Intesa Sanpaolo, Italy’s biggest retail bank, posted a 10.1 billion euro ($13.2 billion) quarterly loss after writing down goodwill to repair a balance sheet damaged by the euro zone debt crisis.
Intesa also said it was to revise targets because of market turmoil and expectations the Italian economy could shrink as much as 2.2 per cent this year. The current plan, presented last April, factored in 0.8 per cent growth for the domestic economy this year.
“We are in a situation of extreme volatility and a very uncertain macro environment,” chief executive Enrico Cucchiani told analysts in a conference call.
“We do not know what lies ahead but we are well prepared if we hit strong headwinds,” he said, declining to give a timeframe for the presentation of the new business plan.
Intesa wrote down 10.2 billion euros goodwill from past acquisitions, mostly related to the all-share merger that created it in 2007 — a deal between Banca Intesa and Sanpaolo IMI worth $37 billion at the time.
The impairments also included its acquisition of medium-sized Tuscan bank Carifirenze and Egyptian lender Bank of Alexandria.
The writedowns did not impact the bank’s capital, liquidity and cash flow, and Intesa shares rallied on relief it had cleaned up its accounts. The stock closed up 4 per cent at 1.56 euros, outperforming a 0.6 per cent higher European banking index.
“Q4 includes quite a lot of kitchen sinking,” said one banking analyst who declined to be named, adding core revenues and costs were better-than-expected.
Intesa said it would pay a dividend of 0.05 euro for 2011, down from 0.08 euro in 2010. Its core tier 1 ratio, adjusted to the European Banking Authority’s requirements, stood at 9.2 per cent after the dividend - one of Italy’s highest.
Intesa is the only top Italian bank that does not have a capital shortfall to plug to meet EBA requirements.
It is vulnerable to a further weakening of an Italian economy in recession, as it gets 80 per cent of its revenue from its domestic hub.
Reflecting the deteriorating economy, total non-performing loans grew 7 per cent to 22.7 billion euros at the end of 2011, and the bank said it had loans loss provisions of 2 billion.