The Resilience and Growth Potential of Italian Banking Giants in 2025

In a year marked by economic uncertainty and the lingering effects of a low-interest-rate environment, Italy's banking sector has emerged as a quiet but compelling story of resilience. Two titans—Intesa Sanpaolo and Banco BPM—are redefining what it means to be a modern financial institution. Through aggressive digital transformation, cost optimization, and robust capital management, these banks are not only surviving but thriving, offering investors a rare combination of stability and growth potential.

The Digital Revolution: A New Era for Italian Banks

Intesa Sanpaolo's 2025 transformation is a masterclass in technological reinvention. The bank has completed a cloud migration under its Skyrocket project, repatriating applications to Google's Turin and Milan data centers. This shift has slashed operational costs and enabled the launch of Isybank, a cloud-native digital bank in partnership with fintech Thought Machine. Isybank's suite of products—prepaid cards, AI-driven financial advice, and automated savings tools—has attracted a younger, tech-savvy demographic, while the Isytech platform has streamlined processes across the bank's ecosystem.

Meanwhile, Banco BPM has leaned into blockchain and AI to fortify its operations. Its blockchain-based transaction platforms have reduced fraud risks and transaction times, while AI-driven customer engagement tools have personalized services for clients. The bank's acquisition of Anima Holding, a €220 billion asset management firm, has further diversified its revenue streams, with 45% of core earnings now derived from fee-based income.

Cost Optimization: The Engine of Profitability

Both banks have leveraged digital tools to slash costs. Intesa Sanpaolo's cost-income ratio has dropped to 42%, well below the European average of 50%, thanks to automation and AI integration. The bank's AIxeleration program has identified 104 use cases for artificial intelligence, from customer service chatbots to predictive analytics for credit risk.

Banco BPM has mirrored this success, with a cost-income ratio of 42% in 2025. Its 4.4% year-on-year growth in net fees and commissions underscores the effectiveness of its digital-first approach. The bank's Vividigitale training programs have also upskilled employees, ensuring they can manage advanced tools and maintain customer trust in an increasingly automated world.

Capital Resilience: A Shield Against Volatility

Strong capital positions are the bedrock of these banks' long-term value. Intesa Sanpaolo's CET1 ratio stands at 13.3% as of March 2025, a buffer above the ECB's 9.84% requirement. Despite aggressive share buybacks and dividends—€3.8 billion returned to shareholders in 2025—the bank maintains a dividend yield of 6.37%, supported by a 74.87% payout ratio. Analysts project this could rise to 6.48% in 2026 if the stock price remains stable.

Banco BPM, however, is the standout in capital strength. Its CET1 ratio of 14.22% as of December 2024 is projected to reach 17.18% by 2027 under the EU stress tests. This resilience is reflected in its 10.65% dividend yield (based on a €1.20 annual dividend), a stark contrast to the sector's 1.388% average. With a payout ratio of 51.20%, the bank's dividend appears sustainable, even in a downturn.

Investment Implications: Balancing Risk and Reward

For investors, the case for these banks is compelling. In a low-rate environment, where traditional net interest income is under pressure, both Intesa and Banco BPM have diversified into fee-based models. Intesa's Isybank and Banco BPM's Anima integration are prime examples of how digital innovation can unlock new revenue streams.

However, risks remain. Intesa's aggressive capital returns—€2 billion in buybacks and a 6.37% yield—could strain its buffers if earnings volatility resurfaces. Banco BPM's high yield, while attractive, requires careful monitoring of its non-performing exposures (NPEs), which have fallen to 0.84% but could rise in a recession.

Conclusion: A Blueprint for the Future

The Italian banking giants are proving that even in a challenging macroeconomic climate, strategic reinvention can yield outsized returns. Intesa Sanpaolo and Banco BPM are not just surviving—they're setting a new standard for digital-first banking. For investors seeking a mix of defensive resilience and growth, these banks offer a rare combination: high dividend yields, strong capital buffers, and a clear path to innovation.

As the financial landscape continues to evolve, the question isn't whether these banks can endure—it's whether they can be outpaced by their peers. The answer, for now, seems to be a resounding no.