Intesa Sanpaolo (MIL:ISP), an Italian retail and commercial bank, was the top contributor to performance for the quarter, returning 37%. Since September 2013, Intesa has returned 64%. Though we still believe the stock to be undervalued, we trimmed our holdings as the gap between price and our estimation of value significantly narrowed. During the quarter, management released a new 2017 business plan that we found very positive. Management has committed to return EUR 10 billion to shareholders via dividends over the next four years. This constitutes a cumulative payout ratio in excess of 70%. Even with this return of capital to shareholders, Intesa will be over-capitalized compared to Basel III requirements, leaving the door open for additional capital returns. Additionally, management plans to increase investments in fee-based businesses, including asset management and insurance. We believe management has a solid plan and that this investment will continue to provide value for our shareholders.
From David Herro (Trades, Portfolio)'s Oakmark International Fund: First Quarter 2014 Commentary.
