Banca Mediolanum Unsp/Adr

Good day and thank you for standing by. Welcome to the Banca Mediolanum 9 month 2025 results conference call. At this time all participants are in listening only mode. After the speaker presentation there will be the question and answer session. To enter the queue for questions please press star 1 1 at any time. You will then hear an automated message advising that your hand is raised. To withdraw a question please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Alessandra Lanzone, Head of Investor Relations. Please go ahead, Madam.

Hello, everyone. It's a pleasure to meet with you again. As you've seen, with a strong third quarter behind us, our nine-month picture is in good shape. And today we are going to take a closer look to our results, what's powering them and how we see the road ahead. Just a quick note before we start. You're welcome to ask a question at the end of the presentation in the language of the line you're calling from. We will answer in Italian, as usual, with a real-time English translation. With that, I'm pleased to turn the floor to our CEO, Massimo Doris, who is joined by our CFO, Angelo Lietti. Massimo, over to you.

Thank you Alessandra, and good afternoon everyone, and thanks for joining us. Let's start with the context. Nine months in, inflation in Europe returned to around 2%. Interest rates remained restrictive, equity markets advanced unevenly, bond yields were volatile, currencies were choppy, and geopolitics remained a persistent headwind. In this kind of environment, discipline matters, and steady execution is rewarded. And that's where we stayed focused. We planned for this noise and kept on doing the fundamentals well, prioritizing our proven trademark levers over one-off moves or tactics. And this discipline came through in our nine-month numbers. From earnings to revenue, the trend is up. Net income up 8%, operating margin expanding 5%, and an 11% lift in the net commission income. We also reached two record milestones that we are proud of. Over 150 billion euro in assets and more than 2 million customers. Another strong year is shaping up. Our nine-month performance reflects preparation and a simple aim to provide our customers with the same dependable, hassle-free service we never fail to deliver. Two points stand out. First, we deliver strong overall net inflows underpinned by a 21% year-on-year surge in managed asset inflows. This supports healthier recurring fees and also strengthens customer relationships. Our family bankers continue to convert customer engagement into advised investment solutions, enhancing quality as much as quantity, increasing share of wallet and improving retention. Second, our revenue mix proved well balanced. As the interest rate tailwind softened as anticipated, recurring fee income increased markedly, thanks to higher average managed assets more than compensating for lower NII, while protection policies and credit volumes picked up year on year. Below the line, we stayed disciplined on costs while investing in growth levers that matter, namely technology, network quality, and the customer experience. Capital and liquidity remain robust, well above regulatory thresholds, giving us the flexibility to keep investing in our business in all market environments while delivering attractive and rising shareholder returns. Our business in Spain is progressing in line with plan and in breadth without distracting from our core Italian focus. As we enter the final quarter, our priorities are clear. Keep leading in flows with a biased asset bias. Protect profitability through revenue mix and discipline. Sustain high quality customer acquisition as well as network growth. And execute with the same level of rigor that has driven quarter by quarter improvement in operating margin this year. Let's walk through the nine-month details. First up, economic and financial highlights of slide number four. Let me start with the headline number. Net income came in at €726 million, 8% ahead of last year, mainly thanks, as we said, to a material recurring fee growth driven by strong inflows into managed assets. Our core business set a high bar. Contribution margin surpassed 1.56 billion euro and operating margin 891 million euro, both advancing by 5% year on year. We solidly outperformed the interest rates headwind. Maintenance income fell 5% to 582 million euro, yet our results came in stronger. Q3 added significant value year-on-year. We anticipated that net interest income would narrow the gap versus last year, and it is now moving toward our full-year guidance for 2025, which we have further revised to end up closer to the results of 2024. Our working view is that three-month Euribor averages 2.17% in 2025, Notably lower than the 3.64% average in 2024. The impact, however, is partially offset by a more favorable volume mix, supported by increasing liquidity from customer deposits. And looking ahead, 2026 points to a higher net interest income. Importantly, while our commercial initiatives put near-term pressure on NAI, they fueled growth in net commission income, which at the nine-month point climbed 11% to some €967 million. Every component of gross commission income posted strong gains, as expected recurring fees contributed the largest share. In fact, combined management and investment management fees rose to over €1.24 billion, marking a solid 10% rise over the same period last year. This expansion was underpinned by a record net inflows into managed assets. which lifted average assets by 13 billion euro year on year. This came despite market volatility and a weaker US dollar weighing on Q2. However, Q3 saw a supportive market backdrop. In fact, as you can see in slide number 9, there was a solid uplift in Q3, 7% higher than Q2, benefiting from constructive markets as well as strong flows. Some volumes boosted the recurring fee income. At the same time, a somewhat different mix favoring fixed income funds, together with increasing equity-oriented influence via Intelligent Investment Strategy, which begins in lower fee money market funds, compressed the average recurring fee from 212 to 202 basis points year on year, in line with our expectations. Let's now focus on the key ratios across the first 9 months. The cost-income ratio came in at 37.2%, edging lower versus H1, as could be expected given the cost seasonality. There is also a cost-efficiency component that should support year-end, and we can now confirm we'll finish out 2025 below 40% as per our cost-income guidance. Acquisition costs measured against gross commission income held steady quarter after quarter, ending the nine-month period at 34.3%. Finally, the cost of risk, annualized on a 12-month rolling basis, stood at 15 basis points, and we expected it to normalize toward around 20 basis points by year-end, consistent with our guidance. Slide 8 provides more detail on the other income statement lines, and let me flag a few. Banking service fees climbed 29% to nearly €182 million on the back of strong certificate sales, especially in Q2, with some follow-through in Q3. As you know, certificate fees are booked upfront in the P&L. Net income on other investments was €23.5 million, up 29% year-on-year, reflecting a larger Q2 Mediobanca dividend and higher valuations on our Treasury portfolio after Italy's rating upgrade. The 50% increase in provisions for risk and charges reflects the same dynamics we saw in H1. On risk provisions, last year's favorable legal resolutions led to one-off partial releases that were not present this year. For natural indemnities, the increase remains volume-driven. Higher commissions naturally require higher provisions. Fair value showed a significant improvement to €23.4 million from €10.3 million last year. The stake in Nexi was fully disposed of in Q2, leading to a substantial uplift from the negative mark recorded in the same period last year. We also saw a positive contribution from Treasury trading activity. Let's turn to slide 5 for a brief look at the business results in the first 9 months. Commercial activity was strong, lifting total net inflows by 14% to €8.16 billion, supported in large part by the success of our time deposit campaigns. Notably, inflows came from both new and existing customers, underscoring the effectiveness of our marketing and acquisitions engines. The clear standout, however, was managed assets, which flows at which flows of €6.58 billion, up 31% year-on-year. And with October now in, the year-to-date figure stands at €7.3 billion. We are firmly on track to reach our €8 to €8.5 billion guidance in minus asset inflows, topping the €7.6 billion record from 2024. As shown on slide 34, for the first nine months of 2025, we again topped Assorety in managed asset net inflows, extending a four-year leadership streak. And even with the updated classification, which also includes the lower margin segment of administered assets with fee-over or fee-only pricing models, we came in second place, only a touch behind Fideurum. Let's now refer back to slide number 5. As we said at the beginning, we crossed the 150 billion milestone in total assets, ending September at 150.4 billion euro, 9% above year-end. The credit book also posted growth, reaching €18.44 billion, with asset quality remaining solid, as shown by an MPL ratio of 0.78%. And this was thanks to loans granted, which increased 37% year on year, totalling €2.79 billion. Gains were also solid in general insurance growth premiums, up 23% to 114 million euro, driven by stand-alone policies, but even more so by a renewed uptake in loan protection policies in line with mortgage expansion. Turning to slide 6, we crossed the 2 million customer milestone. adding 147,700 new customers and lifting the base up 4% at the end of September. Our family banking network at the group level expanded in step, also up 4% to 6,682. As we noted earlier, Intelligent Investment Strategy gained clear momentum. About €4.4 billion is currently parked in money market funds, set to transition into equities over an average of 3.5 years. Since the beginning of the year, €1.5 billion has been added, raising the material 43%. Another 2.9 billion euro is slated to move into mutual funds over the next 12 months, as shown on the last two lines of slide 6, including some 800 million from double chance deposits and over 2 billion from installment plans flows, which continue to build steadily. Our trademark model keeps proving its value. It pairs customer convenience with long-term consistency for the bank, supporting recurring fees and strengthening the durability of our revenue base. Let's move on to another key pillar of our model, balance sheet ratios shown on slide 7. Nothing dramatic here and by design. Capital strength is one of our defining advantages and a cornerstone of your long-term confidence in Banca Mediolanum. For the first nine months, the full set of capital ratios reinforced an already robust balance sheet, comfortably exceeding regulatory thresholds and sector averages. Our C to M ratio moved up to 23.2%. The exit from the stake in Mediobanca is now fully incorporated, contributing slightly above one percentage point. In light of this, the Board of Directors has resolved to pay a more generous interim dividend this year, namely 60 cents per share, which indeed factors in this one-off benefit from the Mediobanca sale we executed in July. The interim dividend will be paid November 26 and corresponds to a total of 443.5 million euro. Let's take a moment to focus on our family banking network in Italy, which crossed the 5,000 mark, reaching 5,046 financial advisors in the first nine months. Since January, 245 new colleagues have joined us, many with prior experience as branch managers or customer relationship managers in other sectors. We also welcome a strong pool of young talent through the project NEXT, our key growth lever to shape the network of the future, ensuring generational continuity as well as enhancing the productivity and profitability of our senior bankers. Our banking consultants are top graduates who begin with a six-month executive master at our corporate university. Finishing with the FA certification, then go straight to hands-on work alongside a senior private banker or wealth advisor, with their remuneration covered by the senior. The numbers in slide 37 reflect the success of the project. As of today, 556 banker consultants are already active in the network. with an additional 207 currently in training. We expect to overcome 800 by the end of 2026. This strategic project is already paying off. For the almost 700 senior bankers supported by a banker consultant for at least 12 months, productivity has stepped up materially. These were already ahead of their peer group, and now the gap has widened sharply. The advantage in minused asset inflows has increased six times, from plus 7% to plus 43%, about one and a half times in loans, from plus 28% to plus 42%. and almost doubling in protection policies from 29% to plus 54% and again almost doubling in terms of customer acquisition from plus 41% to plus 80%. We are more or less satisfied with the progress so far and confident about what comes next. Our network is set to keep growing faster, and we see clear upside in productivity. With that in mind, let's turn to slide number 30, which tracks the last five years of productivity in terms of average assets per banker for the 1,000 private bankers and wealth advisors who make up the top tier of our network. As you can see, at €64.2 million average assets per banker, we are already almost double the industry average , which is €34 million. This gap has expanded in recent years, underscoring our strong commitment to the network quality, as well as higher recurring revenues per banker. A productivity edge that thanks to our dedicated efforts we expect will keep trending higher. Now let's turn our attention to Spain by commenting on slide number 32. Given Spain's impressive step up in volumes, we chose to double down on acceleration to achieve a real step change in scale. This resulted in higher level of costs mainly linked to a scaling up of our platform, increased activity all over the country and incremental marketing spending. Therefore, the effect on the P&L reflects a cautious investment choice and aimed at supporting growth and building long-term value. It's also worth noting that net interest income dropped by 24% compared to the same period last year, and given the significantly smaller scale of our operation in Spain, the increase in net commission income there was not sufficient to offset the gap. Operating margin reached 44.5 million euro, reflecting a 32% decrease compared to 9 months last year, mainly due to the factors we just mentioned. Net income stood at 38.9 million euro, 28% lower year on year. Total assets grew by 14% since the start of the year, reaching 14.8 billion euro. with managed assets rising 15% to nearly €11.2 billion over the same period. Net inflows stood out once again, totalling €1.54 billion, 68% higher than last year. Managed asset inflows contributed €1.37 billion, an impressive 45% increase. On the lending side, the credit book expanded further, reaching €1.67 billion, an 11% increase versus year-end. Meanwhile, the number of family bankers increased up by 1%, to a total of 1,629. But what matters here is the material increase in productivity in the past five years. Just like the domestic market, average assets in their portfolio went from €5.5 million in 2020 to over €9 million today. Finally, our customer base in Spain has grown to 270,750, marking a strong 6% increase since the beginning of the year. In closing, let me first recap our guidance for 2025. Net inflows into managed assets at around €8.5 billion. For 2026, volumes are expected to remain similarly strong, assuming normal market conditions. Net interest income down some 1% compared to 2024, and based on current yield curves, we project an increase in 2026. Cost income ratio below 40% and cost of risk around 20 basis points. Dividend per share to increase compared to the previous year. Of course, subject to shareholders meeting approval. This dividend talking about 2025, of course. Looking ahead, analysts broadly point to a strong net inflows into managed assets, resilient recurring fees, and solid operating and commercial momentum into Q4. and I couldn't agree more. As we wrap up, I'd like to confirm that our recurring business engine is tracking last year's peak run rate, which reinforces our positive outlook for the year ahead. Our priorities continue to be growing the network and enhancing the productivity of our family bankers, delivering sustained net inflows into managed assets, expanding the customer base, building durability in any context through consistent execution, sharing the value we create with our shareholders through dependable dividends. 43 years on, we continue to create value in the same way, a consistent model, a clear strategy and real delivery, built on a long-term vision, our ownership-oriented people and daily customer trust. Thank you for your attention and Alessandra is over to you.