G Generali Ass

By Giovanni Legorano

ROME--Italian bank Intesa Sanpaolo SpA on Friday cut its guidance on the dividend it aims to pay for this year, but confirmed it would distribute 3 billion euros ($3.23 billion) in dividends for last year, after it reported a rise in both its fourth-quarter and full-year net profit.

Intesa Chief Executive Carlo Messina said the bank planned to pay EUR3.4 billion in dividends for 2016 because of the challenging market environment, while last year it had said it aimed to pay EUR4 billion.

"I decided to take a more conservative approach and would prefer to over-deliver in an environment like this," Mr. Messina told analysts.

Still, Intesa also confirmed its target of a total dividend payout of EUR10 billion over the period of 2014 to 2017.

The bank said its fourth-quarter net profit soared to EUR776 million, from EUR13 million in the same period of 2015, when the bank was hit by a one-off contribution to a bailout fund set up to rescue four smaller Italian lenders.

The bank said that without one-off contributions to a national resolution fund for banks and other funds, as well as a writedown of its stake in Atlante, a rescue fund for banks, its net profit for the fourth quarter of 2016 would have been EUR1.15 billion.

Net profit for the year rose 14% to EUR3.11 billion.

Intesa's shares pared gains immediately after the release of its fourth-quarter results but then rose again and were recently up 3.4% at EUR2.25.

The bank has been under the spotlight after it said last week it was assessing a potential tie-up with Assicurazioni Generali SpA as part of its strategy of growth in the insurance, asset-management and private banking sectors.

In a statement earlier Friday, the bank reiterated a tie-up with Generali was one of the many options the bank was assessing, denying press reports that the bank was ready to put a takeover offer on the table.

"We are players in the European context, ready to seize growth opportunities on condition that we maintain unchanged our ability to significantly reward our shareholders and our capital strength," Mr. Messina said after the release of the fourth-quarter results. He told analysts the bank was still assessing whether a tie-up with Generali fits with Intesa's strategic priorities.

Apart from the one-off charges, which analysts said would weaken most Italian banks' results, the lender posted higher revenue helped by rising commissions and trading income.

Net commissions for the quarter rose 7% to EUR2.02 billion from the same three months a year earlier, as the bank continued with its transition to a more fee-based business.

Trading income rose more than fourfold to EUR247 million in the fourth quarter, compared with the last quarter of 2015.

This helped compensate for declining net interest income--the difference between what lenders earn from loans and pay for deposits, and a key profit driver for retail banks--and higher provisions for losses on bad loans.

However, the bank said the stock of bad loans sitting on its balance sheet declined by 10% from the end of 2015.

The bank also said it had agreed to sell a 4.88% stake in the Bank of Italy to a number of Italian banking foundations and pension funds for a total EUR366 million.

Intesa will hold a 27.81% stake in the Bank of Italy after the share sale. In 2014, the central bank's capital was raised to EUR7.5 billion from EUR156,000, a level that hasn't changed since 1936, when local banks recapitalized the Bank of Italy. At the time, the Italian Parliament also set a 3% limit on stakes that individual investors could own in the central bank.

Write to Giovanni Legorano at Giovanni.Legorano@wsj.com

(END) Dow Jones Newswires

February 03, 2017 11:25 ET (16:25 GMT)

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