(Alliance News) - Intesa Sanpaolo Spa may consider smaller-scale acquisitions in the European regions where it operates and in key countries in the Mediterranean basin to strengthen some of its core businesses, Bloomberg News reported Friday.

"While we are focusing on organic growth, the bank is ready to take advantage of any external growth opportunities that may arise," said Marco Elio Rottigni, head of International Subsidiary Banks.

"An acquisition should bring synergies, be in line with our business model and be done at the right value; conditions that we do not see at the moment."

The interview was given shortly before the Italian government surprised markets with an unexpected bank margin tax that could cost lenders up to EUR3 billion in additional taxes. Asked about the impact of the tax, Rottigni confirmed that the division's strategy remains unchanged.

The Rottigni-led division is seeking to increase its share in foreign markets where it is already present by expanding its investment banking and global markets activities and strengthening its wealth management, private banking, and insurance businesses.

"We want to be stronger in the countries of Central and Eastern Europe, where we are already well present," Rottigni said. "We could also consider expanding into some of the countries in the Mediterranean basin, where Italian companies have strong business relationships, to have a gateway to that part of the world.

"Intesa will continue to support Italian companies expanding internationally."

The division, known as ISBD, operates on three continents through 11 commercial banks in Central and Eastern Europe and Egypt and operates an asset management company in China. It serves 7 million customers through a network of nearly 900 branches and about 21,000 employees. Intesa's Serbian unit is the country's largest bank by assets while its Croatian and Slovak units are the second largest in their respective countries.

In Egypt, where it holds an 80 percent stake in Alex Bank, Intesa has begun preliminary talks with the government on a possible purchase of the remaining stake, which is owned by the state, Rottigni said.

ISBD is focusing on technology and digital transformation to reduce costs, increase margins and accelerate the integration of foreign banks, Rottigni said, adding that he expects the division's results to improve despite a complex economic and geopolitical environment.

"Within the ISBD division, we expect net income to reach a whole new level this year, well above previous years, thanks to balanced growth in loans and deposits and increased core revenues."

While rising rates have boosted revenues, Rottigni added said he believes that fee income is critical to revenue growth.

"Commissions represent about 20 percent of the division's revenues, and we are working to increase their weight to 30 percent."

Plans include "pushing on structured finance services and wealth management for the affluent segment through synergies with other group divisions."

Over the past three years, ISBD has averaged 7 percent asset growth per year and, in the first half, accounted for 17 percent of Intesa's profit. Net income for the six months ended at the end of June more than tripled year-on-year to EUR679 million, thanks to an increase in operating income and a reduction in provisions for impaired loans.

"The Euro-Mediterranean area will play an increasingly central role for global shipping routes," said Rottigni. "Our presence in the region is supporting the internationalization of Italian companies and contributing to the growth of the area.

Intesa Sanpaolo's stock is down 0.8 percent at EUR2.40 per share.

https://www.bloomberg.com/news/articles/2023-08-18/intesa-to-consider-small-deals-to-boost-its-presence-abroad

By Giuseppe Fabio Ciccomascolo, Alliance News senior reporter

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