leasing. In first quarter 2006, the Division showed a slight decrease in profitability due to a rise in provisions which was not entirely offset by revenue growth. Operating income rose by 5.8% to 1,384 million euro from 1,308 million in first quarter 2005, accounting for 50% of consolidated operating income (54% in first quarter 2005). Revenue growth was fostered in particular by mortgages (stock up 13%), personal loans (stock up 20%), Intesa Vita’s premiums (up 19%) and the above-mentioned placement of mutual fund Intesa Garanzia Attiva (with a net subscription of approximately 2.5 billion euro in the quarter). Operating costs increased 2.9% to 706 million euro from 686 million and led to a 9% increase in operating margin, which rose to 678 from 622 million, and a decrease in the cost/income ratio to 51% from 52%. Net provisions and adjustments rose to 114 million euro from 48 million mainly due to the transfer to substandard loans of positions which at the end of last December had been classified as past due by over 180 days (the already mentioned category of non-performing loans introduced by the Bank of Italy at year-end 2005). Therefore, income before tax totalled 564 million euro, in line with targets, down 1.7% from 574 million of first quarter 2005.
The Italian Subsidiary Banks Division, which includes subsidiary banks all strongly rooted in regional markets (among which Cassa di Risparmio di Fano acquired in 2005) highlighted a growth in profitability owing to an increase in revenues. Operating income rose by 11.2% to 428 million euro from 385 million, with a 16% contribution to consolidated operating income (the same as the first quarter 2005). With operating costs of 196 million euro, up 5.4% compared to 186 million of first quarter 2005, operating margin was up 16.6% to 232 million euro from 199 million and the cost/income ratio decreased to 46% from 48%. Net provisions and adjustments rose to 35 million euro from 23 million of first quarter 2005. After profits on investments held to maturity and on other investments of 3 million euro, income before tax from continuing operations increased 10.5% to 200 million euro from 181 million in the corresponding period of 2005.
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 16.9% to 290 million euro from 248 million, making a 11% contribution to consolidated operating income (10% in first quarter 2005). Operating costs rose by 15.9% to 153 million euro from 132 million; operating margin, therefore, went up 18.1% to 137 million euro from 116 million and the cost/income ratio was unchanged at around 53%. Net provisions and adjustments rose by 12.5% to 27 million euro from 24 million. After profits on investments held to maturity and on other investments of 1 million euro, income before tax from continuing operations increased by 15.6% to 111 million euro from 96 million in first quarter 2005. In Central-Eastern Europe, Gruppo Intesa’s services are currently available to a population of over 80 million people in six countries taking into account the acquisition under way of Ukrsotsbank, the fourth largest Ukrainian bank by total assets with 527 branches and 660,000 customers. In this area, Banca Intesa is already operational with the second largest Croatian bank (Privredna Banka Zagreb, PBZ), the second largest Slovakian bank (Vseobecna Uverova Banka, VUB), the second largest bank in Serbia and Montenegro acquired in 2005 (Banca Intesa Beograd, formerly Delta Banka), the fourth largest Hungarian bank (Central-European International Bank, CIB) and the fifth largest bank in Bosnia and Herzegovina acquired in the first quarter of 2006 (UPI Banka). Banca Intesa is also active in the Russian Federation with KMB, a leading bank in lending and leasing for small enterprises acquired in 2005, with ZAO Banca Intesa, set up in 2003, the only Italian banking subsidiary licensed to operate in the country and with a Representative Office in Moscow. Moreover, Banca Intesa is present 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 and Financial Institutions. It includes: Caboto, a factoring company and the international network made up of branches, representative offices and subsidiaries specialised in corporate banking. In the first quarter of 2006, this Division showed a marked improvement in profitability due to revenue growth. Operating income amounted to 540 million euro, up 24.1% compared to the 435 million in first quarter 2005, accounting for 20% of consolidated operating income (18% in the corresponding period of 2005). Revenues were affected on one hand by the above-mentioned valuation effect of the Fiat and Parmalat stakes and a 10% rise in commissions and on the other by higher funding costs related to the increase in Caboto and Merchant Banking portolios. Excluding the latter effect, net interest income would rise by 4%. With operating costs totalling 203 million euro, in line with 201 million in the first quarter of 2005, operating margin amounted to 337 million euro, up 44% compared to 234 million for first quarter 2005 and the cost/income ratio showed a reduction from 46% to 38%, a level which benefited from particularly favourable seasonal effects. Net provisions and adjustments recorded a 37.3% decrease to 32 million euro from 51 million. After profits on investments held to maturity and on other investments of 29 million euro, income before tax from continuing operations increased by 83% to 334 million euro from 183 million for first quarter 2005. Since January 1st 2006 activities dedicated to the Public and Infrastructure sector have been transferred from the Corporate Division to Banca Intesa Infrastrutture e Sviluppo, a Group subsidiary with fields of action ranging from public works lending to securitisations for public entities and project finance. For simplicity of presentation, figures of Banca Intesa Infrastrutture e Sviluppo are still included in the Corporate Division.
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An improvement in operating performance is expected in 2006, compared to that of 2005, in line with the guidelines of the 2005-2007 Business Plan, also in the light of results recorded in the first quarter of the current year.
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The consolidated reclassified statement of income and the consolidated balance sheet included in the Report approved by the Board of Directors are attached in order to provide more complete information of results generated in the first quarter of 2006. It must be pointed out that this quarterly report has not been subject to control by the auditing firm.
>> Financial Statements as at 31st March 2006
Last updated 12 May 2006 at 00:00