Company Reports

Intesa Sanpaolo is the best-run bank in Italy and one of the most profitable European banks we cover. Retail deposits make up the bulk of Intesa's funding. Retail, and especially sight deposits, tend not to track market interest rates. Zero or negative interest rates have obscured the benefit to Intesa of having a vast source of cheap funding for more than a decade. Rather than being a highly profitable product, deposit-taking became a loss-making activity.

Intesa Sanpaolo has offered around EUR 30 billion for Italian rival Monte dei Paschi di Siena. This deal follows MPS’ recent move to secure control of Mediobanca and would see part of the business subsequently carved out to Unipol Assicurazioni.

SpaceX has filed for one of the largest IPOs in history, with Anthropic and OpenAI expected to follow in the most significant fundraising cycle in years. No European bank holds a lead equity arranger role; that honor belongs to five US banks.

European banks have declined around 10% from their highs as rising oil and gas prices and the prospect of higher-for-longer interest rates fuel fears that loan defaults will rise.

Intesa Sanpaolo is the best-run bank in Italy and one of the most profitable European banks we cover. Retail deposits make up the bulk of Intesa's funding. Retail, and especially sight deposits, tend not to track market interest rates. Zero or negative interest rates have obscured the benefit to Intesa of having a vast source of cheap funding for more than a decade. Rather than being a highly profitable product, deposit-taking became a loss-making activity.

Intesa Sanpaolo is the best-run bank in Italy, and with the benefit of higher interest rates, it is now one of the most profitable European banks we cover. Retail deposits make up the bulk of Intesa's funding. Retail, and especially sight deposits, tend not to track market interest rates. Zero or negative interest rates have obscured the benefit to Intesa of having a vast source of cheap funding for more than a decade. Rather than being a highly profitable product, deposit-taking became a loss-making activity.

Intesa Sanpaolo is the best-run bank in Italy, and with the benefit of higher interest rates, it is now one of the most profitable European banks we cover. Retail deposits make up the bulk of Intesa's funding. Retail, and especially sight deposits, tend not to track market interest rates. Zero or negative interest rates have obscured the benefit to Intesa of having a vast source of cheap funding for more than a decade. Rather than being a highly profitable product, deposit-taking became a loss-making activity.

Intesa Sanpaolo delivered 9% net income growth for the first half, mostly driven by impressive cost management and the absence of a deposit guarantee contribution. Revenue grew by only 1%, supported by fee and insurance income. Shares were up around 4% on July 30.

Intesa Sanpaolo is the best-run bank in Italy, and with the benefit of higher interest rates, it is now one of the most profitable European banks we cover. Retail deposits make up the bulk of Intesa's funding. Retail, and especially sight deposits, tend not to track market interest rates. Zero or negative interest rates have obscured the benefit to Intesa of having a vast source of cheap funding for more than a decade. Rather than being a highly profitable product, deposit-taking became a loss-making activity.

Intesa Sanpaolo is the best-run bank in Italy, and with the benefit of higher interest rates, it is now one of the most profitable European banks we cover. Retail deposits make up the bulk of Intesa's funding. Retail, and especially sight deposits, tend not to track market interest rates. Zero or negative interest rates have obscured the benefit to Intesa of having a vast source of cheap funding for more than a decade. Rather than being a highly profitable product, deposit-taking became a loss-making activity.

Intesa's first-quarter net profit rose 14% year on year as higher fee income offset an 8% drop in net interest income, keeping revenue flat. Lower regulatory charges drove an 8% decline in expenses, boosting earnings. It kept its 2025 guidance, which implies at least a 5% higher net income in 2025.

No-moat Intesa Sanpaolo showed resilience in the face of lower interest rates, reporting net income of EUR 1.5 billion for the fourth quarter of 2024, 6% lower than a year before. Net interest income peaked in the previous quarter, leading to a 2% revenue decline. The fourth quarter traditionally comes with seasonally high operating expenses—this is when Intesa raises its provisions for employee incentives. Operating expenses grew by 3% year on year. Credit quality remains sound with nonperforming loans and loan-loss provisions at record lows. Intesa now expects even higher net profits in 2025 than in 2024 despite the hit from lower interest rates on net interest margins. We believe that growth in fee income and lower operating expenses will have to do the heavy lifting to offset lower net interest income.

No-moat Intesa Sanpaolo reported another superb set of results, recording a net profit of EUR 2.4 billion for the third quarter of 2024—26% higher than a year earlier and only 3% lower than the previous quarter. Despite lower interest rates, net interest income held up well. Healthy fee growth was the main driver behind a 6% increase in revenue year on year.

Intesa Sanpaolo continues to deliver exceptional results, with the second quarter of 2024 contributing to its best six months in history. Net revenue grew by 8% in the second quarter compared with the same period last year, with net income increasing by 12%. Intesa will, however, face a more challenging base from the next quarter, with net interest margin expansion having peaked. The bank kept a tight lid on costs, resulting in a slight decline in operating expenses and a lower cost/income ratio of 38%. Credit quality remains sound, and Intesa recorded its lowest-ever nonperforming loan ratio of 1%. It generated substantial excess capital, which we expect the firm to distribute to shareholders through dividends and share buybacks over time. Intesa's options to meaningfully return excess capital are unclear in the near term. It expects the total payout to be somewhat higher than in 2023. Intesa is well positioned for the changing economic cycle and is on track to achieve its 2025 targets. We maintain our fair value estimate of EUR 3.50 per share.

Intesa Sanpaolo's first quarter of 2024 was one of its best quarters, with an impressive 21% EPS growth and the industry-lowest cost/income ratio of 38%. We raise our fair value estimate by 17% to EUR 3.50 per share from EUR 3.00 per share as we anticipate higher fee income growth than previously and structural improvements in cost management. Intesa’s digital investment (around EUR 3 billion over the past two years) is starting to bear fruit, supporting fee income expansion and efficiency gains. In response, we have decreased our short-term and midcycle efficiency ratio by 3% and incorporated 10% growth in fee and commission income for 2024. These changes are the main drivers of our fair value increase.

Intesa Sanpaolo is the best-run bank in Italy, and with the benefit of higher interest rates, it is now one of the most profitable European banks we cover. Retail deposits make up the bulk of Intesa's funding. Retail, and especially sight deposits, tend not to track market interest rates. Zero or negative interest rates have obscured the benefit to Intesa of having a vast source of cheap funding for more than a decade. Rather than being a highly profitable product, deposit-taking became a loss-making activity.

Intesa Sanpaolo is the best-run bank in Italy, and with the benefit of higher interest rates, it is now one of the most profitable European banks we cover. Retail deposits make up the bulk of Intesa's funding. Retail, and especially sight deposits, tend not to track market interest rates. Zero or negative interest rates have obscured the benefit to Intesa of having a vast source of cheap funding for more than a decade. Rather than being a highly profitable product, deposit-taking became a loss-making activity.

No-moat Intesa Sanpaolo reported a net profit of EUR 7.7 billion for fiscal 2023, slightly below our EUR 7.9 billion estimate, with wage inflation driving operating expense growth ahead of our expectations. Intesa slightly increased its net profit guidance for 2024 and 2025, and guidance is also slightly ahead of our expectations. Management came across as confident that it can keep growing net interest income. In sharp contrast to some of its peers, Intesa believes it can keep a lid on the cost of deposits while its hedging program will also shelter it from the initial expected decrease in interest rates. Even in the event of a sharp decline in interest rates, Intesa believes it can make up for lower net interest income by migrating deposits into its asset-management and life insurance operations.

We estimate that Intesa Sanpaolo has a fair value of EUR 3.00 per share, equal to 1.3 times Intesa's 2022 tangible book value and 8 times the EPS we estimate Intesa will record for 2023. We estimate that Intesa can generate a midcycle return on tangible equity of around 13%.

Intesa Sanpaolo is the best-run bank in Italy, and with the benefit of higher interest rates, it is now one of the most profitable European banks we cover. Retail deposits make up the bulk of Intesa's funding. Retail, and especially sight deposits, tend not to track market interest rates. Zero or negative interest rates have obscured the benefit to Intesa of having a vast source of cheap funding for more than a decade. Rather than being a highly profitable product, deposit-taking became a loss-making activity.