Intesa Sanpaolo (MIL:ISP), an Italian retail and commercial bank, was the top contributor to performance for the quarter. During the quarter, Intesa released fiscal 2017 earnings that exceeded expectations. The company’s total amount of non-performing loans declined for the ninth straight quarter, further improving its asset quality, and Intesa’s capital position was stronger than expected. The company also announced its new business plan for 2018-2021. At first glance the plan appears ambitious, but we have confidence in CEO Carlo Messina who largely delivered on the previous plan (2013-2017). A few highlights include revenue CAGR of 4%, credit costs declining to pre-crisis levels, net income increasing nearly 60% to E6 billion and a CET1 ratio of 13.1% by 2021. We continue to be impressed by Messina and believe he has great command of both the big picture and the details of the business. We believe Intesa remains an extremely well-run bank, trading at a significant discount to our estimate of intrinsic value.
From David Herro's first quarter 2018 Oakmark International Fund commentary.
