Finecobank Banca Fine Spa

Good afternoon. This is the Coral School conference operator. Welcome and thank you for joining the FinEco Bank first quarter 2020 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. Alessandro Foti, CEO and General Manager of FinEco Bank. Please go ahead, sir.

Good afternoon, everyone. Thank you for joining our first quarter 2020 results conference call. Today, we will also present our UK business right after the Q&A session of the first quarter results. Before we start going through the details of the presentation, let me please underline the key messages of the quarter. Once again, this set of results confirms the soundness of our business model, able to deliver sustainable and industrial growth in every market condition. With brokerage strongly performing and acting as a perfect counter-cyclical business. Adjusted net profit stood at 92 million in the first quarter of the year, plus 45% year-on-year, thanks to the growth of our very well-diversified stream of revenues. Operating costs were under control with the cost income ratio declining by 82 percentage points year on year to 33% and confirming operating leverage as a key strength of the bank. Net sales in the first four months of the year were strong and robust reaching 3.1 billion with April being close to 1 billion plus 89% year-on-year and with an improved mix, which highlights a strong recovery of asset under management as volatility calmed down from its recent peak. This is also thanks to the strong success of the new generation of products launched by Finneco Asset Management, which is increasingly becoming the cornerstone of our inflows in asset under management. Also, let me please remind you that our net sales are generated organically, and in the first quarter of the year, only 9% came from recruits made in the last 24 months. Finally, total financial assets in April stood at $79.1 billion, which gathered products reaching 72% of the asset under management. Let's now move to slide five and start commenting our quarterly results. As announced, we recorded very strong results. We've adjusted net profit in the first quarter of the year, reaching 92.2 million plus 45.4% year-on-year, despite the complex scenario. We generated 201.3 million of adjusted revenues in the quarter, 27.2% year-on-year, supported by whole business areas. Operating costs stood at 66.5 million, plus 1.9% year-on-year. Cost income decreased to 33%, despite the continuous expansion in assets and clients, thanks to our strong operating leverage and to the scalability of our platform. Please go through the following slides to analyze more in details all the dynamics of our results. Let's start with the net interest income dynamics on slide six. Despite the lower interest rate environment, net interest income remained resilient at 6.8.1 million, decreasing by only 1.6 million in the quarter, of which 0.8 million related to the day's effect, thanks to the continuation enlargement of our quality lending book and sticky side deposits, even more valuable given the current remuneration on liquidity offered by the system. The yearly decrease was minus 3.2%, mainly due to the lower interest rate environment, which led to a reduction in average gross margins on interest earnings assets from 1.26% in the first quarter of 2019 to 1.08% in the first quarter of 2020. As an example, five-year euros moved from plus 13 basis points a year ago to minus 26 basis points in the first quarter of 2020. Finally, cost of funding remained very low at three basis points due to deposits in foreign currencies please let me remind you that our cost of funding related to deposits in euro which represents 96 of our total deposits is zero let's now move on slide seven to deep diving in on our bond portfolio Our strategy to run off the Unicredit bond portfolio and move into a more diversified and low-risk investment portfolio through a blend of European government bonds and covered bonds is progressing very well. Our bonds portfolio now includes also France, Spain, Ireland, US, Poland, Austria, Germany, Belgium, Portugal, UK, sovereign national agencies, and covered bonds in addition to Italy. Finally, let me please remind you that almost 100% of our financial investments are accounted in Help to Collect. This has to have no impact on our P&L by the widening of the spread. Let's now move to slide eight. Fees and commissions grew by 35.8% year-on-year, driven by all business areas. We will deep dive on brokerage and investing later on during the presentation. Banking fees benefited for the first time by the contribution of the smart repricing in place starting from February 2020. Trading income, net of non-recurring items, increased by almost 169% year-on-year, driven by the strong market volatility in the quarter. Let's now move on to slide 9 for a focus on brokerage. Brokerage acted as the perfect counter-cyclical business, allowing us to deliver consistent results also in a complex market environment. In the quarter, overall brokerage revenues stood at 63.4 million, reaching its best results ever, and increasing by 110% year-on-year and 76.5% quarter-on-quarter, recording its best results ever. On the back of the skyrocketing volatility in March, of the deep reshape in our hoofer and of the strong growth of new customers. mainly driven by the enlargement of the market, as more Italians are now interested in financial markets. The accelerating trend of brokerage was also confirmed in the month of April, with revenues estimated at around 22 million, plus 1.07% year-on-year, bringing brokerage revenues in the first four months of the year to around 85 million, more than doubled year-on-year. Let's now move on slide 10 for a focus on investing. Investing revenues amounted to $60.9 million, increasing by 12.4% year-on-year, thanks to the high contribution of gathered products and services and to Finneco Asset Management. Investing revenues increased by 3.7% quarter-on-quarter, mainly explained by the higher incentives to PFAs paid in the fourth quarter of 2019 related to the quality of inflows in the asset under management realized in the last part of the year. This more than offset the quarterly decrease in management fees driven by negative market effect in particular in the month of March. Pre-tax net management fees margins to that 63 basis points in the quarter, decreasing by one basis point quarter on quarter. Margins were affected by a lower equity component on asset under management due to the negative market effect recorded in the quarter and by the increased penetration of the accumulation products among our offer of gathered products. After-tax management fees margins remained flat at 46 basis points, thanks to the positive contribution from Fineco Asset Management. As you probably know, starting from last year, Fineco started to offer the accumulation products to its customers. These products tend to build increasing profitability for the bank over the years as they automatically and progressively invest from conservative asset class towards equity. We therefore agreed to change the contracts related to our financial planners incentives starting from 2020 to incentivize them to maintain their assets for at least three years to obtain the bonus. With the new contract, the cost of incentives will be split over three years' horizon, currently with the longer persistence of the assets. Slide 11, as you can see from this slide 11, our results once again confirm efficiency to be part of our DNA and core in our bank, representing a clear and unique competitive advantage. In the quarter, staff expenses stood at 24 million plus 10.9% on a yearly basis, mainly due to the increase in the workforce related to the business development and to the internalization of some services after the exit from Unicredit Group. Non-HR costs stood at 42.5 million, decreasing by 2.6% year-on-year, mainly due to a different scheduling of the marketing campaign. Moving to slide 12, as you can see on the left-hand side of the slide, commercial loans grew by 26.6% year-on-year, with the usual strict control on credit quality. Let me remind you that our lending is offered exclusively to our loyal customer base and our deep internal IT culture allows us to fully leverage on big data analytics. This translates into a commercial cost of risk very well under control at 14 basis points as of March 2020, in line with our guidance of the cost of risk between 10 and 15 basis points, which is confirmed also in considering the present context of COVID outbreak and the government decrees to support the moratorium. Expected losses decrease for all our lending products, thanks to the quality of our lending portfolio. As a confirmation of the quality of our lending book, we only received less than 200 requests for moratorium. We will deep dive more in depth in analyzing our lending offer on the next slide. Moving to slide 13, in the wake of recent events, our cautious approach has become even more conservative. Therefore, we slightly reviewed our 2020 guidance on mortgages. We further increase our guidance on new production in the range between 400 and 500 million As we are observing, clients prefer mortgages in a period characterized by very low fixed rates. Following the decrease of the EUR interest rates connected to the worsening of market conditions, we now decrease our expected yield to a range between 55 and 70 basis points. Let me remind you that our expected loss in this product is very low. And in the quarter, it has moved from around the 23 basis points to 17 basis points, thanks to the strength of our big data analytics. On personal loans, we slightly decrease our expectations of new production to a range between 150 and 200 million per year, and the net growth in range between 20 and 40 million with average yield confirmed at between 380 and 410 basis points. On Credit Lombard, we confirmed an hour growth in a range between 300 and 350 million. We've expected a yield between 75 and 85 basis points. Let me remind you that Credit Lombard can be impacted by our brokerage platform, as it was the case in the third quarter of 2019. Please keep in mind that for the expected yields, In the case of the market environment changes, we would have to move accordingly.

Slide 14, capital ratio.

Fineco confirmed once again a rock-solid capital position on the wave of a safe balance sheet. Let me remind you that following the strong recommendation by ECB and Bank of Italy, we suspended the proposal regarding the distribution to shareholder of a dividend equal to 0.32 euro per share the board of directors will convene an ordinary shareholders meeting after the the 1st of october 2020 to resubmit the aforementioned distribution proposal in the same amount already approved by the board of directors and communicated to the market for this reason we recommend pro forma figures, which include the dividend payment. Common equity tier one ratio pro forma stood at 19.28%. Finally, total capital ratio pro forma stood at 34.94% as of March 2020.

Now I would skip directly to slide 22

In this slide, we summarized our guidance for 2020. Please note that it does not include the revenues and costs related to the UK business development. Also considering our current outlook, we are on track to achieve our expectations for 2020 results, although with a different mix, and we expect no change in our growth expectations in terms of revenues generation, and net profit growth. Net interest income is expected to remain solid and resilient or slightly decreasing by a few millions on the back of volume effect and the benefits coming from ECB tiering. Let me remind you that this assumption incorporates no change in our investment policy, no increase in our risk profile, and the more dynamic management of our treasury. Deposits are expected to increase in the region of 2.53 billion per year, and new production of lending is expected to be in the region of 0.81 billion per year, equal to 0.8 billion net growth. For investing fees, we give a sensitivity for every 1 billion change in asset under management, which generates around 3.6 million of revenues starting from May the 1st until the year end. Brokerage revenues are expected to remain strong and above our expectations for three main reasons. First of all, the deep reshape of our product offer. Second, the level of volatility, which will probably be higher than the extremely low levels registered in the past years. the strong growth of new customers, driven not only by the increase of our market share, but most of all by the enlargement of the market. In fact, we are observing that more Italians are now interested in financial markets. Let me also remind you that this business acts as a perfect counter-cyclical business. Banking commissions related to the smart repricing are expected to increase by around 20 million of euro. We are decreasing our guidance on operating costs to a yearly growth of around 4% thanks to our strong operating leverage. Let me please highlight that this guidance does not include marketing expenses related to UK, which are expected to be up to 6.5 million. Operated costs in UK are expected in the region of 1.5 million. And in this case, these 1.5 million are already included in our guidance. So what I mean that in the guidance of cost growing by 4%, they are including also 1.5 million related to operational cost in UK. In terms of future evolution, we confirm our guidance on a continuously declining cost income in the long run, thanks to the scalability of our platform. and to the strong operating gearing we have. We confirm our floor of quarter one ratio equal to 17%, a level that we deem appropriate and massively above the industry average, but we expect to stay in the region of 18% for 2020. Leverage ratios stood at 3.73% in March 2020, and is expected to remain above 3.5% thanks to all the initiatives the bank is undertaking. We are extremely relaxed about our leverage ratio, considering our organical capital generation after dividend distribution and payment of IT1 coupon. Also, in the case of an extremely adverse scenario and assuming 5 billion of deposit growth in 2020, our leverage ratio would remain around 3.5%. Cost of risk is expected to remain in a range between 10 and 50 basis points, even in this environment, thanks to the high quality of our lending book. Finally, we expect robust and high quality net sales. Let's now move to slide 23 to deep dive into the impact for the bank from the current situation. Current situation is creating the conditions for further enlarging our growing opportunities and it's generating more positive than negative impacts. Among the positives, let me highlight robust net sales driven both by flight to quality and increase of share of wallet of our existing clients. Let me remind you that we are one of the few financial organizations able to provide unmatched customer experience for clients. Brokerage is booming and perfectly working thanks to our fintech DNA, even with an enormous infrastructure load managed in the period, both in terms of amounts of data and transactions. Cost savings, considering that everything is more digitalized following the COVID outbreak. The situation is generating a gigantic opportunity to increase the speed at which we are growing. The behavior of our society is changing and there is a massive acceleration in direction of digitalization. Being born already digital and with a strong business model based on innovation, quality and efficiency, Fineco is already positioned at the sweet spot for capturing this gigantic trend. Let's now move to slide 24. delivering on industrial measures. Our key priority going forward remains to structurally improve the quality of our net sales and client base in order to increase better quality recurring revenues and keep the growth of our balance sheet under control. Our focus on improving of our asset mix is already delivering, in particular starting from second part of 2019. On the graph, you can see a breakdown of our quarterly net sales showing a growing contribution from asset under management, constantly increasing over the quarter, also thanks to Finneco Asset Management. Net sales mix in March reflected both the flexible and transparent approach of our multi-channel platform and extremely high volatility of financial markets. April net sales showed a prompt recovery of the mix, also thanks to volatility calming down a little bit from its March peaks. Asset under management in the month represents 69% of total inflows. Let's now move on to slide 25 to analyze more in-depth FinEco asset management. FinEco asset management is key in our move to accelerate the conversion of deposit into into assets under management. Our latest net sales results confirm once again that FinEco asset management is gaining commercial momentum and in the latest month it has further accelerated its contribution to FinEco's inflows, remaining positive even in particularly difficult environments. This thanks to its ability to create modern and innovative multi-manager solutions reinforcing our guided open architecture platform, and enhancing our time to market in developing our offer to meet evolving customer needs. We just released our new solution suitable for volatile markets, Finneco Asset Management Global Defense, a capital preservation solution for more conservative customers who want to protect capital, and Finneco Asset Management Target Boost, an evolution of the decumulation products for customers who want to take advantage of bear market phases. And we are ready to launch a new capital preservation product in the next few weeks. Finally, I would like to highlight that the penetration of Finneco asset management to retail class total assets reached 20% of Finneco's total assets under management. And we expect the heat to grow even farther. The penetration on asset under management, excluding the insurance, reached 32% in March 2020, increasing by 8% percentage points in one year. Thank you for your time. And after the Q&A session, I will hand over the floor to Paolo Di Grazia, Deputy General Manager of the Bank, for presenting our UK business.

Excuse me, 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 and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Domenico Santoro from HSBC. Please go ahead.

Yes, good afternoon. Thanks for the call, and I hope everyone is okay and 10 is included. I do have a number of questions on margins and volumes and brokerage, if you don't mind. First of all, margins in the quarter, they held up very well, actually. So I'm just wondering whether it doesn't include yet the market effect and if it could give us a guidance for the second quarter. In particular, I'm interested in understanding the difference in margin between asset management products and the accumulation products that were sold during the quarter and also last year. Another question on volumes, whether you can give us or you feel confident enough to give us a sort of a guidance for the sales for the end of the year. Then on brokerage, I understand you're doing fantastically here. And also April was very strong. Well, all depends how the volatility will go ahead during the year. But given the change in the customer behavior, I mean, everybody is at home. and probably we stay at home for longer. Do you see any structural change here in behavior that probably might make you confident in giving us a sort of a bottom rock, sort of a revenue stream month by month, a minimum? This is at least for the benefit of our model. Then an indication for tax rate uh for the year and last one sorry for the very long question i was just wondering if you accrued uh any dividend already for 2020 and whether the 17 floor quarter one includes any payout for 2020. thank you very much so uh starting from the margins uh

on the asset under management. Clearly, there has been an effect that at the end of last year, clearly there has been, in our opinion, an overreaction by the market on our margins because in the first quarter, there has been a temporary effect caused by the the payments of the incentives to the network that skewed on the upper end by the huge overachievement of results by them. So this, as we explained during the presentation, was a temporary effect that clearly has been finished during the first quarter. And clearly, in the first quarter. The first quarter is including the market effect. In terms of guidance, clearly it's a little bit difficult to give such a precise guidance on margins because if we assume that the market remains relatively stable, we don't expect any significant change in the margins. It's clear that in the case that we go throughout another huge market disruption, clearly there is the possibility for a further decline of margins, but mainly driven by the market effect. In terms of margins between the accumulation products and the other products, clearly the accumulation products, as you probably know, is a product that they are progressively building up profitability. But this gap in terms of profitability on the accumulation products has been in part upset by the change that we introduced in the contracts for the financial planners, because now our financial planners, their bonus is just related to the the fact that they are maintaining their assets over a certain period of time. And this is making it possible to make the margins of the products more current with the longer term picture. Coming to brokerage, brokerage clearly has been pretty strong, as we were saying, driven reshape of the product offer that has been very important and is continuing. So the bank has in the pipeline some other very relevant new solutions for better capturing the brokerage opportunities. Second, clearly the volatility has been pretty high. But as you were correctly underlying, there are emerging very clear structural changes the customer behaviors so the most relevant that clear is dramatically growing the number of Italians that they are starting on being extremely interested in what's going on on the financial market this clearly driven by it's it's perfectly current with the increase of the saving ratio of the Italian family because on one hand Italian families are becoming more concerned regarding their future in terms of economic growth, their job and so on. And this is making them clearly much more interested in what's going on on their financial assets because the Italians are extremely clearly they sit on a gigantic amount of savings and so clearly. And so the most amazing part of the story that we are is not just a matter of, because Finneco on one hand is continuously increasing the market share, but this is just a small piece of the story. The real difference that is emerging that the market overall is growing in a quite significant way. And it's clear that Finneco being by far the dominant player is the player that is expected to get the the highest level of benefits of this. So clearly, we expected that the structure is the floor of the revenues generated by brokerage. So for us, the floor of the brokerage revenues is the amount of revenues generated in a period of time characterized by very low volatility. So we think that the floor of the brokerage revenues is expected to keep on growing over the time, driven by the new products, but mainly by the continuous enlargement of the market. And as we are saying, we are considering in our expectation, we are expecting to pay the dividend both in 2020 and 2021, clearly. And and the 70% floor on the court your ratio is clearly, including the payout of for 2020 but there's a game 70% is a very conservative floor more reasonably. Our courtyard ratio, as we said in the presentation is going to stay after the payments of the dividend to comfortably above the 18% and on the. Tax rate on 2020, it's clearly the tax rate. We don't think that it's... We have to be very cautious in looking to the tax rate because, for example, in 2020, there is a huge, the big jump in brokerage. The brokerage revenues are accounted in 100% in Italy. That is a higher tax rate. So There is the possibility that the tax rate, but probably I leave a little bit the floor on the tax rate to the CFO. Please, Lorraine, if you want to elaborate a little bit more on the tax rate of 2020.

Okay, thank you, Alessandro. So regarding tax rate, we have to say that in absence of new regulations, we expect the tax rate to be flattish in 2020. also including patent box contribution. In fact, we don't expect a significant reduction to our consolidated tax rate despite revenues generated by Fineco Asset Management are increasing because, as already said by Alessandro, the majority of the consolidated income will continue to be represented by revenues generated by Fineco Bank in Italy. that are growing even more due to the outstanding performance of our brokerage business following the increased market volatility.

An indication, if I may, on the sales for the end of the year?

In the region of 30% as we have already had in the first quarter.

All right, thank you. And the question about the sales instead, can you give us an indication?

The sales, net sales, clearly we, on the net sales, we are expecting our net sales remaining pretty robust. Clearly now, based on the most recent developments, we are starting on sailing, let me say, in uncharted waters, very nice and chartered with us to sale because as we were seeing, there is a disruption in the client's behaviors at the moment in the market that is clearly coming in our favor. So I don't want to be too optimistic, so to say that we can keep on having the same net sales we had in the month of March and April is not going to be serious. But we expect that our net sales are going to remain pretty robust and strong because the structural trends behind our growth, they are reinforcing. Because the most recent events are just anticipating something that we were expecting to happen in the next five or six years probably is going to happen in the next couple of years. Another very important point to consider that these numbers are absolutely amazing and outstanding considering that Finneco practically among the big players is the only one that is not using any shortcuts and incentives. We have now several places they are massively overpaying deposits for gathering clients and assets. FinEQ is not doing that because we don't need to do that. This massive jump in direction of the much more digitalized and modern world is a massive jump in direction of the FinEQ world. And so let's say we remain pretty positive.

Thank you very much.

The next question is from Gianluca Ferrari with Mediabanca. Please go ahead.

Yes, good afternoon, everyone. I have four questions. The first one is once again on brokerage. If you were to split the 76% increase quarter on quarter between what is VIX related and what is more structural long term and also related to the new uh products and features you introduced uh could you uh help us in understanding these two uh trends please the second one is on the uh distribution cost to essays uh you remind you reminded that in q4 last year you reported 8.7 million because at the time uh essays gathered 1.3 billion But now in April, in one month, you did half of the flows of Q4 2019. So my question is, is it likely that in Q2 we will see once again something like eight, nine million of incentives to a phase if flows will keep the pace observed in April? The third one is on the banking book. Now, looking at page seven, basically the banking book added 600 million and 70% of it went into Italian BTPs. I was wondering if now the strategy is to add the vast majority of the increase in the book in BTPs or in Q2 you are preferring other kind of GOVs like France, Ireland or US, for example? Or what is the strategy here? The final question is on the 6.5 million marketing costs in the UK. Are all one-off costs related to a specific campaign or there will be some something more structural, something more running in this 6.5. Thank you.

On brokerage, it's extremely difficult to make such a kind of distinction because to say what is related to the volatility and so on. Let me say that a larger part is driven by the new products and solutions, and the enlargements of the client base and clients' behaviors. And the smaller part is generated by volatility. Because, for example, and this is emerging pretty clearly in the month of April. April has been, if you have a look to the VIX period, compared with the VIX of March. Clearly, there has been a dramatic drop in VIX in April. Nevertheless, we experienced a triple-digit growth in the revenues. So let me say that a larger part is explained by the the new product offer that clearly, as I was saying, is continuously improving and by the continuous enlargement of the base of clients and clients' behaviors. And on top of that, clearly there is the contribution coming from the volatility. On the distribution cost, We don't expect any significant jump and discontinuity in what we have to pay to the financial planners because, as we explained, a large part is represented by the accumulation products. And as we explained, we agreed with our financial planners to change their contract. So now their contract is a contract that is... is giving to us the possibility of clawing back their bonuses in the case the assets are not remaining with us. And this is giving to us the possibility to split the impact of the incentive for the financial planners on a longer period of time. So this is an approach that is more current with the kind of products that they are distributing. So the answer is we don't expect any big unexpected jump in what we have to pay to the financial planners second quarter.

Sorry, Alessandro, just on this, but when the FA is selling an accumulation product, in the immediate moment of the sale, you have to book an incentive in the P&L, right? Regardless of the clawback you can have for the future.

The new contract is giving me the possibility to divide the incentive to pay to the financial planners over a longer period of time. Okay. On the banking book, no, the strategy has not changed. So clearly, in the end, so in any case, I'm going to leave the floor to our CFO. So Lorena, if you want to give visibility on the most recent investments we made of the liquidity in which direction has gone.

Yes, so as you can see on slide 7, we have invested 250 million of euros with a longer maturity because we bought the ABTP 2044 that we have swapped and transformed in a variable investment, variable rate. And we decided to invest in BTP to keep in balance our portfolio with the maturity, which is structurally below five years.

This is the... No, but Lorraine, I was referring to the most recent investment that's been made in other European governments. So the latest... Yes, yes.

So I'm referring to this because... This is regarding BTP, but... Our investments are more skewed towards GOVIs such as France, Ireland, Spain. So in the first quarter we bought more than 1.8 billion of euros of government bonds, supranational agency, covered bonds.

So the most recent investment has been made mainly in France and other countries like that?

Yes, so we bought 1.8 billion of the bond and 1.6 billion of Govis, mainly in, we bought around 200 million of Spain, 118 billion of United States of America, 100 million in France, so several different countries. And then we bought supranational and agencies. So the strategy is much...

The strategy has not changed at all, so clearly we confirm that our exposure on Italian Govis is going to remain unchanged, and everything we are going to invest is going to move in other directions. And regarding the $6.5 million of marketing costs, this is up, the indication is up to $6.5 million. This doesn't mean we are going to spend, as we explained in the UK, we are going to keep an extremely pragmatic approach that is the incremental approach that has been the approach we always used also in developing the Italian business. So the more we get evidence that what we are doing is moving in the right direction and the more we invest. So at the moment, as probably Paolo we'll have the opportunity to show to you in just a few minutes, the evidence that they are building up in UK is extremely positive based on the feedback we are receiving by clients and so on. And so we decided that it was the right timing for starting on putting a little bit more money on the table. So clearly this means that for this year, if all these positives are continuously confirmed, we expect to spend up to as a maximum of 6.5 millions of euros. It's pretty clear that if, for example, it emerged that we are wrong, we probably are going to spend less. And if we are right, we are not going to spend more than 6.5 millions. And going forward, again, the approach is going to remain the same. Extremely strictly in currency, with the feedback we are receiving from the market. So the more positive is the feedback and the more money we're going to put on the table. The less positive is the feedback and the less money we're going to put on the table. But it's not a brand new story. It's exactly the way we built the Finneco business from the beginning. So following in a constant way the evolution of the feedback received by the market and by the clients.

Okay, thank you.

The next question is from Alberto Villa with Intermonte. Please go ahead.

Good afternoon and congratulations for the results. I have a couple of questions. The first one is a general one. It is related to the current situation and I see and I agree with you about the positive trends that underline your business. I was wondering if you have any specific or broad concern about the current situation and your business or the industry that we should bear in mind in the short and the long term if you think there are some elements we should consider going forward and how you think you will address this, if any. And the second one is on the recommendation issued by Consul last week about increasing transparency on costs for investment services in Italy. I was wondering if you can give us an update on your view on that for Fineco and for the entire industry. Thank you.

So regarding the current situation, clearly I'm starting on making a comment regarding the the peculiar situation of Fineco. Clearly, we don't have any particularly concern about the current situation because it's exactly the contrary. The existing situation is generating an even more favorable environment for Fineco because what we expect also in the case of deepening of the economic recession, we expect the saving ratio remaining pretty high, if not growing even more. And clearly this, by definition, is good news for us. And second, clearly what's going on is, as I was explaining before, is acting as a gigantic accelerator in the direction of making the Italian society much more digitalized and modern. And so clearly it's an absolutely great news for us. Generally speaking, the main point of concern of the situation remains related to the credit industry. But as you know, Fineco is not a business in which we are particularly involved because the most painful part of the story is going to be represented by the corporate business. But Fineco is not... It's not a business we're running. So it's sad to say, but for us, the current situation is creating clearly an even more favorable environment than it was before. Regarding the recommendation, they are very well welcome because as very well known, Finneco has been always characterized by being by far the fairest and the most transparent player in the industry. And so we think that every move by the regulator in direction of making the market even more transparent and fair, it's another big push in direction of our world.

Thank you.

The next question is from Elena Perini with Bancaimi. Please go ahead.

Yes, good afternoon and thank you for your very clear presentation. I have got some questions on your three business lines, if I may. First of all, on the banking business and referring to slide 22, your 20 million increased expectation in banking fees. includes only the repricing started in February or some other repricing related to the new features of your banking service?

No, it's just related to the latest repricing. It's not embedding any other repricing.

Okay, so all the new features will be for free?

Yes.

OK, thank you very much. And passing through investing, in your guidance, you mentioned that every $1 billion change of AUM versus the 1st of May generates $3.6 million revenues till the end of the year. But I was wondering if you are able to give us some guidance. I know that it is difficult given the current context, but on the level of investing fees compared to last year. And then finally, also considering that you seem... very good at the moment in switching the non-managed assets, in particular the direct deposits into AUM. And finally on brokerage, considering the further reshape of your platform, we would expect the brokerage revenues for next year to be lower than this year. considering the exceptional level of volatility, especially in the month of March. But probably this would help you to keep them at a very good level. If you can add some comments on this, please. Thank you very much.

So coming to the investing sensitivity, clearly it's a It's very difficult to give you such a precise guidance on investing fees because there is something that we don't manage, that is the market effect. Clearly, in the first quarter, the biggest driver on the investing fees has been clearly the market effect. So we remain, at the beginning of the year, we gave a guidance of investing fees growing the region of low double digit area and clearly probably this is a little bit there is a question mark that is related to the market effect so if let me let put this way if the market remains remains in a situation on and i'm not saying a very low level of volatility but the volatility this is not such as high and scaring as that has been in the month of march we expected that the usual journey in direction of asset under management is going to continue and so progressively we are going to to return in direction of an a growth of the low double digit area but clearly there is the question mark represented by the market effect So this is the reason why we prefer to give to the market an indication of the sensitivity for every €1 billion of assets, plus or minus, because it's the best way for trying to give visibility to our investors and shareholders on what they can expect on the investing fees. On depositing into asset under management, I'm trying to give you an answer linking together to brokerage, because we think that the real point of strength of the bank, because your point was what we can expect to make in terms of progression in moving deposits into asset under management, and the other question was what we can expect on brokerage. So why the two questions are strictly correlated? Because the beauty and the strength of our business model that, for example, case one, volatility remaining incredibly high and with a continuous market disruption, this clearly is going to put on temporary halt the journey of growth. deposits into the direction of asset under management, but it's going to make the brokerage business literally booming. Case two, volatility remaining relatively low. In this case, the moving direction of asset under management is going to be pretty robust. Case three, that in my opinion is the case with the highest probability to happen, is volatility is going to remain, in any case, higher than it's been in the last few years, because the last few years have been years characterized by incredibly low level of volatility. So volatility, reasonably, is going to remain above that level. Second, the structural increase of the structural enlargement of the market is going to continue, because there is a booming demand of financial information and interaction with the markets by clients. And so in the case three, we can expect that this volatility being higher than has been at the very low level of the past few years, but lower respect that has been in the month of March. This is the perfect scenario because we can expect brokerage keeping on doing absolutely very well. and at the same time also asset management doing pretty well at the same time. But we have to work on the scenario. But the nice part of the story is that in every kind of scenario, the revenue generation of the bank is going to remain pretty strong. Clearly what is going to change probably is the mix, but the result is going to be extremely good.

The next question is from Angeliki Bairactari with Autonomous. Please go ahead.

Good afternoon. Thanks for taking my questions. I have two questions, please. First of all, when I look at your April NetFlows press release that you published last week, I can see that the number of customers has actually declined a little bit in April versus March, despite the fact that you gained 7.3%. thousand new customers. So I was just wondering if that is a sign of the current account repricing and effectively you have seen some customers exiting the bank on the back of that. And how do you expect your customer base numbers to develop going forward? And my second question is on the trend you see in terms of AUM net flows in April, and perhaps the beginning of March. Some of your peers have pointed to a very significant reduction in both growth inflows and redemptions from AUM products in April, with the exception of the accumulation products due to the lockdown. Have you seen a similar trend? And is there a risk that customers may take money out of mutual funds at a faster pace as the lockdown eases in March and in June and that the economic activity gradually resumes and customers might be a bit more risk averse.

Thank you. So first of all many thanks for these two questions because it's giving to me the opportunity to deep dive in a couple of very interesting concepts. The first one that clearly what we The number of clients we are leaving the bank are clearly clients strictly related to the repricing. When we introduced the repricing, we gave as an indication we were expected to lose between 50,000 and 60,000 clients, and this is what's happening. And the clients that are leaving the bank are absolutely very low-value clients, so just to give for giving giving you an idea the average assets for clients that they are leaving the bank is in the region of 7 000 euros so they are and the what is emerging now is that the new clients that we are acquiring are definitely of a much higher quality than in the past so the lockdown is generating a quite significant impact in the client's behaviors because many new clients are coming to us they are coming because they've been incredibly disappointed by the the quality of the services received by their original banks because in this lockdown period for many clients has been almost impossible to reach their banks, to dialogue with their bankers. And this has generated a massive frustration in clients. And this is acting as an incredibly effective marketing campaign for the FinEco services. So what we are observing that we are acquiring a little bit lower number of clients but the quality of the client is much higher than in the past. And considering that for us, our goal is not to get on board the highest number of possible clients, but to get on board the highest possible number of good clients. And this is exactly what's going on. Because one thing is to explain to clients that Fineco is perfectly working and is a company able to deliver absolutely outstanding services. is another thing to experiment what does it mean to interact with a perfectly working bank instead of working with a bank that is not working. And this is exactly what's going on. And this is making, to me, the possibility to To answer also to your second question, when we released our numbers of March, in which there has been quite significant outflows on asset under management, and then followed by a big recovery in April, one of the reasons is that Fineco is a perfectly working platform. And it's clear that if you don't have access to a platform because it's not working, you are not able to sell. And so this is the first reason why, in the case of Fineco, we had in March this kind of move. Second, Fineco has an incredibly... transparent platform. So our clients have in real time the update of the net asset value of their portfolio. So that can be sometimes scaring and introducing a little bit more of volatility, but it's making clients perfectly conscious and aware of what's going on. it's clear that it's a different story if you don't have access to these kinds of figures and numbers, because it's a platform that is not giving you these numbers. And clearly what you can expect that when the final end, the clients are going to realize the exact situation of their portfolio, probably that is the time in which you can have the reaction. So Fineco, in order to make the comparison between the Fineco platform, the Fineco world and the other world, Finneco is like to make a comparison between the financial markets and the real estate market. The financial markets are immediately reacting to all the news flowing into. The real estate market is much more skewed, but at the end of the story, if there is bad news, the bad news is going to play into effect. So at the moment, again, same story. If the situation remains the same, a situation decently normal, so I'm not saying with markets going up or volatility coming back down to a very low level, but just the markets not returning to the incredibly scaring high level of volatility of the month of March, we expect our progress and journey in the direction of asset under management continuing and going in the expected direction.

thank you very much that's very useful in other words if I understand correctly from your comment you haven't really seen any big change or a suspension of activity from clients in the investing part of the business business as usual for you is exactly the contrary because in the

the most part of the growth that we experienced in April has been driven by new money, new clients entering into the market. And still we have the clients that exited by the market in March that are still waiting for re-entering. And this is making us extremely positive for the future.

Thank you. The next question is from Frederico Braga with UBS.

Please go ahead.

Yes, hello, good afternoon, everyone. Just a few questions left for me. The first one is actually a follow-up on your Italian bond portfolio. Just to be clear, if I'm not wrong, a couple of quarters ago, you got it for roughly stable expectations in terms of size at around 5 billion euros. At the end of March, we were close to 6 billion euros, so Looking forward, we should expect the bond portfolio investing into BTPs to remain stable at $6 billion or what else? The second is a comment on your net interest income for 2021. I know that might be still too early, but given what rates are now, I was wondering if you could give us a little bit more color on your expectations for NII in 2021. The third question is on the financial advisors. I saw that in Q1, Q1 has been the first quarter in a couple of years where the number of advisors actually increased on a sequential basis. So I was wondering if you could give us a little bit more color on that, if there was anyone off or anything. change that drove this increase? And as a follow-up question on financial advisors, what has been so far the feedback from financial advisors on the change into their contract that you mentioned before in terms of spreading the incentives over a three-year time horizon? And finally, with regards to the April flows, the How much of the 500 million outflows, if you can quantify, how much of the 500 million outflows from deposits actually went into managed products and how much was actually driven by clients leaving Fineco or parking the liquidity in something else or whatever? Thank you.

So on the Italian bonds, so the exact position Italian bonds is 5.3 billion spares. I don't know, Lorraine, if you make a comment on the difference between the 5.7 and 5.3, so please, because it's a counting difference, so please, Lorraine, if you can.

Yes, the nominal value of our Italian exposure in bonds is 5.350 million of euros. And 5.8 billion is the accounting value, including interest accrued. And in any case, the nominal value is the right one to take into consideration. And we think that we have reached our target.

Yeah, because we are expected to remain stable at this kind of level. In terms of indication on the net interest income for 2021 is clearly assuming that clearly all the indication produced by the implied forward rate curve are right and assuming to keep on growing our base of deposits between 2.5, 3 billions of euros and something like that and without changing our investment policies or leaving unchanged our exposure in Italian Govis and keeping on diversifying and so on, we expect the net interesting for 2021 that more or less the same kind of guidance, so possibly just remaining relatively flat or declining by just a few millions of euros year on year. On the number of financial planners, we we just the increase of the number of financial planners is just related to the fact that last year we has been a here characterized by the the industry has been very aggressive on the recruiting side because clearly has been last year and here characterized by absolutely enormous results and so this has driven many players in direction of over over overspending for recruiting financial planners. And clearly, as we explained many times, we are not interested in playing that kind of game. Now the world is returning more normal, and so probably considering that the market conditions have worsened, and so the industry has returned with their feet on earth, and so what is hopeful to financial planners is that returning to a more normal level. And for this reason, we are resuming the expected normal direction of recruiting of financial planners. In terms of indication, clearly probably the recruiting of financial planners is the most heavily hit activity by the lockdown, because as you can imagine, it's practically impossible to recruit a financial planner without meeting him physically at least a few times. But again, for us, this is not a matter of concern because the largest part of our growth is driven by organic growth, so we don't care too much. But if we return to a more normal situation in terms regarding the lockdown, we expect a gentle rise in the number of financial planners resuming. The change of contracts for the incentives has been absolutely perfectly accepted and agreed by our financial planners. I want to remind that our financial planners are extremely satisfied because, for example, in this period of lockdown, it's not just for the clients realizing how it's different to be a FinEco client, but also it's been on the financial planner side realizing how it's different to be a FinEco financial planner because when you are able to keep on working perfectly, smoothly, without any changes with your clients in these kinds of conditions, this is a big asset. And the outflows of deposits have been 100% driven by investments on asset under management and asset under custody.

Thank you very much. Very useful.

The next question is from Fabrizio Bernardi with Fidentis. Please go ahead.

Hi, everybody. Just two very small questions. The first one is about marketing. If you are trying to launch any marketing campaign, in order to address those clients that are totally disappointed by the way the physical banks are dealing with them. I have met a few friends to be honest that said that it was almost impossible to talk with the banks despite what CEOs are telling us during the conference calls. And the second question is about the possibility that you could exploit the current situation, the current environment, which is clearly not an easy one, in order to enter another European country in order to really get the most of the situation, considering what I said before about the way physical banks are treating clients. Something like a free lunch for you. Thank you.

Regarding marketing, clearly, as you We are keeping on, in this period of time, we are continuing our marketing campaign because it's a great, the timing is perfect because never the marketing campaign has been more effective considering that people, they're spending much part of their time looking to the TV, reading newspaper, in any case surfing throughout information. But what is really working incredibly well, as usual, is the word of mouth. Because believe me, particularly with the high-level clients, the word of mouth is disruptive. Because when you are a client of Finnecon, you are talking with your friend, and you're saying, come on, my bank is working perfectly well. And on the other side, there is someone that is absolutely upset because it's more than... two or three weeks that is not able to be contacted by the bank or by the bankers. This is the main driver behind our growth. Regarding the second question, I don't want to anticipate nothing regarding the presentation of Paolo, but clearly as we anticipated in the guidance we gave on the cost, we reduced the guidance on cost from 5% to 4%. is embedded the operational running cost for running the UK business at full steam, that is 1.5 million euros. As you can imagine, if you are so efficient that every single new country you are opening is going to cost you, in terms of operational running cost, just 1.5 million euros, clearly there is no limit. regarding what you can do in terms of expanding your geography in terms of what you are doing. And again, this thanks to the incredibly operational efficiency of the bank. So it's just a matter of how much gasoline you want to put in the engine. But the engine is incredibly low consuming in terms of gasoline. 1.5 million euros for every country that you decide to launch. It's really a very negligible amount. So at the moment, we are going to remain concentrated on the UK because we want the UK to be full up and running. As you will see in a few moments, everything is extremely promising, but it's pretty clear that we are ready for repeating the experience in other European countries, for sure.

Thank you.

The next question is from Luigi Dabelli with Equitasim. Please go ahead.

Yes, good afternoon. Just one quick question. With respect to lending, which products are registering higher demand and on which one do you see more risk in terms of new production going forward and what is your strategy on lending going forward? Thank you.

On lending, our strategy is pretty simple. We are taking an extremely cautious and conservative approach. The lending is the business in which clearly we have decreased the most our interest on the short term for a very simple reason, because unless we don't have a higher visibility On the macro picture, we think that it's extremely important to be very conservative on lending. Clearly, we remain absolutely perfectly, we didn't change our position on Lombard Loan, because clearly this is not the case, but on the residential mortgages and personal loans, we have become even more prudent and conservative than we were before exactly because we prefer to see what's going on at the moment on terms of macro picture and then we will see. In any case, as we explained, we are extremely relaxed on the lending business because the business is small in case of very high quality. We think that the biggest, the most relevant demonstration of the quality of the lending is the fact that we just receive only 200 requests of moratorium by our clients. So the lower is the quality of your clients and the higher the numbers of moratorium that you are going to receive in terms of demands. This is a very pretty clear ratio. But our strategy is to be very conservative and cautious is not if you if you make a few hundred millions of euros less or more of lending is not going to change absolutely nothing in terms of our revenues generation thank you as a reminder if you wish to register for a question please press star and one on your telephone Now, if there is no more questions, I'm going to hand over to Paolo for a quick deep dive in what's going on in the UK. So please, Paolo.

Thank you, Alessandro, and good afternoon, everybody, and welcome to this presentation. Let's start on slide number two. In 1999, Finneco disrupted the financial service market. in Italy with a simple action that until then was unimaginable, combining online banking, trading, and investment service in one account. This model has enjoyed 20 years of success by mixing the convenience of the one-stop solution with continuous innovation, very high-quality service, and surpricing. We believe that today there is a similar opportunity in the UK market. which Fineco can successfully cite by introducing a business model similar to what we did in Italy. A unique stock solution with best-in-class customer experience and over 20 years of in-house digital know-how in the financial industry. So the UK is an extremely fragmented market where people have relationships with too many providers. For this reason, we believe that our model which aim to simplify the customer experience rather than having to interact with several disconnected providers, will be successful, mainly acquiring clients coming out from the traditional banking system. Let's now move on to slide number three. The type of customers acquired so far already shows that the one-stop solution is a popular solution. Those who initially chose for multi-currency also trade now. And those who invest or trade also use payment services. We therefore have a lot of potential to meet a variety of demands, concentrating all customer needs in one offer. The numbers clearly show that once clients have an account, we naturally start to use the different services available. For example, 50% of our client traders also use the debit card, and 50% of our clients also use multi-currency services. We expect a further increase in this multi-product behavior once the investment service is ready, as we know that 46% of our actual client base also uses other providers. Let's go now to slide number four. So the one-stop solution allows us to target diversified range of clients. So OTC and stockbroking users, self-investors and multi-currency users, but it also allows us to exploit a diversified range of acquisition sources, ranging from traditional banks to specialized brokers. All segments are growing, and very often clients overlap among different targets. These give us a huge acquisition opportunity, leveraging our one-of-a-kind offer, including brokerage and investment services in one single account. As an example, over 300,000 UK clients are both self-investors and active in stockbroking. We also see tremendous opportunities in the investment arena, where the UK represents one trillion of addressable market, and this number is growing. We plan to acquire a large part of our new clients from traditional banks. This is what happened in Italy over the last 20 years, and we are seeing the same pattern in the UK. The table below shows where our new clients are coming from, mainly, as you see, from traditional high street banks. Let's go to slide number five. And this slide clearly shows how our one-stop solution can meet the UK market's demand. Today, there is no financial player in the UK capable of satisfying all financial needs through a single turnkey platform. Please note that ISA will be ready in the coming months, while SIPP will require the branch to be fully operational before launch. And the more detailed timeline will follow later in the presentation. Moving on to slide number six, our strategy is also based on service quality. This table shows the technological tools available to our clients for free compared to what competitors offer. Clearly, you can see we provide several features, such as free market data for trading, real-time screeners to identify stocks, and budgeting tools used more for banking, obviously, which none of domestic players is capable of offering. And now let's see, let's move to slide number seven. As you can see from the two tables, we are extremely competitive in equity CFDs, where we want to go with an innovative modeling, offering the CFDs at zero commission and no added spread. while average UK clients are charged 10 basis points. Indices and FX CFDs are also very competitive, spread-wise. A more detailed slide on the type of client we're acquiring will follow, but we also acquire stock-broking clients, and a good 12%, 15% are also trading CFDs, where we have a better remuneration. We can offer this competitive pricing thanks to our proprietary order internalization model, as you know. However, it's important for you to understand that currently we have a huge gap in our favor in terms of pricing, but also in terms of functions, analytical tools, and platform usability. Our operating efficiency and economies of scale allows us to be sustainable and profitable even with such a low fee. Let's move on to slide number eight now. Our multi-currency service is also one of a kind. We're talking about 20-plus currency multi-purpose accounts that can be used for bank transactions to diversify liquidity or to invest and trade in local currency, all without fixed costs or exchange fees in real time and from your website or mobile application. Despite the fact that our purpose is not to compete with other challenger banks, and we have a very different target, our multi-currency service can compete with challengers for both small transactions and larger transactions, more in line with the investment and trading target that we have. Moving to slide number nine, this slide shows the great effectiveness of our pricing, both for platform and transaction fees. As you know, some players apply dealing charges to the fund transaction. In line with the idea to offer a simple and transparent service, we chose to apply only a platform fee. But once again, I would like to emphasize that competitive pricing is only one of our strengths. We believe that our success is combined best-in-class pricing with state-of-the-art services in terms of product range, service quality, user experience, customer care, usability, and even the platform look and feel, combined with a one-stop solution approach. Let's now move to slide number 10. And let's talk about the marketing strategy. From a communication point of view, our market penetration strategy involves two distinct phases. In phase one, that already started a few days ago, we exclusively started the most profitable segment with a shorter payback period, meaning the traders. This is the same strategy we used in Italy when we started back in 1999. At the very beginning, leveraging our very distinctive brokerage service in order to be more effective in our marketing expenses. In the second phase, starting from Q4 2020, will broaden our communication to target P2C investors focusing on a multi-brand platform. The campaign obviously focuses on pricing. Again, we want to underline that our low fees are the direct consequence of our ability to leverage and scale Italian technology and our internalization models, which provide us good margin. Let's now move on to slide number 11. So in both phases, our position will be quality service combined with best-in-class pricing. The tagline at the base of all our marketing strategies is, in fact, premium service without premium price, where service may from time to time stand for trading, investing, or even banking. This way, we are positioning Fineco in the UK market with a very unique model, combining pricing similar to a discount broker, with the service quality of market leaders in one single package, one-stop solution. For the first phase, we completely redesigned the website, refocusing the communication and trading in comparison with the main broker to highlight our differentiating points. Let's now move on slide number 12. Here we see some of the creative subjects that we are already using in this launch phase. Our current campaign is focused on the brokerage and CFD services. As we said, the answer is on pricing, but we also want to establish ourselves on the market as historical, reliable European leader in brokerage, as we are. That's why our tagline is trade without compromise. The performance and usability of our platform are distinctive elements. They will make a difference in the UK trading community, combined with our wide trading products, from CSDs to stocks, bonds, and futures and options. This way, we will also be able to attract professional trader clients, which we understand to be a very big community in the UK. Let's now move on to slide number 13. Since January, we have been working to shift our focus on brokerage, as we said, where our offer is already complete in terms of product, access to the market and technology. So we want to give you a picture of how this new focus is impacting on our KPIs. Key distinctive elements of client acquisition in the pattern we are going to show have been pricing, multi-product offer on trading, and the new website, and of course, the volatility of this period. Let's see slide number 14 now. So until 2019, our marketing investments were limited and focused on the multi-currency service, just on that. Just a few weeks ago, we refocused our marketing on trading, also starting to invest in online ads, mainly in search engine and programmatic displays. And the results are already beginning to show that this repositioning works very well. And as you can see in this slide, We want to show you a very limited investment started last month has already delivered a change of pattern in our acquisition numbers and the quality of the clients. We wanted to compare a snapshot of Ineco UK in the last two months with the previous period. So the KPIs on the right side of the slide show that we are acquiring clients at a cost of 600 euros, more or less, and the period In the period, active clients generated more than 1,000 of average revenues. We're talking about active clients. So when you look at this figure, remember that we are communicating a brokerage message. We are mainly acquiring traders as clients. Furthermore, the interest in trading and leveraged products in our platform is growing rapidly. So let's now move on to slide number 15. Let's talk again about the good quality of the new clients we are acquiring. In the top left chart, you can see the more recently acquired clients activate their account quickly and start trading much earlier, so they're more in target. The revenue mix has changed, benefiting from trading products and brokerage offering in general. Also, 56% of our clients are placing more than five trades a month, and 57% are trading TSDs. Despite the fact that we are not advertising the multi-currency service, we continue to see a regular cash inflow similar to the previous month and a nice revenue stream. Let's now move to slide number 16. And you can see now here is our general timeline. In the coming months, we will focus on the increase of the investment services to launch our ISA count and branch development. The branch will also be the next step in order to develop other more specific UK products such as the pension plan SIPs. And just to finish, let's move on to slide 17 to see the fund development, how it will develop the investment offering. So let's close with a quick look at the product development timeline, our trading range as you know, we said is a complete 100%. So in the coming months, we will focus on the enrichment of our multi-brand investment service. We expect to launch at least three new asset managers in a few months, and many others will follow with the next few months as we work to reach a good number of asset managers, which will allow us to satisfy around 80%, at least 80%, of the inflows demand of the UK B2C market. So now, thank you for your attention. I'll hand it back over to Alessandro for questions. Thank you.

As a reminder, if you wish to register for a question, please press star and one on your telephone. The first question is from Domenico Santoro with HSBC. Please go ahead.

Yes, thank you for this follow-up presentation, UK. A couple of questions on my side. It's all very clear, so my understanding is that you will provide the first step, the trading platform, and then, of course, you will move forward. uh onto the normal services being the current account views just a multi-currency so far uh i understand it's a work in progress but i mean going forward in a three five years time how do you see the economics here in the context of the wider group i mean i don't see any targets of course for the business but can you tell us whether at a point you feel confident that this business will represent the next percent of revenues for the group or in the long term, given that you're tackling, of course, very profitable segments for you. Thank you very much.

First of all, it's very important to remind that at the moment we are focusing our attention on trading, mainly in terms of marketing, because at the moment there is the multi-currency account is available. And also on the investing side, we are giving to the clients opportunity to start on using some services. So clearly the strategy is pretty clear to use the, to start from trading in terms of marketing, because in this case, you are going to get on board the clients that have the payback period that is the fastest. So you can be in, quite quite uh quite fast uh profitable so just just in order to give you an idea because what the the very important number to consider is the 1.5 millions of euros of uh of operating cost so with this kind of strategy we can we can say that excluding the marketing cost the business is going to be profitable starting from the year number one. So this is a very important point to consider. And for this reason, honestly speaking, it's very difficult to give you such a precise idea of what we can expect to go going forward because the approach we are using is the approach we used in building up FinEco. First of all, to be concentrated in having an incredibly scalable and efficient platform making us extremely relaxed and comfortable because the operational break-even is immediately reached. So this is the most important point. And then it is a matter of how much we want to accelerate or not. But this is strictly related to the house where we're going to get by the market. So we think that it's not serious to give such a long-term guidance on the business. Clearly, we are the most important message that the scalability of the platform is making for us possible to launch a business that in the year number one is immediately profitable from an operating or from an operational point of view. And the market is extremely promising. The UK market is in the direction of a kind of quite evident disruption because another very important point is that our goal is not to take away clients from, I don't know, the established innovative players like Art Grace and so on, but is to take clients by the traditional banks. The same job that we have done successfully in Italy and still we are doing. Also in Italy, 100% of our clients' assets is coming from traditional banks. And probably in one of the slides presented by Paolo, it's pretty clear also from which kind of banks we are taking our clients. As you can see are represented all the most established and traditional UK commercial banks. So it's a little bit too early to give you such a precise indication in terms of contribution on the overall revenues of the group. considering that what we expect in Italy, also in Italy, we are just at the beginning of our process because our market share is still so small that the opportunity we have also in Italy is gigantic. So it's difficult to make a relative comparison at the moment.

All right, fair enough. Thank you very much.

The next question is from Gianluca Ferrari with Mediobanca. Please go ahead.

Yes, good afternoon again. Three questions here. The first one is, you are referring mainly to traditional banks in the UK, but what about trying to build up a B2B2C network, i.e. becoming the point of reference for ISA, so building up a kind of non-tied agency network in the UK, And mid-term, do you have any idea or plan or targets in terms of how much ISA versus retail clients Fineco UK will have? The second one is, again, if you have an idea of how the investing business will shape in the UK, i.e., what will be the percentage between farm products versus the traditional open platform scheme investment? that Cineco had also in Italy at the very beginning of its origin. The third one is about the customer service. Where is the customer service located? Is it domiciled locally in the UK or is it in Milan? And how many FTEs do you need to serve the UK clients?

Thank you. As you know, our preference goes definitely for the for the B2C business because it is more profitable, it is more stable and has attached and higher values and multiple. As a matter of fact that Fineco is continuously receiving requests by other financial institutions for providing white label services considering the high efficiency of our platforms. And of course, in UK, we have been approached for offering our services to independent financial advisors. But for the time being, we remain concentrated on targeting the B2C segment because it's by far the most promising. We remain convinced that it's much better to take directly the final client instead to be intermediated by someone else. So at the moment, we... our target remains concentrated on the B2C side. We expect clearly that at the beginning, the largest part is going to be represented by the external products of the traditional open platform in comparison with FinEQ asset management. But clearly, in coherence with what has been experienced by other UK asset gatherers, so we think that on the long run, Finacost management can play a very interesting role, particularly with the structure and the portfolio solutions for clients. The customer service is located in Milan, and when we are referring to the 1.5 millions of euros of cost embedded in our 4% guidance of cost for overall the bank is considering also the cost for the customer care for UK. And how many people, sorry? Paolo, how many people?

We can talk about up to 10 people that we can basically use based on the volume of the calls that we have, up to 10.

Okay, thank you.

The next question is from Angeliki Baraktari with Autonomous. Please go ahead. Hello.

Just one question for me. Could you give us the number of the amount of deposits and funds that your clients hold in the UK?

Thank you very much.

At the moment, as you can see, the amounts of deposits and funds are still limited because the most part of the attention is on the traders. But in any case, Lorena, you have some numbers on the deposits that at the moment are in the UK, deposits and assets?

They're close to 100.

100 million, yes. Yep.

is that that's the total amount both deposits and other custody assets thank you the next question is from federico braga with ubs please go ahead uh yes uh thanks for taking the questions again just three more general questions uh the first one is what level what number of clients will make you happy uh let's say like in five years time would you be happy with 100 000 clients 500 200 just um just the number that will make you happy as of now and the second question is uh again what are in your opinion the key risk to the execution strategy of the uk business over the next 12 18 months and the final question is we So in the U.S., brokerage and trading fees going to zero. You have already a pretty competitive offering in the U.K. I mean, would you expect a similar trend in the U.K. in the next two to three years? Or again, how do U.K. markets work? Do you think that fees are a little bit more sustainable with regards to the brokerage business? Thank you.

So the number of clients we are going to make, I'm happy because First of all, it's a matter of the quality of the clients, because as we were saying, with just this year, we are going to be happy because we're excluding the marketing cost. The business is going to be profitable. So we probably with, I don't know, Paolo, in our extremely basic scenario, that is going to make the business absolutely

very well up and running uh of how many of how many clients we are talking about in the yeah of course in the next three years because five years yeah of course we're talking uh not just about number of clients but also target of clients so we if we're able to to acquire clients that we want we really want uh i think that probably around 30 35 000 clients where we could be happy

Yeah, so as you can see, it's not such an incredible amount of clients because, but again, the strategy is working because our base of operational cost is incredibly low. And so this is making for us incredibly easy to reach the break-even and to be profitable in a very short period of time. And in terms of execution strategy, Honestly speaking, we don't see the only possible risk that the feedback we are receiving at the market are below our expectations. But in this case, currently with what we announced, we are going to probably we are going exactly the same we did with Fineco because the process of developing Fineco has not been straightforward. In some cases, it's been a little bit bumpy. So every time that if there is something emerging that is telling us that there is something that is not working, we are going to decelerate on what we are spending in terms of marketing, reshaping what we are doing and restarting again. So we are not particularly concerned by some kind of execution risk strategy because the The concern is coming to you if you have put tons of money in advance on the table. And so if something goes wrong, clearly you have tons of money put at risk. But this is not the case because the amount of money that has been really put at risk is very few millions of euros. So we can change any time and we can reshape the strategy any time we want accordingly. So we don't see any We are not concerned by execution risk. So it's a business as usual has been the history of Fineco. Brokerage fees going to zero in U.S. I want to remind that the U.S. market has a structure that is different from Europe because it's mostly a market driven by market-making activities and less commission-driven. And the market-making activity is the point of strength for FinEco. Because when we are talking about the internalization of flows, we are talking about zero-risk market-making activities done by us. And this is the reason why we are able to offer such... competitive fees on the most popular products in UK remaining profitable, just because we are leveraging on our internalization capabilities. So we think that we are going to be able to play this kind of game without any significant concern regarding what's going on in terms of pressure on fees.

The next question is from Andreas Kauri with Lamanic. Please go ahead.

Yes, hi. Good afternoon, everyone. A quick clarification on the strategy in the UK. I was wondering, does your strategy is not implying any acquisition, so everything is organic or if any opportunities arise, would you consider to develop the business also with some acquisition? Thank you.

No, we are not planning any acquisition, but for a very simple reason. First of all, Fineco, we have been always very successful the green field and building up from scratch businesses and and in any case we think that in terms of creation of value for our shareholders the the the building up from scratch of the business is is much better because if you consider that if you go through and also in a small acquisition you had to put aside and a gigantic amount of goodwill and so on if you compare this kind of good deal with And with the marketing expenses that you can make, there is no match. So considering that we have an incredibly very well-working infrastructure, incredibly scalable, we think that it would be totally a huge mistake to go for an acquisition. It's much better, again, to go directly for acquiring directly the clients, leveraging on our platform's efficiency.

and scalability okay thank you thank you very clear and reassuring thank you the next question is from luigi davani with equitasim please go ahead yes good afternoon two quick questions the first one what are the characteristics to open a uk account with finnico do you need to be a uk registered resident And the second question, what is the mix of revenues do you expect at three or five years in UK between brokerage investing and payments? Thank you.

Paolo, if you want to give some visibility on this.

Yeah, the first question, you need to be a UK resident. So you need to be there in the UK. And the second question is, of course, in the first phase, the majority of the revenues will come from brokerage. So in the next, say, one year, probably a little bit less, but let's say one year, the revenues coming from the brokerage will be probably 80%. Then they will probably decrease gradually because the investing business will kick in. And so we'll see in probably two or three years from now, seeing brokerage down to 40% and the rest, the big majority is on investing and a small part on payments.

Okay, thank you. And if I may, just a follow-up. Do you expect to be profitable also after marketing cost in 2021?

It depends on how much you're going to spend in terms of marketing. And again, the marketing cost is are strictly current with the success and the progress. So as we were explaining, the incremental approach is based on the concept that the more successful you are, the more money you're going to put on the table. But it's matching the questions made by the previous investor that was asking if you want to go for an acquisition or not. The marketing expenses are corresponding to, are something that you are using for creating your business. So we think that it's not the right representation to evaluate the profitability of the business considering the marketing cost, because the marketing cost, they can be stopped anytime. And so what is important is what is remaining, so on one side that you have your operational cost and the production of revenues. Regarding this point, at the end of this year, the business is going to be profitable.

Thank you very much.

Gentlemen, there are no more questions registered at this time.

Thank you very much for your attention, as usual. and as usual again for everybody of you that you have interest in deep diving more in the some numbers and concepts please you can contact us for arranging any follow-up anytime thank you again