By Valentina Za
MILAN (Reuters) -Italy's biggest bank Intesa Sanpaolo (OTC:ISNPY) on Friday cut its profit guidance for the year after setting aside 800 million euros ($847 million) to cover potential losses from its exposure to Russia.
Intesa joins peers including rival domestic heavyweight UniCredit, as well as France's Societe Generale (OTC:SCGLY) and Credit Agricole (OTC:CRARY), in taking a hit to first-quarter earnings from Russia.
Intesa now expects net profit of more than 4 billion euros in 2022, compared with an estimate of more than 5 billion euros provided in early February before Russia's invasion of Ukraine.
It otherwise stuck to profit and payout goals it set then under a new plan through 2025.
Were it to further raise provisions on Russia and Ukraine to cover 40% of its exposure, full-year net income would be lower still, though well above 3 billion euros, it said.
"The outlook for 2022 is subject to fine-tuning in the coming months based on the evolution of the events involving Russia and Ukraine," Intesa said.
Jefferies analysts said it had been "a tough quarter" for Intesa, though the profit goal reduction had been largely discounted by investors.
"But with no firm update on timing of the targeted 3.4 billion euro buyback (still subject to European Central Bank approval) and warning of potential tail risks on Russia exposure, we think stock will weaken," it added.
Intesa shares were down 1% at 1119 GMT.
By contrast, UniCredit's shares rose on Thursday as surprise confirmation of a 1.6 billion euro share buyback that had become conditional on Russia fallout outweighed a profit miss.
Intesa's core capital fell sharply in the period to 13.6% from 15.2% at the end of December. The proposed buyback would shave 1 percentage points off those levels.
Strong trading gains drove Intesa's net income to 1.02 billion euros for January-March, well above an average estimate of 709.4 million euros in a Reuters poll of eight analysts.
Intesa said its cross-border exposure to Russia before the provisions booked in the quarter stood at 3.9 billion euros, net of guarantees from export credit agencies.
While the loans are still all performing, Intesa, like rivals, had to shift them to a riskier category of "Stage 2 loans." Some 400 million euros are to counterparties hit by international sanctions against Russia, it said.
Intesa's local units Banca Intesa Russia and Ukraine's Pravex Bank have a further 1.1 billion euros of exposure.
When also including off-balance sheet items, such as for example untapped credit lines, the overall exposure net of guarantees totals 6.1 billion euros.
Intesa said it had shed 4.8 billion euros in gross impaired debts in the quarter, cutting them to 2.2% of total loans, in line with goals set under its new plan.
($1 = 0.9441 euros)