By Valentina Za
MILAN (Reuters) -Italian state-controlled bank Monte dei Paschi di Siena on Friday hiked its profit goal for the year after reporting a larger than expected 31% yearly rise in third quarter income.
Like other Italian lenders, whose profits have been boosted by higher interest rates, Monte dei Paschi has been consistently topping exepectations in recent quarters, and upgrading its profit outlook.
CEO Luigi Lovaglio told analysts the bank’s performance in the current quarter would be in line with the average of the previous three, allowing Monte dei Paschi to surpass its 2024 pre-tax profit goal of 1.3 billion euros ($1.40 billion).
“We believe that we can move from 1.3 billion to 1.4 billion euros,” Chief Executive Luigi Lovaglio said.
The bank, which is 26.7% owned by the state, 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 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 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 must cut its Monte dei Paschi 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 = 0.9275 euros)
(Reporting by Valentina Za, editing by Giulia Segreti, Tomasz Janowski and Elaine Hardcastle)
