Milan, May 6th 2022
The international crisis caused by the conflict that Russia unleashed in Ukraine has defined the beginning of this year and affects us all.
The Intesa Sanpaolo Group immediately showed its support for the Ukrainian people through a €10 million donation to support humanitarian initiatives.
We are very close to our colleagues at Pravex Bank. Most of them are still in Ukraine, though we have helped some of them to find refuge in bordering countries where we operate, and in Italy. My thanks go to all our colleagues who have put initiatives in place to welcome nearly 300 people fleeing Ukraine. In Italy, we are hosting over 200 of our colleagues and their families.
As a Group, we immediately activated a crisis unit to oversee activities in Russia and decided to end all new financing and investments in the country. These actions are in addition to the Group’s strict compliance with sanction regimes.
Turning to the Bank's results, in these first few months, we have fully launched the main industrial initiatives of our 2022-2025 Business Plan, a plan that moves us into the future and creates the bank for the next ten years. We confirm the €6.5 billion net income target for 2025 and the 70% dividend payout in each year of the Business Plan. We also confirm the intention to remunerate shareholders through the share buyback, pending ECB approval. Strong value creation and value distribution will continue to be our priority.
The expectation of rising interest rates, the Bank's high strategic flexibility in managing costs, the massive deleveraging already achieved – by which we have reached the lowest-ever NPL stock and ratios – are driving forces for further growth, even in a highly complex context such as the one we currently face.
Intesa Sanpaolo remains best-in-class in 2022 in terms of profitability: we expect to exceed €4 billion in net income assuming no critical changes to commodity or energy supplies; in the event of a very conservative assumption of ~40% coverage of the exposures to Russia and Ukraine, we see a net income well above €3 billion.
The results achieved in the first quarter of 2022 are a further demonstrations of how Intesa Sanpaolo is able, even in extremely complex contexts, to generate significant and sustainable profitability thanks to a highly diversified and resilient business model, to the benefit of all stakeholders.
Excluding provisions and write-downs related to exposure to Russia and Ukraine, net income for the quarter was €1.7 billion; stated net income was €1 billion. We have already accrued dividends of €700 million in the first quarter. Operating income and operating margin accelerated strongly compared to the fourth quarter of last year, growing respectively by 7.8% and 46.0%.
Costs decreased further by 3.2% compared to the first quarter of last year and the cost/income ratio at 31 March – equal to 46.3% – places us at the top among major European banks. Start-up activities for the new digital bank, Isybank – which will contribute significantly to improving the Group’s cost structure – are proceeding swiftly: following the partnership with market leader Thought Machine, a new unit (Isy Tech) has been created for the development of Isybank with 190 specialists. We are also strengthening the digital skills of the Bank's core business. In the first part of the year, we further improved asset quality thanks to a €4.8 billion reduction in gross impaired loans compared to the end of 2021 – this is equivalent to our exposure to Russia and Ukraine. We have thus brought the gross NPL ratio to 1.6% and the net ratio to 0.9%, considering the sale that took place in April and others already planned for this year (provisioned for in the fourth quarter of 2021) and applying the EBA methodology.
Our capital structure remains extremely solid and well above regulatory requirements with a fully phased-in CET1 ratio of 13.6%.
Intesa Sanpaolo is the engine of Italy's real and social economies. In the first quarter of the year, medium / long-term lending to households and businesses in Italy totaled €17 billion (out of a Group total of €22.2 billion). We also helped 1,200 Italian companies return to performing status, thus preserving 6,000 jobs.
We are strengthening our food and shelter program to support the needy with a commitment to provide 50 million interventions during the Plan, in addition to the 28 million interventions carried out since 2019. In the first three months of the year, we provided more than €2 billion in social lending, towards our goal of €25 billion in cumulative flows announced in the Business Plan.
We have also laid the foundations for one of the largest social housing programs in Italy with the goal of about 7,000 units dedicated to the young and to seniors. Our new €8 billion circular economy credit facility has already granted over €800 million in loans in the first quarter.
The professional quality of our people has been and remains the key factor in achieving solid, sustainable results that benefit our stakeholders; we are grateful to all of them.
In closing, let me repeat that we are experiencing an extremely serious international crisis, that I hope will soon pass with the end of the war in Ukraine.
Read more about the financial results for the 1st quarter of 2022 at the link.
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