Banca Generali Spa

Good afternoon. This is the Coral School conference operator. Welcome and thank you for joining the Banca Generali's first top 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. Gian Maria Mossa, CEO and General Manager of Banca Generali. Please go ahead, sir.

Good afternoon and welcome to our first half results conference call. Let's start saying that despite the severe impact of the pandemic and the spike in volatility of the markets, the overall numbers of the bank for the first half and the first half are very, very solid. In terms of total assets, we ended the first six months with almost the same level of the end of the last year at 68.9 billion euro, thanks to basically very, very high diversification of the portfolios and very strong inflows. for the first half inflows were at 2.8 billion. It's not just about the amount of inflows, but it's also about the quality, and we're going to see later that the quality was much better than the previous year. In terms of financial results, in the first six months, on a year-on-year basis, The results were in line with the last year, but again, the mix was, in my opinion, definitely better. And in terms of results in the second quarter, of course, the starting point after the correction of the markets penalized some specific lines of the P&L. In terms of capital position, as you know, the ECB and Bank of Italy have just published a new recommendation and we're going to see the impact on our dividend policy in the slide dedicated to capital ratio. So let's start from page 4 that is our usual as usual we represent a short representation of our P&L so we had a very positive steady growth of almost all the revenue lines with the total banking income up almost 11 percent operating profits were in line with the revenues so up 10 percent while below the operating line we had some one-off and on that penalized the net profit net profit as we already said is almost in line with the same period of the last year, close to €132 million, where we had also a negative impact by the tax rate at 22%, and we update our projection for the full year at this level, for this year. Page 5, there is the net profit breakdown. You can see that variable net profit contribute negatively on year-on-year basis with a minus 4%, so from 64.4 to 62.0, while the recurring net profit slightly increased up 2.2% at 69.9 million. Once we focus on the underlying, so on the build-up of the recurring net profit, we see that on the positive side, we had a very positive contribution of the net interest income and the from net fees, while on the negative side, we had net adjustment provision and tax. In particular, in terms of net adjustment and provision, we had two specific items. The first one, we update the discount rate for the pension planning and loyalty schemes for our financial advisors. So we update with a lower discount rate and the impact is negative for $4 million. And then we review the economic scenarios and these penalize the provision for the loans book. So, all in all, total recurring net profit is 69.9 million. So, starting from page 7, we go through line by line, starting from net financial income. First half, we exceeded 50 million euro, with a significant contribution on net interest income, 42.4 million. Focusing on the quarterly contribution, The second quarter numbers are pretty solid, 22.2 million euro with margins at 0.77. On the left side of the page, of slide 7, we see the stabilization of total assets and the interest-bearing assets at 12.3 billion euro. Comparing these numbers with the same period of last year, you can see an increase of the loans to clients up to 100 million and financial assets up 1.5 billion. In terms of yield, we continue to work to have a more efficient cash management, so cash optimization, and the cost of cash lowered again, so minus 0.03%. while yield on loans to clients and yield on financial assets are stable to 1.08 and 0.79. Moving on to page 8, we have the gross fees. Total gross fees were up almost 30 million or 8% to 382 million. And in terms of margins, the overall profitability was at 1.14, with a temporary dip in the second quarter, basically driven by front fee. And as we already said, the market crashed in March with a lower contribution on management fees for the quarter. Variable fees, almost 20 million euros. so we've gained a positive contribution, and also for July, we do expect positive numbers in the range of 7-10 million in July. Page 9, there is a deep dive of management fees, where you can see on the right, top right of the slide, the zoom of monthly numbers, and it's pretty evident that The numbers in April were in line with March, so 51.5, and then there is a steady increase and recovery at 54.7 million. In terms of margins, you see a dip at 1.36. Here you have two different trends. a recovery of the profitability of the financial wrappers up one basis point. Probably we're going to see another basis point in this quarter, while the penalization comes from funds. So basically it's not about product mix, but it's about asset mix, asset allocation mix, and in particular the profitability of third-party funds declined to basis points and also the profitability of Laxim was marginally lower for a specific initiative on cash products. Let's say that considering this a sort of deep link to the asset allocation and not to the product allocation, we are pretty confident to see a recovery at current levels if markets stabilize. Page 10, there is the other side of the gross fees that are other fees. Other fees are the sum of front fees and entry fees, sorry, and banking fees. The total contribution of these kind of fees was about 55.6, with an increasing profitability at 0.16. Moving on to the second quarter numbers, you see two different behaviors. The banking fees slightly increased despite the market correction, and this is basically thanks to a very resilient advisory services, while the entry fees were penalized by two factors. When the performance of the clients are negative, it's more difficult to charge from fees, and then during April and during May was very difficult to structure a certificate because the implied volatility was the one of the previous month. So it was very expensive for the client. So we reduced the activity that has been resumed in these days. On the right of the slide, always page 10, you see another way to present other fees. where the cluster is not between banking fees and entering fees, but it's about new revenue streams and, say, traditional fees. New revenue streams jumped to 33.5 million. It means an increase of 63% in the period. And again, we are very confident to continue to see an increase in contribution of the new revenue streams. and the total contribution of gross fees on other fees on gross fees exceed 15%. Page 11, we move on the cost side. Let's start from the fee expense, so payout. Payout is down to 53.3 from 54.1. This is basically driven by the fact that the last year we had a one-off component in the payout to the network, 0.5. You can see in the bar graph on the right of the slide. Overall, cost of growth decreased a little bit because, as you know, the recruitment activity slowed down in the first half, so the marginal cost of growth decreased. And the payout to third parties instead is almost stable. You have the one-off linked to the acquisition of Nextam that will expire next year. Page 12, operating costs. Core operating costs were up 2.5%, excluding, as usual, the sales personnel costs. Core operating costs expected to remain in the range 2-3% over this year, thanks to cost optimization. And if you focus the attention on the second quarter, you can see the cost of COVID, it's a one-off, it's 0.9, it's basically donation. And then you see a decreasing value of the changing perimeter, that is basically thanks to streamlining and rationalization of Nexstam and Nexstam has been merged at the end of the first half in Banca Generali. As usual, we close this part on cost with the cost ratios, so overall best in class, top level of the market with operating costs on total assets 0.33 and both cost income ratio gross or net of variable cost below variable revenues below 40 percent now the the last page of this section is about capital position as we already mentioned the 28th of july so yesterday ecb and bank of italy extend the recommendation not to pay any dividend for the full 2020 year. This morning the Board of Directors has acknowledged this recommendation and we will take the consequent decision regarding the first tranche of dividend payment in the next meetings. It's Pretty clear to me that we cannot proceed with the payment of this first tranche, so in this slide you see both the reported capital ratio as well as the pro forma numbers. Let's say that the report focuses on total capital ratio, you can see that the reported capital ratio is at 15.7, so very solid position. and the pro forma jumped to above 20%. I confirm the intention to pay these cash as soon as possible, but from now, of course, it will depend from the new recommendation, eventual new recommendation of the regulators and the need to call a new general meeting. Page 15, so before changing section, let me sum up this first part. Very good news from net interest income and we are confident to confirm the positive trend in the first half also for the second half and so we confirm the double digit growth for the year and as you can see the evolution of numbers we are pretty confident to do very well. And then if you think of the market at current level, I do expect also some gross fees because the commercial activity is working very well and all the initiatives have been launched in the last month. So there are several initiatives and that can increase the fees. On the cost side, again, we confirm the guidance of 2-3%. So on the revenue side, I think the most important contributor is from our Luxembourg platform. You can see at page 16 that the total assets, referring to the managed solution, increased particularly well in house funds. House funds were at 7.6, so it means 400 million euros above the end of the last year. Also, insurance wrappers confirmed the level of last year, so very resilient to the crisis, while third-party funds and financial wrappers are the ones that suffer most the correction of the market. Another important number is always on page 16, bottom right. Here you can see that the cash level of our clients was stable in the six months. It means that in the first quarter we accumulated some extra cash and in the second quarter this extra cash has been reinvested And so it's really important because the net inflows are all about asset management, insurance products or advisory services. About advisory mandate, page 17, we exceeded 5 billion euro, 5.1 to be exact. And you see that the share of wallet is at 7.6. So let's say that we are well above the initial projection of penetration of these initiatives. And as we already confirmed, we increased the range at 8 to 10 with the goal to achieve 10% of the total assets. Also because we are very impressed by the spread of the culture of advisory services. On the top right of the page, you see that 62% of the sales force start approaching clients also with this approach. Page 18, another positive example. This is about our Luxembourg business, Luxembourg platform. Total assets are at 16.7, slightly below, let's say, the level of the last year. But if you look at the breakdown, you can see the important acceleration of Luxembourg. And the negative contribution comes from BG selection. The focus, of course, must be on the retail share classes, the one with the high profitability. And you can see how important has been the acceleration of Luxim for retail distribution. On the top right of the page, you see that now retail fund classes is at 7.6 billion euro. It means that the highest level ever for the bank, while the institutional fund classes decreased from 9.7 to 9.1. Zooming the retail fund classes, you see the growing weight of the LUXIM at 4.5 and then you see the gradual reduction of selection. As we already said, for each euro, of runoff of the BG selection, the target is to collect at least 2 euro of the LUX-IM. And at the moment, also during the worst half of the year ever, we successfully reached this target. Page 19, you have the details of total net inflows. As we already said, The result year-on-year is almost flat, but if you focus your attention on the bar graph on the right, you can see the impressive difference in the mix. It seems that COVID and crisis was last year because on year-on-year basis, the numbers on in-house fund was three times, third-party funds twice, insurance wrappers twice, and then the outflows in the financial wrappers decreased significantly. And if you look at the numbers in July, are almost in line with the second quarter, with all these components and products with positive inflows. Page 20, there is the focus on recruitment. New recruitments were at 28 in the first six months and we reactivate the recruitment activity starting from May and so you can see that we successfully recruited seven new colleagues during the end of May and in June. and I confirm that July is going pretty well. Focusing on the net inflows mixed by acquisition channels, and we are page 20 on the right, bar graph, you see that more than 80% of the total net inflows come from the existing sales force, And the productivity of the existing Salesforce reached the highest level ever for the bank. And this is, again, a way to see how close our financial advisors were to the client and how proactively it managed these situations. So to sum up this part of the presentation, I'm very, very proud. of the activity of our financial advisors as well as of our employees. Their phase network is really in good shape, really in good shape. And as I say, July numbers continue to be very solid. So I do expect a second half very, very solid and sound in terms of net inflows. The mix of net inflows is going exactly in the right direction with insurance wrappers and Luxembourg with a growing interest by all the financial advisors and the client. So again, it's not just about a single product, but it's about a range of very innovative solutions. And we continue to release a new version of the insurance wrappers, just to mention one, the Luxembourg solution. And we are back to normal. And this is really important from the recruitment activity because, you know, to me, recruitment is crucial. to continue to upgrade the sales force, to insert new energies in the network, and to continue to run. So this is another positive good news. The last part of the presentation is in line with the approach of the first quarter conference call, where there is a focus on the nine main initiatives very supportive for both profitability and new inflows. You know, we clusterized these nine initiatives in three major groups. The first one is about the key business drivers, is about the core engine of our P&L, it's about asset management insurance products. And the three priorities here are on LookSim, our Luxembourg platform, ESG commercial approach, and the insurance wrappers with a particular focus to private insurance initiatives. On the right, you see the new business levers. These are initiatives already present in the bank that we decided to speed up, in particular, lending, private markets, and the BG International Advisory, so the Swiss project. And on the bottom of the page, there are the so-called new revenue engines, which is about advanced advisory, certificates, and BGSACs. Now, in the next three pages, there is a deep dive for just one initiative for every cluster, just to give you an update on a very important project for us. Page 2-3 is a focus on sustainability. Sustainability is very important, very supportive for the influence in asset management products. And here you have basically four information. The first on the left, top left of the slide, is the penetration of ESG products on overall asset under management. We exceeded 9%. Bottom left, probably the most important information, that is the resiliency of the net inflows of ESG products despite market conditions. And what interests me more, for example, is the number for the first half of this year, that means almost 400 million euros of new ESG net inflows, and it's all about asset management products. Top right of the page, there is the spreading of the cultural ESG in the network. 15% of the population of financial advisors have a percentage of ESG product above 20% and 90% of these financial advisors are very active and proactive with the digital support because you know for us sustainability is not just about product but it's a value proposition, it's a commercial approach and it starts from a proprietary digital platform. Bottom right you see the numbers on clients. Of course, here is the case of investing just one euro in ESG products, so 40% is just the number I do expect. What impressed me is about the kind of clients with a greater attention on this kind of solution because it's linked to education, it's linked to age, and of course to wealth. Wealth is just also a way to diversify more the portfolios. And the age is really important because if you are best in class in something really interesting for younger people, for the succession planning and for the continuity of the business in the family of our clients, this is the way. It's not just about smart home banking, but it's about to build a better world. And you know the commitment of younger population on this topic. Page 2-4, we are in the second cluster of initiatives about new business levers and the focus this time is on lending because for us lending has been a long journey. We focused our attention last year on the IT platform, organization, procedures, teams and now it's time to deliver results and to launch new initiatives. And you know this is because we want to increase the diversification of our assets and it's a way to be supported to the net interest margin. So in the graph on the top left, you can see the total loan portfolio. You have two different dimensions, granted loans and drawn loans. These numbers differ slightly from the ones in the net interest income because here the there is the inclusion also of the off-balance sheet bank guarantees. So here you can see the gradual growth of these numbers. But what is probably more interesting is about the Lombard loan. It's about retail, so our client. And here you see how it speeds up this kind of business. We launched several initiatives And we are very close to launching new ones. And here you have the list of the major ones. And we are very confident to close the second half with at least net new granted loans for at least, as I say, 200 million euros. So now also this initiative will start providing support to the P&L and to the quality of service to our clients. The last focus, and it's about our new revenue streams, new revenue engines, and the focus is on BG Saxo, because, again, BG Saxo is a strategic, digital, and based on innovation partnership. We worked a lot, as you know, to be fully and really, really integrated, and it took time. But now we start seeing the payoff. So I always deal with three main waves. The first one was about opening up the platform to internal bank general clients and because the business of direct trading is marginal and it was a way to test the platform. The second wave was about opening up the platform to our financial advisors to insert orders on behalf of clients and this was extremely difficult because for the first time ever worldwide Saxo implemented a different layer in the technology in their platform so the impersonification of the bankers so also for them was a great challenge and we successfully achieve this target, we successfully launch a pilot and we successfully run the rollout. The third wave is about opening up the platform to external clients, so not just BG clients, but it's for traders, for clients of other competitors. And to be ready for the third wave, we have to complete some implementation that is about the completion of current account features and the completion of derivatives, in particular CFD and Forex. And on the last part of the slide, on the bottom, you can see the constant increase of volumes in the retail business and the constant increase of the contribution of BG Saxo on the total numbers. And again, it's not just about BG Saxo, as we always say, it's about a changing culture driven by advanced advisory services, robots for advisory. On top of that, there is also the technology, there is also the implementation of the new platform. And I'm sure that the contribution of BG Saxo will increase over time. So, Just to conclude the presentation and then leave the floor to Q&A. First of all, I want to confirm all the targets we announced during our investor day in 2018 in terms of cumulated net inflows, total assets, core net banking income, core operating costs and dividend. And of course, dividend doesn't depend only by ourselves, but it's also about the recommendation of the regulators. But again, we are all committed to distribute our excessive capital. We are all committed to be in line with our dividend policy. with a payout ratio between 70 and 80 and with a floor in the DPS at 1.25. So as soon as we can, we will ask to a general meeting to distribute an extra dividend. That means the timeline doesn't depend only by our intention. Thank you and now I leave the floor for the Q&A.

Excuse me, this is the Coruscall conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 under touch-tone telephone. To remove your set from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Gianluca Serrari with Mediobanca. Please go ahead.

Yes, hi, good afternoon. Ciao Gianmaria. Three questions. The first one is on the life insurance business. If I'm not wrong, you restarted selling some class C insurance in the semester. I was wondering if you had any kind of cap in terms of new business into a pure Ramo Primo product, and how much of the 510 million net inflows in life in the first half was in this product? I think the commercial name is BG Custody, if I'm not wrong. The second question is, On the one-off you mentioned at page 11 on payout to third parties, these 0.3 percentage points, I wanted to understand a bit more what was this one-off about. And the final question is just a technicality. When you highlighted the increase in the liabilities to a phase, I guess, is the Enasarco contribution. I was wondering which kind of yield curve are you taking to calculate this cost? Some of your competitors are simply using the BTPs 10 years. I don't know which kind of curve are you considering. Thank you.

Okay, thank you Gianluca. So first of all, life insurance business, let's say that the contribution of traditional insurance product was pretty negligible in terms of net result while we saw an acceleration in June and July because we organized a campaign. So in July you will see a total contribution net is around 100-150 in July. In June it was probably close to 100 million but the first three months were negative, so overall numbers, now we are checking the numbers, but should be negligible in the first half, and then I would confirm the number.

Do you have any cap from Generate Life about the size you can gather on Ramo Primo?

I would say that the cap is something we manage internally because it's about the yield expected for the existing clients, so They say that we are well below the cap and we manage tactically this sort of campaign to support inflows, but we are definitely lower to the cap and I do expect an acceleration. If you look at the numbers, the developers continue to do well, so we are more focused on this than on the traditional life insurance. A window of opportunity, we accelerate, and then we close the campaign. Okay, thank you. You will see that in August, for example, the numbers in traditional life insurance policy will be negligible and probably negative. On the second topic, let me see, I'm checking out. Yes, yes, it's almost negligible. I confirmed the numbers on the traditional life insurance for the first week. other that is almost zero.

The one-off is about a distribution agreement of Nextam with their capital and then I will hand over to Tommaso if he has... Yes, I think it's linked to the reorganization of the Nextam group so we decided to close some contract and there has been a transaction and we paid a cost so it's a one-off and has been included in the passive fees. And it's one option. We are not going to have it in the next years. And then the third question was about... The first question is linked to the... What is the rate? Yes, it's linked to the average BTPs. So it's something that is going to change according to the movement of the market. Ten years bond or ten years bond as well.

Okay, grazie mille. Thank you. Grazie.

The next question is from Domenico Santoro with HSBC. Please go ahead.

Hey, good morning, guys. Thanks for the presentation. I do have a number of questions. I'll go one maybe. I'll try to be quick. First of all, I mean, we all read Sorry to be the Bad Guy here. We all read the article on the press and the way you responded, and so we know very well the story. I'm just wondering whether there was any sort of reputational issues on your franchise in July, if you see anything, because we don't have the sales yet for this month, and whether you're taking some sort of... measures or procedure in order to avoid the same to happen again. And maybe this is a time for you to clarify. So we close the story. On the dividend, I mean, the message, the language from the banks is a little bit different about 2019. Because what they say is that this morning, for example, in a cradle just said 2019 is gone. And, you know, let's look beyond that. in 2021, whether we can pay. So I'm just wondering whether it's the same for the asset managers or here the message is different because I heard before you saying that the excess capital can be distributed back. So how can be the formula here? And maybe you have enough capital also to think about some sort of M&A in the future. Then talking a bit about the business, first of all, margins in the third quarter. you explain very well the second quarter what happened. So it's more a matter of asset allocation rather than products. So just wonder whether margins can come back to the level of Q1 and we can get the same level of gross asset management fees. Simon says you're pretty confident, but I mean, there was quite a market rebound in the second quarter. So basically people, they took advantage from that. So I'm just wondering whether your confidence in getting a, a similar level of, if my understanding is correct, of sales for the second part of the year that comes from Hawaii is so confident. And then just a final comment on the other revenues. I heard that you said, if I catch correctly, 15% growth or whatever. Just wonder whether you can give us a little bit of visibility short term, you know, for the third and fourth quarter in terms of banking fees and the entry fees. And sorry to be so long. Thank you.

Thank you, Domenico, in particular for the first question, because at least I consider the FT article misleading and misrepresentative of the situation. It's something about Italian securitization issued in 2017, repaid in 2019. with the expected performance so clients were happy and the bank was happy. It was about just two invoices for a total amount below one million and you know total receivables in Italy probably are billion and billion of euros and we were just distributors or investors so you have The credit broker and you have the servicer that are Italian regulated and they are both in charge of conducting anti-money laundering analysis. So there are two institutions, two legal entities supervised by Bank of Italy, not one. This is normal during a lending activity. And again, if you think of the total amount, the timing of the article, And the fact that it's really common practice in Italy to factor in activity and receivables for banks, for securitization, is well regulated. And we didn't have any consequence with both regulators and internal auditors because all the procedures were pretty well managed. So the risk that in one bank, commercial bank, or in Banca Generale, or in any securitization, there is one receivable where the state of anti-money laundering, the score change over time, is granted, is 100%. It's something that can happen any time for any institution, and actually it happens around the world. It happens in the commercial banks in Italy, it happens in the commercial banks in all the developing countries. So I think that there was another goal with the publication of that article, because General is a very, very strong brand, as you know, in particular in Europe. So internally, but I would say yesterday was at dinner with a manager and said, financial time has passed, but I have to be honest with you, I think that the sense of belonging is even stronger. Because it's about something that was so unusual, so distant from the way we are, that the reaction was very strong and very positive among financial advisors. as well as among clients. If you look at our inflows in the last six weeks, they are very, very positive. So, honestly speaking, the impact now exposed is negligible on the reputation side. Of course, during the event, I was very, very upset, very upset, because to me, reputation is first. but just for our clients and our financial advisors. But I haven't seen any significant consequences, and if any, it's a positive one with a strengthening in the sense of belonging to the bank. In terms of dividend, 2019 dividend is not gone because there is my personal commitment to say to pay at least 70-80% of the annual net profit and with the floor of 1.25. So it doesn't depend 100% by just myself because as you know there is a general meeting was to approve the proposal but my intention is to continue to pay the dividend both for 2019 and 2020. respecting all the recommendations of ECB and the Bank of Italy. And so the dividend for 2019 is not gone, at least today. And of course, we're going to pay in 2021. I won't pay all the excess capital. I would like to pay what we promised. No more, no less. And for the other revenues, sorry, it was probably a misunderstanding. The 15% is the weight of other fees on total gross fees, 15%. Let's say line by line. Advisory services, we do expect consistent new inflows in the second half. So now we are at 5.1 billion euro at the end of June. Probably we can exceed 6 billion euro at the end of the year. This is a potential target. Let's say with this market level, it's a challenging target, but we are very committed to reach these numbers. In terms of structured product, I do see a slowdown in the activity. because we have already said that the range of 500, 600 million euro of new issue per year is the right target. So it means that on quarterly basis you are in the range of 120 and 150. So it's more in line the second quarter than the first quarter in terms of, let's say, structured product fees. In terms of trading, I consider the second quarter, let's say March and April, to, let's say, one-off months linked to lockdown and linked to the volatility of the market. So we do expect a normalization in the behavior of clients, but I'm confident to see increasing numbers of clients and of financial advisors joining the new project and the new initiatives, so Robot for Advisory, BG Saxo, and Advisory Services. So I think that the second quarter volumes can be considered a good level, sort of floor, for the fourth quarter. The third quarter, there is always some seasonality, so I don't have any projection. These are best efforts, of course, to raise the bar to the commercial structure to give the targets. And then if we reach the target, we'll be happy. But let's say that I do expect a positive contribution.

Thank you, Domenico. Sorry, the last question.

I need to answer on the asset management products and gross fees. I do see healthy behaviors in the network. So the numbers in July are very significant in this sense because they continue to develop relationships, they continue to switch from current accounts to asset management products. So we can probably imagine a reduction in the acceleration of the switch But I really don't see the risk of a reduction, a significant reduction of the risk, so of the asset allocation, because it is pretty conservative. So as we start from equity now is around 21%, 22%. And then we have several mechanisms of automatic switch. And so I think there are several initiatives that are supportive to gross fees. So I do believe that in the fourth quarter, we will close the gap with the first quarter. Of course, it would be great to close the gap in the third quarter. But again, the third quarter for seasonality effect is pretty different from others. But in the fourth quarter, it's the target we have. to exceed our previous record in the total gross fees.

Thanks. Did you take any TLTRO, sorry, in June, just basically to get the benefit on the NII?

Did you take any? Sorry, any initiatives on the NII? Did you take any TLTRO? Yes, yes, yes, 500 million euros. So the impact for this year should be around 2-3 million, 2.5 million. million for this year and then an increasing contribution for the next year. Thank you very much. Thanks. Welcome.

The next question is from Elena Perini with Intesa San Paolo. Please go ahead.

Hello. Good afternoon and thank you for taking my questions. I've got two questions and one clarification to ask. The first question is on net inflows. July has been, again, a positive month, as you are saying. So would you expect for this year a higher net inflow compared to to last year and for sure a higher contribution from asset management. But can you give us some flavor on the second half? Then I was wondering if you can update us on the level of performance fees in July. And finally, a clarification about the dividend. So is it your intention, if allowed, to pay both 2019 and 2020 dividend during next year, so in 2021? Thank you very much.

Thank you Elena. So let's say first of all in terms of the target of net inflows, we are used to update our guidance at the end of September because August and September are difficult months. So in September we decide, we're going to decide whether or not increasing the targets. I confirm the net inflows in July is strong. It's in line with the second quarter. Performance fee, as I mentioned before, we are about $7 million in July. I do not expect a performance fee higher than $9 million. We are in the range of $7.9, $7.10, depending on the last two days of the month. In terms of dividends, You are right, my intention is to pay dividend both for 2019 and 2020 next year. But again, you know ECB recommended not to pay for this year and they announced potential new recommendation also for 2021. So it depends also on the behavior of the authorities. And again, this is our intention when we have to call for a new general meeting, because to pay eventually an extraordinary dividend, you have to ask the approver to the general meeting. So it will be a choice of the general meeting, but again, we are intention to honor the commitment for 2019 and 2020. Of course, at the current condition, so without any extraordinary M&A activity and with this market situation, but let's say this is the intention. We should have already paid, so I don't see the case not to pay for the future.

Okay. Thank you very much.

Very clear.

The next question is from Angeliki with Autonomous Research. Please go ahead.

Hello. Thanks for taking my question. First of all, on the dividend, sorry to get back to that. I know you have responded already, but just in terms of clarification, you were planning to distribute the second tranche in the month of January. So I was wondering, is it possible, if we assume that the ban is lifted from the 1st of January 2021, can you pay the full 1.85 in the first month of next year? That's my first question. And also, I presume the currency to one ratio that you disclosed, it includes the 2020 dividend accrual in line with the accrual policy that you have. And then another question related to ESG. Thank you very much for the disclosure. It's interesting to see that ESG is gaining traction with your clients. I was wondering how does the EU taxonomy regulation work How is it going to impact the distribution of ESG products at Banca Generali? And is there any need for incremental investments to be compliant with these rules from next year onwards? And then maybe one last question. On your management fee margin, you had disclosed back in the day when you presented your plan a target of 138 to 142 basis points. That was before Nexum and Valère. Should we now expect a margin more in line with the Q2 20 level, so around 136 basis points? Thank you very much.

Thank you. So let's start from dividends. No, we cannot pay 1.85. We can pay 0.3, so the second trash. To pay the first trash, as I said, we must call a general meeting and pay an extraordinary dividend. This is the first question. The second question is that in the capital ratio for Vizier, we retained all the net profit of the first half, so our net of net profit. The third, ESG, let's say that we are working with the watchdog to include ESG. ESG criteria on the know your customer questionnaire. In the investment policy, let's say that we haven't any, at the moment, any obligation, but of course, if we manage directly ESG products, we must follow an investment policy, but I don't see any constraint out of the investment guidance of the bank. In terms of approach to client, instead, all the industry must work out a new questionnaire for the profile of the clients. The deadline should be in the next two years, but I'm not sure about the deadline. And on management fee margin, we are committed to confirm the guidance. Probably we are definitely closer to 1.38%. instead of 1.42, but we do believe to be able to confirm this number.

Thank you.

The next question is from Filippo Trini with Kepler. Please go ahead.

Yes, good afternoon. Three questions from my side. The first is on provision on credit. If you can confirm that the numbers that you book in the second quarter is correct, The bottom end is just related to generic provision, not to some specific position. The second is on the tax rate. In the slide, you mentioned 22% for this year. Just to understand the classification, if just for this year and next year, the tax rate could decline. And the last one is on the performance fee related to LUXIMA. if it's possible to understand how far you are on the high water market before starting to collect performance fee from this part of your asset under management. Thank you.

Thank you. So I confirm provision on credit are generic provision. I cannot say that it's a floor because it depends on economic scenarios, so it depends on the the economic environment, but let's say that I hope so. Tax rate to 2%, 22% for this year and could be a good guidance also for the next year. It's the result of a mix with more activity, so more revenues in Italy and a more conservative approach in the taxation in Luxembourg. So I think that 2-2 can be a target also for next year. Performance fee depends mostly on what strategies, because we have some funds that are already at the high water market level. For example, all the sector funds with the industrial partnership, for example, the innovation one, the medtech, the energy. are all in line with the top level, so in the high watermark range. Some market neutral and longshore strategies are close or at the high watermark, while more in general, bonds and credits, as well as equity, are between 3% and 6% from the top.

Thank you. Okay, many thanks.

The next question is from Luigi Debellis with Equitosim. Please go ahead.

Yes, good morning. Two quick questions for me. The first one is on the payout to the network. Do you expect to maintain the payout ratio for Starforce in the second half of the year? And the second question on the private markets. Do you have a medium-term target of illiquid private market products to achieve in the asset allocation of your clients in the medium term? And do you expect this product to be neutral or attractive in terms of fees margins?

Thank you. Thank you. So for the payout network, we have a target in the range of 53-54, so slightly above the number of the first half. Private markets, we do not have any targets, also because they are dedicated to normally private clients. But let's say that we do expect to stay in the range of 2.53 billion euro in the medium term, so it means less than 5% of the total assets, between 3 and 5% of the total assets. On revenues, it's not the most profitable product, just to increase the quality of service and the value of the asset allocation, so we do not expect positive contribution in the revenues from these kind of initiatives. It's more about the optimization of diversification and value of service to clients.

Sorry, the payout 53, Tommaso, please go ahead. The payout is a total payout, so including also third party payout 53, 54. So just to be sure that we are talking about the same figures.

Yeah, we have a target for the payout to the network that is below 50%. and should be around, let's say, 48, 49, depends on the incentive scheme. But let's say that overall payout must be below 54%. Thank you.

Thank you.

Gentlemen, there are no more questions registered at this time. I give you the floor for the final remarks.

Thank you. Thank you for attending our conference call and I hope you will have a great summer. Bye. Thank you all.