Milano, 08 November 2004

• Operating margin for the third quarter 2004 to over 1 billion euro
  
• Consolidated net income for the first nine months 2004 up to 1,341 million euro (+29% with respect to 1,038 million of the first nine months 2003)
  
• Ordinary income for the first nine months 2004 up to 2,135 million euro (+30% compared to 1,645 million of the first nine months 2003)
  
• Revenues from retail business up by 8%
  
• Cost/income ratio improved significantly, down to 59.1% from 62.9%
  
• Capital ratios strengthened further: Tier 1 ratio at 8.6%, the target set out in the Business Plan for 2005

 

 

Banca   Intesa’s Board of Directors met today under the chairmanship of Giovanni Bazoli and approved the consolidated quarterly report as at 30^th September 2004.

 

 

Results for the first nine months of 2004

 

The consolidated income statement for the first nine months of 2004 recorded net interest and other banking income of 7,258 million euro, up 1.6%   compared to 7,142 million   for the first nine months   2003, driven by the sustained trend in revenues from the retail business (Retail Division and subsidiary banks in Italy and in Central-Eastern European Countries) up 8% to 5.4 billion euro from 5 billion.

 

As part of it, interest margin amounted to 3,871 million euro, unchanged with respect to the first nine months of 2003. In fact, the slight decrease in net interest income (-0.5%) from 3,726 million euro to 3,709 million was wholly offset by the increase in dividends and income from investments carried at equity which rose to 162 million euro from 145 million (+11.7%). The above-mentioned slight decrease was due to the decline in market interest rates and the decision to structurally reduce loans to large corporates, mainly international ones (curtailed by around 7 billion euro in the last twelve months), against the increase in loans to other enterprises and households (up by around 5 billion euro).

 

Net commissions showed a 3.7% increase up to 2,524 million euro from 2,434 million, mainly attributable to the rise referred to commissions on bancassurance (+47.1%), dealing and placement of securities (+36.2%), debit and credit cards (+8.5%) and current accounts (+4.3%). Profits on financial transactions went up 1.4% to 589 million euro with respect to 581 million of the corresponding period of 2003.

 

Total operating costs amounted to 4,291 million euro, down 4.5% compared to 4,492 million in the first nine months of 2003. As part of it, personnel costs decreased 4.5%, other administrative costs were down 0.7% (despite advertising expenses which nearly doubled and personnel training costs which grew by over 50%) and depreciation and amortisation dropped by 16.2% in spite of the heavy investments under way due to the rationalisation of real estate assets and the extinguishing of the depreciation period of past investments.

 

Consequently, operating margin rose to   2,967 million euro, up 12% compared to 2,650 million in the first nine months of 2003 with a marked improvement in the cost/income ratio, down to 59.1% from 62.9% of the 2003 corresponding period.

 

Total provisions and net value adjustments (excluding goodwill amortisation) amounted to 735 million euro, down 19.3% compared to the 911 million for the first nine months of 2003 with a 68% coverage for doubtful loans, beyond the 67% target set out in the Business Plan for 2005.

 

Therefore, ordinary income rose to 2,135 million euro, up 29.8% from 1,645 million for the first nine months of 2003.

 

Extraordinary items showed a negative result of 70 million euro compared to the 78 million income of the 2003 corresponding period.

.

The first nine months of 2004 closed with a consolidated net income of 1,341 million euro, compared to 1,038 million of the first nine months of 2003 (+29.2%), with the Parent Company’s net income at 1,203   million euro with respect to the 988 million of the corresponding period of 2003.

 

 

Results for the third quarter of 2004

 

The 2004 third-quarter consolidated income statement registered a net interest and other banking income of   2,392 million euro, down 2.5% with respect to the previous quarter, due to the seasonal decrease in dividends and commissions from tax collection and no more up-front revenues from structured bonds; a 0.6% increase was registered with respect to the 2003 third quarter.

 

As part of it, interest margin amounted to 1,301 million euro, up 1.1% with respect to the previous quarter and up 4.6% to the 2003 third quarter. Net interest income rose to   1,259 million euro, up 4.5% on the previous quarter and up 1.9% on the corresponding quarter of 2003. Dividends and income from investments carried at equity amounted to 42 million euro compared to the 82 million euro of the previous quarter due to the lower contribution from dividends, which are usually cashed in the second quarter, and to the 9 million of the 2003 corresponding period.

 

Net commissions amounted to 848 million euro, slightly down (-0.9%) with respect to the previous quarter, due to the seasonal decrease in commissions on tax collection (-15%) which was largely offset by the growth in commissions on bancassurance (+34%) and current accounts (+8%); a 2% increase was registered on the 2003 third quarter owing to the sustained trend of bancassurance (+75%). Profits on financial transactions totalled 160 million euro with a decrease compared to the 209 million of the previous quarter and to the 186 million of the 2003 corresponding period attributable to no more up-front revenues connected to the sale of the Bank’s own structured bond issues.

 

Total operating costs amounted to 1,391 million euro with a 5.2% decrease on the previous quarter and a 6.6% drop with respect to the 2003 third quarter, due to the reduction in personnel costs, other administrative costs and depreciation and amortisation.

 

Consequently, operating margin rose to 1,001 million euro, up 1.5% on the previous quarter and up 12.9% on the 2003 corresponding period.

 

Total provisions and net value adjustments (excluding goodwill amortisation) amounted to 174 million with respect to the 301 million of the previous quarter and to the 242 million of the 2003 third quarter.

 

Ordinary income rose to 794 million euro, up 21.6% from 653 million registered in the previous quarter and up 29.1% from 615 million in the third quarter of 2003.

 

Extraordinary items showed a 61 million euro negative result with respect to the negative results for 13 million and 19 million recorded in the previous quarter and in the 2003 third quarter respectively. They included the 160 million euro charges for the settlement with Parmalat related to the “Nextra bond” and around 110 million euro income from transactions on real estate assets.

 

The 2004 third quarter closed with a consolidated net income of 465 million euro, compared to 458 million of the previous quarter (+1.5%) and to 328 million of the 2003 third quarter (+41.8%), with the Parent Company’s net income at 334   million euro with respect to 558 million of the previous quarter (which had benefited from the dividend contribution usually registered in the second quarter) and to 314 million of the 2003 third quarter.

 

* * *

 

As regards the consolidated balance sheet figures, as at 30^th September 2004 loans to customers amounted to 154 billion euro, unchanged with respect to 31^st December 2003 and to 30^th September 2003, despite the reduction in exposure to large corporates mainly international ones with no business links with Italy - by around 5 billion euro with respect to December and around 7 billion to September 2003 - and the securitisation for about 1.5 billion euro of lease receivables closed at the beginning of 2004. Doubtful loans net of adjustments decreased to 4.3 billion euro, down 6.6% with respect to December 31^st 2003 and down 11.6% to September 30^th 2003, and represented 2.8% of total loans; the degree of coverage was 68%, beyond the 67% target set out in the Business Plan for 2005.

 

Customer deposits under administration amounted to 466 billion euro, with a 1.7% increase with respect to 31st December 2003 and unchanged with respect to 30^th September 2003. As part of it, direct customer deposits reached 178 billion euro, up 3.6% compared to 31^st December 2003 and up 1.5% to 30^th September 2003; assets under management amounted to 116 billion euro, down 4.3% compared to 31^st December 2003 and down 6.5% to 30^th September 2003. The outflow in mutual funds (around 8 billion euro in the first nine months of the current year), mainly due to monetary and short-term bond funds, was largely exceeded by the overall inflow in structured bonds (around 6 billion in the first nine months) and life insurance policies (around 5 billion euro in the first nine months).

 

As at 30^th September 2004 capital ratios resulted in: Core Tier 1 ratio at 7.6% (6.9% at year-end 2003), Tier 1 ratio at 8.6% (7.8% at year-end 2003) thus reaching the target set out in the Business Plan for 2005, and total capital ratio at 11.9% (11.7% at year-end 2003).

 

* * *

 

As at 30^th September 2004 Gruppo Intesa’s operating structure was made up of 3,709 branches - of which 3,086 in Italy and 623 abroad - and 57,352 employees, 2,047 lower than at 31^st December 2003.

 

* * *

 

In the framework of the projects aimed at growth, several new products have been launched in the first nine months of the current year, particularly:

1. Conto Intesa, the current account   tailored for households, with the opening of over 250,000 accounts over the period;
2. Carta Intesa, the debit card with on-line checking of payments, with nearly 600,000 cards sold over the first nine months;
3. PrestIntesa, the personal loan for a maximum of 30,000 euro available within 48 hours, with over 1 billion euro granted in the first nine months of the year, thus more than doubling the 2003 nine-month personal loans;
4. Sonni Tranquilli, the floating rate mortgage with fixed instalments, which led to a 17% increase in the amount of mortgages granted in the first nine months of the year compared to the corresponding period for 2003;
5. life insurance policies, via Intesa Vita (the new insurance company set up as a joint-venture between Gruppo Intesa and the Generali group fully operational as of 1^st January 2004) which recorded new premiums for a total of 4.2 billion euro over the period, up 55% with respect to the first nine months of 2003;
6. Conto Intesa Personal, the current account product launched last June with tailor-made solutions dedicated to customers searching for personalised contents. Over 30,000 accounts were opened in four months;
7. Conto Intesa Business, the current account targeted to the small business segment, which serves the needs of retailers, artisans and free-lance professionals. Over 16,000 accounts were opened with the advertising campaign launched in mid- September.

 

In the third quarter of the year Banca Intesa launched IntesaNova, an initiative in cooperation with some of the most prestigious universities and research institutions in Italy dedicated to enterprises investing in innovation. Banca Intesa - under the usual creditworthiness evaluation process - grants medium-term loans (three-five years) to innovative projects within two weeks after the positive assessment of the university partners, requiring no collateral and offering more favourable conditions. This initiative covers ICT implementations and industry specific technologies. As for the latter, IntesaNova has been initially applied to the Machine Tools industry and will gradually extend to include other industries. Next sectors to be covered: Industrial Engineering (November 2004), Electronics and New Materials (January 2005), Food & Beverage (March 2005).

 

Moreover, in the third quarter the acquisition of Crédit Agricole Indosuez Private Banking Italia was finalised. This bank’s activities and skills have been added to those which were already present within Banca Intesa, thus creating Intesa Private Banking, the bank specialised to serve private customers and integrated in the Retail Division, which currently manages around 30 billion euro assets of 23,000 clients. The distinctive feature of this organisational model, which is unique in Italy, refers to flexibility in customer relationship: private clients may use the specialised bank (with its 65 Private Centres and 375 Private Bankers), the 2,000 branches of the Retail Division and the on-line channels of Gruppo Intesa. Intesa Private Banking offers not only a full range of financial products and services of Gruppo Intesa and high-standing outside companies but also a vanguard system for wealth management and the following services: legal and tax consulting, fiduciary and legal entity advisory, real estate and art advisory.

 

* * *

 

As regards this year’s outlook, also in the light of the results achieved so far, Banca Intesa confirms its Business Plan targets aimed at a tangible increase in net income for the whole year with respect to 2003.

 

* * *

 

In order to present more complete information regarding the first nine-month results, the consolidated statement of income and balance sheet are attached (reclassified and in a summarised format). The latter are included in the report on operations approved by the Board of Directors. It must be pointed out that this quarterly report has not been subject to control by the auditing firm.

Banca Intesa also notifies that - pursuant to provisions set forth in Art. 82, par. 2  of Consob resolution 11971 of 14th May 1999 as amended - the draft Parent Company’s financial statements and Banca Intesa’s consolidated financial statements as at 31st December 2004 will be available for shareholders and the market within the maximum term of 31st March 2005, instead of the quarterly report as at 31st December 2004.

>> Financial Statements as at 30th September 2004