Banca Mediolanum Unsp/Adr

Thank you for standing by. Welcome to Banca Mediolanum Q1 2026 results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a 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 your 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. Thank you.

Hello, everyone, and welcome to Banca Mediolanum's conference call. Thanks for joining us today. We are only at the beginning of the year, but Q1 offers already a meaningful first read on a very active start to 2026. The strength of our business, the drivers behind the numbers, and the trends of our performance. For the Q&A session at the end, please ask your question in the language of the line you're calling from. As usual, we respond in Italian, but with a simultaneous translation into English available. With that, I'm pleased to hand this over to our CEO, Massimo Doris, joined by our CFO, Angelo Lietti. Massimo, over to you.

Thank you, Alessandra. Very good afternoon to all of you. We started 2036 in a context that was already complex, shaped by geopolitics, shifting rates expectations, and policy developments. As the quarter progressed, market volatility increased, particularly from March onwards. But the border point is that volatility is no longer an exception. It has become part of the baseline we operate in. In this environment, the key question is not whether uncertainty is present, but how customers respond to it. So far, the evidence is clear. Despite market volatility, we are not seeing our customers stepping back from the market. Flows continue, and customers remain engaged, more selective perhaps, but still participating. This is an important signal. It confirms a pattern we have seen repeatedly and consistently over time. Not by chance, but by design. It is part of our trademark. In more uncertain phases, our model tends to show its strength. When customers need guidance, the value of advice becomes more visible. and the difference between a transactional approach and a relationship-based model becomes clearer. At the same time, the market's focus is evolving. The debate is moving away from rates alone and toward the quality of flows, the mix between managed and administered assets, and the sustainability of NAI as the rate environment adjusts. So the question we are addressing today is not simply how the quarter looks, but what it tells us about the consistency and quality of our growth going forward. With that in mind, let's move into the numbers. I begin with the economic and financial highlights on slide 4. The headline news is that we started 2026 exactly as we ended 2025, with strong momentum across the board. Let me walk you through the numbers that matter most in line number 4, and I think you'll see why we are generally excited about this quarter. I'll start with the bottom line. Net income in the first quarter came in at 276 million euro, up 13% year on year. The point is the underlying quality of that growth, which is coming from the core business, while non-recurring items moved in the opposite direction. In fact, core revenues were notably strong. Contribution margin reached €582 million, up 18%, and operating margin, perhaps the most telling figure, came in at €350 million, improving 25% versus the prior year. This quarter offered a particularly clear example of the operating leverage now built into our model. with revenues growing materially faster than costs. Of course, a favorable NAI comparison certainly helped, but it was also the result of the discipline we have been building over time. Results were supported by net commission income growth up 12% to 354 million euro, helped by solid management fees, the recurring backbone of our business model, up 9%. This increase in management fees needs to be read in context. The market correction in March had a visible impact on our managed assets, given their significant equity component, even though net inflows remained very strong. At the same time, the strength of January and February, both in terms of inflows and market appreciation, allowed recurring fees for the quarter to remain broadly in line with Q4. At the end of the day, this tells us the quality of inflows is strong. Our customers keep choosing managed products. Net commission income growth was also boosted by banking service fees, which contributed substantially, surging 66%, as we'll touch on later. Net interest income stands out as the strongest swing, but this is not a race-did-the-work quarter. NII came in at $236 million, up 31%, despite a markedly different rate environment. What supported the increase was a stronger starting base. We had deliberately shifted our funding mix towards deposits. which we couldn't do without our consistent ability to attract them, and this gave us access to a cheaper and more durable funding base. Don't forget that we also benefited from a lower retail cost of funding. In Q1 last year, the cost base was affected by the combined impact of two high-volume time deposit promo offers, both carrying a relatively high rate. at 5% launched in autumn 24 and one at 4% at the beginning of 25. This year, by contrast, the two campaigns impacting Q1 were both priced at 3%, making our funding cost much lighter. The expansion of the credit book in previous periods did the rest. Our NII growth is driven less by rates themselves and more by the structural work we manage on the balance sheet, including our decision to front load part of the government bond portfolio during the quarter. Keep in mind that the interest rate increase that was implemented in the quarter will only start to be reflected in our numbers from Q2. This will lead us to revise our guidance for the year based on updated assumptions, as we'll see later. Finally, non-recurring items were down 42%, from 51 to 29 million. In Q1 last year, this line item benefited from a higher contribution from performance fees generated by our Italy-based funds, as well as from the positive fair value impact of our trading portfolio. This quarter, the contribution from performance fees was more limited, while fair value had a negative impact. A quick word now on the ratios. The cost-income ratio dropped to 34.8% from 37.6% of the full year 2025, and this was helped by the usual Q1 seasonality and G&A costs, which tend to be lower, together with strong business momentum. Importantly, this was achieved while continuing to invest where it truly matters for the future of the business, in digital capabilities, in the effectiveness of our network, and in the overall quality of the customer experience, without compromising cost discipline. The ratio of acquisition costs over gross commission picked up slightly to 35.2% from 34.8% for the entire 2025, driven mainly by a timing mismatch between contest-related costs and revenues. Finally, on credit, cost of risk remained contained at 19 basis points for the quarter, in line with our expectations. Overall, this quarter confirms that the engine we have been building continues to deliver and that our growth is structural, not cyclical. We are in a very good place. That aid gives a closer look at the remaining income statement lines, with a few points worth highlighting. Banking service fees is certainly the standout figure, jumping to €80.5 million, up 66%. This growth was driven by particularly strong certificate sales, almost three times higher than in Q1 last year, which were also helped by the strong market backdrop. Many auto-callable certificates reached their trigger levels earlier than expected and were redeemed ahead of schedule. Customers received attractive coupons and often reinvested the proceeds into new certificates, generating additional upfront fees. On top of this, there was also a positive price effect thanks to a longer average maturity profile of the new issuances. Impermanent on loans show a sharp percentage increase from 1.4 million to 6.6 million, which, however, is within the range of the previous quarters. It is worth remembering that Q1-25 was particularly low, partly because we benefited from the adoption of a new model for calculating expected losses on retained exposures. Turning to slide five, Let me walk you through the business results for the quarter. Commercial activity remained robust, with total net inflows at 3.34 billion euro, despite being down 11% against a very strong comparison base last year. In particular, mass asset inflows were positive at 1.87 billion euro, only a mid-single digit below last year's record level. which we see as a very resilient outcome, given the different market backdrop. Last year benefited from exceptionally supportive conditions from the outset, while this year was marked by volatility much earlier on. Even so, the quality of our inflows remained strong, even more so in March, showing that our customers continued to invest and put money to work rather than simply stay on the sidelines, even as uncertainty increased during the quarter. The same positive trend continued into April. As shown on slide 34, net inflows into managed assets reached €831 million in the month, while total net inflows came in at almost €1.3 billion. This brings the first four months of the year to a very strong level, with €2.7 billion into managed asset flows. The year-on-year comparison is clearly demanding, as April 2025 was our best month ever, but the absolute level of inflows remains very solid and confirms the continuous strength of our commercial activity. The impact on the market downturn on assets in Q1 was naturally quite visible for us, reflecting the higher equity content of our customers' portfolios compared with the industry average. Total assets ended March at 154.37 billion euro, 1% lower than at the start of the year, with the gap already recovered by the end of April. To the contrary, the credit book expanded and expanded, ending the quarter 1.4% higher than at year end at 19.25 billion euro. Credit book growth was supported by higher loan originations, with loans granted up 12% year on year and lending just shy of 1 billion euro for the period. General insurance also had a good quarter, with gross premiums up 14% to €60.47 million. For us, this is not just an add-on business. It is part of how we help customers protect their wealth and earning capacity. Growth came particularly from standalone policies up 16%. On that six, you can see another strong quarter in terms of customer growth. we added almost 60,000 new customers, taking the total close to 2.1 million and lifting the customer base by 2% from year end. Our group Family Banker Network kept step with this growth, also up 2%, putting us within touching the distance of 7,000 family bankers, a milestone we actually reached in April. Our intelligent investment strategy continues to gain traction. We now have over 5.5 billion euro invested in money market funds with a planned and gradual switch into equities over an average horizon of some 3.5 years. Since the beginning of the year, around 500 million euro of new money has been added to the service. bringing the total up around 10% and reinforcing the pipeline of assets that will progressively move into equity solutions over time. In addition, we can see a further €3.4 billion set to move into mutual funds over the next 12 months, as shown in the last two lines of slide 6. This includes well over €1 billion from double chance deposits up 27% since the beginning of the year, and more than 2.3 billion from installment plan flows, which continue to build progressively and provide good visibility on future managed asset inflows. The rapid build-up in double chance deposits was no coincidence. When geopolitical tensions triggered a sharp increase in market volatility at the beginning of March, We put DoubleChance back in the spotlight, refocusing customers with available liquidity on a solution that was perfectly suited to that moment. In fact, this offers a way to take advantage of a particularly uncertain phase through a gradual entry mechanism, while adding to the pool of assets set to move into equity funds over the coming months. Let's move on to another key pillar of our model, balance sheet ratios as shown on slide 7. Our CET1 ratio remained extremely robust at 22.8%, without including the contribution from the previous earnings. The MRF3A ratio increased versus year-end, as it reflects the 500 million euro bond issued in January. compared with the 300 million bond included in the year-end figure. The leverage ratio was slightly lower than at year-end, moving from 9.5% to 8.3%, mainly reflecting the temporary increase in overall balance sheet exposures. Let's take a moment to focus on our network in Italy, which now stands at 5,294 Family Bankers at the end of March. The start of 2026 was particularly strong. We saw an 87% increase in the number of professionals choosing Banca Mediolanum, with 176 new financial advisors entering the network in the first quarter alone. Of these, 117 were senior profiles and 59 were junior advisors, namely the banker consultants for our next program. Women represented around 26% of total new recruits. The senior profiles are especially worth mentioning. Almost half of them came from the banking and insurance sector, where they had worked as private bankers, relationship managers, or branch managers. This confirms a trend we have been seeing for some time. Experienced professionals are increasingly looking beyond the traditional banking model and moving toward an advisory model that gives them more room to build long-term customer relationships. And this is where our positioning makes difference. Banca Mediolanum is not a bank that simply has a network of advisors. It is a model built around family bankers. The structure, the tools, the training and the product platform are all designed to help them support individuals and families across their financial lives. That is why the network remains not only a growth engine for the group, but also an increasingly attractive destination for high-quality professionals. At the same time, our Banking Consultant program continues to be one of the most important ways in which we invest in the future of the network. It is designed for high-caliber graduates who begin with a six-month executive master at our corporate university, obtain their financial advisor certification, and then start their professional journey alongside a senior private banker or wealth advisor. working with that advisor's existing customer base. This gives them early exposure to real customer relationships, but within a structured and high-qualified environment where they can build experience, credibility, and seniority alongside an established professional. What makes our program distinctive is precisely this combination of structured training and early field experience with a strong mentoring component. The remuneration is covered by the senior banker, reinforcing the mentoring relationship and supporting the young professional's development within the network. The figures of slide 37 show how successful the project has become. At the end of April, 676 banker consultants were already active in the network, with a further 250 currently in training. On the back of this pipeline, we now expect to exceed 900 banker consultants by the end of 2026. We are now seeing clear evidence of the impact of this strategic initiative. Among the 830 senior bankers involved, Those who have worked with a banking consultant for at least 12 months have recorded a material increase in productivity. They were already ahead of their peers at the starting point, and that lead has widened further. The advantage is particularly visible in managed asset inflows, where it has widened from 3% to 33%. In other words, It is now 11 times the initial level. The gap has also increased in loans from 27% to plus 39%, equivalent to a 12 percentage point increase and has more than doubled in both protection policies from 28% to 60% and customer acquisition from plus 40% to plus 81%. The trend is positive and the pace is improving. Our network is becoming increasingly solid while productivity still offers further upside. Now let's turn to Spain on slide 31. Q1 showed a slightly different picture versus year end. Economics were stronger with the scale we have been building starting to come through more clearly in the P&L. At the same time, commercial activity normalized from the exceptional pace we saw last year, mainly reflecting the more volatile context and more cautious investor behavior. The improved results we saw in Q1 confirmed that the platform is gaining substance, and the investments made over the past quarters have created a broader and stronger base for future growth. Spain, in fact, remains a very exciting growth opportunity for us, with significant room to scale further. Let's look at the main highlights. Operating margin reached €16.3 million, a 4% increase year on year, while net income stood at €15.3 million, 8% higher. Total assets were broadly stable, with only a marginal increase versus year-end. to just over €15.5 billion, with managed assets in line at €11.9 billion. Total net inflows in the period were positive at €590 million, while managed asset flows came to €380 million. Turning to lending, the credit book continued to grow, reaching 1.84 billion euro, up 5% versus year end. Meanwhile, the family banking network grew by 1%, reaching a total of 1,670. The key point here is the step up in productivity over the past five years, mirroring what we've delivered in Italy. Average assets rose from 5.5 million euro in 2020 to 9.4 million today. Finally, our customer base in Spain expanded to 292,200, marking a 2% increase versus the end of the year. Let me also give you a brief update on our Grandi Patrimoni program. The key initiative we are driving to strengthen our position at the top end of the market, as illustrated in slide As you know, the program was launched to raise the service standard for customers with more than 2 million euros in assets, offering a high-end advisory service designed to address complex needs through a strategic, personalized, and long-term approach. It combines fee-based advisory models, a dedicated product set, tailored investment banking and fiduciary services, and an enhanced coverage model through wealth advisor teams. The important point is that the program is now moving from launch phase to execution, and we are already seeing good traction. At the end of April, we had over 4,200 customers in the over 2 million euro segment, up 6% versus year-end, 28% above the program's initial baseline at the beginning of 2025. Total assets in this segment reached approximately €20 billion, up 5% despite the market volatility seen during the quarter, and 27% above the starting level of the program. What matters here is not only the growth in the number of high-network customers, but the quality of the relationship we are building with them. More tailored advisory, greater use of specialized expertise, and a clear opportunity to increase our share of wallet at the top end of the market. This is an area where our brand, our strongest private bankers, and the enhanced coverage model can make a real difference, and we will continue to scale it during the year. Finally, we are accelerating in the development of our AI program, not as a standalone technology initiative, but as a practical enabler of our business model. The focus is tri-fold. Improving operational efficiency, equipping our family bankers with better tools to serve customers, and developing end-user solutions that make the customer experience simpler, faster, and more personalized. To date, we have around 100 initiatives currently in the testing phase, 13 projects already released, and more than 1,800 active AI agents. To wrap up, Q1 was a strong and reassuring start of the year. It was not a quiet quarter, markets became more volatile, uncertainty increased, and the comparison base was demanding. The market environment changed quickly, but our direction did not. We continued to deliver across the main business lines, to grow our customer base and our network, and to make further progress on the strategic initiatives we have been building. So, while we remain mindful of the external environment, The route is clear. The first quarter confirmed the resilience of our model and gives us further confidence that even in a more complex context, our objectives for the year remain well within reach. With that in mind, let me now turn to our 2026 guidance and to the targets we are working towards. We expect net inflows into mass assets to be around 9 billion euro assuming normal market conditions. We now see net interest income up approximately 15% versus 2025. We are targeting a cost income ratio of around 38%. We expect cost of risk to be around 20 bps and we intend to increase dividend per share versus the 80 euro cent base dividend. Q1 was a strong first step in that direction. Our job now is to keep executing with discipline and consistency because making progress look steady is exactly what a resilient model is designed to do. Thank you for your time and as always we appreciate your continuous support.