Finecobank Banca Fine Spa

Good afternoon. This is the Corusco Conference Operator. Welcome and thank you for joining the Fineco Bank first half 2021 results conference call. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Alessandro Foti, CEO of Fineco. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining our second quarter results conference call. Before we start going through the details of the presentation, let me please underline that last quarter once again confirmed our new dimension of structural growth. We are progressively delivering on two strategic discontinuities that we anticipated during the first quarter confidence call in order to progressively become more a platform fulfilling the financial needs of our clients than a bank. First, we are carrying on our initiatives in order to leverage our balance sheet, which will in turn progressively increase and improve our revenues, mix boosting fees and commissions. Of course, the mix of net sales during the summer months might show an increase in deposits compared to the recent months, but this effect is only temporary and just linked to the seasonality. Therefore, we expect to reabsorb hit thanks to our increasing effectiveness in transforming liquidity into asset under management. Second, FinEQ asset management is already delivering in its strategic discontinuity and is taking more control of the value chain to further accelerate our investing revenues and margins. The outcomes of our strategic discontinuities will be a structurally higher profitability thanks to the jump of investing revenues and the capital light business model thanks to the leveraging as we will have structurally higher room to dispose of it. This will allow us to distribute a higher level of dividends and at the same time to invest more for our growth. Let me highlight that also in the first half of the year, we recorded a record high growth net profit reaching $185 million and increasing by 2% year-on-year despite the contribution to systemic charges in the year due to the single resolution fund paid for the first time in 2021. This result is even more valuable considering that it has been achieved in a new normal world and beats the previous record set in the first half of 2020. which was characterized both by low operating costs due to the strict lockdown in place in Italy and by the strong performance of brokerage due to volatility peak. Revenues stood at 403 million, increasing by 3% year-on-year, excluding non-recurring items of 2020 and mainly supported by the growth of investing, thanks to the growth in asset under management and the operational efficiency by FinEco asset management. Brokerage confirmed a structurally higher floor, also in an environment characterized by a much lower volatility compared to 2020. Operating costs were well under control and the cost-income ratio stood at 31.3%. confirming operating leverage as a key strength of the bank. Our capital position confirmed to be strong and safe with a common equity TR1 ratio at 18.6%. Let me please underline that after the decision by European Central Bank not to extend beyond September 2021 the dividend band and following the dialogue with the supervisory authorities, the board of directors has proposed to distribute a dividend for 2019 and 2020 equal to 0.53 euros at the next shareholders meeting on October 21st, 2021. Also, our commercial activity continued to strengthen compared to the impressive growth experience in 2020. After the record net sales registered in the first half, estimated figures for the month of July are around $900 million, increasing by about 34% compared to July 2020. The mix confirmed to be strong, with about $0.5 billion in asset under management and almost $360 million of deposits due to the summer seasonality. As already said, we expect to absorb this temporary increase in liquidity going forward, also thanks to the pipeline of new initiatives that we are delivering. Brokerage revenues are estimated for July at around $15 million. This is very good news considering the unfavorable market conditions due to both low volatility below the average level of 2017-2019 and low volumes. Nevertheless, revenues are around 30% higher compared to the average monthly revenues in the same period, confirming once again that the floor of the business is now definitely higher. Let's now move on to slide five. Before we start going through the details of the presentation, let me please underline that in order to give a better representation of investing fees, and in line with prevailing market practice. In the quarter, we went through a recast of some items related to our investing business, previously accounted in other lines. In this slide, you can find all the details. In particular, we included within the net commissions cost efficiencies achieved by Finnecoset management, previously accounted under other income line, Second, the costs related to the network of financial planners, like recruiting, loyalty, FIR, and ASARCO, previously accounted under other administrative expenses. On top of this, financial planners incentives that were previously accounted into other product areas had been recasted into investing fees. following the change of the financial planners incentive scheme. Please let me add that in the past, we had to apply the accounting rules in line with our previous parent company, which were not taking into account the features of our business model. Therefore, in the past, we structurally overestimated our cost income ratio. And this representation now better reflects our real operating leverage as an asset gatherer. Let's now move on to slide six. As announced, we reached very strong industrial results, also in a new normal world. We've adjusted net profit standing at 184.6 million in the first half, plus 2% year-on-year on a like-for-like basis despite the higher contribution for systemic charges. Among the adjustments of the quarter, let me underline that we have recorded a $32 million one-off fiscal benefit related to the realignment of intangible assets under the Legislative Decree 104-2020. Revenue stood at 403.5 million, up 3% year-on-year, as we have been able to catch the strong acceleration of the structural trends in place, mainly thanks to the contribution of investing. Operating costs stood at 126.1 million, increasing by 4.7% year-on-year, excluding costs strictly related to the growth of the business. We will deep dive on cost later on during the presentation. Cost income confirmed to be very low at 31.3%, despite the continuous expansion in assets and clients, thanks to our strong operating leverage and to the scalability of our platform. Let's now move on slide seven and start to analyze more in details the dynamics of our results. In this slide, we show our net financial income amounting to $148 million and remaining flat in the first half of the year. Net interest income stood at $124.3 million, despite the worsening of interest rates environment. And profit from Treasury management stood at $23.6 million. the more we will be effective in leveraging the balance sheet and the more we will be able to slow down and possibly even reverse the growth of our financial investments. This will lead to recurring industrially driven profits from treasury management and progressively improve revenues mixed with a higher component of fees and commissions. We will come back later on on our initiatives related to the the leverage of the balance sheet, some of which are about to enter in action, like the third-party savings account platform.

Let's now move on to slide eight.