MILAN, July 31 (Reuters) - Sanpaolo IMI will see profit levels "under pressure" for the rest of the year from volatile markets and flat interest rates, one of the co-chief executives at Italy's second-largest bank said on Wednesday.
Luigi Maranzana's comments in a conference call came a day after the bank said in a results statement that elements of its second-quarter results allowed for "cautious optimism" for the rest of the year.
Sanpaolo, the first of Italy's major banks to report first-half results, is the one whose financial performance is most tightly linked to stock markets.
"This is a business which is geared to interest rates and to equity markets," Maranzana said. "The difficult operating environment in the second half will definitely put profit levels under pressure for the full year."
Sanpaolo's second-quarter profit beat analysts' forecasts to rise 17 percent from the first quarter to 324 million euros on strong trading income, although profits in the first half were still down 25 percent from last year on a pro-forma basis.
The bank's shares trimmed early gains of seven percent in afternoon trading and ended up 2.8 percent, outperforming the DJ Stoxx European banks' index but only partly recovering from a six percent fall on Tuesday ahead of the results.
Asked about interest income, which edged higher in the second quarter, he said the bank did not expect "further big improvements in this area," especially because the results benefited from a one-off sector-wide price increase.
"It is sustainable, the increase we've had so far, we think," he said.
Detailing the first-half results, Maranzana highlighted a strong contribution to funds under management from 5.3 billion euros in inflows stemming from a government tax amnesty on funds held in offshore tax shelters.
He said Sanpaolo, which controls fund management specialist Fideuram , grabbed 15 percent of the inflows, the top market share of any domestic bank.
"The quality of these assets is very strong," he added.
The bank's trading income, which helped the bank surprise analysts positively in the second quarter, was boosted by profits from a 650 million-euro structured bond distributed through Sanpaolo branches, he said.
The bond placement, a two-year issue with a guaranteed return, helped bolster trading income by 25 million euros, to 125 million euros, up 49 percent from the first quarter.
Maranzana said that despite a tough start to the second half, the bank expected to "start seeing some improvements in the third quarter," without elaborating.
FIAT'S STAKE VALUE TRIMMED AGAIN
Maranzana also said Sanpaolo, which holds a 1.5 percent stake in Italy's battered automaker Fiat , has written down the stake's value by 44 million euros to 103 million euros in the first-half balance sheets.
Fiat shares have lost some 40 percent so far this year on concerns about the group's debt level and sagging car sales. Fiat closed 2.8 percent off at 10.46 euros on Wednesday.
Maranzana said Fiat's share value in the bank's first-half accounts was set at 12.89 euros, based on the stock's average price in the last month.
At the end of 2001 Sanpaolo wrote off 72 million euros of Fiat's stake value, to 147 million euros.