FINANCIALS: ISPIM: Conf Call Adds Bullish Spin To Our Spread Positive View

Intesa Sanpaolo (ISPIM: Baa1/BBB/BBB) conf call gave a strong affirmation of current guidance including the chance to “exceed” it. Equity payout is also going to be increased early in FY25 but the improving metabolic rate of the business, alongside strong credit metrics are overriders, in our view. There’s little here to dissuade us from our “spread positive” view.

• Guidance upgrade: it was noted on the call that the EUR8.5bn upgraded guidance is actually below the run-rate achieved in 1H24. Mgmt confirmed that the bank “can also exceed” this guidance but it did leave some latitude to take additional restructuring charges at the year-end. The CEO also stated the bank could “achieve easily” the NII guidance and that trajectory could improve into FY25.
• Equity payout: it’s clear that, including the 120bp of DTA realisations that are set to drop into CET1 at the year-end, mgmt can go quite a bit further on this. Normally, we’d view this as a credit negative, but we continue to feel the overriding factor is that above message on the increased metabolism of the business and chances to surpass guidance. Mgmt also noted it could find additional headroom on optimisation of operational risk under Basel 4.
• On credit quality guidance, the corridor of 30-40bp is above peers but mgmt noted its guidance is very much “sustainable” i.e. through-cycle. So, there’s a further potential upside, here, we feel.