Intesa Sanpaolo Reports Record Second-Quarter Profits, but NPL Haircut a Concern

No-moat Intesa Sanpaolo reported net profits of EUR 1.5 billion for the second quarter of 2021--the highest second-quarter profits that the bank has reported. Pretax profits from continued operations came in at EUR 1.7 billion for the quarter, double the predetermined EUR 827 million Intesa disclosed for the second quarter of 2020--this number was restated to include the profits of UBI Banca in the base. There was a possible red flag in the results, however. Intesa booked loan-loss provisions of EUR 599 million for the quarter; of this, EUR 200 million relates to provisions taken against legacy nonperforming loans or NPLs that were sold during the quarter. To our mind, this could be a sign that the still sizable NPL book is overvalued and that Intesa will have to raise further provisions as it winds down its NPLs. We maintain our EUR/share fair value estimate and our no-moat rating.