Banca Monte dei Paschi di Siena SpA rose in Milan trading after earnings at the world’s oldest lender got a boost from rising interest rates and cost cuts.
(Bloomberg) — Banca Monte dei Paschi di Siena SpA rose in Milan trading after earnings at the world’s oldest lender got a boost from rising interest rates and cost cuts.
The Italian bank reported net income of €383 million ($420 million) in the second quarter, compared with €30.5 million a year earlier. That was well ahead of the €231 million analysts had estimated. The company said it expects a profit of more than €1 billion for the full year.
The stock rose as much as 6.4% in Milan trading and was up 2.8% at €2.59 at 10:25 a.m., giving the bank a market value of €3.2 billion.
What Bloomberg Intelligence Says:
Monte Paschi’s 2023 net income may have as much as 30% upside to consensus €750 million, based on our calculations, following strong 2Q results driven by an 11% beat on revenue estimates. Costs and loan losses also showed better-than-expected trajectories, lifting CET1 to a solid 15.9%. Deposit pass-through and cost-of-risk evolution will be key to the outlook.
— Lento Tang, BI banking analyst
Chief Executive Officer Luigi Lovaglio raised €2.5 billion in fresh capital in November to finance a turnaround plan that envisages lower costs, a simpler structure and a switch toward more profitable commercial businesses. As part of restructuring he cut more than 4,000 jobs last year that will allow Monte Paschi to save over €300 million a year.
The cuts helped lower the cost-to-income ratio, which stood at 49.4% at the end of June. Revenue rose 29%, led by higher net interest income, while costs declined 16%.
Monte Paschi is “well ahead” in the turnaround, Lovaglio said on a conference call with analysts. “A strong capital generation is positioning Monte Paschi within the top ranks in the Italian banking sector and with further upside.”
Founded in 1472, Monte Paschi has undergone years of painful efforts to turn its business around. The bank was first bailed out in 2009, after being hit by souring loans and derivatives deals that backfired. In the following decade it struggled to deliver consistent profit, given limited room for maneuver under terms the European Union set in exchange for nationalization in 2017.
The turnaround plan implemented by Lovaglio has allowed the bank to return to profit as the government has to exit the bank next year to comply with the European Union.
–With assistance from Antonio Vanuzzo.
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