Banca Generali Spa

Good afternoon, this is the Coruscall Conference Operator. Welcome and thank you for joining the Banca Generali 9 Months 2025 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.

Good afternoon, and thank you for attending our third quarter result conference call. Let's start by saying that despite the challenges of the last quarter linked to the tender offer of Mediobanca, we achieved very strong financial results. with strong support from recurring commission. Also, the commercial activity was very solid, thanks to the ongoing contribution of the existing sales force. Today, we're going to focus on two major projects, Alleanza and Intermonte, and we'll spend a few minutes also on the main project on the core business. But let's start, as usual, from numbers. So moving on to page four, net profit. We closed the third quarter with net profit at almost 115 million euro, great part of which driven by recurring net profit. And also the variable component is catching up and more good news for the fourth quarter only. Net profit well supported by all the components. Page 5, we can start with the net financial income. As you can see, the overall net interest income closed almost flat quarter on quarter. This is the result of expanding assets. and just a slight reduction of the net interest margin. In particular, the net interest margin closed at 200 to this point, and the overall contribution for the quarter of the net interest income was 81 million. On the net interest income, now we are confident to close at around or above 301 million, and we are confident to confirm the same level also for next year. Moving on to page six, total gross fees. As previously mentioned, very strong result from the recurring component of the P&L. As you can see, the overall contribution for the third quarter was above 280 million, while variable fees Close higher, quarter on quarter, close to 30 million. And we already had 20 million euro in the fourth quarter of performance fee. And almost 50% of our assets in Luxembourg are close or at the high water mark. Deep diving the gross fees, the recurring component, page 7. Let's start from the investment fees. Here you have the same trend as the net interest income. Asset expansion in stable margin. We are confident to confer margins in the range 1.4, 1.42 for the end of this year, but also for next year. And again, we are confident to see an expansion of the overall asset underinvestment. Moving on page 8, the other leg of those current fees, so other fees. Here you have positive news. First of all, of course, the numbers are stronger thanks to the inclusion of Intermonte, but also once we compare numbers like for like, you see solid brokerage commission. A recovery of entry fees, and we will dive on the reason behind the acceleration in September of certificates in particular, while banking fees close a little bit lower due to a review of the prices of the current account. But let's say that we are confident to see very robust entry fees for the fourth quarter and steady growth in the brokerage commission. So the overall Revenue are very strong, confirming a positive trend, confident to maintain and stabilize the net interest income, confident to expand the recurring fees, both thanks to expansion of asset underinvestment and solid numbers for the other fees. Moving on to the cost side, page 9. Here is business as usual. Payout ratio is in line with guidelines. or a little bit lower due to some positive seasonal effects. So overall payout to the network below 46. Overall payout to third parties around 6%. So here no news, good news. Very confident to confirm the current targets. Page 10, operating costs. Also in this case, no surprises. We have some non-core items linked to the setup cost of new business line, the insured banking, and also for the tender offer received from MediBank, excluding these components. Let's say that overall total operating costs are well under control, focusing on core operating costs. Again, no surprises. Here it's important to highlight the fact that we set up the AI business and we set up the insured banking business. So part of the costs are for investment in new business line and we will see later some numbers on our projection of this new business line. Page 11, the ratios for operating costs on total assets achieved the lowest level, like for like, so 0.27, and cost income at or close to the lowest level, always like for like. Page 12, we have the usual sum up, so we are pretty proud of the results of the third quarter, considering also the uncertainty of the time, solid operating profit, also excluding performance fees. We recorded also better non-operating charges, basically driven to a lower regulatory contribution to banking and insurance funds, and the overall tax rate was a little bit lower at 24.2, so this allowed us to achieve the best result ever in terms of recurring net profit at 273.8 million euro. Next chapter, balance sheet, as I say, is a game of assets expansion with slightly lower margins. In particular, on page 14, you can see that the cost of funding is slightly down in line with the trend of the interest rate of the markets. And you can see that the overall deposits are higher, 2 billion year-on-year comparison. Page 15, same trend. So the overall interest-bearing assets up by 2.1 billion, and the yield on interest-bearing assets slightly down. Page 16, we have the capital liquidity ratios. Also here, in line with the trend already communicated during the year, so total capital ratio close to 20%. Also once considered the impact of the CRR3 and the first time consolidation of Intermonte, this contribution was partly offset by higher net profit. And as usual, the dividend provision is in line with our current policy, so at 83% of the net profit. Leverage and liquidity coverage ratio and net stable funding ratio dwell above the direct requirement. Let's go in the third part, so net inflows, assets, and recruiting. They say that quickly commenting total assets, it was about 110 billion euro, more than 73 billion invested in asset under investments. Page 19, you can see the breakdown of asset under management. First of all, confirmation of very strong presence of wrappers, about 50% of the managed solutions. acceleration in-house financial wrappers, acceleration in-house funds. This is driven basically by the net inflows. Page 21, you have the usual presentation of the inflows. Starting from page 20, you can see that the asset underinvestment accounted for almost 50%. The greatest part coming from asset undermanagement. And if you focus on asset under management page 2.1, you see the most comes from financial wrappers and in-house funds. So you can see the ongoing rebalancing from third-party funds to in-house funds. Now they say that in-house funds account for 50% of the overall retail funds, and more will come. Phase 2.2, you have the net inflows by acquisition channels, very solid numbers from the existing network, despite three, four months of challenging markets, driven by the tender offer, so very positive, and also recruitment. went pretty well. Of course, the mix is more in favor of young talent, more difficult to recruit during this uncertainty. But now, I can say that in October, we start again recruiting also very senior partners. And again, also in this case, I'm pretty confident to see strong results in the next month. Page 23, we close with the October numbers. October numbers were very strong, 1.2 billion euro. Also thanks to recruitment in Switzerland, we recruited three senior bankers, almost 800 billion euro, a million euro, three top senior bankers, very confident that we will contribute to the success of our chief initiative. Also, the Italian contribution is pretty solid, and as I say, we are gaining momentum in recruitment, so confident to close the year very well. But now let's enter the last part of the presentation, where I will focus a little bit more and we'll dedicate more time, as it's really important to start giving some numbers on Intermonte and Allianz. Page 25, you see a box on Banca Generali, Banca Generali core business, just to say that today we will focus on Intermonte Alleanza, that we are continuing investing also in our core business. First of all, if you consider our major assets, so the financial advisors, we're very confident to enhance our financial advisory network thanks to some specific projects, very important, The first one is the project related to the young talent. As you saw in the numbers of recruitment, we are more and more focused on increasing, accelerating numbers of young financial advisors. The second main project in the distribution channel is about teams, so the possibility to work together, both senior bankers or senior bankers with young talent. And we are working to increase the personalization of this contract among bankers. And this contract will be useful also for our insured banking project. And third, probably even more important, you know that we have some specialization in the network. For example, we have the sustainable advisor. Numbers are almost doubled in just a bit more than one year. We are focusing some bankers on the investment corporate banking capabilities. It's a way to fidelize more and more our financial advisors, giving them the possibility to focus on the topics they prefer. This is about how to enhance the financial advisors. On the product side, very focused on our asset management capabilities. very confident to expand numbers for our luxury platform just because we launched a new family of products one example in the last three weeks we launched our first initiatives of protected farm and some other initiatives on entering the equity market uh gradually We collected more than €200 million in three weeks, and I'm sure that more will come in the next week. So it's all about internalizing margins and developing our Latium platform. And we have been working for the last six months in launching also dedicated initiatives in Ireland for active ETFs, and I will dedicate more time on these initiatives in the next conference call. But now let's focus on Intermonte and Alleanza. So starting from page 26, two strategic pillars of the acquisition. You remember I said that for us this acquisition was a game changer. It's a game changer from a revenue perspective and margins. as we expanded our capabilities in global markets and we started seeing the first results. I was mentioning certificates. October has been the strongest month in certificates, both in terms of volume and also in terms of margins. Part of the dividend structure was closed by Intermonte, and thanks to the expertise in these assets, I'm sure the numbers will expand in the next month. So expertise, more expertise in global markets, as well as the possibility to expand the business of our financial advisors in the corporate investment banking. And in this case, again, some numbers, the business is already there. We organized more than 130 meetings with top entrepreneurs, already clients of the bank, and we are close to delivering some mandates with these entrepreneurs. So the potential is very huge. Why we are so confident on this deal? In page 27, you see some numbers. You know that the total equity, not listed, so small media enterprise basically, amount to 1.5 trillion euros. And if you look at our client base, we have more than 3,900 clients, entrepreneurs, with more than 160 billion euros of estimated value. So in our portfolio, in our clients, we have more than 10% of the overall equity not listed, small and medium enterprises. And we are the best positioned in terms of distribution. We have more than 600 financial advisors with more than 50 million, average 100 million. So we have the clients, in our portfolio, and we have the competencies and the professionals to provide investment services. And we have Intermont, of course. And remember that one major priority for the private banking will be the generational wealth transfer. And some projections estimate at more than 300 billion euros of transfer within 2033. So page 2.8, you see the projection of revenues of Intermonte in the next five years. We are confident to more than double the overall contribution of net banking income of Intermonte. So from 42 million euro at the end of 2024, when we close the deal, a range of at least 89 million euros, three major components, asset under custody and trading, so what we're talking about, what I was dealing with previously, so structural products, certificate derivatives, managed products, the example of protected fund launched in October, and investment banking. And as you can see, bottom of the page, cost income, end of 2024, 80%, end of 2030, less than 60%. So it means that the extra net banking income has a cost income that is almost in line with the existing banking and cost income of the bank. So it's a very good operating leverage in this case. So Intermonte, as I mentioned, will be something very important for the bank, disruptive, because we have the clients, we have the competencies in the network, and now we have also the capabilities, the internal capabilities to work on the entrepreneurs. The second project, page 2.9, is about Alleanza. And let me give you some numbers of Alleanza. The portfolio of the clients of Alleanza amounts to almost 2 million clients, of which more than 55% are foreign clients. They serve these clients through a paid agent, an insurance channel, with almost 10,000 distributors. Of these 10,000 distributors, 2,700 are registered to the financial advisory book. So they could work as financial advisors, but actually they don't have a mandate. So actually they can just offer insurance products. And the quality of this distribution network is very high, and you can see how they improved their results over time. Now they are the third player in terms of volumes every year. So they said it is a very performing distribution network. Bottom left, you see probably the most important part of this slide. The overall life reserves account for more or less 40 billion euro. Internal projection estimation of the potential of the clients gave a number of around 170 billion euro. So it means that the existing portfolio, the existing client, manage more than 120 billion with other intermediaries. Basically, banks and posse with banking products and asset management products or asset under custody. So, here the opportunity is pretty clear. Allianza can manage work on a wider range of products in terms of bank their clients, in terms to, let's say, to reach the clients with more sophisticated solutions. So also, let's say, balancing the bank insurance project. You know, all the banks are trying to penetrate the insurance business. So this can be seen also as a defensive move. We will start banking their clients. So expanding revenues and defending their existing portfolio. On our side, we will enter the affluent business without distracting our target bankers from our core activities that are target clients. And the combination will allow us to catch up with the penetration in the affluent segments. how we can offer at page 36 where the details to a page sorry no stories in the cup we will offer both banking products as well as we will extend the distribution of our insurance wrappers to their clients so you know one of our capability has been to set up and to develop a dedicated insurance wrapper in which you can combine the best solutions of external asset managers. So we will provide support to the Alianza network and advise them with portfolios to distribute these kind of solutions also for their clients. And the numbers we expected to achieve are significant. I mentioned in previous meetings that we do expect a sort of penetration of 1% of the potential of the client per year. And so here you see the projection in the case of Alleanza for the next five years. We are confident to achieve at least 7 million euro of assets, of which 3, 3.5 invested in banking and asset under custody products, and 4, 5 billion euro invested in these insurance wrappers, of which almost 3 billion euro invested in, let's say, BG fund management products. So we have, of course, the business come from the advisory fees, the advisory services we provide in this solution, and the underlying of the insurance business. The overall impact in terms of net banking income is in the range of 40, 50 million euro, and the cost income, conservatively, we literally say the cost income of the bank, but I'm also confident that it exposes cost income will be lower. So as you can see, also Alianza is transformative because it will allow us to expand also in the affluent business, focusing on a third-party distribution, but very close to the bank. We share the lion. And Intermont is an accelerator, is a new engine to accelerate our existing business for private clients. So the combination will accelerate the trajectory of our growth path. Page 3-2, there is just a slide on our target for Vizia, commercial targets, just to say that, you know, the tender offer of Medibank had some uncertainty during the summer, and despite this challenging time, We announced some targets at the beginning of the year, and now I can say that I'm confident to overachieve in terms of total net inflows. So to close, definitely higher than 6 billion euros announced at the beginning of the year, and also to confirm the target in terms of product mix with asset underinvestment above the 3.5 billion euros. And as I mentioned, I start seeing also very good sign in recruitment activity, and while the existing Salesforce has continued to work very well during all the months of this year. And now I will hand over for the Q&A session.

Thank you.

This is the Chorus Call Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star N1 on their touch-tone telephone. To remove yourself from the question queue, please press star N2. Please pick up the receiver when asking questions. Anyone who has a question may press star N1 at this time. We will pause for a moment as participants are joining the queue. First question is from Giovanni Razzoli, Deutsche Bank.

Good afternoon to everybody. I have two clarifications and one question. The question is about the trend of inflows and recruits. I wonder whether during the offer of Mediobanca during this uncertain period, you suffered the exit from bankers and if so, whether the effects of these exits have already been fully factored in into your monthly flows so that from now on, from October onwards, the commercial data of Banca Generale will reflect only the ongoing business and the new recruits with no more impact from previous events, so to say. So that's my first question. And then I have two clarifications. The first one is on the insured banking project. Is it fair to say that the network of the agents of Alleanza represents around one-third of the total of Assicurazioni Generali, is my understanding correct? And the last clarification is on the guidance from net interest income. I apologize, but the line was bad, Gian Maria, when you mentioned this. You said that for 2025 you expect an NII above 320 million euros, right? Thank you.

Thank you, Giovanni. First of all, inflows and recruitment. You are right. Of course, during the summer we had some exits. From June to September, the overall contribution of net recruitment, so in less out, was almost zero. I'm pretty confident that we have almost factored all the exits and I start seeing the new colleagues. So from November, I can say that we are again in business as usual with some positive cues in terms of recruitment. And from that point of view, my optimism. So I don't see more extra impact. For the initial banking project, I can give you a rough estimate We say that overall general distribution channel account for 50% of the whole industry, should be around 100 billion. So being Alianza 40, I would say that is more or less 40%. But this is, I should ask generally the right number. If I have to guess, I would say 40%. So slightly above a third. For the guidance in terms of net interest income, you are right. We confirm for this year net interest income equal or above 320 million euro and the same level confirmed for next year. Thank you.

Thank you.

Next question is from Gianluca Ferrari, Mediobanca.

Yes, hi, good afternoon. Two for me, please. The first one is on the 40-50 million revenues on the insured banking project in 2030. I was wondering if you can give us some shorter, let's say, targets for 2026 and 2027, how much will be the contribution in 2026 and 2027. The second one is on the contribution, again, on the insured banking. You are targeting 3.5 billion of deposits, right? So with 200 basis points of NIM you are having today, I'm not getting to the 40, 50 million overall contribution. So is there a split with Alleanza on this NII or I'm missing something here? Thank you.

Thank you Gianluca. Let's say that we do expect to reach a sort of steady growth in the Allianza business in the second part of next year. So you will see a phase in. So it's reasonable to think that for each year we will gain one percentage point of the potentiality of the markets. For the next year, they say that we reach the phase-in. So it will be a little bit less, but we already started. And we start seeing some positive numbers already now. We are piloting it. So it will take no more than six months to achieve the speed, the normal speed. So you can more or less... spread these numbers in the next five years with a phase-in in the first half of next year. In terms of margins, we say that when we mention banking products, you have to consider that part of these assets are current accounts and part are assets under custody. So as a conservative assumption, we estimate a margin of around 80 basis points for that part of the business. Thank you.

Okay. Thank you.

Next question is from Luigi Debellis, Equitasim.

Hi, good afternoon. Three questions for me. The first one on Intermonte, so could you elaborate a little bit more on the main synergies expected from the integration, in particular regarding asset under custody and trading products? And are there already some synergies realized in 2025? And regarding the SMEs, are there specific new services or products that you plan to launch for this client segment? The second question on the insured banking with Alleanza, so 7, 8.5 billion in volumes by 2030, very interesting opportunities, but what are the main challenges you foresee in reaching these targets? And even in this case, are there early signs of cross-selling effects between banking and insured products? The last question on the market environment, the recent M&A activity in the sector, how do you see Banca Generali's positioning evolving in the Italian private banking landscape over the next few years? Thank you.

Thank you. So in terms of synergies, let's say that all the business of structured products will be impacted positively. We estimate a run rate of structured products of around 1.5 billion euro per year. Primary market, 80%. Secondary market, 20%. And we can internalize a good part of these structured products for the derivative components thanks to Intermountain. So these are the major synergies that I can see. and then some efficiency also in the negotiation of ETF and equity. Yes, we start seeing some synergies already now. We started with the first 50 million euro structure product in these weeks, and the initiatives are very successful. So we will start seeing some revenue synergies on, let's say, the capital market part as soon as the fourth quarter. you have a phase-in, we will reach the run rate probably in Q2 of next year. We have some implementations, some technological implementations to reach the run rate. In terms of Alianza, I consider that we launched the pilot a couple of weeks ago. So, probably too early to see the results. I can see that the communication was great, we organized conventions, and my perception was a great enthusiasm, just because, I mean, it's pretty normal to think of cross-selling and synergies between Banca Generali and Alianza. Some good practices, consider, for example, the successful case of the financial planner of agencies, so, you know, we have this dedicated network in the agency of Generali, We almost doubled the numbers in the last three years. So this is an example of collaboration. This is working pretty well, and I'm pretty sure that we're going to accelerate it in the future. So there is a positive momentum for insured banking. Also, it's a defensive move. If you consider the announcement of the major banks, they are all about bank assurance. So you have to protect your existing business, and the first step to protect is to manage the current account. So I'm confident that it will be a priority also for the distribution channel, for each professional. And so there is the same interest in understanding and speeding up this kind of project. And it will be positive for Alianza, diversification of revenues, a higher penetration in the shareholder world of their clients, and for Banca Generali, leveraging a third-party distribution to enter the affluent market. So I don't see, honestly, challenges. I'm very confident.

Thank you. Next question is from Marco Nicolai Jeffries.

Good afternoon. First question on NII, if I understood correctly, 2026 is going to be stable. I was just wondering if you give us, if you can give us a bit of the drivers here, because with some deposit growth, you should actually increase your NII compared to 2025. So what am I missing there? And another question on the Intermonte synergies, I see in the slide you mentioned 10-15 million by 2026. I was wondering how much of them you expect by, say, 2027 or 2028. Another question is on the ERAP tax base. If I look at your profit before tax, how much of it would enter into the ERAP tax base? Obviously, my question is linked to the proposal of additional tax on banks by the Italian government. Thank you.

Thank you, Marco. Just to complete the answer for Luigi. Sorry, Luigi, I missed a couple of questions. Cross-selling for SME new services. Let's say that the 130 meetings were about M&A and Equitable capital market and debt capital market. So bread and butter for investment bank. For us, it's a blue ocean because it's the first time that we offer these kinds of services. So nothing new that is consistent with the propositional capabilities of Intermonte. M&A scenario, they say that we are very focused on internal growth. Thanks to Intermonte and Alleanza and all the innovation in the core business, I'm sure that we don't need any activity to grow. And let's see if we can accelerate in the initial banking business. Moving on to Marco. Marco, as usual, we apply a conservative approach. So in our projection, there is a slight expansion of the deposit, a slight reduction of the net interest income. Let's say that we are in the order of 5%. So 5% of expansion of the asset, 5% of reduction of net interest income of the margin, and you have a stable contribution. But again, then we will see it if we can be more positive on the client deposit. And the second question was about ERAP. Tom, I will hand over to Tommaso Verruus.

Thank you, Gianmaria. You see that we expect that the impact of the 2% on ERAP will account for 6, 7 million per year. So it's not... a dramatic problem for our scenario, we have to consider it on the other side, that we have the benefit on the dividends, which is probably around 6 million per year. And so the two things are mainly net impact really negligible in our scenario. You can estimate between 1 and 2 million per year.

Thank you. And instead on the Intermont synergies, like how many, how much of them we can expect by say 27 or 28?

I would suggest a linear projection. Okay, thank you. I'm sure it will accelerate, but we say that a linear projection, it will work in my opinion.

Thanks. Just a quick follow up on the NII. Can you remember us in your portfolio? what are the bonds that you own maturing and the rates of these maturities in 27 and 28? Thank you.

Yes, we have an average maturity of the portfolio which is around less than four years, so starting at From this data point, you have to assume that every year we have around, in 2026 for example, we have more than 3 billion of bonds that are going to expire and a couple of billion in the next year. So we are very diversified from this point of view. And also the duration is still in the range of 1.4. This is the profile that we have today. Consider that the speed of the portfolio is around 60%, 6% rate, and 40% on floating rate.

Thank you.

As a reminder, if you wish to register for a question, please press star N1 on your telephone. Mr. Mossa, there are no more questions registered at this time.

Okay, so just to say thank you for every participant to our conference call. Hope to see you soon. Bye.