Intesa Sanpaolo's Second-Quarter Results Flattered by Gain on Disposal

No-moat Intesa Sanpaolo reported net income of EUR 1.4 billion for the second quarter of 2020, 16% higher than the EUR 1.2 billion it reported for the second quarter of 2019. Revenue declined year on year by 12%, with trading revenue pulling back sharply after an extraordinarily strong first quarter. Fee income was also under pressure as client transactional activity came to a standstill due to the lockdown measures. Fee income already showed signs of recovery in June when the lockdown measures were eased. Costs were well controlled. After surprisingly seeing little increase in the first quarter of 2020, loan-loss provisions came in at 2.5 times what they were in the second quarter of 2019. The increase in provisions is forward-looking, however, and the actual performance of the lending book showed no signs of deterioration yet with the nonperforming loan ratio declining. Pretax profits declined 60% year on year, excluding the EUR 1.1 billion gain on the disposal of Intesa's merchant acquiring business to Nexi. We maintain our no-moat rating, and despite some adjustments to our model, our EUR 2.10 fair value estimate remains the same.