Italy’s MPS profit tops forecast as recovery gathers pace

Rome: Italy’s Banca Monte dei Paschi (MPS) (BMPS.MI), opens new tab beat first-quarter net profit forecasts on Tuesday, helped by higher revenue, and said it would update its medium-term targets next quarter as its recovery is running ahead of plan.

The bank, which had to be bailed out by the Italian state in 2017 and secured a make-or-break capital increase in November 2022, will pay a dividend of 0.25 euro per share this month, its first since 2011 and two years earlier than anticipated.

“We started (2024) with a very good pace,” CEO Luigi Lovaglio said in a call conference after the results.

MPS’s first-quarter net profit surged 41.2% year-on-year to 332.7 million euros ($358.2 million), well above a company-provided consensus of 281 million euros.

Total revenue rose 15.2% to 1.01 billion euros, mainly driven by a 10.1% increase in net fees, including wealth management and advisory fees.

“The trend in total revenue in Q1 is the result of the bank’s ongoing commercial revamping strategy”, said Nicola De Caro, Senior Vice President, European Financial Institution Ratings at Morningstar DBRS.

Lovaglio confirmed guidance for 2024 pretax profit to exceed 1.3 billion euros, the result reported last year adjusted for the release of legal risks provisions.

He said the bank would update medium-term targets during its second-quarter results presentation, adding MPS was ahead of its business plan goals to 2026.

MPS shares, up 51.4% so far this year as of Monday’s close, were 0.1% higher at 0915 GMT.

After rescuing MPS in 2017 and taking a 68%, Italy’s Treasury has recently cut its holding to 26.7% through two market placements, raising around 1.57 billion euros.

The sales are in line with commitments agreed during the 2017 bailout with European Union authorities, which require Rome to re-privatise the lender.

MPS’s coverage of non-performing loans stood at 49.5%, up 40 basis points on the previous quarter, while its CET1 capital ratio – a gauge of financial strength – was 17.9% at the end of March, just below 18.1% at the end of December.