Higher provisions against bad debt and a writedown on the value of an investment in Telecom Italia pushed Intesa Sanpaolo into the red in the final quarter of 2012, Italy's biggest retail bank said on March 12. Like other Italian lenders, Intesa is having to set aside more cash to cover for rising bad loans as the euro zone's third-largest economy battles through a painful recession.
Full-year net profit came in at 1.6 billion euros ($2 billion) against a net loss of 8.2 billion for 2011, when the bank wrote down billions of euros of goodwill from past deals to repair a balance sheet damaged by the euro zone debt crisis.
The bank closed the fourth quarter with a net loss of 83 million euros, which was however well below the average estimate of a loss of 169 million in a Reuters poll of six analysts.
"The results are a bit better than market forecasts and they have triggered purchases because people were expecting worse," a Milan trader said.
The Bank of Italy had told some of the country's biggest lenders to hike bad loan provisions after conducting confidential inspections at between 20 and 30 large listed and unlisted banks.
Intesa, the first major Italian bank to report full-year earnings, said loan-loss provisions totalled at 4.7 billion euros in 2012, up 11 percent from a year earlier. It said the cost of credit would remain high in 2013.
Intesa's core Tier 1 capital ratio, a key measure of financial strength, stood at 10.3 percent at the end of the year, unchanged from its level at the end of September and one of the highest in Italy.