Banca Generali Spa

Good afternoon. This is the Chorus Call Conference Operator. Welcome and thank you for joining the Banca Generale First Quarter 2020 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Gianmaria Mossa, CEO and General Manager of Banca Generali. Please go ahead, sir.

Hello, good morning, and thank you for attending our first quarter results conference call. And I hope you are all safe. Before starting with numbers, I would like to share with you how we have been managing the situation since the outbreak. And so in page three, You see the three main pillars of the strategy. First of all, of course, to protect our clients, our people, and more in general, our stakeholders through working from home, continuing communication, and medical assistance. The second pillar of the strategy was to stay very, very close to our clients. without of course the physical presence, but being proactive in giving continuous communication on products, markets and investment solutions and providing innovative products, for example to manage liquidity. The third pillar of the strategy of course was about action to support our country. First of all, we provide liquidity to small and medium enterprises. Thank you to our innovative approach to securitization. Second, we provide facility, credit facilities in line with the recommendation of the authorities. And third, of course, we stay very close to the health system and health organization through donations. So now, moving on to numbers, and I'm at page four, let's say that during the first Four months of this year, we saw a very, very high volatility in our total assets linked to the market, of course. We reached a maximum in February, and then we closed March with 65.2 billion euro, and we partially recovered in April with total assets at the end of April at 67 billion euro. On the advisory services side, numbers are pretty good because we more than offset the fall of the markets with inflows. So at the end of April, we have assets higher than the asset at the end of the last year. And probably the most positive news is about inflows. because we closed the first quarter with 1.5 billion euro. It means almost half billion euro per month. And the mix and the quality of these inflows are among the highest for the bank. Net profit at 79.1 million, thanks to solid operating trend and positive contribution from variable fees. And moving on on the capital position, as you know, during our AGM in the 23rd of April, we approved the dividend policy for this year. So the capital ratio won't consider the first quarter contribution of the net profit. And in working out capital ratio, we exclude also from equity the dividend matured in 2019. So with this consideration, total capital ratio resulted at 15.5, so well above the capital ratio requirement. Page 5, there is our usual representation of the P&L. We change the representation of the gross fees, splitting it in two parts, the gross recurring fees and the variable fees. Let's say that the result of the first quarter is definitely higher than the first quarter of the last year, thanks to the contribution of almost all items. Net financial income up 20%. Net recurring fees up 16%. And as a result, total banking income was 26% higher than the first quarter of last year. If you look at operating costs, they are inflated by the change in the perimeter. And you will see that we have adopted a conservative approach below the operating line. The tax rate is a little bit higher than in the past due to a one-off. In the payment of the dividend from Luxembourg to Italy, it means that basically since the amount of this dividend from Luxembourg to Italy was twice the amount of the previous year, the taxation is a little bit higher and impact a couple of points on the tax rate. So before analyzing line by line, page 6 offers a breakdown of the net profit between variable net profit and recurring net profit. And as you can see on the left side of the slide, the recurring net profit is almost stable. But I think that the quality is definitely higher. On the right of the page, you can see a graph with the contribution of both operating and non-operating items. The first operating items up 11.4 million euro, the non-operating items down 11.3. So at the end of the day, the result is the same, but the quality is much better. Moving on to page eight. Let's start with net financial income in line with expectation, total net financial income for the first quarter at 24.2 with a contribution of the net interest income at 20 million euro. Now we are pretty confident of increasing a little bit the projection for this year so you can consider a double digit growth as a full year result. Why? Because we are confident to increase marginally the yield on the financial assets above 0.8 and we are confident to maintain at least the same level of total assets. So last time we said one single digit, now we are definitely above 10%. Page 9, there is the split between gross recurring fees and variable fees, which is a new slide. If you look at on the left of the slide you can see the increasing importance and relevance of entry fees and banking fees. Now they account for almost 15% of gross recurring fees and allowing us to maintain almost stable the yield on total asset also in this difficult time. While variable fees close the first quarter with a contribution of 53.4 million euro. In this case, our projection for the year is of an increase of other 20, 30 million maximum, so a little bit lower than the previous projection. Page 11, you can see the other recurring fees, so in particular banking and entry fees. Impressive, the acceleration on year-on-year basis, 29.7 million versus 17.8. A great part of this increase is explained by the new revenue streams, and you can see it on the right of the page, on the right graph of the page, sorry, with an increase of 10 million euro of the sum of certificates, advisory fee plus an increasing in retail brokerage. So now the yield on these other fees, other recurring fees on total assets is around 0.17%. Moving on to, sorry, I skipped one page. Sorry, I don't know why. I skip page 10, sorry. So page 10, there is a focus on the management fees. So if you come back to this page, page 10, you see the trend of management fees and on average managed assets and the margin. You see a reduction on margin of about three basis points, which is some round effect. This is basically linked to a different way to get the commission from the financial wrappers because you take the commission only once. at the end of the quarter. So we took the commission probably in one of the worst days of the quarter in terms of total AUM. So we are pretty confident to see a recovery of these two basis points in this quarter and in the next one. So now coming back to page 11, we already described the trend in banking and entry fees. So we can move on page 12 where we have the fee expenses. On this side, good news, total payout ratio down from 54.6% to 53.4%. This reduction is basically driven by a reduction in the payout to the network in both components, so cost of growth and ordinary payout, while in the payout to third parties, you see a small increase is driven by a one-off that is a consequence of the integration with Nexta, but we are confident to confirm the range 5.5, 5.6 for the end of the year. So again, good flexibility in the structure of the cost for, first of all, for the network and for the third parties. Going on to the operating costs, page 13, here you can see that the core operating cost increased by 3.8%. from 46.5 to 48.3, and you can see the contribution to cost of the integration of Nextam and Valeur 5.1 million, of which 1.2 of one-off costs for the integration. You can also see the contribution, the cost related to COVID-19. We estimate overall costs at 1.8 million, of which 1 million of donation. And also for operating costs, we slightly review our guidance. reducing the range 3-5% to a range 2-3%. And we are, as I said, confident also to see a slight reduction in the cost of growth. Page 15, we have the capital position. Capital position, as I said, see the total capital ratio at 15.5, which is the effect of the mark-to-market of the banking book for the part held to collect and sales. And as I already said, the first quarter capital ratio are excluding the net profit of the first quarter as well as the 2019 dividend ratio. In terms of liquidity ratio and leverage, we continue to maintain a very strong position. So just to sum up this first part of the presentation, I'm very proud of the increasing diversification in the revenue streams, in the revenues, and also within the management fees with a positive contribution of all the products innovation we launched in the last two or three years. And I can say also that the operating leverage is working very well and the overall costs are under control with a projection for the full year, as I said, slightly lower than previously communicated. So now move on to the chapter related to net inflows. assets and recruitment. So page 17, we close the first quarter of the year with a reduction of total assets of 3.8 billion with a performance, a negative performance in the range 7-8%, minus 7-8%. and with a negative performance of managed solution in the range 11-12%. During April, we have recovered part of this performance with an overall performance since the beginning of the year for the total assets at around 5.56%. As you can see in the slide on the top right, managed solutions, The relative best performers are in-house funds and insurance wrappers, while the most hit are third-party funds first and then financial wrappers. Next page, page 18, a focus on total net inflows. We said very, very strong inflows for the first quarter, 1.5 billion euro. If you look at the breakdown of the managed solutions, you can see the positive contribution of insurance wrappers, more than 200 million euro, and the positive contribution of Luxembourg platform, almost 300 million euro. And while negative sign in both in-house funds and financial wrappers. Page 19, you can see the contribution from existing sales force, highest level ever, 79%. It's not about percentage, but it's about absolute value because it implies something like 1.2 billion euro in three months coming from the existing sales force. And the outflows are almost in line with last year's. And while the recruitment trend, of course, is frozen, let's say we are around 25 now, 24, we expect, of course, that this can be probably hit by the lockdown. So now we change our projection for the recruitment for full year from the range 80-100 in the range 70-80. So 20 financial advisors less than previously expected. Page 20, there is a focus on the numbers, the April numbers. Positive in terms of quality, 100% coming from managed solution. As we already said, total assets at 67 billion euro. and asset under advisory 4.8 billion euro. So to sum up also this second part, I would say that I'm pretty confident on the quality of the inflows in the coming months and I just see a sort of delay in the recruitment activity because we are more and more perceived as a safe harbor and probably the right place to work in an uncertain world. So as I said, I think that recruitment is a very important activity and I see even higher opportunities in the medium term due to the fragility of the banking system and the perception of our brand. Now, the last part of the presentation is the business update, page 22, and there is the slide we presented during our full year results conference call. Just to remind you that we identified three main blocks of initiatives. The first block is about our core business. and it's about the focus, the strategic focus on our Luxembourg platform, the new commercial approach on ESG and SDGs, plus the focus on the insurance solutions. The second block is about new business levers and it's about the launch of new initiatives in the lending space. the acceleration in the private market, and the internationalization. The third block that is in the bottom of the page are the three new revenue engines that you know pretty well, so Advanced Advisory, Certificates, and BG Saxo. And now we're gonna through these blocks with a particular focus on the first one. So page two, three, Focus on LAXIM, what impressed me more is the constancy of the inflows quarter by quarter. You can see it on the top right of the page, 500, 600 million per quarter and also April and May are working pretty well. This is due to a continuing innovation of solutions, a well-diversified portfolio plus new services that we have been launching since the second part of last year. The first one that we are continuing to innovate is about what we call twin mix that are scheduled to switch plans so the client invests immediately all the amount of money in the platform and then we gradually switch from low risk to high risk solution we have an amount of 400 million euro of services activated and on top of that you have to add also initiatives we launch during the crisis that is a dedicated fund and to manage in the next six months is a sort of liquidity plus fund. So we have almost 600 million euro that in the next 12-18 months will be converted in higher volatility solution and then you have the traditional accumulating saving plans and also this you know it's a new opportunity for the bank, first time we focus our attention also on seven plans for our clients, and also during these last two months with the challenge, we continue to see positive numbers in the new contracts. The second part is about the sustainability new commercial approach. It's page 24. This is very important strategically because we are sure that it's another way to approach clients. We develop a proprietary platform, as you know, where clients can personalize their preferences in terms of sustainable development goals. And on top of the platform, we developed also a dedicated offer. In the graphs you can see in the first one the net inflows, so part of the acceleration of the inflows for the existing Salesforce comes also from this new project, almost one billion in the last five quarters, and the share of ESG assets on total managed assets now account for 7.7%. I confirm we launched the initiative with Generali Italia, We manage a unit link. We are focused on ESG solution. And let's say that the inflows are around 300 million euros since the launch. Page 25, you see the third component of the core business. It's about insurance. Insurance products account for almost 37% of our total investments. And you see that we continue to have positive inflows, almost 800 million euro. And we are confident to accelerate the share of wallet for the top, top clients, thanks to the launch of our Luxembourg Lux Protection Lite. It's a very innovative solution at the European level. And this needs the presence of the client. because it is pretty important to share the strategic relevance of this kind of solution. At the moment we have something like between 50 and 100 million euro of net inflows, but I'm confident to see higher numbers in the next months. Page 26, you see the second block of initiatives on the new business levers. On the lending side, we've just launched Lombard Plus for professional clients, and we are leveraging a new offering on the state guarantee fund with credit facilities with a guarantee up to 90% provided by government agencies. So this will allow us to increase the numbers of lending and we expect for the full year more than 200 million euros of new loans. The second is about private market. We continue to see a great interest in our securitization activity. that it works pretty well and allow us to offer more advanced advisory services. You know that we have in pipeline two dedicated initiatives under the brand of BG4Real, the LTIF and the FIA, and these two initiatives can have a boost also from the recent law announcement of a higher contribution for such a kind of solution and products. Last but not least, we have the internationalization. In these two months, we start seeing a growing interest in receiving advisory services in but with at least part of the booking in Switzerland. We already closed operation for 60, 70 million euro and we received some requests for about 200 million euro and we will see what happens in the next month but of course the opportunity to diversify also the booking center is really relevant when uncertainly increase. The slide number 27 is about the new revenue engine, so the third pillar. We know pretty well this slide. You see advanced advisory services where now we reached 7% of total assets. and we are pretty confident to continue proposing this kind of service to our clients. So we raise our expectation in the range of 8-10% at the end of the next year from 7-8 this year. Structured products. You know we have a target of €150 million and I confirm this target for the following quarters. We saw an acceleration last year in the first quarter of this year, but let's say that it was for a particular condition, market condition, when the volatility is very high. it's pretty difficult to give solution, high quality solution because you know we offer this kind of solution for private clients and our private placement where you need the price in one day and so the counterparts have different problems in providing this kind of prices when the volatility is so, when it moves so quickly. So, we need a stabilization of the volatility to resume the previous volumes. But we are pretty confident to confirm 154 quarter. While brokerage fees, brokerage fees accelerate, accelerate thanks to an acceleration in the volumes and particularly in the third, in March. I see two reasons under this acceleration. One is a structural trend of the bank. You can see the graph. Thanks to the partnership with Saxo, thanks to the focus on advisory services, I'm very, very confident to see raising volumes over the next quarter. And then there is a one-off driven by the volatility. So also these three strategic new revenue engines will contribute in the medium term to increase more and more the diversification of our revenues. The last page, we start with this presentation with an update on COVID, and I would like to close with a focus. on the number of operations and the quality of the operation during the lockdown because I'm very impressed by the results, the quantitative results, the number of operations and the resiliency. First of all, let's start on the left side of the slide where Nine out of 10 financial advisors complete operations fully digitally. And this is a confirmation of the great investment we did in the last three years to be ready. Second, 10 out of 10 complete training programs thanks to our new, very innovative training digital platform. Second, if you look at clients, two out of three complete operations digitally, and one out of three leverage new operation processes we launched for the crisis, in particular the possibility to give orders also via phone call and via mail. So this is another example of great flexibility of the bank. and great, very, very innovative approach in technology, not just as a front end for our financial advisors with our BG advisory platform, but also in terms of processes and procedures. On the right, you see the number of operations. That is sort of proxy of the commercial activity. And we focus on two particular topics. We exclude trading because you know trading in March increased everywhere. But we focus on two different activities, pretty complicated in such a challenging time. The first is about assets transferred. This is commercial activity when a client transfers position from one bank to another one. And you see that the numbers of transfers in, so from an external bank to Banca Generali, was in line with the last year when the markets were pretty different and when COVID didn't exist. And if you look at the out, it's lower than the last year. It means that the churn rate of the clients um is lower and lower the second focus is on fund activity because you know during challenging time the risk to see significant outflows on funds is real and here you can see that the operation in is even higher than the last year the operation out are definitely lower. And what surprised me more, and I'm very proud of this, that the advisory activity, so the switch, the repositioning of the clients, accelerate. So it's a way to say that our financial advisors were proactive. And when you have the commercial activity that is in good shape and of great quality, you know this is our core business, this is our competitive edge, and this is the element that makes me very confident on the future. Thank you, and now I hand over to a Q&A session.

Excuse me, this is the Coruscant conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove your question, please press star and 2. Please pick up the receiver when asking questions. The first question comes from Gianluca Ferrari of Mediobanca. Please go ahead.

Yes, hi. Good afternoon. I have three questions. The first one is on the flows you reported in April, the quality in particular. It was very strong. I think we have to go back to 2017 to see mutual funds reporting 370 million of net flows. You also mentioned during the speech that you are placing a unit-linked, ESG unit-linked on behalf of Generali Italy. I was wondering if that helped to reach that number. And which kind of margins do you have on the unit-linked you manage on behalf of Generali Italia? The second one is on an update on performance fees in cash in April, if it's possible, please. And the third one is on the incredible results you are achieving in the new revenue stream. I understood that in some cases they might be a bit affected by volatility and the contingent situation, but you're running well ahead of 2001 targets in all the three business areas. Where do you feel more prudent in increasing your 2021 targets? And linked to that, we discussed with one of your competitors if the increasing brokerage fees are VIX-related or more structural. I think you mentioned that it is probably a bit of both. But do you have any data to share with us regarding April, in which volatility went down, but it seems that revenues remained as good as in Q1? Thank you.

Thank you Gianluca. Starting from Unit Link, the Unit Link numbers doesn't account for the inflows of April. We keep well separate. We provide numbers only for the financial advisors. What kind of Unit Link? Historically we provided some advisory on the Unit Link, in particular we have some risk engine approach. But since the end of the last year, we focus on managing actively and proactively some unit link with the focus on ESG. So we define five different portfolios with different bias in SDG goals. And they are offered through the TED agents. And we start in November. So now we are at 250 million euro more or less of underlying invested also in our funds because at the same time we launch also some dedicated solution ESG solution in our Luxembourg platform. So just to sum up, no inflows of Unit Link, General Unit Link accounts for the inflows that we communicate to the market. Performance fee in April zero. We have some strategies that are not distant from the high watermark and then we still have the runoff of selection and we have some projection for performance fee in selection for June that is around 8-10 million euro. for advisory, brokerage and certificate. I think that certificate are a full speed. 150, 200 million euro is the target we had in mind and I don't see room to increase significantly and structurally these numbers. Advisory fee, I'm positive. I see room to increase and accelerate, and this is the reason why we increased also the target of the percentage out of total assets. And then brokerage fees. While I'm very confident to see increasing volume for the bank due to the partnership with Saxo and due to the focus on advisory fee, I don't see any structural shift on this kind of activity. And I can give you some flavor because we have the advantage to see the numbers of Saxo that is an international platform and the numbers, in particular in May, are very, very low compared to the March 1. So it's normal. Brokerage fees are correlated 100% with volatility of the market. So it depends on your expectation on volatility. But if we expect a stabilization, brokerage fee will diminish. No way to change structurally the attitude of investor, in particular in Italy. And I think it will answer all the questions. Thank you, Gianluca.

Yes, very clear. Thank you.

May I remind the participants to please use the receiver to improve the ALIO quality. The next question is from Luigi Di Bellis of Equitasim. Please go ahead, sir.

Yes, good afternoon. Three questions for me. The first one is on the financial asset. Can you elaborate on your strategy on financial investments and on Italian government bonds in particular? Would you invest more? in BTP given current rates or not. Second question on capital position, where do you see the CHAT1 and RWA evolution for the next quarter and at the end of 2020? And the last question on Switzerland and international growth, could you give us an update on the strategy goal for 2020 in terms of inflows, recruitments and banking license? Thank you.

Thank you, Luigi. Let's start from the banking book. We set a target of Italian government bonds in the range of 5.5 billion euro. And we are maintaining constant exposure to the Italian government bonds because we run several back tests. And also in a very, very extreme scenario, we could, let's say, react positively to the hurt, to the consequence of, for example, downgrading or something like that. So for us, 5.5 is manageable. And the rest part of the banking books is invested in other European government bonds, part in financial and corporate of very high quality. We started to diversify the banking book also thanks to some illiquid solution, but it will represent maximum 5% of the whole portfolio. And in terms, let's say that we project a yield on the banking book in the range of 0.8, 0.85, so not such a big increase, but necessary to provide a double-digit growth in the net interest margin. And second, capital position, we have in mind a range of 14.5, 15.5 as the projection. But since we are maintaining probably a much prudent approach in this moment to the banking book than what we expected in the past, the capital ratio could be a little bit higher. And about international growth, for us, international growth means three things. The first one is to provide, they say, a very, very innovative services of multi-booking center to Italian clients. in order to maintain the investment services in Italy and to diversify the deposit of the asset. This is our first priority and I think also the most important in terms of inflows and we confirm increasing interest in this activity. Let's say that the only risk is that you need the physical presence for this kind of activity. The second business line in Switzerland is to develop a dedicated distribution channel there and at the moment recruitment activity is frozen but I don't honestly see the urgency to accelerate also because then we have the third priorities that is to provide portfolio management solutions through our insurance vehicle from Switzerland. So we provide a unit link, our Luxembourg platform solution, some unit links that are managed directly by Switzerland. So if you think of these three goals, the most important is the first one. And I think that we will see positive inflows, in particular in the second half of this year, significant inflows. I have a target around between 300 and 400 million Euro. In the Luxembourg platform insurance solution for private insurance, we do expect the target around 200, 300 million to sum up to the first number I gave you. development of a distribution channel in Switzerland, this must be considered as an opportunistic approach. So if we see the opportunity, we're going to buy assets. But my priority in this moment, due also to the context and the situation, are to achieve the first two goals.

Thank you. Thank you.

The next question is from Elena Perini of Bancaimi. Please go ahead, madam.

Yes, good afternoon and congratulations for your results. I've got essentially two questions. The first one is about the recovery you mentioned in the customer's assets at the end of April, 67 billion, if I remember well. Can you split for us in managed assets, traditional life products and banking products, just to have an idea, not precise numbers? Then the second question is a follow-up on the guidance you provided on the net interest income. Have I understood correctly that you mentioned a double-digit increase for this year, as my line says? was not very good at that time. And then another follow-up, if I may, on the level of risk-weighted assets, the question which was posed by my colleague before, as I'm not sure to have understood well. Thank you very much.

Sorry, Elena, can you repeat the last question? Sorry, the line is a bit disturbed.

Yes, I'm sorry about that. It was on the level of risk-weighted assets, I think, at the end or the trend. It was the question which was posed by my colleague before, a follow-up. Thank you.

Okay, thank you, Elena. So the recovery, the recovery was well spread among all the asset management solutions. So let's say that if you consider that at the end of March, the loss was around 12.5%. Now we are in the range of 8%. And it is well spread among funds and the unit link and discretionary accounts. The second demand on capital catch up with the question of TCR and I answered that we have in mind a range of between 14.5 and 15.5 but considering that we are confident to achieve a double-digit growth in the net interest income, probably we will save some extra capital because we decided during this quarter and the next quarter to have a more conservative approach in investing in risk-weighted assets. So, at the beginning, we set the target that I already said. Due to the crisis, we decided to reduce a little bit the use of risk-weighted assets in the banking book, also because we see the opportunity to reach double-digit growth in the net interest income, also saving part of the capital that we had in mind. When I say double-digit growth, I mean that we are closer to 20% than 10%.

Okay. Thank you very much. Very clear.

The next question comes from Alberto Villa of Intermonte. Please go ahead, sir.

Good afternoon. I have three questions. The first one is on the managing fees that were down. You explained two basis points were related to, let's say, a temporary factor. I was wondering if the current turbulence of markets is posing any problems acceleration in the margin erosion or if you are confident to keep on a stable margin or a very slight decrease of margin as you mentioned in the past. The second question is on the tax rate apart from the spike this quarter if you can provide us a guidance for 2020 in terms of tax rate you're expecting. And the last question is a more strategic one. The current situation has created a lot of disruptions. You mentioned a lot of elements in your presentation, especially on the short term. I was wondering if you can share with us what are your thoughts for the industry in the mid-term if you expect acceleration or any specific area of interest that could be a risk or an opportunity for your company. You mentioned the opportunities on the recruitment side. Well, any thoughts on that would be helpful. Thank you.

Thank you, Alberto. Let's say that in terms of margin I do not see an acceleration in the erosion of margins. I confirm a very slight, slight decrease in the next two, three years. Of course, there is a more conservative approach in this phase. So you saw the switch. And I think that it's healthy to have some resources to reinvest when we start seeing a normalization. So I see upside in particular in our Luxembourg platform more than downside in the Luxembourg platform. Where we see some downward pressure is of course for the runoff of this election that is continuing but is slowing as expected and some little more down pressure on the, let's say, in the financial wrapper solutions. But at the same time, I see some more space on the insurance wrapper. So in the end, the sum should be almost zero. And second topic, tax. So the tax rate suffered for an higher dividend this year, as explained. The result of taxes for this year will depend on the mix of revenues. We do expect a tax rate in Luxembourg in the range of 10%, 12%. And you know when there is the tax on dividend that's around 4% and then the tax in Italy for the other revenue streams. So it depends on the mix. If you have lower performance fee, normally you have a little bit higher tax rate, but it's in line with the historical average, I think. The third topic. It's about my view on the mid-term for the industry. I'm very positive for the industry, not only for Banca Generali, because I see the increasing need of advice for entrepreneurs and also for savers. And the banks will be more focused on the balance sheet side. not on the services. This is my perception. So I see the opportunity in the recruitment, but recruitment to me is not just about financial advisors, but it's also for clients. And so I'm positive structurally for the influence for the industry as a whole. Then if the question is, do you see also some consolidation? I don't understand how small companies can survive in such a kind of environment.

Thank you.

The next question is from Federico Braga of UBS. Please go ahead, sir.

Yes, hello, Daphne, and thanks for taking my question. Just three questions for me, please. The first one is a follow-up. If you can please actually give us the percentage of how much of your managed assets calculate the measurement fees at the end of the quarter rather than on the average AUM. The second question is if you could give us a little bit more color on the feedback from clients on the Saxo platform, brokerage platform, especially given the fact that March was a pretty volatile year. environment as we all know, just wondering if you could share us a little bit more feedback from clients and if you can remind us how many clients actually now have full access to the platform and what stage is the implementation of this process. And then the last question is more related on performance fees. I mean, after the changes that some of your competitors made in the last years, you will be named with the highest contribution from variable fees. So I was wondering if this is something that is fine for you or you would consider maybe some changes in order to increase your reliance on non-performance fee earnings.

Thank you very much.

Sorry, Federico, can you repeat the first question? I'm sorry, but the line is really disturbed.

Sorry, just the first question. The first one, if you can please tell us how the size of the managed assets which charge management fees at the end of the quarter rather than on the average AUM's.

I start with Saxo and then I hand over to Tommaso to give you the numbers on performance fee. Saxo, let's say that the Saxo as an average in the last three months account for 15% of the revenues and in April we opened up the platform to the B2B2C model. So until now it was only for the B2C and internal clients because we wanted to test the platform, we had to complete the integration for, for example, derivatives and so forth. I can say that after a first wave of platform only for the B2C of internal clients, in April we open up the platform also to the B2B2C. That means that financial advisors can insert order for the clients, on behalf of clients. is about opening up the platform to the B2C also for external clients. And we project this launch by the end of the first half of the year. So the numbers and the contribution to the revenues start to be significant because it's 15%. is in line with our projection and we see an acceleration in the second half when we will complete the release and the rollout on the three targets of clients. Direct clients with a direct access to the platform, financial advisors, and external clients. These are the three waves. The first is done. The second has been completed. in during April, and the last will be in June. The third question is about performance fees. So, Tommaso, if you can.

Yeah, performance fees are calculated on our Luxembourg platform, which is at the end of the quarter was around 15 billion of assets, and in April we had a rebound. So now it's around 60 billion of assets. Performance fee, as we said before, I expect it to be low in April, but we have an expectation of positive performance fee by the end of the next quarter, especially in June, because some compartments are near to the level, so it could be If the market remains at the same level, we could have some performance fee in the next quarter, especially in June. The range that we expect is between, as we said before, between 8 and 10 million.

And the last question on the performance fee calculation. I do not see in the short term any changes. We are thinking of a dedicated offer for different targets of clients and we are working on a new offer and it will be launched probably in the last part of this year and we are considering also a different mix of revenues, so a different mix between measurement fees, front fees and performance fee. We don't have any deadline. We are just considering to develop also a dedicated offering for other targets of clients to increase the penetration of such a kind of products on the total wallet of our clients.

Thank you very much.

The next question comes from Angeliki Bairaitari of Autonomous Research. Please go ahead, madam.

Good afternoon. Thanks for taking my questions. Just two on my side, please. First of all, you mentioned in the beginning of the call that you have suspended some loan repayments from clients and financial advisors. Could you give us the amount of these loans that are effectively now in moratorium? And what is the outlook for cost of risk this year, considering the change in the economic environment? And the second question, the lower recruitment of financial advisors should have some impact, I would imagine, on that cost of growth and, in general, on the payout to financial advisors this year. So could you give us some guidance for this line item of your P&L, please?

Okay. I start with the payout, and then I hand over to Tommaso for the lending. On the payout, I would say that we have a target for the ordinary payout ratio that is in the range of 36%, 37%, and we confirm this target. While the cost of growth depends mostly on the volume and on the mix. And I think that in this case, let's say that we have normally a range between 12 and 14%, more or less. And we are probably in the lower range of demand, probably. Depends on the acceleration of recruitment, the second part. But I'm pretty confident to stay below the level of the last year. Tommaso, please.

On the lending side, if you have understood correctly your question, the moratorium, we had a small amount because we just have 10 million of payment which are being postponed and 100 million of exposures, more or less. I mean, we don't see any impact in terms of net interest margin because, of course, it's just a cash postponement of the payment, but the interest... still occurred in the lending book. So it's just a very small impact for us.

Thank you very much. And with regards to the potential impairments on loans, you don't see any spike there for this year?

No, because our lending are always lombard. Basically, we are over-collateralized and we don't see any major impact from that. The level of the guarantees is still very high, and so we think that we won't have any pressure on that also if there is, let's say, the market goes down.

This is a great answer.

This is a great advantage for our bank because our landings are over-collateralized, so we do not see, we do not expect any, say, MPL in the future, even if we assume very, very difficult context and very deep recession in Italy.

Thank you. The next question is from Domenico Santoro of HSBC. Please go ahead, sir.

Yes, hi. Good afternoon. Thanks for the presentation. Very clear everything. Just a couple of follow up my side. First of all, page 26. When you talk about lending to SMEs via the state guarantee, are we talking about the loans backed by guarantees as per the you know decreto cura Italia in Italy and if yes I mean those loans are pretty unattractive in terms of interest so I'm surprised that if the answer is yes you will leverage on these considering also the narrative that if banks that leverage on this lending there will be also counter argument in terms of distribution of dividend is it correct are we talking about those loans

Thank you, Domenico. Let's say that, first of all, you are right. In slide 26, we are dealing with the lending activity with the guarantee of MCC, Medio Credito Centrale, who provide a coverage up to 90% of the loan. And we are providing this kind of facility only for our existing client. And we have a target maximum at 200 million, between 150 and 200 million maximum. It's just about the guarantee at 90%, not a guarantee at 100%. In the guaranteed 100%, you must apply a predefined rate yield at 1%. In the one we are providing, you can have a target that is a little bit higher. For us, it's in the range of 1.5%, 2.5%. And in terms of capital absorption, I don't see significant impact because, you know, if there is the guarantee, the risk-weighted asset is equal to zero.

Yes, this is very clear. Of course, it's part of the decree. My question is, given that it's already fixed at this point, the payment date for the dividend is 19... how confident you are, because of course this is a discussion that I have every day with investors, how confident you are to pay this dividend according to the talks that you had with Banco of Italy, how realistic it is. And I'm just wondering whether the leverage, the utilization of this guarantee, it might preclude you in a way from to be totally independent, you know, in the distribution of dividend, which is, I mean, I cover the banks, you know, so this is largely the narrative that basically Investor, they use for the banks, for the traditional banks.

Okay, I got the question, sorry. As of today, I'm confident 99% because we just postponed the dividend payment in October. And let's say that we do offer this kind of lending just to be, say, in line with the recommendation of Bank of Italy of providing liquidity to our existing clients. ancillary services and we are providing these facilities to be compliant with the recommendation of regulators.

I don't know if Tommaso wants to... Basically, I mean, it's something that we offer especially to our clients. So it's, in many cases, it's also, let's say, a transformation of lending that we already have. So also the impact in terms of leverage... we don't expect to have any problem from this point of view. But the main point is that we offer to our clients and just is basically for that there is a change of the actual lending that we have. In many cases, some entrepreneurs can ask to access this kind of lending and they are probably changing the guarantees that are collateralizing this lending activity.

All right. I understand. Very clear. Then can I ask you also to follow up on margin and sales? First of all, I understand your point about margin compression over the next couple of years, but what about more short-term, short-term guidance for the second quarter? I was just wondering whether the market effect of March is all in the gross margin that you presented in the slide or shall we expect some further, you know, decline in the second quarter. And then next phase for the end of the year, I know it's a very difficult situation, very volatile. Just wonder whether we should keep it, you know, as a consideration the one that you presented in the plan as a fair number for this year as well as a normal run rate. Thank you very much.

Let's say that in terms of margins for asset management products, with these markets, you should consider the number of the first quarter as a sort of floor. So some recovery in the second quarter, basically due to the discretionary accounts, if the situation is confirmed as of today. So it will be below the last year, but higher than the one of March. In terms of net inflows, we confirm our target of 4.5 billion euro, even if probably the contribution of new financial advisors will be lower, while probably the productivity of the existing sales force will be higher and in line with this first quarter.

Thank you very much.

Mr. Mossa, at this time there are no questions registered.

Okay, so thank you very much for the participation and I'll wait for you for the next conference call. Thank you, bye.