Italian Banks: Higher Net Interest Margins And Lower Underlying Credit Costs Support 2022 Results

The commentary analyses the FY 2022 results for the five major Italian banks: Intesa Sanpaolo, UniCredit, Banco BPM, BPER, and Banca MPS.

Summary highlights from the commentary include:

• Italian banks reported an aggregate net profit of EUR 12.8 billion in FY 2022, up 66% YoY, or up 80% excluding the impact from Russia/Ukraine, the badwill from BPER’s acquisition of Banca Carige, and restructuring costs net of a positive tax impact at Banca MPS.

• Revenues for the FY 2022 were underpinned by higher net interest income, reflecting the accelerated interest rate hikes in H2 2022. Cost optimisation measures will remain key to address high inflation, customers’ higher energy bills, digital investments and more stringent practises regarding the transition to a sustainable economy.

• Loan Loss Provisions (LLPs) were up YoY in FY 2022. Excluding Russia and Ukraine, however, LLPs decreased driven by improved risk profiles. The average cost of risk in FY 2022 remained below the levels reported in 2019-2021.

• Asset quality metrics improved further in Q4 2022, and capital buffers remain sound.

“FY 2022 results benefitted from higher revenues, flat operating expenses, and lower underlying credit costs,” said Andrea Costanzo, Vice President from the DBRS Morningstar Global Financial Institutions team. “The full benefit from higher interest rates will be visible in the coming quarters, however we expect the likely increase in the sensitivity of deposits and wholesale funding to the updated interest rates to curtail part of the upside”.