Intesa Sanpaolo Profit Rises as Wealth-Management Fees Climb -- Update

By Giovanni Legorano Features Dow Jones Newswires

Intesa Sanpaolo SpA said Friday its first-quarter profit rose by 12% from a year earlier, mainly reflecting higher fees and commissions that offset declining revenue from lending and insurance.

Continue Reading Below

Net profit at Italy's second-largest bank by assets rose to 901 million euros ($984 million) from EUR806 million for the same quarter in 2016. The bank's shares rose 2.8% to EUR2.84 in afternoon trading.

Intesa said that without one-off contributions to a national resolution fund for banks and other funds, as well as a writedown of its stake in the Atlante rescue fund for banks, net profit for the quarter would have been EUR1.18 billion.

These costs, incurred mainly by Italy's largest banks, underscore how the troubles of weaker lenders hurt the results of healthier ones.

Italian banks are still struggling to digest more than EUR350 billion in problematic loans they accumulated during the financial crisis and they are trying to improve their profitability, undermined by high costs and declining revenue on lenders' traditional commercial activities.

In December, Banca Monte dei Paschi di Siena SpA asked the Italian government to bail it out with a EUR20 billion fund the Treasury earmarked to support ailing banks. Monte dei Paschi is a perennial trouble spot in the Italian banking system and on Thursday posted a net loss for the first quarter,

Continue Reading Below

Two smaller banks, Banca Popolare di Vicenza SpA and Veneto Banca SpA, said in March they requested state aid to stay afloat.

Intesa said its fees and commissions rose by 10% to EUR1.86 billion from the same quarter a year earlier, mainly boosted by higher fees on management and consulting activity on clients' savings.

This result underscores the bank's continued push to tap Italians' vast private wealth as a source of income and make proportionally more revenue on fees and commissions than on traditional lending activities as ultralow to negative rates hurt the margin it makes on loans.

Net interest income for the quarter dropped by 3% to EUR1.81 billion compared with the first three months of last year.

The bank said this result would have been slightly higher than the one booked for the first quarter of last year, if the effect of the Egyptian currency's depreciation, which affected the income of Intesa's Egyptian unit, were excluded.

Total revenue increased by 1% to EUR4.21 billion. Revenue from the bank's insurance business dropped by 15% to EUR283 million.

Intesa's provisions for bad loans--a major source of costs for Italian banks--were almost flat at EUR695 million.

The bank said it reduced its stock of bad loans by EUR7.5 billion in the last year and a half and that the inflow of bad loans during the quarter was at its lowest level since the creation of the bank around 10 years ago.

Write to Giovanni Legorano at giovanni.legorano@wsj.com

(END) Dow Jones Newswires

May 05, 2017 08:54 ET (12:54 GMT)