Italian Banks with Momentum Towards the Second Half of 2024: New Fintech Intermediaries Launched

Italian banks Intesa Sanpaolo, Unicredit, Banco Bpm, Mps and Bper closed the first 6 months of 2024 with an annual growth of 10.4% for the interest margin – which reached 1.8% of all assets – and 6.5% for net commissions, supported by a +5.3% of indirect deposits.

The increase in revenues has determined for the first 5 Italian banks a net profit of over 12 billion euros (+19.8%) and a Roe of 15.5%. The first accounts at the halfway point of the current financial year come from the Fiba Foundation but, from how the 2023 financial year ended, it was predictable how 2024 would go.

It must be said that what First Cisl requires in the face of profits – namely investments in technologies and AI, continuous training of internal staff, digital education of customers – abounds in the reports released by each Big, which do not fail to extol in black and white the added value of their staff and constant attention to the customer.

Yet for the union, from January to June, employees decreased overall by 2.6% per year (although the cost of personnel marks +1.6% due to the contractual renewal ) and on the national territory another 261 branches closed (-2.2%).

Italian banks challenged by fintech companies

The sore point for the sector remains the loans: -3.2% calculates the Fiba analysis, over 37 billion in absolute figures against an EU average of +1.35%, based on the ECB data on significant; and the percentage would drop to -4.5% net of repos. The loan/deposit ratio is also lower than continental competitors, beaten however on the cost/income, further decreasing to 39.9% compared to their 52.8%.

This particular trend is valid for the entire Italian banking sector, not only for the large groups: all the players have managed to reduce the stock of impaired loans and maintain a high quality of the credit portfolio, through a selection at the entrance of the clientele requested – after all – by the same supervisory authorities.

Morningstar DBRS agrees with most of the figures reported: from January to June, the aggregate net profit of the 5 groups was 12.6 billion (+20% y/y with non-recurring items), benefiting from higher core revenues and net fees, cost discipline and lower provisions for loan losses.

The rating agency calculates the percentage increase in revenues at +8% and also agrees on the +10% of the interest margin – expecting it to remain solid also in the current year “ with dynamics in loan volumes that will eventually offset the negative impact due to the continued lowering of interest rates ” – and on the advance of net fees (+6%) noting a good performance of investment and bancassurance activities , while fees from traditional banking services still incorporate the slowdown of stagnant loan growth.

The picture is completed by increasingly strong risk profiles, low default rates, further strengthened capital.

The verdict is that “ the first half suggests good momentum of Italian banks to continue into 2024 with resilient net interest margins, contribution from fee income and lower credit costs offsetting likely increases from staff costs and digital investments.” If credit quality remains as high as it is, Morningstar’s forecast is that the current financial year will end even better than 2023, with an average CoR of 40 bps.

And even further ahead, how will Italian banks develop in 2025 and beyond? On the credit front, the challenge of the future actually seems to come from new, even more innovative intermediaries. This emerges from a recent report by the Bank of Italy according to which – given the growing importance of technology – the entry of new operators has so far had little impact on the structure of the market; in perspective, however, their number will increase, if only in light of the legislative concessions on the instruments available.

Fintech companies eye Italy to expand businesses. What that means for Italian banks

As already confirmed by a similar report from 2023 , the non-banking sector continues to show high dynamism based on the number of authorizations issued, and Via Nazionale notes a growing interest from leading European fintech companies in expanding their presence with branches in Italy – where some of them were already active under the freedom to provide services regime – to increase the customer base, linking it with growing business segments such as buy now pay later and banking as a service: this last method of providing services – based on the formula of collaboration with the partner company, which directly distributes the intermediary’s products to its customers – is becoming increasingly widespread.

Last year, moreover, the first providers specialized in crowdfunding were authorized: nothing that existing intermediaries cannot do, but it is common to set up specialized entities – often small – with flexible cost structures, thanks to the use of partnerships and outsourcing, which aim to undermine their turnover from multiple points.

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(Featured image by Julien Rocheblave via Unsplash)

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First published in PL tv. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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