Italy's Intesa SanPoaolo loses euro8 billion in 2011

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By COLLEEN BARRY, Associated Press

MILAN (AP) — Italian bank Intesa SanPaolo on Thursday reported losses of euro8.2 billion ($10.71 billion) for 2011 due to heavy writedowns, but said it would still pay shareholders a dividend.

The bank said in a statement that the euro10.2 billion writedown included losses on Greek bonds and a one-off payment to Italian tax authorities. The loss will have no impact on cash flow and future profitability, it said.

Without the writedowns, Italy's second-largest bank by assets would have recorded 2011 earnings of euro2 billion, down 24.5 percent from 2010 when net income was euro2.7 billion.

CEO Enrico Tommaso Cucchiani — who took over in November when Corrado Passera left the bank to join the new Italian government of technocrats — conceded that the figure of the writedown sounded "shocking."

"When we analyze it, we see it means very little, to the extent it has no impact whatsoever on capital ratios, on cash flow and liquidity and on real profitability," Cucchiani told an investor conference call.

Intesa SanPaolo said its core Tier 1 capital ratio, a key measure of a bank's health where capital is measured against the sum of riskier assets, was 10.1 percent. It proposed a dividend of euro0.05 a share.

In the fourth quarter, the bank reported a net loss of euro10.1 billion, compared with a net income of euro505 million in the same period of 2010.

The bank said it expects to maintain the Core Tier 1 ratio above 10 percent this year, despite tougher regulatory conditions, but said it would have to review its earnings targets due to "negative market development and forecasts of contraction for the Italian economy."

Cucchiani said the bank's priorities are to ensure solid equity and a strong liquidity, generate earnings above the capital costs, cut structural costs and reward shareholders.

"Boring is the new sexy. We are focused on execution," Cucchiani said.

Cucchiani also said he may consider a buyback of savings shares — or nonvoting shares that generally yield a higher dividend — a classification he called "inefficient."

Ordinary shares, down all day in anticipation of the earnings, closed up 4 percent to euro1.55. Savings shares were up 9 percent to euro1.35.

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