Banking crisis in Italy? The number of branches and employees is decreasing

In an unexpected turn, the top five Italian banks reported as many as six billion in profits in the first quarter of 2024. This despite a notable decrease in the number of branches and employees.

What happened

A recent report reveals that major Italian banks recorded a substantial surge in profits in the first quarter of 2024. In parallel, banks recorded an increase in productivity and a decrease in cost/income ratio, despite reducing the number of branches and employees compared to last year.

Over the past five years, banks have strengthened their capital base by reducing risk-weighted assets and lending. The increased profitability was used to reward shareholders through dividends and buybacks, as per the analysis Fiba Foundation Of First Cisl.

The operating revenues of Intesa Sanpaolo, Unicredit, BPM desk, Mps And Bper they recorded an increase of 9.5% compared to the same period in 2023. The 15% growth in net interest income, combined with the 4.9% increase in net fees, significantly improved the banks’ performance. Profits increased by 25.1%, reaching six billion euros.

Costs continued to decrease: the cost/income ratio stood at 39.8%, compared to 43.1% a year ago. The reduction of branches and employees had a positive impact on cost reduction. The ratio between personnel costs and operating revenues also decreased, from 26.6% to 24.8%. Meanwhile, productivity has increased, demonstrating the significant contribution of labor.

Because it is important

The capitalization of Italian banks is largely in line with Europe. Banks have managed to improve their capital position by reducing risk-weighted assets. The choices made by Italian banks are reflected in the quality of credit, which in the period under review saw a substantial decrease in the gross NPL ratio.

First Cisl’s Fiba Foundation highlights a strong recovery in terms of profitability of Italian banks. Italy recorded a record ROE of 13.7% in 2023, 50% higher than the average of the main European banks.

Italian banks were able to benefit more from the increase in interest rates decided by the ECB. This situation occurred thanks to a greater presence of jobs indexed toEuribor and to a lesser adjustment to the increase in the remuneration of retail funding.

Despite the excellent state of health of the banking system, Riccardo ColombaniGeneral Secretary of the First CISL, comments on the shadows on the country’s development prospects, considering the different behavior of the European banking systems.

Colombani also explains that it is necessary to create the conditions so that Italian banks are one of the country’s main drivers in redesigning the economy and society, which is absolutely essential and urgent.

For many years to come, we will need substantial private investment in the real economy to manage the digital and ecological transition. Strong incentives for the mobilization of private savings must be accompanied by credit provision policies to stimulate the transformation of production systems. With labor costs less than a quarter of total revenues, it is necessary to invest in worker involvement rather than insisting on a further unjustified reduction in employment levels.

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