Italian bank Monte dei Paschi di Siena has today reported a larger than expected 31% yearly rise in profit for the third quarter of the year, as income from its lending business performed strongly in the period.
The bank, in which the Italian state maintains a substantial stake, reported net profit in the three months to September of €407m compared to €323m forecast in a company-provided analyst consensus.
Net interest income, which reflects the gap between lending and deposit rates, rose 1.8% in the quarter versus the previous three months, despite declining interest rates.
Net fees fell quarter-on-quarter, which Monte dei Paschi said reflected the lull of the summer months, but were up 12.5% from a year earlier.
Net profit halved from the previous quarter which had been boosted by tax credits stemming from previous losses, known as deferred tax assets (DTAs).
In a blow for the state-owned banks, Italy has temporarily increased the tax burden of its lenders to raise funds for next year's budget by preventing them from taking advantage of DTAs for two years.
Having restructured under CEO Luigi Lovaglio after a 2017 bailout and a 2022 cash call, Monte dei Paschi has begun benefitting from DTAs accumulated during years of steep losses.
DTAs normally sit in a bank's balance sheet and can be used to boost earnings only if the bank posts sufficient pre-tax profits.
Italy still owns 26.7% of Monte dei Paschi, and must cut its stake below 20% this year to show European Union's competition authorities it no longer controls the lender, in line with commitments taken when it rescued it.
