Finecobank Banca Fine Spa

Good afternoon. This is the Coral School Conference Operator. Welcome and thank you for joining the Fineco Bank Full Year 2022 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 of Fineco. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining our 2022 results conference call. As you know, our new dimension of growth is underpinned by the new structure of the interest rates. Thanks to this, adjusted net profit in 2022 reached a new record level at 429 million, up by 23% year-on-year. Adjusted revenues at 948 million, increasing by 18% year-on-year, and mainly supported by investing, thanks to the volume effect and the higher control of the value chain by Finneco Asset Management, and by net financial income, which is sustained by our clients' very sticky and invaluable transactional liquidity and not driven by lending. Operating costs were under control at $281 million, increasing by 4.6% year-on-year by excluding costs related to the growth of the business and confirming operating leverage as a key strength of the bank. Adjusted cost-income ratio was equal to 29.6%. On cost, let me please remind you that the strategic decision to manage 100% internally our IT is protecting us from the inflation on IT cost. Our capital position confirmed to be strong and safe with a common equity TR1 ratio at 20.8%. Let me please underline that we are very pleased to propose to the next Annual General Meeting a dividend per share of 49 euro cents. Our commercial activity confirms to be extremely solid also in January with net sales at around 750 million and a strong mix with around 700 million in asset under management and around $320 million in assets under custody. Let me underline that Fineco Asset Management has recorded its best month ever in terms of retail net sales with around $700 million thanks to the launch of the new capital preservation product offer. Estimated brokerage revenues in January at around $16 million more than 35% higher compared to the average revenues in the period 2017-2019. This result was achieved despite market volumes extremely low in the month and close to the historical lows, thus confirming once again that the floor of the business is now definitely higher. Looking at 2023 and going forward, we expect to continue to deliver a strong growth thanks to our very diversified business model. On the right-hand side of the slide, you can find a summary of our 2023 guidance more in detail. On net financial income, we have improved our 2023 guidance, and we now expect a growth by around 80%. and respected the better than expected 2022 results. On investing revenues, we expect for 2023 an increase high single digit compared to 2022 with a higher after-tax margin. We confirm 5 billion assets under management net sales both in 2023 and 2024 with 4.5 billion retail net sales for FinEcoset management. We also confirm management fee margins after tax at around 55 basis points in 2024 with pre-tax margins at around 73 basis points. On brokerage, we confirm for 2023 expected revenues strong with the floor higher versus pre-COVID period. On operating costs, we expect an 6% growth year-on-year in 2023, not including around 2 million of additional costs for final cost management, strategic discontinuity, around 3 million for UK operational costs, and other costs for the expansion in Germany and eventually additional marketing expenses. We expect our cost of risk in the range between 5 and 9 basis points. And finally, we expect a growing CT1 and leverage duration. Let's now move on to slide five. As announced, we reached a new record high adjusted net profit in 2022 at 429 million plus 23% year-on-year on a like-for-like basis in a very challenging macro scenario. Revenues at 948 million, up by 18% year-on-year, as we have been able to catch the strong acceleration of the structural trends in place, mainly thanks to the robustness of our net financial income and to the contribution of the investing business. Operating costs at 281 million, well under control, and increasing by 4.6% year-on-year, excluding costs strictly related to the growth of the business. Let's now move to slide 6 and start to analyze more in detail the dynamics of our results. Net financial income in 2022 at 392 million, increasing by 40% year-on-year, with net interest income at 343 million and profit from treasury management at 49 million. Let me highlight that net interest income is progressively increasing thanks to the strong gearing to interest rates we have, driven by our clients' valuable and sticky transactional liquidity. We are continuing to accelerate the growth of our non-financial income, which in 2022 reached $555 million, up by 6% year-on-year, mainly thanks to the positive contribution of investing and banking. Now, jumping to slide 18, we will deep dive on the performance of the brokerage business. Overall, brokerage registered an excellent 2022 at $190 million, despite the persistent negative market context in terms of volumes and the bear market, confirming a structurally higher floor compared to pre-pandemic levels regardless of market conditions. As you can see in the chart on top of the slide, in the fourth quarter of the year, brokerage revenues reached 41 million, resulting in a monthly average 22% higher compared to the monthly average revenues in the period 2017-2019. Let me remind you that the growth of the brokerage business is driven by the contribution of three structural components. First, the continuous process of deep reshaping of our brokerage business. Second, the widening of our client base using the platform with active investors growing significantly in absolute terms and standing around 35% above the average level of 2018-2019. And this trend has been confirmed also in the most recent quarters despite the low volumes on the market, as our target market is focused on wealthy and financially aware clients able to trade in every environment. Third, we are continuously increasing our retail market share. Let's now move on to slide seven for a focus on investing. Pineco is positioned in the sweet spot to capture the structural trends in place in Italy, and also thanks to our initiatives, we have experienced a strong acceleration towards asset under management. On top of this, Finneco asset management is delivering on heat discontinuity and taking more control of the value chain. As a result, investing revenues were equal to $308 million in 2022, increasing by 12% year-on-year with management fees increasing by 13.5% year-on-year. Let me highlight that the strong contribution by FinEco City Management has been able to sustain margins and revenues. Management fees margins after tax reached 53.1 basis points in the quarter, in line with the previous one, despite the stronger negative market performance at the end of the third quarter, which has resulted in lower average asset under management in the last three months of 2022. Let's now move to slide 8 for a focus on our costs. This slide confirms once again efficiency to be part of our DNA and core in our bank representing a clear and unique competitive advantage. Operating costs in 2022 at $281 million growing by 4.6% year-on-year, excluding costs related to the growth of the business. Mainly, additional $5.7 million costs for FinEco Asset Management that are current with the acceleration to further expand its business and have in higher control of the value chain. Additional $4.3 million in marketing costs. Staff expenses at $117 million. in the period, increasing by 5.1% on a yearly basis, net of the cost related to the expansion of the business of finical asset management. Finally, non-HR costs at $164 million, growing by 4.2% year-on-year, net of the cost related to the growth of the business. Let's now move to the slide 10 for a focus on our capital ratios. Fineco is confirming once again a rock-solid capital position on the wave of a safe balance sheet. Common equity tier 1 ratio at 20.82%, leverage ratio at 4.03%. Risk-weighted assets at 4.74 billion and total capital ratio at 31.2%. 37% as of December 2022. Let's now move on to slide 16. Let's now focus on our 2023 guidance and outlook going forward. On banking revenues, we expect the net financial income in 2023 to grow by around 80% compared to the better than expected results in 2022. Let me remind you the assumptions behind the guidance. First of all, the guidance is updated with the forward rate code as of February the 3rd, 2023. We confirm that we will not pay any interest on current accounts, 1 billion net inflows in deposits. In terms of our investment policy, we will continue the diversification of our bond portfolio by buying European Govins and we have stopped reinvestments in Italian and Spanish GOVIs. Finally, let me remind you that the net financial income is expected to be represented entirely by net interest income, as we don't expect any contribution in terms of profits from treasury management in the present interest rate environment. Going forward, we expect net interest income to keep on benefiting from the new interest rate environment. Overall banking fees are expected stable compared to 2022. On investing, taking into consideration the negative market effect up to the end of January, we expect the 2023 revenues to increase by high single-digit year-on-year, with higher management fee margins after tax. Overall, banks' asset under management net sales are expected at around 2%. 5 billion, while for Finacost management, we expect to retail net sales around 4.5 billion. On this, let me add that inflows in January have been very solid and promising, and we will update the guidance in case of a consolidation of the current trend. Our financial planner network is expected to increase by around 100, 120 financial advisors. In 2024, we expect around 5 billion net sales per year in the overall bank's assets under management. For our Irish company, we expect a retail net sales of around 4.5 billion per year. Finally, despite the challenging context, we confirm the increase of our management fee margins after tax up to around 55 basis points by 2024. thanks to Finneco asset management operational efficiency that is more than offsetting the negative market performance. Pre-tax margins are confirmed at around 73 basis points by 2024. Brokerage revenues are expected to remain strong with a floor in relative terms with respect to the market context that is definitely higher than in the pre-COVID period. Operating costs in 2023 are expected to grow at around 6% per year, not including around 2 million of additional costs related to FinEQ asset management strategic discontinuity, around 3 million for UK operational costs, other costs for the expansion in Germany, and eventually additional marketing expenses. Cost income, 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. Systemic charges for 2033 are expected in a range of 50-55 million. On capital ratio, we expect a growth in 2033 for both CT1 ratio and leverage ratio, currently with a combination of both a strong acceleration in the growth of the bank and the distribution of generous dividends. On dividend per share, going forward, we expect a hit constantly increasing, also thanks to the progressive delivery on our strategic discontinuities. Customer risk was equal to four basis points, thanks to the quality of our lending portfolio that is offered exclusively to our loyal customer base. In 2023, we expect a hit in a range between five and nine basis points. Finally, we expect a robust increase and high-quality net sales with a mix mainly skewed towards asset under management and with a lower component of deposits thanks to all the new initiatives we are undertaking. Let's now move to slide 17. As you know, Finneco Asset Management is progressively taking more control of the investing value chain, resulting in higher revenues and margins for the group. The contribution of Finicco asset management to the group asset under management net sales is further improving regardless of the macro scenario, moving from 53% in 2021 to 77% in 2022. At the end of 2022, the contribution of Finicco asset management asset under management out of the total stock of asset under management for the bank moved from 27.3% in 2021 to 30.3%, and in January is above 31%. Let me please underline that our Harish company has recently launched a new generation of product perfectly in line with clients' needs in the current environment, as shown by the strength of the influence in the last few months, with January recording the best month ever in terms of retail net sales. On top of this, Finicost Management continued to deliver the internalization of value chain by collecting net sales of funds underlying of wrappers. As a reminder, this process is linked to the substitution of Finicost Management funds within the building block used for funds of funds or insurance wrappers, thus leading to an additional margin contribution for the bank. I now leave the floor to Paolo Di Grazia, our Deputy General Manager, for an update on our international business on slide 21.

Good morning. Let me start with the usual update on our UK business. We are finalizing our talks with the local authorities on the post-Brexit setup and we have submitted the request to open a live subsidiary in the UK. This will imply a slight increase in our UK cost base in the region of around 3 million more. As for the results in 2022, let me underline that we are very happy for the growth of the business we experienced despite we stopped our marketing activity due to the talk spending with the local regulator. Our client base kept on increasing thanks to the word of mouth and our revenue generation has doubled year on year to 2.7 million. The next country we are assessing to enter is Germany in 2023, leveraging on our new platform for investments. Our intentions are to develop the offer in two steps. brokerage and multi-currency, and the second investing with no financial advisor. The offer will tailor German customers' behaviors, leveraging on stocks, ETFs, certificates, and CFDs on a multi-currency platform. While the brand positioning will look to acquire sticky, high-value, and financially aware clients looking for fairly priced quality service as in our DNA. Finally, in the next few years, we will assess to approach different countries across Europe, depending on the opportunity that may arise. Thank you for your attention, and I will hand it back to Alessandro.

Thank you for your time. We can now open the call to questions.

Thank you. This is the Coruscant 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 touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receipt of an asking questions. Anyone who has a question may press star and one at this time. The first question is from Azura Guelphi with Citi. Please go ahead.

Hi, good afternoon. I have two questions. One is on the net interest income guidance and component, and the other one is on the flows. When you talked about the detail of the NIGI guidance, you talked about no deposit remuneration. Can you give us some evidence on how this is going with customers, if there is any resistance on this, or if there is any level at which the interest rate environment could create some question about that? You also talk about one billion of inflows of deposit, if I'm correct, for the entire 2023. And this links to my second question on flows. The flows on FAM are confirmed at 4.5 billion, and in the recent month, we have seen very strong flows in the product that have been launched. What degrees of conservatism is in this number? And when you think about deposit flows, do you think that there is a risk of outflows from deposit into higher-yielding products like, I don't know, BTPs or others? Thank you.

Thank you, Azura, for the questions. First of all, yes, we are confirming our guidance that we don't plan to remunerate deposits, but this is perfectly in line with our history. Just as a reminder, we stopped on remunerating current accounts 10 years ago in 2012, so for us it's not a brand new story. So now there is no resistance by clients because the bank is offering plenty of opportunity for the clients that they are interested in chasing rates. They can buy our brand new solutions in the asset under management business that is mostly in direction of satisfying the fixed income appetite by clients. They can invest in term deposits offered by other banks. We launched last year the platform that is growing. And they can buy also directly bonds on the platform. So, yes, no, there is no questions by clients. For our clients, it's pretty clear that one thing is the transactional liquidity that is on the current account with a zero remuneration. And another thing is the remuneration for the excess liquidity. And yes, the 1 billion deposit inflows is mostly driven by the expected continuous growth of our base of new clients that are expected to keep on driving in our direction fresh new transactional liquidity. The question is if this is conservative. I take the opportunity to spend a few years on the guidance on the asset under management. It's clear that the numbers that are emerging over the last few months, particularly in general, are really strong, very impressive, and mostly driven by the One is our flexibility and rapidity in launching brand new solutions able to capture the appetite of clients. Second, clients in any case are even more aware that inflation is a problem and so they want to invest. And so, yes, we... We didn't change the guidance just because we are at the beginning of the year. So we don't think that to change the guidance after the first month of the year doesn't make any sense. But it's clear that we are extremely positive, constructive, and as soon as we have this trend consolidating, we think that there is room for improvement. for improving the guidance. And any risk of outflows from deposits into BTPs, as we explained by definition, the GOVIs are back again, but more generally speaking, fixed income is back again as an appealing alternative for clients. But this overall is not the bad news. Because now we have in front of us a world in which we have all the full range of the asset class that are investable. So on one hand, you have to put in account a little bit more competition by the Govis. But at the same time, the broadness of your hope in terms of asset under management is much bigger and much more balanced. So overall, it's a

It's a good thing.

The next question is from Filippo Prini with Kepler. Please go ahead.

Hello. Good afternoon. Thank you for taking my question. I got two questions. The first one, I've seen that you're... that your share of floating rate has increased a little bit in the last quarter compared to the previous quarter. Is it fair saying that your guidance of a plus 80% growth in IEI in 2023 still thinks of counting increase of the part at floating rate? And the second one is on your 81 bond. If I remember correctly, one of the two 81 bonds, that one that is fully underwritten by Unicredit, is becoming callable in June. Could you already share with us your plan to roll it over with a new 81 bond? Thank you.

Now I'm... Just a second, because I'm checking with Lorena. I was here for the increase of the token rate bond portfolio. Lorena, you are?

I'm not.

Only speaking, we don't see that kind of increase. But in any case, the increase of the guidance is not driven by this. Just a second. So, in any case, the increase of the guidance is just related to two components. One, clearly, the further improved that there has been on the forward rate curve. And second, the consistency of the fact that the beta of our deposit is practically zero. The increase of the guidance is driven by these two components. 81 bonds by unicredit. On this, if we assume that the conditions remaining as we are now, clearly there is a high probability that it is not going to be recalled because it doesn't make any sense from an economic point of view. and it would be very difficult to justify also in front of the regulators.

Okay, thank you for the clarification. Thank you.

Regarding the first... Sorry, there is Lorena that has some additional comments on the floating rate notes.

Yeah, so regarding the floating rate notes, with respect to the last quarter, there was a slight increase from 35% to 38% swapped. So as you know, when we buy generally fixed rate bond and then we swap them into floating rate.

So this is why there is this... But in any case... It's a normal activity... Yes, but it's not this behind... the increase of the guidance on the net interest? No, no, no, absolutely not.

It's only the normal activity of investment that we are doing, investing the additional liquidity we have.

The next question is from Domenico Santoro with HSBC. Please go ahead.

Hi, good morning. I have a question from my side. First of all, I appreciate that you defend the idea of deposit beta for this year, but your guidance also shows a bit of confidence on the NII for the next year instead. Now, given that the yield curve implies rates going down and there is a risk, of course, for the NII for the next year, I just wonder if you are contemplating some actions already in order to counter effect, you know, the impact from rates in 2024 going forward. Then on the change in the share of viable floating rates, I just wonder whether also your NII sensitivity has changed a little bit. And if yes, if you could quantify. Then I have a question on investing. Because your guidance, if I'm not mistaken, implies even accounting for the market effect in January and the strong sales of 5 billion, implies, if I'm not wrong, margins to improve significantly. during the course of the year maybe reaching already if not above the 73 bps that you are targeting instead of 2024 so my understanding from the call is that you might have been a little bit also conservative in giving these high single digits for investing fees so i just wonder whether this is correct so the 73 bps target for 2024 now is conservative and if you could do better going forward. Then if you could give us also the level of tax rate that you expect for this year, which is consistent, of course, with the level of NII and fees that you give in your 2023 guidance. Thank you very much.

Yes, so clearly we are not giving guidance on the on 2024, but in any case, based on taking into account the forward right curve and so on, also for 2024, the net interest income is expected to keep on going, clearly not at the same speed of 2023, but it's still keeping on going. The main reason is that still probably is not completely fully captured by the market is that our business model that is driving to a zero beta deposits and so on. So this is the real point of strength. And again, I'm going back to the the strategy we put in place many years ago because we stopped on remunerating current accounts 10 years ago. So the clients are coming to us because they are interested in the services we are providing and if they want to change rates they are using completely different kind of solutions. The net interest sensitivity Honestly speaking, the traditional net interest sensitivity that is measuring the expected changes in net interest income with a parallel shift of the curve, honestly speaking, doesn't make any sense because this is the reason why people prefer to give to the market in order to make their life easier for the market to give the right guidance. Because, honestly speaking, in my personal career, never I saw a parallel shift of the curve. So this absolutely doesn't make any sense. But in any case, our gearing to rates has not changed particularly. Regarding investing, yes, there is for sure there is an There has been some kind of cautiousness in what we are giving, but this is correlated with the fact that we are just at the beginning of the year. We know that we are moving in an extremely volatile environment, but it's clear that everything is extremely promising, both in terms of net sales of asset under management. Finneco asset management is doing an absolutely terrific job, so we expect that it's going to In my opinion, I would not be surprised to see them doing even better than we are expecting. So, yes, there is a reasonable and decent level of cautiousness that is correlated with the fact that we are just at the beginning of the year. Tax rate, we expect an increase of the tax rate for 2033, but a very simple reason, that that the weight of the revenues generated in Italy is going to jump a lot considering the big rise of financial income. So we expect the tax rate growing, increasing by... Between 1.5 and 2%. Yes, between 1.5 and 2%. Again, driven by the fact that now the mix in terms of revenues is more skewed in the direction of the of revenues generated in Italy.

Sorry, just a follow-up question. So I'll make it very simple, the question. Is your guidance on investing fee implying a certain increase of margins from year to handle 2023, correct?

Can you repeat?

That's good. So which is exactly your point?

My question is, yes, is your guidance on investing revenues implying a certain increase of margin from here to the end of 2023?

Yes, yes, clearly, because the reason, the steady and continuous contribution by the increase of the penetration of financial asset management. And so if you put together the volumes and growing margins, you get the guidance, yes.

So having said that, is that a possibility that you'll reach the 73 bps target on our margin well before the end of 2024?

Honestly speaking, we strongly suggest to be focused on the after-tax margins because otherwise The pre-tax margins, you are missing a quite important part of the story that is the fiscal component. Considering that a large part of the increase of the margins is driven by the higher penetration of financial management, clearly if you are just focusing on pre-tax, you are missing a sizable part of the story. So again... But yes, if we have the consolidation, if we have the consolidation, if the markets, we are assuming a neutral market. In the case of more favorable market conditions, yes, sure, we can achieve the target before. And the same story if we are going to do better in terms of volumes and so on.

Thank you.

The next question is from Enrico Bolzoni with JP Morgan. Please go ahead.

Hi, good morning. Thanks for taking my question. So one question was on your broking activity. If I look at your market share, looking at Assocene data, I mean, clearly you're doing something right because you keep increasing your market share also year on year. Can you just give us some color on why you think you're being so successful in increasing your market share in broking activity? And related to that, Can you give some color on maybe what is the strategy? Do you think you can increase it more? I mean, you're very strong in the equity segment, but maybe not so strong in some of the bond markets or maybe in some of the other equity markets. Is there anything there in terms of product you think you can launch to win even more market share going forward? So first question, thank you. Second question, I would just like to hear from you a comment on maybe the discussion which is currently ongoing the European level on a potential ban on rebates, which clearly would be very impactful for the Italian asset management industry. Is there anything you can say on that? And then partially related to that, maybe, can you just give an update on how the recruiting is going? Have you seen a change in how easy it is to recruit advisors? I mean, year-to-date markets have rebounded, so... think it's easier, it's going to be easier this year compared to 2022. Thank you.

Yes. Thank you for your question. First of all, the market share delivered by SOSIM are just giving just a piece of the story because now the percentage of the business that is related to the Just a second. The part of the business that is not related to the Italian market is now continuously growing and is very important. Second, there is everything related to the derivatives and over-the-counter products. So it's a little bit more, it's a little bit broader picture. And the reason of the continuous increase of the market share is, first of all, is the robustness, the broadness, the quality of the platform combined together with a very high level of convenience. And second is the target market, because we are extremely competitive. We are excellent in capturing the most valuable part of the target market represented by clients that are aware of what they're doing and clients that are decently wealthy. So clients that are able to trade in every market conditions. So this is the main reason because usually on the brokerage business you have players specialized in offering extremely basic services solutions just leveraging mostly on the pricing or other players that they are offering absolutely very sophisticated platforms but they are not able to capture the normal clients. So we think that we are going steady but continuously we are going to increase our market shares. And going back to the ASOSIM numbers, the point is that when you are looking, you are observing, for example, on the bonds, the ASOSIM numbers are taking and putting together everything retail and institutional clients. And clearly the presence of institutional clients on the bond market is much bigger than... than, for example, there is in comparison to the equity market and with the retail. So retail clients are more actively involved in the equity market than in the bond market. On the discussion that is in place on the possibility of a ban on the inducement, first of all, Fineco is by far the best positioned player in the case this is going to happen. We have 24 billion of asset under management on which clients are paying an advisory fee. So we started on offering these kind of solutions to clients in 2008, so many years ago. So this means that we have the most part of our financial planners are absolutely familiar in... on the business model of making clients paying an advisory fee. And also we have a quite broad base of clients that is familiar in paying a fee, particularly the rich clients. Second point, one of the most important impact that is expected to be produced by the introduction of a ban on inducement is a massive rise of the level of transparency on the market. And Fineco, as probably everybody's familiar, has been always a champion of transparency. We built the bank and our offer on the concept of transparency. So, at the end of the story, in the case to raise such a kind of a move, we think that for us, in relative terms, it's going to be a great advantage. Recruiting activities is keeping on doing extremely well, because as we had the opportunity to explain several times, there is a brand new trend, very strong, represented by the bankers, so people that at the moment are working in traditional banks as employees, that more and more are deciding of moving direction of becoming agents. And Finneco is emerging as the perfect place for them, Because these guys, what they're looking for is a business pattern characterized by a very high level of efficiency, considering that this is the new world. And second, they are looking for a business pattern, transparent and respectful clients, because many of them are really annoyed by some market practices delivered by traditional banks. And so if they had to change They want to change in direction something that is going to be better. And so, yes, the recruiting is doing well, and we expect it's going to keep doing for us in the next future.

Thank you. And actually, sorry, one follow-up I forgot to ask. I mean, your excess capital is substantial now. Would you consider any share buyback at some point in the future?

No, the old excess capital we're going to give back to the market is going to be given back throughout the dividends because we think that the dividends are more respectful of the independency of our shareholders because through the dividends, the shareholders can decide what they want to do with that money. And with the buyback, it's the company deciding what to do with the money. And so this is the main reason. So, yes, we are going to continue in the direction of paying dividends.

The next question is from Giovanni Razzoli with Deutsche Bank. Please go ahead.

Good afternoon. Two questions. The first one is on the wording of your statement. external growth strategy? Because now, if I look at the presentation, you seem to assess the launch of a platform in Germany. Why in the last few conference calls, we were led to understand that you were already targeting the launch of the platform in the country. So are you still in a strategic review of this move or you plan to enter the market anytime soon? soon. And my second question is, if you can share with us what is the amount of third-party deposits that you have reached at year-end. I must tell you this because you have been crystal clear in saying that deposit beta for Fineco has been zero for the last year and will remain so for the next years. But I must tell you this to understand the client's appetite for this product and the risk that other players may instead suffer in terms of increasing the funding cost and, in general, the remuneration to clients. As your peers are guiding for a 30%, 40% deposit beta, so you are a good proxy, you know, paradoxically for them as you are offering third-party money with a completely different product mix. Thank you.

On the wording, it's just a matter, it's just a wording, so there is nothing behind. So yes, we are not, we don't have any specific doubt. So we are using, it's just a matter of respect also, because we know that the last final word, we are a public company listed, and so the last final word for everything we are doing is in the hands of the board of directors. So we come to the conclusion that would be a little bit not polite and fair and giving for decided something that has not been approved yet in the Board of Directors. It just is a formal point, but we don't see any reason for it because everything is going to be so straightforward and so there is no problem. On the third-party deposits, Paolo, if you want to give a little bit of color on which is the amount at the moment of the third-party deposits we have?

Now we have 430 million in deposits. There is an acceleration, but there is no, I would say, there is no huge interest yet. But I think it's a great product because, you know, We don't push the product, but if the clients want to have a deposit, they can just do a one-click buy and have it in Fineco without moving the money out. And of course, we make money on the deposit of the third party that we offer.

In any case, in the guidance we are giving to the market, for example, we expect, correct me if I'm wrong, to reduce to move up to 1 billion of temp deposits. So what is important? Because I think that this discussion on the beta, what is, again, it's really, it's probably, it's really a little bit not fully captured by the market. First of all, the business model of the bank. Fineco is much more a platform than a bank. So it's giving the clients this concept of the one-stop solution. And this, by definition, tends to get in a higher level of transactional liquidity. Second is the very long period of time in which we change strategy, stopping on remunerating deposits, stopping on using rates as a weapon for taking on board clients. The result is that we have been extremely consistent in building up a base of clients that is our clients because they are interested in the services we are providing. And the same story for the new clients, because the new clients we are taking on board are driven by the word of mouth. But the word of mouth is not moving finico because you are going to get an higher rate. It's moving finico because the platform is working in a perfect way. So the more you are using rates as a weapon, and the more you have to expect on the long run to have a higher beta to deposit. And this has not been our case. It's been the strategy, and we are perfectly aware that we missed some opportunities in terms of more clients on board, more liquidity, but the result is that we have a much more solid and valuable base of clients and deposits.

Thank you. The next question is from Alberto Villavit in Termonte. Please go ahead.

Good afternoon and thanks for taking my questions. Congratulations for the results. Two quick questions from my side. The first one is on the guidance on costs. You mentioned during the speech that you will incur 3 million additional costs for the setup of the light bank in the UK. I was wondering if that is going to be happening in 2023 and if it is included in the guidance you have provided of UK operational cost of 3 million, and if this cost is a one-off or is a kind of recurrent one you're going to have to keep on doing business in UK. The second part of this question is on Germany, if you can clarify what you're expecting in terms of costs for 2023 to come. to start the operations in Germany. The final question is on the dividend. You have been having a payout in the region of 60 to 70 percent in the past. I was wondering if that's something that we can expect for the future and when you talk about redistributing excess capital maybe that is going to allow you to have a payout which is even above this level already in 2023. Thank you.

On the UK cost, yes, these 3 million are included in the guidance we gave, and these 3 million are running. On Germany, policy speaking, considering that everything is going to be much closer to the end of the year, you don't have to expect any meaningful and significant impact in terms of cost in 2023. On dividends, we are not giving a precise guidance on the payout for a very simple reason that Fineco is an extremely fast-growing and continuously moving company. It doesn't make any sense This makes sense when you are an extremely... For example, for a traditional bank, it makes much more sense. In any case, going forward, the business model is, as you are familiar, incredibly capitalized, expected to keep on growing fast in terms of revenue generation. And for this reason, we... We expect that our key capital ratios keeping on going up. I'm referring to the CT1 and the leverage ratio. So at a certain point, it's possible that we are going to have on the table the fact that we have a little bit more capital in excess than we are used to have. In that case, probably we are going to give back to the market more. This is what we are going to do.

Okay, thanks.

The next question is from Elena Perini with Intesa San Paolo. Please go ahead.

Yes, good afternoon everyone. I have only one residual question. It is related to if you have placed Eurovita products and what is the weight of these potential products on your total offer. Thank you very much.

Yes, the most part of the financial planner network we distributed Eurovita products in the past. So now is relatively several years that we don't have any significant production on Eurovita. So in terms of looking to our numbers over the last few years, the weight in our total offer at the moment in the last few years has been practically close to zero so the additional and in any case just as a as a clarification we have to consider that the eurovita problems are on the on the on the insurance company not on the product so it's just a problem driven by the the lack of handsware by the controlling shareholders that has missed of making the capital injection in the company, but it's not a problem related to products. So the problem is on the company, but not on the products.

Okay, thank you very much.

The next question is from Marco Nicolai with Jefferies. Please go ahead.

Hi, thanks for the presentation. Sorry to go back on the remuneration of deposits, but just wanted to understand this better. So as you said before, you give options to your customer to chase higher rates by a various product, being those third-party deposits or fixed income funds, so on and so forth. But to what extent higher inflows in this type of product could still impact your NII Given that, after all, your fixed income portfolio is financed also via these clients' deposits. I mean, if my understanding is correct. Or maybe you expect always to generate enough inflows of new deposits kind of to offset this potential scenario. Thank you.

Yes, thank you for your questions. So, first of all, let me go back again to the business model. The bank took a strategic decision 10 years ago on keeping very clearly separated the transactional liquidity by the liquidity that is chasing rates. And we did that through stopping on remunerating deposits in 2012. That was a period of time which rates were not negative. The results that clearly we agree is everything that is related to the day-by-day life of clients and so on, that is transactional liquidity, is there. We are not paying nothing. And more or less, based on our models, 85% of the overall deposits are represented by transactional liquidity. And that is which clearly the beta is zero. Then there is the liquidity that is just waiting to be invested, because we are continuously growing. And so it's liquidity that is just parked and waiting to be invested in asset under management. And then there is a receivable number that is probably in the region of 1.5 billion, something like that, that is liquidity, let me say, is the bad liquidity, liquidity that is not transactional, that is chasing rates. Then we have the structural inflows of additional transactional liquidity because the bank is keeping on enjoying a quite robust growth in terms of clients that are opening accounts. And the rationale behind the decision of a client of opening an account within ECO because they want to use our services. And this is the reason why what they are bringing to us is or transactional liquidity or liquidity that is interested in being invested. And so putting everything together, this is the guidance. So we expect that the transactional liquidity is going to keep on growing for this reason. And we are going to have an and some of the liquidity that is the bad liquidity moving direction of EuroGov or temp deposits. But in any case, considering that we have an extremity, we started last year in offering this platform with temp deposits or other banks, and we are offering absolutely very appealing rates and so on. the numbers that are moving there are remaining absolutely negligible in consideration of the overall dimension of our deposits. And in any case, in the guidance we gave to the market, there is an embedded expectation of moving from 430 million of term deposits up to 1 billion by the year end. we are factoring in the possibility of an acceleration in that direction. But everything is embedded in the guidance. What is important that on the current accounts, we are going to keep on paying zero as has been the case for the more than last 10 years. And also another final consideration, the largest part of the transactional liquidity is related to the transactional banking. not to brokerage, because brokerage is, yes, it's contributing, but it's a small part. The largest part is the transactional banking, people that are using the current account for their day-by-day life, paying utilities, taxes, bills, using credit cards.

So this is the picture.

Okay, thank you.

Mr. Foti, there are no more questions registered at this time. I turn the conference back to you for the closing remarks.

Thank you for attending our conference, and thank you for the absolutely very interesting questions you raised. As usual, if you need to make some more deep dive in our numbers and so on, please contact us anytime. Thank you again for taking part in our call.