By Valentina Za
MILAN (Reuters) -Italian bank Monte dei Paschi di Siena on Friday reported a larger than expected 31% yearly rise in profit for the third quarter, boosted by income from lending.
The bank, in which the Italian state maintains a substantial stake, reported net profit in the three months through September of 407 million euros ($439 million), against a 323 million euro forecast in a company-provided analyst consensus.
Net interest income, which reflects the gap between lending and deposit rates, rose 1.8% in the quarter versus the previous three months, despite declining interest rates.
Net fees fell quarter-on-quarter, which Monte dei Paschi said reflected the lull of the summer months, but were up 12.5% from a year earlier.
Citi analysts said fees, however, were better than the market had been expecting.
“(The) core revenue beat was the highest within our Italian banks coverage,” Citi said.
Net profit halved from the previous quarter which had been boosted by tax credits stemming from previous losses, known as deferred tax assets (DTAs).
DTAs normally sit in a bank’s balance sheet and can be used to boost earnings if the bank posts sufficient pre-tax profits.
Having restructured under CEO Luigi Lovaglio after a 2017 bailout and a 2022 cash call, Monte dei Paschi has begun benefitting from DTAs accumulated during years of steep losses.
But Italy intends to temporarily freeze the possibility of taking advantage of DTAs for two years, in order to raise funds for next year’s budget.
Italy still owns 26.7% of Monte dei Paschi, and must cut its stake below 20% by the end of the year to comply with European Union conditions to allow Italy’s bailout of the bank.
Monte dei Paschi’s core capital, one of the highest in the sector, edged up slightly in the quarter to 18.3% of risk-weighted assets.
($1 = 0.9279 euros)
(Reporting by Valentina Za, editing by Giulia Segreti, Tomasz Janowski and Elaine Hardcastle)
