Finecobank Banca Fine Spa

Good afternoon. This is the Coral School Conference Operator. Welcome and thank you for joining the Fineco Bank Third Quarter 2021 Results Conference Call. 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 Third Quarter Results Conference Call. Before we start going through the details of the presentation, let me please underline that the last quarter once again confirmed our new dimension of structural growth. We are progressively delivering on our two strategic discontinuities in order to become more a platform fulfilling the financial needs of our clients than a bank. First, we are carrying on our initiatives that already are keeping under control the growth of our balance sheet, which will in turn progressively increase and improve our revenue mix, boosting fees and commissions. Second, Fineco Asset Management is already delivering in its strategic discontinuity and is taking more control on the value chain to further accelerate our investing revenues and margins. The strategic discontinuities are making Fineco more and more a fast-growing and capitalized business model with a structurally higher profitability thanks to the jump of investing revenues and a structurally higher room to dispose of it. This will allow us to distribute a higher level of dividends and at the same time to be in the position to invest more for our growth. Let me please add that already now with our initiatives that are not yet at full speed, our balance sheet growth is comfortably under control and our leverage ratio is not more a point of attention. Coming back to our results in the first nine months of the year, in the period we recorded a record high net profit, reaching $257 million and increasing by 4% year-on-year despite the increased contribution to systemic charges. 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 nine months of 2020. Revenues stood at $597 million, increasing by 4% year-on-year, excluding no 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 flow, also in an environment characterized by a much lower volatility compared to the 2020. Operating costs were well under control, and the cost-to-income ratios to the 31.144%, confirming operating leverage as the key strength of the bank. Our capital position confirmed to be strong and safe with a common equity TR1 ratio at 18.4%. Let me please remind that after Finneco received the MRL requirements by Bank of Italy, we have successfully issued and allowing us to be already compliant with a fully loaded leverage ratio exposure requirement with two years in advance. Also, our commercial activity continued to strengthen compared to the impressive growth experienced in 2020 after the record net sales registered in the first nine months Figures for the month of October are around $900 million, increasing by 22% year-on-year. The mix confirmed to be stronger with about $500 million in asset under management, more than three times higher year-on-year. Brokerage revenues are estimated for October at around $16 million. This is very good news considering the unfavorable market conditions due to low volatility, which was below the average level of 2017-2019. Nevertheless, revenues are around 42% 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. As announced, we reached very strong industrial results also in the new normal world, with adjusted net profit standing at 257.2 million in the first nine months, plus 4.4% year-on-year on a like-for-like basis, despite the higher contribution for systemic challenges. Revenue stood at $596.9 million, up 4.1% 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 $187.6 million, increasing by 5.2% year-on-year, excluding costs strictly related to the growth of the business. Cost income confirmed to be very low at 31.4, 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 to the slide six and start to analyze more in detail the dynamics of our results. In this slide we show our net financial income amounting to $217 million and remaining flat in the first nine months of the year. Net interest income stood at $186 million despite the worsening of the interest rates environment and profit from treasury management stood at $31 million. Let's now move to slide seven. Season commissions stood at $324.4 million in the first nine months of 2021, growing by 13.1% year-on-year, mainly thanks to the positive contribution of investing. Brokerage, net commissions, and trading profits confirmed once again a floor structurally higher compared to the past. despite the unfavorable market conditions in terms of volatility compared to both the first nine months of 2020 and the second quarter of 2021. Let's jump to slide 26 to deep dive on our brokerage business. Brokerage confirmed once again that the floor of the business is structurally higher compared to the past and regardless to the level of volatility. As you can see in the chart on the top of the slide, in the third quarter of 2021, brokerage revenues reached $45.9 million in a period characterized by low volatility, also due to seasonality, resulting nevertheless in a monthly average 36% higher compared to the monthly average revenues in the period of 2017-2019. In October, estimated brokerage revenues were equal to $16 million, around 42% higher compared to the average monthly revenues in the period 2016-2019, and with a volatility that was lower than the average volatility of the same period. Let me remind you that the growth of the brokerage business is driven by the contribution of three structural components. the deep reshape of our brokerage business. In this regard, we are now live with our leveraged certificates platform, and we are starting the marketing campaign. As a reminder, our offer will be listed on the high MTF, the alternative venue of which we recently took a 20% stake, this allowing us to extract value from the vertical integration of the business as we are issuer, market maker and distributor. Let me also remind you that in the first half of 2022, we'll be live with a brand new brokerage platform, which will combine our state-of-the-art standard with top quality, easy to use. Second, the client base using our platform is widening with active investors that have grown significantly in absolute terms, standing around 35% above the average level of 2018-2019. Please note that our active investors have an average of four executed holders per month, are wealthy people in their 40s-50s with assets on average above €200,000 and the vast majority of them relationship with our financial advisors for their long-term planning and their financial wealth. Let me please add that in order to further position Fineco for its long-term growth and build up on its stake in high-quality client base, starting from January 2022, we will propose the most competitive offer in Italy. to catch the next generation of active investors. We will propose a very aggressive pricing for our investing and brokerage platform, giving them access to the global markets through shares, bonds, ETFs, and mutual funds, also through accumulation plan. Third, we are continuously increasing our retail market share.

Let's now move to the slide 8 for a focus on investing.