Intesa CEO Criticizes Excessive Bank Buybacks and Underprovisioning
Intesa Sanpaolo CEO Questions Use of Share Buybacks
Intesa Sanpaolo Chief Executive Carlo Messina criticized the excessive use of share buybacks in Europe, describing it as “almost pathological.” He expressed his concern about the prevalent trend of using share buybacks to reward investors, stating that it was not a sustainable approach. Messina’s comments came after Italy’s largest bank announced its plans for a buyback, which had been anticipated by the markets.
Concerns Over Loan Loss Provisions
Messina also emphasized the importance of provisioning against loan losses, even in the absence of immediate requirements. He suggested that it was prudent to maintain provisions above a certain threshold to ensure the bank’s stability and resilience.
Intesa’s Financial Moves
Intesa Sanpaolo revealed its decision to buy back its own shares, amounting to approximately 1.7 billion euros, in addition to its regular 70% cash dividend payout. This move reflected the bank’s commitment to rewarding its shareholders while maintaining a balance in its financial strategies.
Contrasting Dividend Policies
The bank’s dividend policy, known for its generosity, stood in contrast to that of UniCredit, where CEO Andrea Orcel favored share buybacks to appease fund shareholders. UniCredit had revealed its plans to distribute 100% of its 2023 profits through share buybacks, highlighting the divergence in approaches between the two major Italian banks.
Differing Investor Profiles
Messina pointed out the distinctive investor composition of the two banks, with Intesa having Italian not-for-profit banking foundations as major shareholders, while UniCredit was predominantly owned by international funds. He emphasized the differing needs of these shareholders and the importance of aligning the bank’s strategies with their interests.
Messina underscored the need for a thoughtful and balanced approach in utilizing buybacks as part of the bank’s distribution policies. He anticipated a normalization in the use of buybacks as banks gradually exhaust their excess cash reserves.
Prudent Risk Management
The CEO also touched upon the strategy for loan loss provisions, highlighting the need to maintain a certain level of provisions, irrespective of the prevailing asset quality. He stressed the significance of prudent risk management, especially during periods of strong earnings.
By Valentina Za