Tuesday, April 1, 2014

Intesa Sao Paolo

This post is to outline a Europe Bank recovery play.

Intesa SanPaolo is a bank from Italy.

This is a link to the bank. http://www.group.intesasanpaolo.com/scriptIsir0/si09/

This is a look at the stock price over the last one year

The bank posted a hefty loss for 2013, sort of like a kitchen sink year.

A new CEO has come on board.

The bank has unveiled a business plan for 2014-2017.

This could be a recovery play in terms of dividends as well as a recovery play on Italy.

The upside if we were to look at the five year chart is a recovery to around 6 Euro level

Even if we look at a 10 year chart, the level is that of 6 Euro or so.

In a way this will be like the play from 2004-2007.

I guess this will take around 2-3 years to play out, so, i expect it to hit around 6 Euros per share by 2017.

Here is more information from the press release.

Italian lender Intesa Sanpaolo S.p.A.reported a hefty loss for the fourth quarter that widened sharply from the previous year, hit by impairments. Further, the company unveiled a business plan for 2014-2017.

Consolidated net loss widened sharply to 5.190 billion euros ($7.14 billion) from 83 million euros in the fourth quarter of 2012.

The lender recorded impairment of goodwill and other intangible assets of 5.797 billion euros in the quarter. 

Further, net adjustments to loans climbed to 3.10 billion euros from 1.461 billion euros last year.

Consolidated net income, excluding impairment of goodwill and other intangible assets, was 578 million euros. It had reported a net loss of 83 million euros last year.

Operating income declined to 3.944 billion euros from 4.494 billion euros. Net interest income fell 6.6 percent to 2.038 billion euros and profits on trading were sharply lower.

Net fee and commission income increased 9.9 percent to 1.625 billion euros, with double-digit increases in commissions on commercial banking activities as well as those on management, dealing and consultancy activities.

For the quarter, the Corporate and Investment Banking division reported operating income of 741 million euros, a decline from the prior quarter.

The Banca dei Territori division, which includes Intesa Sanpaolo Private Banking, witnessed a marginal sequential rise in operating income at 2.752 billion euros.

The company reported a consolidated net loss of 4.550 billion euros for the year, compared with net income of 1.605 billion euros posted in 2012.

Excluding impairment of goodwill and other intangible assets, consolidated net income was 1.218 billion euros, while it totaled 1.605 billion euros last year.

Annual operating income slid to 16.295 billion euros from 17.881 billion euros in the prior year.
The lender proposed a cash dividend of 5 euro cents per share for 2013, flat with 2012.

For 2014, the company said, it would continue to prioritize the delivery of sustainable results. Profitability targets would be combined with close attention to the profile of risk and liquidity, as well as with the Group's capital position, the lender added.

Repricing actions are also planned for 2014, which will partially limit the impact of an expected negative environment on market rates.

In a separate statement, the company detailed a business plan for 2014 to 2017, which sees a sharp increase in profitability, as a result of solid revenue creation, continuous cost management and dynamic credit and risk management.

The plan prioritizes more fee-intensive businesses, to face a potential prolonged period of low interest rates.

The group's net income in 2017 is expected to increase to 4.5 billion euros in 2017 from adjusted 1.2 billion in 2013.

Intesa's operating income is expected to rise up to 19.2 billion euros in 2017 from 16.3 billion euros in 2013.
The lender looks for increasing distribution of ordinary cash dividends of about 10 billion euros for 2014-2017, with 1 billion euros for 2014, 2 billion euros for 2015, 3 billion euros for 2016 and 4 billion euros for 2017.

Full Disclosure : I am long Intesa SanPaolo and will be adding to my holdings.

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