Finecobank Banca Fine Spa

Good afternoon. This is the Coruscall Conference Operator. Welcome and thank you for joining the Fineco Bank Second Quarter 2023 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 Bank. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining our first half 2023 results conference call. Adjusted net profit in the first half of 2023 was equal to $309 million, up by 39% year-on-year, and by 63% excluding first half 2022 profits from treasury management. Adjusted revenues at 601 million, increasing by 29% year-on-year, and mainly supported by net financial income, which is sustained by our clients' very sticky and valuable transactional liquidity. And by investing, thanks to the volume effect, and the higher control of the value chain by FinEco Asset Management. Operating costs were under control at $144.5 million, increasing by 5% year-on-year by excluding costs related to the growth of the business. Adjusted cost-income ratio was equal to 24.1% decreasing year-on-year and confirming operating leverage as a key strength of the bank. In the first half of the year, Finaco recorded an outstanding commercial performance thanks to our organic growth strategy. First of all, we recorded a further acceleration in our new client acquisition, increasing by around 25% year-on-year. This is a particularly healthy and remarkable growth considering that we have not changed our client's acquisition strategy and that the competitive environment is crowded with short-term aggressive commercial offers on rates. Second, our net sales confirm to be very solid with 5.2 billion inflows in the first half of the year. This trend is confirmed also in July, with estimated net sales at around 500 million, of which deposits at plus 200 million, despite the 260 million of higher taxes here and here paid by clients in the month, driven by the decision by the government to anticipate in July taxes that last year were paid in August. Asset under management at around $40 million due to around minus $160 million of outflows from the low-margin institutional business and asset under custody at around $250 million. July brokerage estimate revenues are equal to $14 million, more than 35% higher compared to the average July revenues in the period 2017-2019. Third, our network of personal financial advisors confirmed to be once again the leader in terms of productivity within the asset-gatherer space, thanks to our powerful organic growth engine and the FinTech DNA. Our capital positions confirmed to be strong and safe with a common equity TR1 ratio at 23.2%, and the leverage ratio at 4.68%. Looking at 2023 and going forward, we expect to continue to deliver a strong growth thanks to our very diversified business model and our organic growth strategy. On the right-hand side of the slide, you can find a summary of our 2023 guidance, which are all confirmed More in detail, our net financial income, we confirmed hit to increase in 2023 by around 70% versus 2022. On investing revenues, we confirm our 2023 revenues guidance expected to increase high single digit compared to 2022 with higher after-tax margins. For 2024, we confirm our net sales and management fees margins expectations. On brokerage, we confirm for 2023 expected revenues strong with a floor higher versus pre-COVID period. On operating costs, we expect a 6% growth year-on-year in 2023, not including around 2 million of additional costs for FinEco asset management. strategic discontinuity, and at least around $3 million of additional marketing expenses. We expect our cost to risk in a range between five and nine basis points. And finally, we expect a growing CT1 ratio and leverage ratio. Let's now move on to slide five. As announced, adjusted net profit in the first half of the year stood at 309 million in a very challenging macro scenario, increasing by 39% here and here, and by 63% excluding profits from treasury management realized in the first half of last year. Revenues at 600.7 million, up by 29.4% here and here, as we have been able to catch the strong acceleration in the structural trends in place. The strong growth of our net financial income, increasing by 86% year-on-year, is supported by our high-quality and capital line net interest income, growing by 158.5% year-on-year and with a very low contribution by lending. Net commissions increased by 4.1% year-on-year thanks to the contribution of investing and banking. As for the trading profit, let me remind you that in this line there are accounted minus $5.1 million related to the ineffectiveness of hedging derivatives in accordance with the accounting standard IFRS 9 compared to the plus $11.7 million in the first half of 2022. The value is influenced both by the spread between the euro short-term rate and the euro rebar and by the amount of the fair value of the derivatives. Excluding these effects, the decline of the trading profit is mainly related to the lower brokerage activity due to the level of market volumes. Operating costs at 144.5 million, while under control and increasing by 5%, year-on-year, excluding costs strictly related to the growth of the business. Mainly, additional costs for FinEco asset management to further expand its business and have a higher control of the value chain. Additional marketing costs to catch the strong momentum of the business. Let's now move on to slide six for a deep dive on the performance of the investing business. Investing revenues were equal to 156.2 million in the first half, increasing by 4.8% year-on-year. Let me please remind you the quality of our investing revenues, mirroring our transparent and fair approach towards clients. As a result, our revenues are exclusively driven by recurring management fees, only 1% contribution from placement fees and no performance fees at all. In the second quarter, management fees margin after tax increased to 53.8 basis points, up both on year and quarter on quarter, thanks to the strong contribution by Finneco Asset Management. Let's now move to slide seven for a focus on our asset management company. As you know, FinEco Asset Management is progressively taking more control of the investing value chain, resulting in higher revenues and margins for the group. The contribution of FinEco Asset Management to the group asset under management, NetSede, is further improving regardless of the macro scenario, moving from 81% in the first half of 2022 to 122% in the first half At the end of June, the contribution of FinEcoset management out of the total stock of assets under management of the bank moved from 28.8% in the second quarter of 2022 to 33.4%. The commercial performance by FinEcoset management this year has been outstanding, not only in absolute but also in relative terms. Down in the slide, we are showing a benchmarking based on Associstioni Retail Net Sales as of June. As you can see, our Irish company delivered the highest net sales compared to the most relevant asset managers operating in Italy. This remarkable result is due to some effectiveness in quickly developing the right set of products to catch what clients are currently looking for. Our Irish company has recently developed a new generation of capital-protected investment solutions, which is now further widening to allow clients to build a protected exposure towards equity. Let's now move on to slide eight for a focus on brokerage. Brokerage, as usual, registered an excellent first half at 96.1 million, resulting in a monthly average 43% higher compared to the monthly average revenues in the period 2017-2019, confirming a structurally higher floor compared to pre-pandemic levels regardless of the market conditions. 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 reshape 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 2018-19. Third, we are continuously increasing our retail market share. As you can see on slide nine, all of this is translating in a very resilient revenues generation regardless of the market context. delivering a far better performance compared to peers. Let's now move on slide 11 for a focus on our capital ratios. Sineco confirmed once again a capital position well above requirements and expected to grow on the wave of a safe balance sheet. Common equity TR1 ratio at 23.2% and leverage ratio at 4.68%. and wild or risk-weighted assets at $4.6 billion, and total capital ratio at 34.04 as of June 2023. As for the liquidity ratio, liquidity coverage ratio is at 785%, and net stable funding ratio at 384%. Before moving to the next slide, let me underline that our rock-solid capital position has been confirmed by the results of the stress test by European Banking Authority and the European Central Bank. Finneco emerged among the top three Italian banks and among the best European banks, and even in an adverse scenario, we reported an improvement in our CT1 ratio. Let's now move to slide 14 for a focus on acceleration of our commercial dynamics. Let me spend a few words on the strong acceleration of our new clients acquisition, which is even more remarkable considering the context. As you can see from the graph on top of the slide, new clients in the first half were 25% higher here on here. These results have been achieved keeping our marketing strategy unchanged. This is clearly shown by our most recent marketing campaign, which was only focused on Finneco positioning and not relying on any short-term aggressive offers on rates. Our clear aim is to build up a reputable brand that generates a positive word of mouth. This translates in the acquisition of a high-quality and sticky client base, key to grow an healthy business in a long-term horizon. Let me also add that we have recently increased the efficiency of our marketing engine thanks to our brand-new onboarding process. First of all, we introduced responsive onboarding and the app accessibility, making it easier for customers to open accounts from any device. Secondly, we streamlined the entire onboarding journey by simplifying each step. This optimization has significantly improved our conversion rate while also lowering acquisition cost, as you can see down in the slide. Let me also quickly comment on slide 18 as another key driver for our organic growth is the best-in-class productivity of our personal financial planners. helped by our FinTech DNA. As you can see in the slide, the productivity of our network in terms of asset under management has been by far the best one within the sector. Let's now move on to slide 19. Deep dive on our transactional liquidity. The granularity and stickiness of our deposit base is confirmed quarter by quarter with a transactional liquidity around 90% of our client deposits. This is the result of a clear strategy we have taken more than 10 years ago when we stopped remunerating liquidity and focused on our client acquisition 100% on the quality of our one-stop solution. As you can see from the slide, 98% of our deposits is represented by retail clients. Second, our deposits are extremely granular, with an average ticket of around 19,000 euros and the median ticket at 4,700 euros. Third, 76% of our deposits is under the protection of the deposit guarantee scheme. On top of this, different from other players, mostly focused on brokerage and investing, our one-stop solution relies on a fully-fledged banking platform. our clients are not just using our bank for brokerage or investing purposes, but all of our quality banking proposition for their daily life. Indeed, we have 50% of the clients crediting salary with us. Let's now move on slide 20 to deep dive on the next phase of our deposit during the first half of this year. On the left-hand side of the slide, you can find The evolution of net sales this year, inflows of assets and clients continue to be very robust as the bank continues to benefit from the long-term structural trends underpinning the growth. Let's now focus on the breakdown of the net sales. With deposits being negative due to the reinvestment into assets under custody and assets under management of the excess liquidity of our clients. To give you the sense of the strong underlying drivers of our transactional liquidity. In the box down on the left of the slide, you can see that in the first half of the year, the bank collected plus 8.4 billion of liquidity coming from salary and pensions and plus 6 billion from bank transfers. After the expenses in cards, bills, taxes, deposits were still up by 4 billion. And taking into account also the investments in asset under management and asset under custody, the final result is minus 2.1 billion of deposits net sales. Moving on the right side of the slide, we share our usual graph on the daily balance of the bank transfers. As you can see, it has firmly remained on deposited territory, meaning that FINEC is keeping on acquiring new liquidity from the banking system. also from institutions that they are remunerating liquidity. Then on the graph below, we can see the trend in terms of liquidity flows per cluster of clients. Clients with total financial assets below 100,000 euros increase the amount of liquidity in the bank. This is mainly transactional. On the other end, the cash sorting process has been 100% driven by wealthier clients. which in the past accumulated excess liquidity waiting to be invested. Let me also add that looking at private banking clients, the liquidity as a percentage of total financial assets is now at 13%, the lowest level since 2015, suggesting that they are approaching the floor. Finally, please note that the new clients acquired in the year also brought positive liquidity. Let's now move on to slide 22 to focus on our guidance. On banking revenues, we expect net financial income in 2023 to grow by around 70%. Going forward, we expect the net interest income to keep on benefiting from the interest rates environment and the stabilization of deposits. Overall, banking fees are expected to be stable compared to 2022. On investing, taking into consideration the market effect up to the end of July, we confirm our 2023 expected revenues to increase by a single digit year-on-year, with higher management team margins after tax, and with new cost management retail net sales up to around $5 billion, as it is able to catch the outflows coming from insurance rafters in the new interest rate environment. and overall banks' asset under management net sales at around 4 billion. In 2024, we confirmed around 5 billion spent net sales in the overall banks' asset under management. For our Irish company, we confirmed return net sales at around 4.5 billion. Finally, despite the challenging context, we also confirmed the increase of our management fees margins after tax up to around 55 basis points by 2024, thanks to the Finneco Asset Management Operational Efficiency. Pre-tax margins are confirmed to up 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% year-on-year, not including around 2 million of additional costs related to FinEco asset management, strategic risk continuity, and at least 3 million of 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 the year are expected at around $50 million. On capital ratios for the year, we expect a growing CT1 ratio and leverage ratio, currently with the combination of both a strong acceleration in the growth of the bank and the distribution of generous dividends. On dividend per shares, going forward, we expect heat constantly increasing, also thanks to the aggressive delivery on our strategic discontinuity. Cost of risk was equal to five 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 range between five and nine basis points. Finally, we expect robust and high quality net sales, keeping our priority in direction of asset under management. Let's now move to slide 25. Let me share the usual update on our UK business. We are still dialoguing with the local regulators to find the right setup post-Brexit. We will continue to develop our UK business only if we will be allowed to remain with the branch and a very capitalized business model leveraging on the Italian infrastructure. Business-wise, the performance has been quite strong, considering that we stopped our marketing activity. Our client base kept on increasing, thanks to the word of mouth, and our revenue generation has increased by more than 58% here on here, reaching 1.5 million in the first half. Once we will finalize our discussion with the UK regulators, we will focus on the rest of the European Union. Thank you for your time. We can now open the call to questions.

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 one on the touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to use the handset when asking questions. Anyone who has a question may press star and one at this time. We will pause for a moment as participants are joining the queue. The first question is from Azura Guelfi from Citi. Please go ahead.

Hi, good afternoon. I have a couple of questions, if I can. One is on the NII, and I hear you have confirmed your guidance, but the rate curve has moved, and if anything, the deposit trend seems to be stabilizing and improving from now on. So can I just ask you why you didn't review your guidance, and how do you expect the outlook for 2022 in terms of net interest income development? The second one is on the slide that you put on the AUM, slide 18. Clearly, I guess, all this good performance on AUM is linked to FAM. So if you can give us a little bit more color on what are the initiatives that have been taken there in terms of new products, and if you can elaborate a little bit more on what's the pipeline for the second half. And if I may, one more on the leverage ratio. The leverage ratio has improved significantly. because of the deposit trend, I guess. And this could lead to higher capital return. So if you can give us some color on your thinking about capital return. Thank you.

Let me start by the first question. So it's clear that an environment in which we have a higher rate and a clear indication of stabilization of the base of deposits and so on, this by definition is positive for the evolution of net interest income. At the same time, we want to keep a reasonable and, let me say, decently conservative approach because we know that market conditions can change, particularly the expectation of rates and so on. This is the reason. We think that it makes sense to to stay where we are, that it's an excellent number in any case. And then we will see. My opinion, the most important, so clearly on the rates, we cannot do anything because it's not in our hands. We think that what is extremely interesting is that, as expected, we are progressively observing a stabilization of the cash sorting process. On the slide 18, yes, throughout our asset management company we have been an absolutely positive outlier in comparison in terms of productivity. And the reason is mostly related to the fact that FinEco is using and historically a lot of technology in interacting with the network. And this is making, by definition, everything. Our financial planners, they are really in the position to spend nearly 100% of their time in running their job as a financial planner. It's not like administrative employees. And in Finic Asset Management, the initiatives are mostly in the direction of capturing in real time the emerging needs by the clients and the financial planners. So the secret is to have a company that is incredibly fast, agile, reactive. And so we have been quite effective in bringing to the clients solutions, smart solutions, focused on fixed income solutions that are very well in demand. In demand, same story with exposure to equities with the protection of capital. And clearly, we have plenty of additional initiatives that are in the pipeline. The leverage ratio has improved in a big way. So if someone is interested in having a little bit more color on the recent evolution of the leverage ratio, probably we can ask to our CFO to give more details. But it's clear that the bank is also assuming a very generous, the continuation of a very generous dividend payment is on track for keeping on building up additional and excess amount of capital. So as we had the opportunity to discuss recently, In the next few months, we will explore what can be the best way to use this excess of capital. We can rule out from the beginning any direction in increasing our lending activity. Lending is going to remain an ancillary business, and also we can rule out any interest in entering any M&A transactions. So everything is going to be just focused in managing the excess of capital.

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

Hello. Hi. Good afternoon. Thanks for the presentation. A bit of questions from my side, because I guess there is a little bit of conservatism in the guidance that you just gave. First of all, let's dig a little bit more on the NII, because if I look at your guidance for this year, I guess that the quarterly round rate for the third and the fourth quarter is around 170 million euro, more or less, of NII. if I'm not wrong. So if I look at the breakdown at page 35, your lending component increased by 10 million, more or less, quarter by quarter. So that means that the financial component will go down sequentially in the second part of the year. So I'm just wondering, in your guidance, what's the implied decline in the stock of securities, which is, I guess, symmetric to the loss of deposits. So the question is what you have implied in terms of deposit outflows and symmetrically in terms of financial investments. I saw that you removed in your guidance the hint at the fact that the NII will pick in the fourth quarter. So I'm just wondering now what's the sequence of NII that you have in mind. The other question is on the stock of securities, because I see that you cut the exposure to Italy by $2 billion and the securities portfolio by $2 billion. Why you lost $800 million or less of deposits in the quarter? So I'm just wondering why you cut more your securities portfolio and maybe you anticipated something and what should we expect going forward? The other question is on banking fees as well, because if I look at your guidance, your guidance implies that the second part of the year will be weaker than the first part of the year. So why is that? And if you have in mind any cut in banking fees or anything that you can tell us. The other question is on investing fees, because, I mean, you are doing better here compared also to the other competitors here. And I wonder what the implied market performance in your guidance. Is it zero? Because I guess you can do a little bit better. So I'm just wondering whether now you're more confident maybe to stay in the upper end of the high single digits that you mentioned. And then a question on the systemic charge for next year. I wonder whether this will disappear completely from your P&L. So what's your... assumption in 2024. And then to come back to the question of the colleague about the shareholder's remuneration, just wonder, I know that you would tell us more going forward, but I mean, why we should think about a share buyback at this point, given the valuation of the stock, what it is, if this is an option, and whether you are considering instead distribution of a dividend, of an extraordinary dividend. Thank you very much. Thanks.

Thank you. So, first of all, I'm not sure that I got correctly your point on the first questions, because your point is focused on... Domenico, please, help me in... understanding exactly which is your point, because... On the NII, you mean, right? Yeah, yeah.

Okay. Yeah, very simply. Sorry if I've been probably a little bit complicated. If I look at your guidance in terms of NII, right? Yes. For the year, that means that Q3, Q4 is going to be more or less around rate of around 170, more or less, right? Yes. uh or maybe it might be different you tell us uh that means that the landing component it keeps increasing quarter by quarter because of the repricing because of the landing book so that means that the other part of your nii the financial component will go down if my you know this makes sense for you so i'm just wondering how much you think about cutting the securities portfolio more from now on, and what's the implied assumption in terms of deposit outflows? Because it's all based on that, I guess.

As we said, we are keeping, let me say, every time that you're talking about the evolution of NII, as explained, there are components that we are controlling on which we have, let me say, a reasonable and decent visibility So, for example, the fact that as we, over the last few months, we continuously repeated to the market that we were extremely relaxed on the cash sorting process because we were relaxed by the fact that we are sitting on a huge amount of transactional liquidity. at a certain point, this cash sorting is expected to stabilize. And so this clearly is something on which we can make a decent forecast. Then there is the other component that is related to the market. And so, as you can see, because we saw the reaction of the market recently when we we gave a guidance that was perfectly consistent with the forward right curve. And when this has been changed, considering the change and so on, the market has not been pleased. So we think that it makes sense to stay on the, let me say, I'm not saying on the decently cautious side. So this is the point. And regarding the peak, the peak is going to be It's difficult to predict exactly the perfect timing of the peak, but it's going to more or less in the region or going throughout the year-end. The area is going to probably expect to have the peak in the financial income, yes, in the net interest income. And stock of security, we cut exposure to Italy by 2 billion, where you lost 800 million of deposits in the in the second quarter. Yes, but this has been, you have to look to that because overall we finished the first half with a decline of deposits that was more or less in the region of 2 billion. So the sales of Italian bonds is perfectly current with the decline of the deposits. And the reason why we sold Italian bonds is absolutely perfectly aligned with the the guidance we gave several years ago that our goal was to keep on reducing our exposure to Italy and Spain, not because we have any concern on Italy and Spain, but because we want to keep on running an extremely very well-diversified balance sheet in order to decrease, let me say, the cost of equity attached to this. banking fees guidance implies a weaker second half this is related to the currently with the indication with the indication received by Bank of Italy we reduced the fees charged to clients we introduced when we were in a period of time with negative rates so we because we At a certain point, we introduce additional fees to clients justified by the negative rates. Now the negative rates have gone, and so now we are going to bring back these clients to the original conditions. Investing fees, our approach, we embed the... the market situation at a certain point. So, for example, here we have embedded the market performance at the end of the first half, and then for the remaining part of the year, we have a natural approach. So we are assuming a zero performance by the market. On systemic charges for 2024, I'm I'm asking to Lorena if you can give more color on what we can expect going through 2024.

Thank you, Alessandro. Good afternoon to everybody. So for 2024, we expect a contribution in a range between 38-40 million of euros. of which around 37 million related to Deposit Guarantee Scheme and 1 million related to the Single Resolution Fund because the contribution of Single Resolution Fund has to reach a percentage of 1% of the protected deposit. And the deposit guarantee scheme has to reach by the middle of 2024 a percentage of 0.8% of protected deposits.

Okay. Thank you, Lorena. You're welcome. Regarding the shareholders' remuneration, so let me – so what is – It's clear that Fineco is on track for progressively accumulating excess capital. The reason is pretty simple. The business model is completely capital-light. The only potential point of attention was represented in the past by the leverage ratio, but the leverage ratio now is with the combination of continuous growing profitability of the bank and extremely very well under control growth or the base of deposits, leverage ratio is expected to keep on going up and down. So it's clear that also remaining consistent with the very high remuneration of the past, the bank is expected to keep on building up excess of capital. As I was saying, we are not considering increasing the lending and also any M&A option. And what is remaining on the table, we have practically... there is practically several options. One option is to, for example, reimburse the IT1 expiring next year. Another one can be to increase progressively the dividends. And another one is to consider a blend of increasing the dividends and entering in a buyback rate. process but this is going to be addressed in the next few months by the bank also and as usual we are going to dialogue with the regulator in order to be sure that everything we have in mind is perfectly aligned with our point of view but what is pretty clear that the bank is on track for keeping on building up in evident excess of capital.

Thank you very much. This is very clear. Can I just ask what the assumption in terms of deposits loss in the second part of the year? I think it's important to understand assumptions behind your guidance.

Our assumption is that what my suggestion has been also in the past to be extremely prudent in trying to make forecasts on the evolution of deposits month by month because As we can see, there are seasonality, plenty of situations, and so on. The assumptions we are, what we expect, the assumptions are remaining, as we discussed, we are remaining cautious, because by definition we think that this is the right approach. At the same time, we think that it's reasonable to expect a progressive stabilization of the cash sorting, but for evident reasons. The largest part of our liquidity is transactional liquidity that is completely unaffected by what's going on on rate. And the clients that are the most interested in the cash sorting process are now approaching a kind of floor level that is, and going below that level is becoming less and less is becoming very, very difficult. So this is the sum. But again, we are keeping on maintaining a cautious approach.

All right. Thank you very much. Thanks.

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

Good afternoon. Three questions, but very fast and three details first. First one, if you can share with us, if you have this data, what percentage of private client assets are now invested into domestic sovereign bonds? The second question is, if you can share with us, what was the contribution of the new product launched since the beginning of the year that is the target date funds? Interesting to know what is the year-to-date contribution and the one in June and July. And the last question is a clarification on the 4 billion euros of AUM inflows target for 2023. If I read correctly your slide number three or four, you're mentioning that in July the AUM inflows were 40 million euros with still negative insurance contribution. So I struggle to reconcile this figure with the the $4 billion with the relative performance in July. So I was wondering whether I got your feedback, sorry, your guidance correctly and the clarification for July. Thank you.

Yeah, regarding the first two questions, if you don't mind, we are going to come back to you later on because, honestly speaking, I don't have in front of me the percentage of product clients that that they are invested in Italian goals, but I think that it's a quite interesting number, but we prefer to come back to you with the right numbers and the same story for the second question. Regarding the 4 billion assets under management target, yes, we think that this is achievable considering the new pipeline of solutions. At the same time, it's a matter of fact that the lack of interest by clients for insurance wrapper is remaining, and so we can't rule out the possibility to have additional outflows by the insurance wrapper. At the same time, we are not particularly concerned by this because, as we explained several times, the insurance wrapper is characterized by extremely low margins. So at the end of the story, for us, what is important is what does it mean in terms of impact on revenues and margins. Regarding that point, we are absolutely relaxed and so on. In any case, we think that 4 billion euros of net sales on asset under management is challenging but achievable by the bank. Thank you.

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

Hi, good afternoon. Thanks for taking the question. So one is on NII actually for 2024. If I look at consensus, it's still pretty flattish year on year, even if clearly the forward curve is suggested an increase and then the positive seems to stabilize. Do you have any comment to make there on whether you think that a flat NAI consensus year-on-year is a sensible number to have or actually seems maybe a bit too cautious? So that's my first question. My second question relates to the frozen insurance product. Can you just remind us what is the total stock? of these products just to get an idea of how much more outflows we could see for the rest of the year. A third question. I noticed that the spread on the floating part of the portfolio has been decreasing. It was 50 bps in Q1 and now it's 36 bps Can you give some color on what to expect? Have we reached the floor for the spread on the floaters or actually can potentially go down a bit more? And then finally, at the European level, they've been discussing a number of proposals in terms of regulation, for the asset management industry and two in particular caught our attention. One is the introduction of a value for money and one of the best interest principles for clients that can be quite material for the industry. Have you looked into those and can you give any comment in whether you think Finequa is prepared to withstand a change in the regulatory environment? Thank you.

Yes, so regarding the 2024, as we discussed before, It's always extremely difficult to make a precise comment on the 2024, because as we were saying, we have two components. One that is more or less in our hands, that is the evolution of deposits, in which we are more and more confident, considering what we discussed before for industrial reasons. And then there is the evolution of rates. And so it's very difficult to make a bet on that because there is the forward rate curve, but as we are continuously seeing, it's frequently wrong. So to make a comment on a forecast of rates which clearly can change any time, it's very difficult. But for us, what is very important is that the largest part of our deposit is incredibly sticky, and we we can keep on running our strategy of not using rates for running the business. And so clearly, so this is my comment for 2024. It's clear that the combination of stabilizing deposits and the forward curve remaining stronger, clearly it's positive for us. And insurance, the total stock of the insurance wrapper is just below 15 billions of euros. So this is the total stocks of the insurance product. Clearly, as we, honestly speaking, these outflows from the insurance wrapper, clearly we see this more than an opportunity than... than a threat because, as we were saying, the insurance wrappers are, by definition, the least profitable products that we have on the shelf just for a simple reason that we don't have a product factory internally, so we have to rely on external counterparties. So this part of the business is the part that is characterized by the lowest level of profitability. Spread on floating bonds has decreased because we sold, clearly, the two billions of euros we sold. We sold as being represented by swopped Italian Govis that, by definition, are characterized by the highest spread. So this is not. So there is anything different. And then there is.

On the regulatory environment.

Yes. On the, yes, we are looking to what's going on there. Fineco is, by definition, as you probably are very familiar, has been always characterized by running a business model in which the fairness, transparency, and try to give to clients the best ratio between quality of services and pricing has been the driving force our driving priority, and so clearly we are in, we think in relative terms, in a great position for managing any kind of outcome by the authorities.

The next question is from Panos Elinas from Morgan Stanley. Please go ahead.

Hi, thanks for taking my questions. I have a couple of follow-ups, if I may. My first question is on cash migration. In the first half of the year, there was strong demand for fixed income products and BTPs, which accelerated the cash migration into AUC. What trends do you expect in the second half of the year? Do you see customer demand shifting more into equities and funds, or do you see similar trends to previous months? And my second question is on management fee margin. In addition to the farm penetration and the market impact, do you see any product mix effect which could positively or negatively influence the margin-free expansion? I mean, you mentioned the opportunity from less profitable insurance wrappers which are shifting, and also farm recently launched new products. So just wondering what would be the impact, if any, to the margin.

Thanks. Regarding the cash migration, we don't see any significant change in the mixed of the appetite by clients. So we think that still for the foreseeable future, the appetite of clients is going to be mostly in the direction of fixed income solution or at best equity solution, but with the protection of capital. So this is not going to change significantly anytime soon. So we are This is what we are expecting to happen within the next few months. On management fee margins, we have several elements contributing to the evolution of management fee margins, because on one hand, there is very positive, is the strong percentage represented by Finicoset management that is definitely higher than in the, for example, the last year, and this is positive. Then clearly there is something that is less positive that is the skew in direction of fixed income solutions that by definition are less profitable. And finally there is theoretically and going forward and a positive effect so represented by the substitution of the insurance products with the But putting everything together, we think that it makes sense to remain stuck and consistent with the guidance we are giving on margins. Because it's an extremely complex environment, which we have. It's like to be on a cross-wave sea, which you have waves coming from different directions. The result is more or less It's nothing. So we think it makes sense to keep the margins, the expected margins where they are.

Thanks.

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

Good afternoon. A couple of questions from my side as well. One is related to the guidance. You didn't put any indication on financial advisors last time. You indicated 100, 120. I was wondering if that number is confirmed. The second one is on the international expansion. Maybe I missed because I was disconnected during the call, but you are refacing the timing of the entrance in other markets like Germany or all the plans are confirmed. And finally a question on the competitive environment and technology. Now there has been a lot of discussion about the impact of artificial intelligence on many industries including asset management. I was wondering what you are expecting in terms of Investments in technology, there will be more to address these potential opportunities and how do you think it can impact revenues and costs in the future. I'm also referring to what I've heard from the largest Italian bank that pushed a lot in the last presentation towards artificial intelligence and technology and launching this initiative today. Fiderum Direct that eventually could look at a potential competitor, let's say not new because Fiderum is there since many years and before the others, but potentially approaching clients with more technological and innovative twist and so I was wondering What are your thinking about the opportunities for a company like Fineco, which is digital since day one on those factors? Thank you.

So regarding the first point on recruiting, probably at the moment we can expect a few tens of employees. less financial planners recruited going throughout the event, but it's a little bit too early to say. But if we were to stay on the crucial side, probably we can expect a little bit softer on the recruiting side. But again, this doesn't make any material difference considering that our growth is mostly organically driven. So never we relied on the recruiting on new financial planners for growing. So that is On international expansion, we are, as we explained during the presentation, we are awaiting the final housework by the UK authorities if they are going to allow us to stay in the UK as a branch. So without putting in place a capital-intensive business model and also because our key priorities prerequisite to remain in the UK is to keep on running a capital-led business model and leveraging on our local infrastructures. If this is not going to be the case, we are going to leave. As soon as we have finished this interaction with the UK authorities and we have the final answer, we are going to start a reassessing process on what to do in the other European countries. On the technology, artificial intelligence, first of all, let me make just a very quick and straightforward comment. Artificial intelligence is among us by many years. Now it's become cool, but artificial intelligence is everything in which you are able to manage data and so on in order to get an extremely efficient and automated control of processes and so on. This is among us. by many years, and Finneco is using this approach quite largely by several years, and we have the advantage that we are in complete control of our technology. So it's much easier for us to implement new solutions and so on. So for this reason, we don't expect any material impact on revenues and cost by this. Regarding all the initiatives that are underway, Overall, I'm not going to make a direct comment related to the single place, but what is all this place they have in common, that they are providing a vertical solution for their clients. Because the case of the digital bank launched by the largest Italian bank, is practically a payment gate. It cannot be considered a full-fledged solution. The same story for your mentioning federal director. It's a solution that is just. So for example, FinEco is a different story because we are offering something that is unique that is the one-stop solution. So from the same banking account, that you are using for the day-by-day life, you can do everything you need. So you can trade on all the markets all over the world in a very sophisticated way. You can interact with the investing platform. One single account for all your life. And from this point of view, I think that still all the most powerful banks are very far away from this. And again, behind this, there is... an extremely, incredibly complex infrastructure point of attention. And second, it's a matter of business model. Because in Eco, we're born that way, so we don't have the problems of cannibalizing, for example, clients. So all our clients are on the same platform doing everything. So this is the huge The use difference is the massive advantage we have.

Thank you.

The next question is from Andrea Vercellone from BNP Exxon. Please go ahead.

Good afternoon. I've got two. The first one is on personnel expenses. I wanted to know if in the costs that you have booked in the first half of the year, you have already made... a degree of accrual for the banking contract, or if you haven't, and the same vis-à-vis the 6% guidance in total growth in operating costs for 2023, in that number, have you left a certain amount for possible increase related to the banking contract, or that will come on top if there is one? The second question is on Eurovita. Now that all of the parties have agreed on what to do with it, can you confirm that you do not expect any kind of negative one-off associated to this when withdrawals are allowed from October onwards? Thank you.

Regarding the first question to President Spence, yes, there is our IHR department. Clearly, they cannot put the precise numbers because nobody knows exactly which kind of hardware we can expect, but starting on considering is increasing the expected personal cost for considering the highly the high probability to have a change in the banking contract. So, yes, we are starting on, in this guidance, we are starting on embedding an expectation of higher personal cost driven by the highly probable new banking contract. And on Eurovita, yes, we can confirm that we don't expect any significant negative one-off when the withdrawals are going to be allowed.

Thank you.

The next question is from Filippo Perini from Kepler Chevrolet. Please go ahead.

Good afternoon. Two questions. The first one, could you give us an indication of which is the maturity of corporate government bonds that your client has bought this year, taking the liquidity in the current account, and so how much of them could be redeemed next year and be available for new investment plans? And the second is still written on Eurovita. Your guidance of 4 billion AUM for this year and also for next year, does take into account an acceleration of outflows of Class I insurance products once it could be possible to redeem a product of Eurovita, or do you expect that most of them will be absorbed by inflows from pharma? Thank you.

First of all, it depends also from an administrative point of view what's going to happen. So when we are going to... So the $4 billion of assets on the measure, clearly they are not considering fully the possible impact generated by an acceleration from the insurance wrapper. But And so we will see on that point. But as we explained, this is completely immaterial in terms of impact on revenues and margins. And then clearly our goal is to capture the largest part of this throughout our other solutions. But in any case, the point of attention on the insurance wrapper is not – is here because it's not something that is going to start when these investments by Eurobit are going to be allowed. There is a structural disaffection by clients for the insurance products. So it's something on which we are dealing with by several months. So it's not going to be an... anything that is going to change the projection of our revenues and margins.

Excuse me, I jumped directly to the second question.

The largest part, so we have the clients, so the clients that are more on the investing side, they are mostly concentrated within a three-year maturity. So it's clear that we're going throughout the next few years, we expect a huge amount of these bonds expiring. And so as many times we explained, we think that overall it's much more an opportunity than a problem, because what is important is to keep on bringing the assets in the bank. The clients investing on their longer maturities are much more trading-driven clients. So in this case, what we can expect in the case of the beginning of a decline on yields, we can expect these clients starting on selling. But these clients, they tend to trade. But the clients that are most... part of the traditional cash sorting process are mostly concentrated within three years' maturity.

Thank you.

The next question is from Adele Palama from UBS. Please go ahead.

Yes, hi, good morning. Thank you for taking my question. I have a question on the incentive for the financial advisor. Did you change or are you planning to change the incentive based on total financial asset flows as opposed to IOM flows only? And then the second question is, in case of possible rate cuts, which are the levers that you have or you can put in place to protect the revenue growth? Thanks. Thanks.

Regarding the incentive scheme for financial planners, no, we didn't change anything. So the incentive scheme for financial planners is remaining just related to their sale of asset under management solutions. And we are not planning to introduce any change going forward. But this is what is a remarkable point of strength for the bank. We don't need to use rates for underpinning the growth of the bank. So it would be easy for us to incentivize financial planners in, for example, in the next phase. So also on the gathering liquidity, but we don't need to do that. And we think that it's on the long run, it would be a mistake. In the case of possible rate cuts, in my opinion, my suggestion is to to look to the full picture, not just being focused on one single piece at a time, because one, in my opinion, the biggest mistake is to just say, come on, rates are going down, so this is going to, this means that, for example, by definition, if rates are going down, by definition, net financial income is going to go down as well. But at the same time, with rates going down, we can expect some other kind of effects happening. Like, for example, a big jump in the investing business. So I think that the best guarantee for the market is that Fineco has an incredibly diversified business model. And we have demonstrated in the past that it's going to be the same also going forward. We are happy to keep on delivering, growing revenues and profits in every market conditions, exactly for this extremely diversified business model that is ranging from transactional banking, investing, and brokerage. So this is that. And again, my suggestion is to look to the full picture, because just looking to one single piece of the story, in my opinion, is a little bit misleading.

The next question is from Luigi Debellis from Equitasim. Please go ahead.

Good afternoon. Just one question for me on the brokerage side. More resilient than piercing the first half. So what can we expect going forward in terms of new initiatives, products to maintain or speed up this outperformance? Can you elaborate on the competitive scenario for brokerage and on the profile of active investors in the brokerage, if there has been a change or not in the active profile for the investor in brokerage. Thank you.

I'm leaving the floor to Paolo. Paolo, you know very well, is our Deputy General Manager that is on the driving seat for developing the new initiatives, not just on brokerage, but also... on the banking side, the onboarding side. So please, Paolo.

Yes, hi, good afternoon. So basically on brokerage, we will continue to target clients with, let's say, active trader clients. So basically people that do four to five trades per month and we are going to work on the easiness of the platform. We have delivered already a lot of new products user experiences on the site and the application, but we have a lot more coming next year. We're launching at the end of August the brokerage-only account, so it's going to be much more easier for people. They want to trade with us or invest in stocks and bonds and ETFs. It's a good development also for the younger people the younger people they want to invest. Basically, we will continue to do some marketing on that, leveraging on pricing, best in class. We're going to use a lot the Govis attention to gather new clients that are going to use the platform for Govis. I just want to remind you that we're the best platform in Italy if you want to buy Govis. For us, it's a fantastic entry product. So people, they start using Govis and then they use other products and they trade stocks. And of course, they eventually link with the financial planner. So this is pretty much the main thing we're working on.

Thank you.

The next question is a follow-up from Enrico Bolzoni from JP Morgan. Please go ahead.

Ah, yes, sorry, very quickly. Can you tell us what's the total customer number at the end of July?

The total number is around 1,500,000.

Oh, the precise number is? I just wanted to, either the net customer, just to see how many customers you onboarded. I know it's probably a nest in it by now, but yeah.

So which is the gross new clients and the next, please.

The stock is $1,500,029. Okay, thank you.

Mr. Fozzi, gentlemen, there are no more questions registered at this time.

Thank you very much for all of you attending our conference. And as usual, if you need to deep dive a little bit more in our numbers and concepts, please contact us for any follow-up. Thank you again for your attention.