# Italy’s MPS vows to keep delivering after sharp profit jump
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-05-09
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Italy's MPS vows to maintain performance with sharp
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# Italy’s MPS vows to keep delivering after sharp profit jump

By Valentina Za

MILAN (Reuters) -Italy’s Monte dei Paschi di Siena (MPS) pledged on Tuesday to maintain the state-owned bank’s performance after reporting a much bigger than expected first quarter net profit.

Under CEO Luigi Lovaglio, MPS completed a make-or-break 2.5 billion euro ($2.8 billion) capital raising in November, which it used in part to fund thousands of staff exits.

Net profit for January-March was 236 [million euros](https://www.financedigest.com/sp-global-fined-1-1-million-euros-for-premature-credit-rating-publications.html "S&P Global fined 1.1 million euros for premature credit rating publications") ($260 million), outstripping a 150 million euro market consensus and spiking from only 10 million euros last year.

The net [profit of the quarter](https://www.financedigest.com/portugals-galp-quarterly-profit-up-62-below-market-forecast.html "Portugal’s Galp quarterly profit up 62%, below market forecast") confirms the new capability of the bank to generate sustainable returns,” said Lovaglio, who has just been given another three-year mandate.

Based on the current evidence, we reasonably [expect to replicate this performance in the next quarters.”](https://www.financedigest.com/ericssons-quarterly-core-profit-misses-expectations.html "Ericsson’s quarterly core profit misses expectations")

[Operating costs](https://www.financedigest.com/uk-pub-operator-wetherspoons-loss-narrows-despite-higher-costs.html "UK pub operator Wetherspoon’s loss narrows despite higher costs") at MPS fell 14% year-on-year to 53% of income, down from 60% at the end of December and already ahead of a 2026 target of 57%.

Income from its lending business rose 57% from a year before, outpacing expectations as MPS joined other banks in reaping the benefits of higher [interest rates](https://www.financedigest.com/london-stocks-slip-ahead-of-key-interest-rate-decisions.html "London stocks slip ahead of key interest rate decisions"). Net fees, however, also rose 7% from the previous quarter due to the sale of [investment products](https://www.financedigest.com/spain-to-invest-5-1-billion-in-electric-vehicle-production.html "Spain to invest .1 billion in electric vehicle production").

European Union state aid rules require [Italy to cut the 64% MPS stake](https://www.financedigest.com/italy-open-to-selling-down-mps-stake-on-market-if-terms-buyers-are-right-sources.html "Italy open to selling down MPS stake on market if terms, buyers are right – sources") it acquired after the 2017 bailout.

After an attempted [sale to UniCredit failed](https://www.financedigest.com/uk-new-car-sales-rise-in-november-fail-to-zoom-past-2019-levels-smmt.html "UK new car sales rise in November, fail to zoom past 2019 levels- SMMT") in 2021, the Treasury has been mulling the possible sale of shares on the market, but industry supervisors see a merger with a stronger peer as the best solution.

Bankers say Lovaglio, a respected UniCredit veteran, is working to [maximise the value](https://www.financedigest.com/maximise-customer-lifetime-value-in-a-saasbased-world.html "Maximise Customer Lifetime Value in a SaaS Based World-Magazine") of MPS. UniCredit and [Banco BPM are both seen as possible partners](https://www.financedigest.com/nexi-open-to-options-as-banco-bpm-seeks-partner.html "Nexi open to options as Banco BPM seeks partner").

We can finally start generating value for all our stakeholders, creating the basis for an adequate valuation of the bank,” Lovaglio said, confirming MPS’ ambition to pay dividends out of 2024 earnings, a [year earlier than planned](https://www.financedigest.com/vw-to-speed-up-electric-shift-in-five-year-plan.html "VW to speed up electric shift in five-year plan").

Core capital fell to 14.9% of risk weighted assets (RWAs), from 15.6% at end-2022, after revised internal risk models drove a smaller than anticipated 3.8 [billion euro increase in RWAs in the quarter](https://www.financedigest.com/rheinmetall-wins-quarter-billion-euro-order-for-e-vehicle-parts.html "Rheinmetall wins quarter-billion euro order for e-vehicle parts").

($1 = 0.9084 euros)

(Reporting by Valentina Za; Editing by Gavin Jones and Alexander Smith)


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