By Giovanni Legorano
MILAN-- Intesa Sanpaolo SpA posted a huge fourth-quarter loss,
hit by large write-downs on bad loans and the value of past
acquisitions, as it cleans up its balance sheet ahead of a checkup
of the euro zone's largest lenders.
The bank reported a net loss of EUR5.19 billion ($7.13 billion)
for the three-month period, compared with a net loss of EUR83
million a year earlier.
Intesa's results follow similar decisions taken by its domestic
peer UniCredit SpA and underscore how, under the pressure of
regulators, Italian banks opted to cut down the value of their
assets to more realistic amounts as the European Central Bank
carries out a review of the most important euro-zone lenders,
before it takes over their supervision toward the end of this
year.
Earlier this month UniCredit, Italy's largest bank by assets,
reported a EUR15 billion net loss for the fourth quarter-- one of
the largest losses ever recorded by a European bank--after taking
EUR18.6 billion of charges as it wrote down the value of bad loans
and so-called goodwill.
While the size and diversification of Italy's two largest banks
has allowed them to shore up their balance sheets without raising
fresh cash, a slate of midtier lenders are set to sell shares in
the coming months. Half of the 15 banks under the ECB's asset
quality review are planning capital increases totaling EUR8
billion.
Share prices of the country's largest banks have grown on
average by 30% since the beginning of the year as investors welcome
the balance sheet cleanup and easing tensions on sovereign debt--of
which Italian banks are big holders. UniCredit shares are up 7%
since it announced its cleanup on March 18, while Intesa's stock is
up 30% this year.
BlackRock Inc., the world largest money manager, owns stakes of
around 5% in Intesa, UniCredit and Banca Monte dei Paschi di Siena,
and Intesa's Chief Executive Carlo Messina said he would welcome
other foreign investors.
"There's lots of liquidity looking with interest at Italian
banks, but investors will prefer those banks with real turnaround
and growth opportunities ahead," said Gennaro Casale, a partner at
the Boston Consulting Group in Milan.
Similar to UniCredit, Intesa's loss would have been much higher
if not for the revaluation of the stake it owns in the Bank of
Italy. The country's central bank is mainly owned by Italy's banks
and its capital was revalued last year to EUR7.5 billion from
EUR156,000-- a level which had been unchanged since 1936--a move
that boosted the shareholding banks' profit and loss account.
Intesa booked a capital gain of EUR2.56 billion on its roughly
42% stake in the Bank of Italy and UniCredit a EUR1.4 billion gain
on its 22% stake. Most large and midtier Italian banks who own
shares in the central bank have seen a sizable impact on their last
quarter results. That gain allowed Intesa to write down the value
of its bad loans by EUR3.10 billion in the last quarter.
Mr. Messina confirmed talks are ongoing to create a joint
venture with UniCredit and U.S. private-equity firm Kohlberg Kravis
Roberts & Co. that would allow the banks to unload some of
their restructured loans. He said he considers KKR a "strategic
counterparty" for the purchase of the bank's bad loans.
The bank wrote down its so-called goodwill, as well as the value
of other intangible assets, by EUR5.80 billion, reflecting a
"conservative" four-year outlook for the Italian economy, said Mr.
Messina. Despite the large write-down on the loan book, its core
Tier 1 ratio stood at 11.9% at year's end.
For 2013, the lender proposed a cash dividend of EUR0.05 a
share--the same as for 2012.
In a new three-year plan, Intesa is targeting annual net profit
of EUR4.5 billion in 2017, with plans to beef up its fee-based
businesses ahead of a potentially prolonged period of low interest
rates.
It also plans to sell EUR1.9 billion in stakes in noncore
businesses by 2017, echoing plans by rivals such as Mediobanca and
Assicurazioni Generali. Among assets for sale are shares in RCS
Mediagroup, the publisher of the influential daily Corriere della
Sera, shares in Telco, a holding company controlling Telecom Italia
and its stake in troubled national carrier Alitalia. It has already
sold stakes in Pirelli and Generali.
"Scarce resources must be allocated to credit and not to
investments of this kind," Mr. Messina said.
Write to Giovanni Legorano at giovanni.legorano@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires