Intesa Sanpaolo: Higher FVE, Lower Uncertainty Rating and Exemplary Capital Allocation

We increase our fair value estimate for Intesa Sanpaolo to EUR 2.70/share from EUR 2.10/share previously. This is due to two factors. First, we reduce our estimate of Intesa's cost of equity to 11% from 13% previously and second, we now believe near-term loan losses are going to be less than we initially feared. Under our new capital allocation methodology, we award Intesa an Exemplary rating. We also believe there is now less uncertainty around our valuation and we now have a high uncertainty rating in place, compared with very high previously. However, we still do not believe Intesa enjoys the benefit of an economic moat.