Milan-based Intesa Sanpaolo embodies the definition of banking excellency. The company is one of the largest banks in Italy and has a strong presence in the retail banking, corporate banking, and investment banking sectors.
2022 was relentless for the company. The tensions between Russia and Ukraine have rippled across Europe, and Intesa had no choice but to sharply cut its exposure to Russia in order to avoid domestic and regional backlash.
Inflationary pressures continued to grow as COVID resurges, energy prices soar, investor expenditure weakens and business and consumer demand diminishes. Regardless, Intesa continued to excel as it has in previous years, thanks to its competitive market position and high brand exposure.
Recent Performance
In the first nine months of 2022, Intesa Sanpaolo generated net income of €4.4 billion, despite massively reducing its exposure to Russia by 65% in the quarter. Intesa was among the several European banking behemoths which cut ties with Russia, including domestic rivals UniCredit. While this measure has cost Intesa Sanpaolo a hefty €1.1 billion out of the annum’s profits, the company’s CEO Carlo Messina is confident that it’ll “keep working to cut limited residual exposure”.
Much of the quarter’s success can be attributed to higher official interest rates, or in other words, the widening of the gap between lending and deposit rates. If rates continue to be buffed in the current year, Intesa expects to earn over €11 billion in the year, and may even beat the company’s 2025 profit target of $6.5 billion. [1]
Technical View
Looking into the technical side of Intesa Sanpaolo, it is noticeable how the stock price reacted to the adversity of the COVID-19 pandemic two years ago and the global conundrums caused by the Russia-Ukraine war in 2022. It manages to impressively recover from the epidemic in a span of two years before plummeting back down again in the early months of the previous year.*
On the bright side, the stock is looking positive in the short- and long-term trends. The liquid ISP stock, currently priced at €2.23 is hovering above a support level near €2.2 after previously surpassing the €2 mark, and below a sturdy resistance level by the €2.4 mark.
It may be a matter of months before the Intesa stock retrieves its high-price tag of €2.85 achieved in February of 2022. [2] On November 11th, Morgan Stanley boosted its price target for the ISP stock from €2.70 to €3, representing a 34% upside from today’s valuation. [3]
Future Outlook
Intesa Sanpaolo is set to prosper in the coming months and years, but much will depend if the financial market turmoil will lose steam or not. The banking pioneer is the 27th largest bank in the world by market capitalization, currently worth nearly $47 billion. The valuation may take a hit for the short-term, but the long-term outlook is promising. [4]
The company eyes international growth, recently increasing its stake in CreditAccess India to 2% in efforts to boost its microcredit lending business. This will leverage its ability to widen its customer base and increase profits, but it must continue to be innovative in order to satisfy the evolving demand of today’s consumers.
Peter Svoreň, Executive Director Apme FX
[1,2,3,4] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
* Past performance is no guarantee of future results.
