Italy's Poste flags safe-haven inflows as markets scrutinise paper bond losses

By Valentina Za

MILAN (Reuters) -Poste Italiane drew an extra 4 billion euros ($4.4 billion) into its savings products in the first quarter versus a year earlier, it said on Thursday, flows that could reduce the need to tap in to its government bond portfolio at a loss.

While Poste is not a bank, analysts have been zeroing in on so-called unrealised losses on its large sovereign portfolio which amounted to 4.7 billion euros as of March 20, down from 7.2 billion euros at end-2022.

Investors have been focusing on risks that lenders could be forced to sell government bonds at a loss due to deposit withdrawals, as happened to Silicon Valley Bank.

CEO Matteo Del Fante, who is running for reappointment, said Poste had always benefited from market jitters because of its safe haven status.

"When people don't feel safe, Poste is the natural place to go," he said.

Some 63% of Poste's deposits are retail, which are more stable.

PROFIT GROWTH

The national post office on Thursday forecast a 9% increase in 2023 operating profit after falling short of market expectations in 2022 due to a one-off hit, and proposed hiking its dividend per share for both years.

Poste said solid revenue trends across its businesses comprising parcels and mail, payments, insurance and financial services would help it offset higher costs and the loss on an energy startup this year.

A major Italian life insurer, Poste struck a deal with five top global reinsurers in the fourth quarter to help manage "lapse risks," or the risk that higher interest rates prompt customers to redeem their insurance policies ahead of time.

Early redemptions blew a hole in the capital of small Italian life insurer Eurovita for which authorities are close to securing an industry rescue.

The reinsurance deals boosted Poste's solvency ratio, a key measure of an insurer's strength, to 253% by the end of December from 207% in September, it said.

Poste's earnings before interest and tax (EBIT) of 237 million euros in October-December were 13% below market consensus, analysts said, and its shares were down 1.1% at 9.41 euros at 1625 GMT.

The earnings miss resulted from 320 million euros in noncash provisions on Poste's 9 billion-euro portfolio of tax credits.

Poste has been an avid buyer of tax credits that benefited building companies in Italy under government incentive schemes to promote energy efficiency.

To monetize the credits, firms have sold them at a discount instead of claiming them over a number of years.

Marred by fake invoice fraud, the schemes were halted after they led to a spike in Rome's budget deficit. The government has been looking for ways to help companies offload existing credits and Poste said it was ready to buy more.

Del Fante told reporters Poste had not relied on an external firm to vet the credits. As an example, bank Intesa Sanpaolo has hired Deloitte.

"The scale of our buying was such that consultants would not do," he said. "We take our own responsibility."

Poste forecast a 2023 operating profit of 2.5 billion euros, up from 2.29 billion in 2022, and proposed hiking its dividend per share by 10% for 2022 and by 9% the following year.

"The dividend-per-share guidance clearly showcases management's confidence in its earnings and capital outlook where we believe the market remains on the cautious side," Morgan Stanley said.

($1 = 0.9228 euro)

(Reporting by Valentina Za in MilanAdditional reporting by Alvise ArmelliniEditing by Gianluca Semeraro, Alexander Smith and Matthew Lewis)