(Finance) – Le large Italian banks (Intesa Sanpaolo, UniCredit, BPM desk, BPER Bank And MPS) have recorded a aggregate net profit of 6 billion euros in first quarter of 2024, up 25% year-over-year (YOY) but down 4% quarter-over-quarter (QOQ). Net profit increased by 22% year-on-year excluding the capital gain from the completion of a strategic partnership between BPER and Gardant in the first quarter of 2024 and by 3% quarter-on-quarter excluding the capital gain in the first quarter of 2024 and a net release of legal provisions and positive fiscal impact for MPS and restructuring costs for BPER in Q4 2023.
First quarter results reflect higher revenues, good cost control and lower loan loss provisions (LLP), the combination of which led to a Return on Equity (ROE) annualized by approximately 14%, up from 12% in the first quarter of 2023.
“The solid performance in the first quarter of 2024 suggests that downside risks appear under control, however uncertainty remains given the expected modest GDP growth in the country and the level of interest rates which will remain elevated for some time, even taking into account of subsequent rate cuts expected during the year – he said Andrea CostanzoVice President of the European Financial Institution Ratings team at Morningstar DBRS – We expect the banks with a more diversified revenue mix continue to perform well in an environment of likely lower interest rates in the future.”
In the first quarter, the NII aggregate increased 15% year-over-year but fell 1% quarter-over-quarter, after quarterly growth for seven consecutive quarters. The revaluation of assets was largely completed amid sluggish lending volumes, while financing costs and hedging charges increased amid expected lower rates. Nonetheless, NII is expected to remain robust in 2024 as average trade spreads will likely remain higher than in 2023 even taking expected rate cuts into account.
In the first quarter, the net commissions increased 5% year-on-year and 10% quarter-on-quarter, as fees from wealth management, investments and bancassurance recovered, while fees from traditional banking services were primarily limited by a modest loan and a reduction in the commissions charged on the current accounts of some banks.
The cost of risk Average annualized (CoR) was 32 bps in Q1 2024, down from 41 bps in 2023 and below levels reported in 2019-2022. Banks have been moving towards an average CoR of around 40-50bps in 2024, however there may be some positives in this regard, including the release of some hedges, if no material asset quality risks emerge.
The default rate annualized average remained contained around 1% in the first quarter of 2024, and the aggregate stock of Gross NPEs increased by 2% at the end of March 2024 compared to the end of 2023, as some banks recorded new, albeit still limited, NPE inflows, in some cases due to the default of individual names benefiting from government guarantees. Nonetheless, the cumulative reduction in the aggregate gross NPE stock since end-2019 was 63%, with the average gross NPE ratio falling to 3.1% at end-March 2024 from 9% at end-2019, and remaining unchanged from end 2023.