Banca Generali Spa

Good afternoon, this is the Coruscall conference operator. Welcome and thank you for joining the Banca Generali first quarter 2025 results conference call. As a reminder, all participants are in this and 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.

Good afternoon, and thank you for attending our first conference call on quarterly results. Let's say that, as usual, we will start with a comment on the results of the first quarter. And then we will give you a first update on the voluntary exchange offer we have received from Mediobank. So slide three, as usual, you can see an executive summary with the most important events of the first quarter. We closed the first quarter with very solid profit. The current net profit closed at 87 million euros. And also they reported the overall net profit was pretty strong at 110 million, thanks to a contribution of also the more volatile component of our P&L. From a commercial perspective, we closed the first quarter with almost 104 billion euro. strong increase of the total assets and the overall net inflows were solid with 1.5 billion of total net inflows with an improving mix and quality. Concerning the voluntary exchange offer, we have just appointed our legal international advisors Our Internal Risk and Control Committee is on the way to appoint dedicated and independent advisors. And I have just received a mandate from the Board of Directors to explore the industrial rationale and the implication of the offer. As I said, in the business update section, we will have time to deep dive on these topics. First part of the presentation is about numbers, so slide four. As you can see, the recurring net profit were pretty solid, 87 million euro or 6.1 higher year-on-year, and this is thanks to stable net interest margin and steady growth in the recurring fee business. Variable net profit, 23.3 million, thanks to performance fee. Consider that from these quarterly results, we will include also Intermonte results, so you will find a comment every time that the item is impacted by Intermonte, and in the slide with the sum up of the P&L, you will see the contribution line by line from the acquisition of Intermonte. So let's start from the two major components of recurring net profit. First of all, page five, net financial income. As I said, pretty strong results with the net interest income pretty stable over time thanks to the expansion of the deposit and just a slight reduction of margins of net interest income. Overall net interest income margin closed at 2.1 and as you can see also the trading gains and others contribute positively at 8.6. And here there is also a positive contribution from the integration of Intermonte for the global market components. The overall contribution was 4.7. Next page, total gross fees. Here you can see how solid the gross recurring fees are and an acceleration at in acceleration at 8.5%. The overall result is close to 280 million and here you will see a positive contribution from the asset under investments and also the other fees contributing in line with our guidance. Variable fees at 34.4 million, this is As I said, a good quarter for performance fees thanks to the good start of the year. And the overall result for the quarter is at €313 million. Focusing on the gross recurring fees, you see at page 7 an acceleration of investment fees. We closed the quarter at $238 million, or 8.5% higher, EUR. And this is basically driven by the average investment asset expansion with a double-digit growth increase. The margins are pretty stable, considering a more, say, defensive posture of our market. portfolio manager, and the volatility of the financial markets, especially in the last part of the first quarter. Page 8, other fees. Starting from the entry fees, you see a normalization of the contribution in line with our guidance, $12.5 million. An acceleration of brokerage commissions at 19 million euro thanks to asset expansion and Intermonte contribution for 3.7 million and banking fees higher basically thanks to 3.5 million of contribution coming from Intermonte. The overall result amount to 40.6 million with an increase of Next page, page 9, payout ratio. We say that the payout ratio is within our guidance, so no use good news. If you look at the total fee expense and the part Related to the net interest income, you see a slowdown of this contribution. So as I mentioned, with the reduction of the interest rate, you will see reductions of the cost of these components, 2.6. The overall total payout ratio is mentioned in line with our guidance that 53.1%. And this will be some seasonal items. All numbers are in line with our guidance. Next page, page 10, operating costs. You see in the overall total operating costs, there is a new item that is in termontes. So here you can see the evidence of the total cost of the legal entity Intermonte, 8.5 million euro. In the core operating cost, Light for Life, so without including Intermonte, but including for the first time in the different items VG Swiss, the overall result close at 67.1 and basically the acceleration is due to IRFT and the phase-in, the last phase of the phase-in of the national banking contract. Page 11, you have the ratios. So, you know, we have a great operating leverage. So operating cost and total assets, like for life, confirmed at 0.28%. cost-income ratio, once included in Intermonte, confirms excellent levels. Page 12, as mentioned, you have the sum-up with the P&L, the overall reported, and the contribution line-by-line by Intermonte. As you can see, the total banking income amounts to 11.5, total cost 8.5, operating profit excluding the operating profits at 3 million, taxes, and then overall net profit at 1.9 million. Commenting the overall results, so the 87 million of recurring net profits and 110 of net profit, comparing the same period of as of the last year, you see a marginal increase of the tax rate at 25.3, that is in line with our guidance of 25.26 for the full year. Now, a quick comment on the balance sheet and capital ratios. Also in this section, you will see not specific news. So far so good. The overall balance sheet size continues to grow. $17 billion was supported by client deposits. $13 billion. The cost of funding starts decreasing in line with the reduction of the interest rate at $0.93. Next page. So page 11. 2015, you see the total assets and the interest-bearing assets. You see that this expansion of the balance sheet has been invested mainly in the financial assets, so in the banking book. Now the banking book accounts for $11.8 billion. the overall yield on the interest bearing assets amount to 3%. So the difference between this 3.02 and the cost of funding was 0.923 equals to 2.1 as net interest margin, the overall net interest margin. Page 16, you see The capital ratio, here you see for the first time the full implementation and the full impact of Basel IV introduction, minus 3.8 percentage point of total capital ratio, and the overall impact of the integration of Intermonte, 3.3%. Despite this inclusion, the total capital ratio is confirmed very solid. at 19.2%, leverage ratio in line with the previous year at 5.7%, and then, as usual, a very solid and liquid, great liquidity of the bank, liquidity coverage ratio above 300%, and net stable funding ratio at 230%. Next section, net inflows, assets, and recruiting. Let's say strong results in terms of total assets, almost 104 billion euros. You see that the assets under management and the overall assets under investment were slightly negatively impacted by financial market conditions. But overall, the mix is improving. You can see it at page 19, where on one side, it's important to highlight the constant recovery of the traditional life policies, 15.0 billion euros, and when the marginal reduction of the overall managed solutions, but within the managed solutions you see an increasing weight of our wrappers bottom left. Now wrappers account for 50.8% of the overall managed solutions. And also the overall weight of in-house funds continue to grow. This is basically driven by inflows. If you move To move on to page 20, you see the total net inflows of the quarter, which is in line with the previous two years. In terms of NICs, half a billion of asset under investment. So again, stable compared to RONIA. Page 21, you see the contribution in terms of the inflows in terms of products with many solutions at 400 million euros that is higher than the same period over the last two years. This is driven basically by the constant growth of our financial wrappers. They are performing well and are the preferred choices of our clients also during more volatile times. Bottom right, you see the ongoing rebalancing among third-party funds and in-house funds with positive inflows also in the first quarter for in-house funds at $0.2 billion. Page 22, there is the breakdown in terms of acquisition channels. Again, also, here are numbers pretty in line with last year. These are very strong numbers also because, you know, we have a rush at the end of this year because of the completion of our three-year business plan. So thinking of ongoing contribution of the business as follows in line with last year, it's a confirmation of very solid and healthy network. In terms of recruitment, you see that it's more or less in line with last year, a slight deceleration from the retail and card banks. The perception is that the traditional banks are on the, let's say, wait and see mode due to the overall organization of the banking system. Page two, three. you see the results achieved in April. Overall, €600 million, of which €200 million are standard investments. Year-to-date, we are slightly lower compared to last year in terms of Product mix, we are slightly higher compared to last year in terms of inflows in asset management products for the two reasons mentioned before, the recovery of the traditional life insurance and the solid inflows in the financial drivers. Okay, so let me close the part on the financial and commercial results, saying that we are very happy with these results. The financial advisory network are in good shape and we are waiting for the communication of the pillar of the new strategy that we should have announced in June. Of course, we have suspended the announcement of the next three-year strategic plan, but we are continuing working on very important and transformational project for the bank. I mentioned just three of them. Intermountain, all the integration groups are working very well. The second is about the general partnership and I will go through the new agreement strategic agreement with the Generali. And the third one, we are integrating artificial intelligence in all the commercial approach and all the phases of the relationship of client and banker. So we are confident to find the way to provide better support for the financial revenue and increasing productivity. So having said that, we received these voluntary exchange offer from Medibanca. As you know, the major contents of this offer are about the aim at creating, say, the leader in the wealth management in Italy. The offer, say, recognizes the consideration for each shareholder of Banca Generali tender to 1.7 ordinary shares of Generali, of Assegurazione Generali. And there are two main conditions. The first one is about a floor, a minimum size of shares is about 50% plus one. And the second is is that there is a condition regarding a negotiation and the conclusion of the main terms of the strategic partnership agreement, including actual banking and asset management. And then Mediomanca communicated also the timeline of the offer. Now page 26 you see the reaction of the board of directors. We call a board of directors the same day when we receive basically the offer where we formally acknowledge this offer and where we specify that this offer was neither solicited nor agreed upon, and this is important to say. So it was a surprise for us. And of course, we confirmed that the board will do its duty, its job, expressing the opinion on the offer within the terms and according to the procedures stated by the law. This morning, we had a second Board of Directors where we communicated the appointment of our advisors, legal and financial advisors. In the same meeting, the Internal Risk and Control Committee confirmed the willingness to appoint dedicated and independent legal and financial advisors. And third, as mentioned at the beginning, I received a mandate to explore the industrial rationale and the implication of this offer. As we said, at the core of this offer, there is a strategic agreement between Generali and MediBanca. In the offer, we are mentioned for this agreement. So probably it's useful for all of us to remind the current agreement. The current agreement is based on two different pieces. So the first one, so the overall framework agreement will be Generali Group. was signed in March 2018. And then, you know, we signed an amendment a few weeks ago. Let's start from page 27, where there is a description of the overall framework. The framework in this agreement has two major legs, so two major points. The first one is about the brand license agreement. So now we have received freely the use of Banca Generali brand and the use of brand is in conjunction with the insurance distribution agreement. This license agreement for the use of the brand may be terminated. And there are two clauses. The first one is change of control clause, and the second is about the termination of the insurance distribution agreement. The second part of the framework is about the IDA, so the insurance distribution agreement, duration 10 years, renewable for an additional 10 years, There is an exclusivity right, so we distribute only for the insurance business generally products. There is a restricted distribution network, so in exchange of this exclusivity, generally cannot sign contracts with selection of potential competitors of the bank. And there is also, in this case, termination clause, in particular in case of termination by Generali of the brand license agreement, the exclusivity will be lifted and may be terminated by Banca Generali and of course on the other side, the same can be said for the restricted distribution network. So from that moment, generally, it could decide to work with the competitors that we listed in the agreement. So it's important to understand that there are these two aspects that are strictly linked. The brand, the distribution agreement, and two major clauses termination clauses that is change of control or termination of this insurance distribution agreement. Then in the last month we have been working hard for several months we finally agreed to sign a new amendment with two major contents. One is an amendment of the insurance distribution agreement and the other one is a new framework of a strategic partnership between Danca Generali and Generali to distribute our products through the Generali distribution channels and it's a way to to reach also general clients. I do consider this contract well-balanced. We worked hard, and as I mentioned, the insurance banking part would have been a pillar of our communication with the new three-year strategy plan in June. It doesn't mean that we stop this framework. It means only that we will not communicate numbers until the end of the offer from Medibank. Page 29, you have a deep dive of this insured banking agreement. There are three different ways to reach clients, general clients. The first one is well-known as we regularly publish data numbers in the annex of these presentations. There are the financial planning agents and here the aim is to accelerate the numbers of financial planning agents. The second way is to provide general agents We've selected the numbers of banking products and services, and we've all this support, remote support, remote banking support from the bank. And the third way, normally for the high-end clients, is to explore cross and up-selling synergies through teams between agents and financial advisors. we are launching a small pilot to test also this channel that is pretty used by other competitors. So just to say that for us the part of the business of Generali as distributors of the product is important and there are specific flows in the contract and on the other side We already started working with Generali to cross and upsell with the financial planner agents, but there is also another way to achieve the same result. The last slide, slide 3-0, is about the final remarks, and I think that it's really important to understand what I personally consider the priority for the bank, and these priorities are, say, the starting point for any transaction that involves the bank directly or indirectly. The first one is pretty clear. I consider the bank the most important pure player in wealth management because at the end of the day, Our purpose is just to protect and value the saving and investment of our clients. This is what we know how to do. We do this one. We strongly believe that this is our mission. I think that we are an exceptional player because we are 100% dedicated to protect and value the savings of our clients. The second point, there is our vision. Our vision is that we're going to be the first private bank, not in terms of assets, probably, but for sure in terms of quality of service, innovation, and sustainability. This is, for us, of foremost importance because we brought our vision and our mission in the most difficult moment of this bank, It was 2016 when, unfortunately, our friends and our previous CEO passed away. So it was a very difficult time for the bank. It was a moment in which we agreed with the financial advisor. The fact was a clear vision. It was about the scope, so to provide power banking services in a different way. And we also wrote our mission. And the mission is pretty clear in the third point. That is where I'm strongly convinced that our extraordinary results that we achieved in these 12 years since I had the honor to join this bank are driven by the long-lasting relationship between clients and financial advisors. The financial advisors are our trusted professionals, and are the most important asset of this bank. We are very united. We have a strong sense of belonging. We are a great team and great respect for the day-to-day business of these professionals with our clients. The fourth one that is close to the first three is that, as you well know, this is a people business. And we say that the success of any transaction depends, mostly depends on the respect of all the people who contribute the most to the success of this bank. Last, but not least, because for me it's of foremost importance, we represent the interest of all our shareholders because the shareholders have placed the trust in the bank and the trust in the management team over the years. So we have great respect of our clients, great respect of our financial advisors, great respect of the people working in this bank and last but not least, great respect of all the shareholders and in particular of the minority shareholders. Thank you and now I am over for the Q&A.

Thank you. This is the Corn School Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. We will pause for a moment as participants are joining the queue. The first question is from Luigi Debellis, Equitasim. Please go ahead.

Hi, good morning. Thank you for taking my question. The first one is on the CHET-1 evolution. Could you elaborate on your expectation for the CHET-1 over the coming quarter? What key factors should we consider in assessing its trajectory, including intermonted? The second question is on the new framework agreement. Can you give us more color on the potential upside related to the insured banking model? And the third question on the offer of Mediobanca, without referring specifically to any ongoing consideration, could you discuss what strategic advantages Banca Generali sees in potential consolidation or partnership within the wealth management sector and how the management view the role of increasing scale and synergies in improving competitive position in the sector. Thank you.

Thank you.

I will start with the second and the third, and when I will hand over to Maso for the CT1 evolution question. The question of framework the new framework and so the potentiality of an insured banking agreement, I think that you should start by considering that Generali is a very strong brand with a very wide customer base and with a penetration limited to the insurance products. So if you know the penetration of the insurance product on the total household wealth, you can work out easily the potentiality of the total assets of the clients reached by generally distribution channels. So the potential is huge. On the offer, let's say that... In different situations, I have commented on a potential offer from Videobank. There was noise on this for the last five years. And I have always said that basically from an industrial perspective, the combination could make good sense. As our impression is that the two businesses could be complementary. Of course, this is an outside-in analysis. Just because I consider Banca Generali the best player in the wealth management, there is great capabilities for the corporate investment banking in Medibank. We bought Intermonte because we believe that you can create synergies, bringing, as I say, corporate investment banking and wealth management closer. So this is clear. And then our business is an economy of scale business. But having said that, from a business perspective, it is really crucial to assess fundamental aspects like governance, business operating models, all the commercial offer, the distribution aspects, and then the financial perspective because it should be necessary to understand the underlying assumption of any synergies. So it's too early to express any opinion on the synergies and on the rationale of the final results of the offer. As I mentioned, this is a people business. So mostly depends on how you think to bring two cultures closer and how you define the future purpose of the potential combination of the two entities. So it's a long journey. It's a very long journey and so from today, Since I've just received a mandate by the Board of Directors, we will try to better understand the rationale and that implication of this offer. For the first one, I will hand over to Tomas.

Thank you, Gianmaria. Let's say that our total capital ratio is still very high because if we compare with the SREP requirement, we have at the end of the first quarter 19.2% of total capital ratio, which is compared with the SREP of 8.5% for SX1 and 13% for the total capital ratio. So we are back basically to the level of 2023. The reduction, which is in the first quarter of 2035, was anticipated to the market because we have the impact, which was again anticipated to the market of the introduction of the new Basel IV. regulation, which has an impact mainly on the operator risk, while the impact of Intermonte is in the range of 2.3 percentage points, and also in this case the impact was anticipated. So I think that there is something that the market was expecting. I can say that also, as Mark said, this is not going to change to have any impact on our dividend policy because it is unchanged. Also, this is a confirmation that going forward, we expect that there will be a growth in the next quarter, which will be basically linked to the net income that we will have quarter by quarter. The last point is that the 90.2% has an implied dividend of the 84% of total net income or dividend payout, which are more or less in the range of 80 cents of net income per share.

Thank you.

As a reminder, if you wish to ask a question, please press star and one on your telephone. Next question is from Marco Nicolai Jeffries. Please go ahead.

Hello, thanks for taking my question. So one on the acquisition of Intermonte. Given that now you consolidated the business, I was wondering if you had another thought about the synergies you can create from this combination and so what's your expectation in terms of contribution in general of Intermonte over the next quarters and then another question on the business plan if I understood correctly you decided not to update the market with a new business plan is this just are you just postponing until you have more clarity of what happens to your bank in the future, or you just won't publish it at all? Thank you.

Thank you.

Let's say that the more we know each other, the more I'm convinced that this is a good deal for us and a good deal for them. business plan of Intermonte and things, in my opinion, are going better than expected. The first quarter, for example, was higher than my expectation, honestly speaking. So, I expected for this year a result that could be higher than what the consensus implied last year for Intermonte. There are plenty of synergies. It takes time. We see some synergies in the short term, some in the medium term, and some in the long term. I always say that this deal is disruptive, will be disruptive for the bank because we are doing something unique. So we are, as I said, I consider the bank the best wealth management, at least pure wealth management company. in Italy and we are providing all our banks with these important capabilities and then in the brokerage and in the trading we see other synergies without considering WebSIM that is an excellent platform. So we were working these synergies and we would have communicated numbers at the end of June. Now, I love to be transparent with the market, so I think that we must provide guidance for the long term, so we will communicate our three-year strategic plan in the future once we fully understand the development of the offer. We will postpone but we continue to work on it.

Thank you.

Next question is from Elena Perini in Tesa San Paolo. Please go ahead.

Yes, good afternoon and thank you for taking my questions. Actually, I've got two questions. The first one is about your performance fees. They were still quite strong in the first quarter, so I would like to know if you can provide us with some information about the distance versus iWatermark. We can imagine that April 1st. was a poor month in terms of contribution and then regarding Intermonte if you can just let us know the main areas of contributions I imagine in terms of well of top line the the trading line and the commission line, and then we will have, I suppose, the staff expenses and GNA and then DNA as regards the costs. But just for a confirmation for updating our model. Thank you.

Thank you.

On the performance fees, of course, you are right, April was a two-hour month. We are launching new strategies. The two general managers are meeting in the network in these days. There is an important roadshow where we communicate all the new products. So we do expect important infos in these new strategies, and they should provide performance fee for the last part of this year. On the stock, we have around 2-3 billion that are very close to their watermark. So depending on the financial market, we could see performance fee again from the next week, depending on the market, of course. In this moment, I would basically confirm the target for the full year in the range of 70-80. And then let's see the market. For Intermonte, let's say that, as I said, we have been working to the business plan for the last few months, and we haven't completed yet the analysis, but basically we confirmed what we announced during the previous conference call. We see synergies in the brokerage fee space. We see synergies in the certificates, structural products and derivatives. And we do see synergies in the combined model let's say, wealth management slash investment banking. So the result is about probably M&A fees, but even more important, inflows. But we will provide details in the coming months, as I said, after more clarity on the offer. Thank you.

Thank you. And if I may, I've got another question about your management fees, the pure management fees. Actually, they were basically flattish versus the fourth quarter. We can expect, I imagine, some pressure due to lower fees. average assets under management for the second quarter and then we can expect according to market trends recovery in the second half of this year just to have an overview of the trend of this very important line of your P&L. Thank you.

On the stock, the measuring field was impacted negatively by the volatility of the market with recovery in these days. So depending on the next week's it could be that with the recovery, we recover also the management fees. Then there is some crowd and see some active management. So the financial wrappers and other solutions are positioned with a more prudent profile. So this is tactical. And more in general, it depends also on the influence. They say that our perception looking at numbers of April and the beginning of May, the reaction of the financial advisor network is positive, but most depends on the next weeks in terms of markets. But I don't see, in this moment, a particular negative impact on the overall management fee, neither margin nor commission.

Okay, thank you very much.

Next question is a follow-up from Luigi Debelli's Equitasim. Please go ahead.

Hi, thank you. Two follow-ups, if I may. The first one, could you give a quick update on the BG Swiss private bank project? And the second question, one of your competitors has highlighted strong client activity and influence into ETFs. Are you observing a similar trend within your client base and how do you plan to capitalize on this growing interest? Thank you.

Thank you.

On the BG Swiss, we are in line with our expectations. We are close to important recruitment. As I said, the onshore business mostly depends on recruitment or acquisition of smaller external asset managers. I don't think that the current condition, the current offer will impact negatively on the negotiation process. For the, let's say, the developing from the Italian perspective of this business, we have implemented almost all the products we had to launch. and we start seeing positive numbers. So we said that overall, I'm confident there is a regulation change, regulatory change, and we are studying the implication, and we are considering the possibility to open a branch in Italy. This could accelerate or impact negatively our targets, depending on some conversation with regulatory. As of today, I think it will be positive for us. In terms of ETFs, you know we have a significant amount of ETFs. We have volumes of around 25, 30 billion per year of ETFs. And in the senior strategy plan, one of the projects was about how to internalize and part of the margins generated by these volumes. I used the past, but let's say that we have been working, we will continue to work on it, despite the three-year strategy plan. We see some synergies with Intermonte on this specific topic, and we have some strategy falls.

Thank you. Next question is a follow-up from Marco Nicolai Jeffries. Please go ahead.

Hello, quick follow-up. Can you please remind us your guidance in terms of NII costs and also net inflows? Apologies if you already said the last one. Yeah, just a quick reminder on the guidance.

The current guidance, and we say that we would update this guidance during our strategy plan, but we say the current guidance that we communicated in the previous conference call is of a net interest income above 300 million euro, of a growth of the cost base of the operating cost, sorry, the core operating cost in the range of 7-8%, 6-8%, and the third one was net investment The net inflows, we said the total net inflows above $6 billion. Total net inflows in asset under investment above $3.5 billion and are all confirmed. Thank you. You're welcome.

For any further questions, please press star N1 on your telephone. Mr. Mossa, there are no more questions registered at this time.

Fine.

So thank you for attending our conference call and have a good weekend.