Italy’s Banco BPM to grow investor payback as rates decline

MILAN, Dec 12 (Reuters) – Italy’s Banco BPM (BAMI.MI) on Tuesday pledged to moderately grow profits through 2026 as net fees offset declining interest rates, allowing it to increase five-fold its payback to investors compared with the past four years.

Presenting its 2023-2026 business plan to analysts, the bank said it would return 4 billion euros ($4.3 billion) to investors by 2026, equal to more than 50% of its market capitalisation.

The new shareholder remuneration policy will start with 1.3 billion euros in dividends next year and thereafter the lender will decide on a yearly basis how to split it between dividends and share buybacks.

Born in 2017 from the merger of two regional cooperative lenders and rooted in Italy’s wealthy Lombardy region, Banco BPM is Italy’s third-biggest bank, whose main investor is France’s Credit Agricole (CAGR.PA), with a 9.2% stake.

Banco BPM said the increased shareholder remuneration will not affect its core capital position, which is seen stable at 14% at the end of the plan.

Its shares were up 2.3% at 1030 GMT, against a flat Italian banking sector overall (.FTITLMS3010) .

Italian broker Equita said in a recent note it expected a total 3 billion euros on distribution over the next three years.

Higher rates have driven Italian banks’ profits to record levels this year, allowing lenders to boost shareholder remuneration.

With rates expected to start declining in 2024, banks are looking to replace income from lending with that from businesses such as wealth management and insurance.

Banco BPM aims to make net fees its main profit driver, growing them 5% annually on average in 2023-2026.

Committing also to increase by a fifth managerial positions held by women by 2026 and hire hundreds of cyber and data specialists, Banco BPM forecast a 2026 net profit above 1.5 billion euros versus 1.2 billion in 2023.

Banco BPM plans to shed 1,600 workers through a redundancy incentive plan to be activated in 2024, hiring 800 young people.

CEO Giuseppe Castagna said in a statement the bank would reap the benefits of its commercial partnerships “in an economic environment that presumably, as early as 2024, could see a reduction in interest rates”.

A year ago, Banco BPM expanded its partnership with Credit Agricole (CAGR.PA) – previously focused only on consumer credit, to include a long-term ‘bancassurance’ deal in non-life products.

In July this year the Milan-based lender struck a partnership in payments with domestic private equity fund FSI and rival banking group ICCREA with a view to creating the country’s second largest player in the sector.

In asset management, Banco BPM is the biggest investor in Anima (ANIM.MI) with a 21.7% stake.

($1 = 0.9277 euros)

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