Intesa Sanpaolo SpA share price up, posts a 5.19-billion-euro fourth-quarter loss after writedowns

The second-largest bank by assets in Italy – Intesa Sanpaolo SpA made an official statement, posting a fourth-quarter loss estimated to 5.19 billion euro (7.14 billion dollars). The bank also revealed that it has made post-tax writedowns in annual results that amounted to 5.8 billion euros and raised its loan-loss provisions by 51% to 7.1 billion euros.

As reported by the Financial Times, Intesa Sanpaolo SpA said it “further reinforced a rock solid balance sheet.” The lender also said in its statement that impairments amounted to 5.8 billion euros, and provisions for doubtful loans increased from 1.46 billion euros for the same period a year earlier to 3.1 billion euros.

Intesas announcement referring to the writedowns came at a moment when the bank also shared that it maintains a 4.5-billion-euro target for its net profit in 2017 from an uderlying 1.2 billion euros in 2012, and plans to discard equity assets estimated to about 2 billion euros.

Part of its statement was cited by Bloomberg: “The business plan envisages a sharp increase in profitability, deriving from solid revenue creation, continuous cost management and dynamic credit and risk management.”

Intesa Sanpaolo SpA revealed part of its business plan, saying that it will increase dividends by about 1 billion euros annually over the next years, raising payments to 4 billion euros in 2017 from 1 billion in 2014. The business plan is part of the strategy of Mr. Carlo Messina, Intesas new CEO, who took the position in 2013 as a successor to Mr. Enrico Cucchiani.

The lenders new business plan also includes reorganization of the bank by merging divisions and moving some of its resources into commercial activities. The legal entities of Intesa are planned to be reduced, and about 2,300 employees are planned to be reallocated.

Analysts working for Berenberg Bank commented for the Financial Times: “We believe the market was expecting a massive Q4 loss, in line with UniCredit’s clean-up. The cash dividend promise of Intesa’s new strategy will be perceived well by the markets in our view.”

Intesa Sanpaolo SpA rose by 4.31% to 2.42 euros by 14:30 GMT in Milan, marking a one-year change of +111.91%. The company is valued at 37.84 billion euros. According to the Financial Times, the 28 analysts offering 12 month price targets for Intesa Sanpaolo SpA have a median target of 2.11 euros, with a high estimate of 3.00 euros and a low estimate of 1.40 euros. The median estimate represents a -9.27% decrease from the previous close of 2.32 euros.