Banca Mediolanum Unsp/Adr

Good day and thank you for standing by. Welcome to Banca Mediolanum H1 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 answer 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, Madame.

Hello, everyone, and welcome to our first top 26 results conference call. It is a pleasure to have you with us today. Before we begin, I'd like to remind you that during the Q&A session, you're welcome to ask your questions in the language of the line you're calling from. will answer in Italian as usual, but with simultaneous English translation. With that, I'll turn the call over to our CEO, Massimo Doris, joined with our CFO, Angelo Ietti. Thank you.

Thank you, Alessandra. Good afternoon, everyone, and thank you for joining us. The first half of the year reminded us that the world will always find new reasons to create uncertainty. The year began with shifting expectations around interest rates. During the second quarter, renewed geopolitical tensions, higher energy prices, and period of market volatility added another layer of complexity. While the headlines changed, one thing did not, the importance of helping our customers stay focused on their long-term financial goals. Indeed, our customers didn't stop investing. didn't freeze and didn't retreat. They continued to invest with confidence, relying on the professional guidance of our family bankers, rather than reacting to short-term market movements in either direction. For us, periods like this reinforce the value of advice. Our customers don't expect us to remove uncertainty. They do expect us to have them navigate it. This philosophy has shaped Mediolanum for more than 40 years. Different market environments naturally favor different parts of our business. And this is precisely the strength of our integrated and diversified business model. The way we are built gives us the freedom to respond to changing conditions without changing our direction while continuing to invest in our customers, our network, and the long-term development of our bank. As a result, the conversation around Banca Mediolanum is evolving. It is no longer simply about the sustainability of earnings in a changing interest rates environment. Increasingly, it is about the quality of our growth, the breadth of our business and our ability to continue creating long-term value. I'm pleased to say that the first half of the year provides further evidence of that progress. I begin with the economic and financial highlights in slide four. The clearest takeaway from the first half is that our business continues to broaden with strong contributions across the various businesses. Let me show you what I mean as we turn to slide four, starting off with the bottom line. Net income in the first half came in at €555.5 million, up 16% year-on-year. The strength of our core revenues was particularly evident. Contribution margin reached €1.16 billion, up 14%, and operating margin, one of the concrete signals of the quality of our earnings, came in at €683 million, advancing 20% versus the prior year. Results were supported by net commission income growth, up 10% to nearly €706 million, helped by solid recurring fees with management fees and investment management fees together, up 12%, as you can see detailed in slide 8. Net commission income growth was further supported by banking service fees, which also had a meaningful impact rising 29%. Net interest income was once again a very strong contributor despite a markedly different rate environment versus H1 last year coming in at 478.5 million euro up 30%. The improvement reflected the combination of structural factors and more favorable repricing dynamics. We entered the year with a stronger funding base, as the growing contribution of customer deposits provided a broader, more stable and cost-efficient source of funding. At the same time, higher interest rates at the beginning of the year supported performance from the second quarter awards, while active balance sheet management included the front-loading of part of the government bond portfolio in Q1. The year-on-year comparison in funding costs was also particularly favorable at both treasury and retail level. In H1 2025, the retail cost of funding reflected two large promotional campaigns in time deposits priced at 5% and 4% compared with two campaigns at 3% impacting H1 this year, which resulted in a materially lower funding cost. Finally, the growth in the credit book achieved in the previous periods provided additional support. Now, looking below the operating margin, non-recurring items came to €76 million. In particular, performance fees crystallized to date amounted to 74 million euro compared with the 49 million in the same period last year. Now, let me say a few words about ratios. The cost-income ratio dropped to 36.1% from 37.6% of the full year 2025. Maintaining cost discipline has gone hand in hand with continued investment in the areas that support our future growth, including technology, our commercial network, and the customer experience. The ratio of acquisition costs to growth commissions is up from 34.8 to 35.8%, reflecting a timely mismatch between the recognition of context-related costs and the associated revenues. Before we wrap up, let me touch briefly on credit. The term month rolling cost of risk remained contained at 19 basis points at the end of June, consistent with our expectation. Slide 8 covers the remaining income statement lines, and I'd like to highlight a few key points. Banking service fees reached nearly 158 million euro. up 29% year-on-year. These fees received an additional boost of 78 million euro from certificate sales, which were particularly strong also in the second quarter, rising sharply in the first six months from 700 million to 1.2 billion, an increase of more than 70%. In fact, favorable market conditions led to the early redemption of a number of auto-callable products, allowing customers to lock in attractive coupons and, in many cases, reinvest the proceeds in newly issued certificates. Impairment on loans were higher in the period, going from €14 million to over €20 million. The year-on-year comparison is also influenced by the exceptionally low level recorded in Q1 2025, following the introduction of a new expected credit loss model for retail exposures. Apart from that, the level of provisioning remains consistent with recent periods. Turning to slide 5, let me walk you through the business results for the half year. Commercial performance continued at a strong pace, with total net inflows at 6.37 billion euro, up 4%. The quality of those inflows was particularly resilient, with net inflows into managed assets at 4.2 billion euro, only mid-single digit below last year's record level, which we see as a very strong outcome, picking up pace in the second quarter. and with July's excellent results, we expect to further narrow the gap versus last year. Total assets at the end of June amounted to €168.23 billion, up 8% since the start of the year, and up 16% versus H1 last year. Loans granted increased 3% year-on-year to nearly €2.1 billion, supporting further growth in the credit book. In fact, the credit book at the half-year point were 4% higher than at the beginning of the year, coming in at €19.69 billion, up 9% year-on-year. General insurance also did well in the first six months, with gross premiums up 13% at €129 billion, You know, we see general insurance as a core component of our customer proposition, helping safeguard both customers' wealth and their financial security. New business or standalone policies continue to lead growth up 17%. Slide 6 highlights another excellent performance in the first six months for our growth drivers. We acquired almost 110,000 new customers, bringing our total customer base to nearly 2.1 million, an increase of 3% since year end. Our family banking network at the group level grew even faster, increasing by 5%. More importantly, the number of top tier bankers, those managing portfolios of more than 50 million euro, rose by 19% over the period, reaching a total of 826. Their assets expanded by 20%, bringing the average portfolio of these top tier bankers to 81 million euro at the end of June. On top of this, our automatic investment services remain an important structural growth driver. generating a steadily increasing stream of recurring inflows. Our intelligent investment strategy continues to gain momentum. We now have almost 6 billion euro invested in money market funds which are expected to transition gradually into equities over an average period of around three and a half years. And this number grew 18% from the beginning of the year. Additionally, we have more than €4 billion of liquidity contractually committed to move into mutual funds over the next 12 months, as shown in the last two lines of slide 6. This includes more than €1.26 billion in double-chance deposits, 50% higher than at the start of the year, and over €2.82 billion from installment plans. Yearly flows into installment plans have grown significantly since the beginning of the year, rising 13%, supported by the strong commercial focus we have placed on encouraging customers to factor longevity into their retirement planning. A key driver has been the increasing use of TFR, the Italian employee end-of-service allowance, as a regular contribution to pension plans. This helps customers build retirement savings in a more efficient way. Turning to slide 7, our balance sheet metrics continue to confirm the strength of the group's financial position. Our CET1 ratio remained very strong at 22.7% without including first half net income in regulatory capital. The MRL-TREA ratio increased compared with year-end, reflecting the replacement of the €300 million senior preferred bond outstanding at the end of 2035 with the new €500 million issuance in January. This leaves us comfortably above the 22% requirement. The leverage ratio is likely from 9.5% at year-end to 8.6%, mainly due to the temporary expansion of the banking book following the front-loading of government bond investments during the first quarter. Let's move to our network in Italy, which stands at 5,473 family bankers at the end of June. Recruitment gained significant momentum in the first half. with 394 professionals joining Banca Mediolanum, 69% more than in the same period last year. The new entrance included 208 experienced professionals and 186 venture consultants recruited through our next program. Among the senior hires, almost one in two came from the banking or insurance industry, bringing experience as private bankers, relationship managers or branch managers. This is an important endorsement of our model. Professionals who have already built successful careers elsewhere increasingly see Banca Mediolanum as the right environment in which to develop their businesses and establish deeper, longer lasting relationships with customers. The reason lies in the way our organization is designed. Family bankers are not just simply a distribution channel. They are at the heart of our customer proposition. Our training, technology, product offering and operating structures are all built to support their work and strengthen their relationship they have with customers. In parallel, our Banker Consultants program remains one of the most strategic investments in the future of our network, creating a strong pipeline of new talent. High-calibre graduates receive structured training at our corporate university, together with hands-on experience alongside senior bankers, allowing them to develop well-rounded skills faster. But the impact goes beyond training. The program supports productivity, organic growth, and generational renewal, both among our advisors and our customers. It also creates a valuable exchange of skills between generations. Senior bankers pass on their experience and knowledge of customer relationships, while younger banking consultants help them make greater use of new technologies and more digital ways of working. This also prepares us for the transfer of wealth from one generation to the next and helps us build stronger relationships with younger customers. The fact that the remuneration of the banker consultant is covered by the senior banker also creates a strong sense of shared commitment and alignment from the outset. Slide 35 gives us a clear sense of how far the project has come. At the end of July, 783 banker consultants were already active in the network, up from 590 at the end of December 25, with a further 164 currently in training. By the end of 2026, we expect the banker consultant population to exceed 1,000, including both Those already active in the network and those still completing their executive master's program. We are now seeing a clear and accelerating improvement in the productivity of senior bankers working with a banker consultant. These bankers were already outperforming their peers from the start and their outperformance has widened significantly over time. The impact is particularly evident in two areas. Managed asset inflows where the productivity gap widened from 4% to 28% and customer acquisition where it rose from 40% to 78%. The message is clear. The model is working, productivity is rising and there is still meaningful room for further improvement. Now let's turn to Spain on slide 30, looking at the main highlights. Operating margin reached €31.3 million, a 12% increase compared to H1 2025, while net income stood at €30.8 million, 36% higher. Total assets appreciated notably, with a solid increase of 11% versus year-end, to nearly €17.2 billion, with managed assets also moving up to 13.5 billion euro with an increase of 13% since the start of the year. Total net inflows in the period were positive at 1.1 billion euro while managed asset flows came to 845 million euro. And taking a look at lending, the credit book has now reached 1.9 billion euro up 10% versus PRM. Meanwhile, the family bank network grew to 1,691, up 2% since the start of the year and 4% year-on-year. The key point here is the step up in productivity over the past five years, mirroring what we delivered in Italy. Average assets rose from 5.5 million euro in 2020 to 10.1 million today. Finally, our customer base in Spain expanded to over 296,000, marking a 4% increase versus the end of the year and 9% versus H1 last year. Let me also give you a brief update on our Grande Patrimonio program, illustrated on slide 73. This is definitely one of our most important long-term strategic initiatives. It addresses a structurally attractive market, where we believe we are well positioned to grow faster than the market, both in terms of customers and assets. As you probably know, this program is designed to provide a highly personalized advisory service capable of addressing our customers' more complex wealth management needs through a strategic and long-term approach. At the end of June, we served more than 4,500 customers with assets exceeding €2 million, representing approximately Our ambition is to grow assets in this segment to around 30 billion by 2030. What is particularly encouraging is that we are not simply increasing the size of this business, we are also improving its quality. Growth continues to be driven by managed assets, supporting the long-term sustainability of our recurring revenues, while strengthening our relationships with these customers. For us, Grandi Patrimoni is much more than a private banking proposition. It is a strategic platform that allows us to increase our share of wallet, leverage the full scope of our advisory capabilities, and create long-term value in one of the fastest growing segments of the Italian market. Finally, let me briefly touch on AI. We see AI as a powerful enabler of our business model. It helps us deliver an even better experience for our customers, provide our family bankers with smarter tools and insight, and improve efficiency across the head office. In fact, these are the key areas our AI strategy is focused on. Customer, We currently have more than 100 AI initiatives underway, with 19 already deployed, delivering tangible benefits in terms of service quality, productivity, and cost efficiency. These initiatives span the entire customer interaction framework, from conversational banking and personalized customer experience to AI-powered advisory tools, training and coaching for our family bankers, as well as solutions supporting operations, lending, insurance, asset management and software development. Across the industry, AI is rapidly becoming a standard capability rather than a differentiator. What will differentiate institutions is not whether they use AI, but how effectively they integrate it into their business model and customer proposition. Technology evolves quickly, but trust does not. We believe AI will strengthen but never replace the trusted relationship between our customers and our family bankers. That relationship is also at the heart of another strategic theme we are particularly committed to, longevity. We believe it represents one of the defining demographic trends of our time and one where we have chosen to invest significantly in our offering, our expertise and our communication. Building on this conviction, we have developed a dedicated longevity program aimed at helping customers prepare financially for longer lives. It brings together retirement planning, TFR transfers, voluntary pension contributions, regular savings plans, and protection solutions into a single advisory framework. Through dedicated tools, our family bankers can identify customers who are likely to benefit most from this approach and provide personalized guidance. We will share more details on this strategic program later this year at our nine-month Result Presentation. The objective is twofold, helping customers build greater financial resilience over time, while creating a meaningful and sustainable driver of future growth for our group. Against this backdrop, we remain confident about the outlook for 2026. In particular, we expect net inflows into Manas Assets to be around €9 billion, assuming normal market conditions. We see net interest income up between 15% and 18% versus 2025. We are targeting a cost-income ratio of around 38%. We expect cost of risk to be around 20 bps. We intend to increase dividend per share versus the €0.80 base dividend. To wrap up, I believe the first half reinforces a simple but important message. Our sources of growth are becoming broader, with our strategic initiatives beginning to contribute across the business. This gives us confidence not because the external environment is becoming easier , but because our integrated and diversified model allows us to adapt to changing conditions while continuing to move forward, whatever the environment. At the end of the day, markets will change, Thank you for your time and as always for your continued trust and support.