Finecobank Banca Fine Spa

Good afternoon. This is the Coruscall conference operator. Welcome and thank you for joining the Fineco Bank fourth 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 and General Manager of Fineco Bank. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining our fourth quarter 2023 results conference call. Adjusted net profit in 2023 reached a new record high and was equal to $609.1 million, strongly up by 42% year-on-year. and by 54% excluding 2022 profits from treasury management. Adjusted revenues achieved 1,237.6 million, increasing by 30.5% year-on-year, and mainly supported by net financial income, which is sustained by our clients' very sticky and valuable transactional liquidity, and by the solid growth of our investing business, thanks to the volume effect and the higher control of the value chain by Finnecoset management. Operating costs were under control at 298.3 million, increasing by 4.7% year-on-year by excluding costs related to the growth of the business. Adjusted cost-income ratio was at a very remarkable level at 24.1%, strongly improving year-on-year and confirming operating leverage as a key strength of the bank. In 2023, Fineco achieved an outstanding commercial performance thanks to our organic growth strategy. First of all, we recorded a strong acceleration in our new clients' acquisition, increasing by around 23% year-on-year and allowing the bank to reach the new yearly record in terms of new clients. Let me highlight that this remarkable acceleration is confirmed also in January, which recorded the second best month ever in terms of new clients for the bank and bodes extremely well for our future growth. Second, our net sales confirmed to be very solid with 8.8 billion inflows in 2023. In January, we met sales at around $0.6 billion, of which deposits at minus $374 million as short-term traders deployed liquidity to buy both equity and GOVIs for trading purposes. As a consequence, brokerage recorded a very strong month with estimated revenues at $16 million, 40% higher compared to the average revenues in the period 2017-2019. Asset under management, net sales were positive at around 79 million, despite one or six million outflows from insurance business, and with Finneco Asset Management recording 153 million retail net sales. Asset under custody was equal to 875 million. Let me also add that we are in the process to launch new investment solution in February, and this will be supported for both volumes and revenues. Third, our network of personal financial advisors confirmed to be once again the leader in terms of productivity within the asset gatherers space, thanks to our power for organic growth engine and FinTech DNA. Our capital position confirmed to be strong and safe with a common equity TR1 ratio at 24.3%. and a leverage ratio at 4.95%. Let me please underline that we are very pleased to propose to the next Annual General Meeting a dividend per share of 69 euro cents, increasing by more than 40% year-on-year. On the right end of the slide, you can find a summary of our 2024 guidance, where we confirmed the outlook we shared in the last quarter conference call. with a better mix, more in detail. On revenues, we expect them to consolidate in 2024 around the record level of 2023 with an improvement of the mix in favor of commissions thanks to investing revenues expected to increase low double digit in comparison to 2023 with a natural market assumption. Banking fees expected stable Brokerage, we confirmed for 2024, expected revenues stronger with a floor higher versus pre-COVID period. On operating costs, we expected 6% growth year-on-year in 2024, not including additional costs for both FiniCost management and marketing expenses. We expect our cost of risk in a range between 5 and 10 basis points. in 2024, and finally we expect in 2024 a growing CT1 and leverage ratio year-on-year. Let's now move to slide five. As announced, adjusted net profit in 2023 reached a new record level at 609.1 million in a very challenging macro scenario with an outstanding increase by 42% year-on-year and by 54% excluding profits from Treasury management realized in 2022. Revenues achieved 1,237.6 million, up by 30.5% year-on-year, as we have been able to catch the strong acceleration of the structural trends in place. The strong growth of our net financial income, increasing by 75.4% year-on-year, supported by our high-quality and capital-like net interest income, which doubled here on here. Net commissions increased by a sound 5.2% here on here, mainly thanks to the solid contribution of our investing business. As for trading profit, let me remind you that in this line, there are accounted minus 7.2 million related to the ineffectiveness of hedging derivatives in accordance with the accounting standard IFRS 9, compared to the plus 12.2 million in 2022. The value is influenced both by the spread between the euro short-term rate and the euro reward, and by the amount of the fair value of the derivatives. Excluding these effects, the decline in trading profit is mainly related to the brokerage activity due to the lower level of market points. Operating costs up to $298.3 million, well under control and increasing by 4.7% year-on-year, excluding costs strictly related to the growth of the business, mainly additional costs for Finicost management to further expand its business and have higher control of the value chain. Additional marketing costs to further improve our growth and catch the strong momentum of the business. Finally, within our provisions, we are accounting a one-off effect due to Eurovita equal to minus 11 million, related to the contribution to the rescue of the company. Let's now move on to slide 6 for a deep dive on the performance of the investing business. Investing revenues reached 329.1 million in 2033. increasing by a solid 6.8% year-on-year. Let me please remind you the great 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. On the quarterly management fee dynamics, let me underline that we were affected by the negative market performance at the end of the third quarter, which resulted in lower average volumes in the last three months of 2023. Let me please underline that this set of results is particularly remarkable given the more challenging marketing environment for the asset management industry. Also, let me underline that the bank is going ahead with its plan to deeply reshape its products and services offered to better fit with the new context. This will give more fuel to our growth engine in the month ahead and will allow us to keep on heading new market share. Let's now move on to slide seven for a focus on our asset management company. Fineco asset management is progressively delivering in having more control of the value investing of the investing value chain. The contribution of Fineco asset management to the group asset under management net sales is further improving regardless of the macro scenario, moving from 77% in 2022 to 118% in 2023. At the end of December, the contribution of Finneco Asset Management out of the total stock of asset under management of the bank improved to 34.5% from 30.3% in the fourth course of 2022. The commercial performance by Finnecoset Management in 2023 has been outstanding, not only in absolute, but also in relative terms. Down in the slide, we are showing a benchmarking based on a suggestion in retail net sales as of December. As you can see, our Irish company successfully delivered the second best net sales compared to the to the most relevant asset manager operating in Italy. These remarkable results, despite the very challenging environment, is due to Fineco asset management effectiveness in quickly developing the right set of products to catch what clients are currently looking for. Let's now move on to slide 8 for a focus on brokerage. Brokerage registered an excellent 2023. at $186.4 million, achieving a monthly average more than 35% higher compared to the monthly average revenues in the period 2017-2019, thus confirming a structurally higher floor compared to the pre-pandemic levels, regardless of the market conditions. As a reminder, January recorded revenues at around $16 million of revenues, 40% higher versus the average of 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 relentless process of improvement of our brokerage business thanks to our new initiatives like the new platform, FinEco X, the new brokerage current account, and leverage certificates. Second, the widening of our client base using the platform with active investors growing significantly in absolute terms. Third, we are continuously increasing our retail market share. As you can see on slide 9, all of this is translating in a very solid revenue generation regardless the market context, delivering a far better performance compared to the peers. Let's now move on slide 11 for a focus on our capital ratios. Fineco confirmed once again a capital position well above requirement on the wave of a safe balance sheet. Common equity TR1 ratio at 24.34% and leverage ratio at a very sound 4.95%, while risk-weighted assets was equal to 4.73 billion, increasing due to the usual yearly update of operational risk. Total capital ratio at 34.91 as of December, 2023. As for the liquidity ratio, liquidity coverage ratio is at 823% and the net stable standing ratio at 378%. While the ratio high quality liquid assets on deposit is up 68%, well above the average of the industry and position Finneco as the best positive outlier, as you can see on slide 12. Let's now move to slide 14 for a focus on the acceleration of our commercial dynamics. Let me spend a few words on strong acceleration of our client acquisition, which is even more remarkable considering the context and bodes extremely well for our future growth. As you can see from the graph on top of the slide, new clients, 2033, were 22.5% higher year-on-year. These outstanding results have been achieved, keeping our marketing strategy unchanged when it comes to new client acquisition and effectively translating the quality and sticky client base, key to grow and healthy business in long-term horizons. Let me also underline the very positive further acceleration in January this year when we recorded the second best month ever in terms of new clients, showing once again that our most recent marketing initiatives are delivering. Going forward, this will represent a very strong support for our future growth. As a reminder, let me also underline that we have recently improved the efficiency of our marketing engine thanks to our innovative and brand-new onboarding process. On top of this, we are now leveraging on artificial intelligence and data-driven marketing, which are allowing the bank to connect with prospect clients in a more personalized and efficient way, leading to a further acceleration in our client acquisition. Let me also quickly comment on slide 18, as another key driver of organic growth is the best-in-class productivity of our financial 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 to slide 19. The granularity and thickness of our deposit base is confirmed quarter by quarter. Our deposit is confirmed to be extremely granular. with an average ticket of around €18,000 and a median ticket of €4,800. On top of this, definitely from other players, mostly focused on brokerage investing, our successful one-stop solution relies on a fully-fledged banking platform with 50% of our clients crediting salary and pension with us. Down in the slide, we show our usual breakdown of the deposit net sales, where we once again saw an increase in the net new liquidity before investments. As you can see, in 2023, the bank effectively collected $18.2 billion of liquidity coming from salary and pensions and $11.4 billion from net bank transfers. After the expenses in cash, bills, and taxes, deposits were up 7 billion. Once taking into account investments in assets under management and assets under custody, the final result is minus 2.1 billion of deposits net sales. On the graph on the right, we confirm the trend in terms of liquidity flows for clusters of clients. Clients with total financial assets up to 100,000 euros increase the amount of liquidity in the bank, and this is mainly transactional. On the other hand, the cash sorting process has been 100% driven by wealthier clients, which in the past accumulated excess liquidity waiting to be invested. For private banking clients, the liquidity as a percentage of total financial assets is at 12% as of December, close to the lowest level since 2015, suggesting that they are approaching what is a structural floor. Finally, please note that new clients acquired in this year also brought positive liquidity. Let's now move to slide 21 for a focus on our guidance. Let's now focus on our 2024 guidance, where we confirm the outlook we shared in the last quarter conference call with a better mix. Revenues are expected to consolidate in 2024 at the record level of 2033, with an improvement of the mix in favor of commissions, thanks to investing revenues, for which we expect a low double-digit growth in respect to 2033, with a natural market assumption. Banking fees are expected stable compared to 2033. 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 are expected to grow at around 6% year-on-year, not including additional costs for both management and marketing expenses. Cost income was set to hit comfortably below 30%, thanks to the scalability of our platform and to the strong operating gearing we have. Systemic charges for the year are expected at around 40 million. which will be accounted in the first quarter of 2024. On capital ratio, we expect a growing CT1 ratio and the leverage ratio, year on year, correlated with the combination of both strong acceleration in the growth of the bank and distribution of generous dividends. On leverage ratio, our goal is to remain above 4.5%. On dividend per shares, we expect heat increasing, Cost of risk was equal to 5 basis points, thanks to the quality of our lending portfolio, and we expect hitting a range between 5 and 10 basis points. Finally, we expect robust and high-quality net sales, keeping our priority in the direction of asset under management and continued strong growth expected for our clients' acquisition, as we are in the sweet spot to keep on adding new market shares. Thank you for your time, and we can now open the court questions.

This is the Chorus Co-Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. We kindly ask to use the handset when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Giovanni Razzoli with Deutsche Bank. Please go ahead.

Good afternoon to everybody. A couple of questions. The first one is a clarification on your guidance for revenues in 2024 when you said that you consolidated 2024 levels to the same record level of 2023. So I interpret this as a flattish revenues on a year-on-year basis with growing fees on investing and stable banking fees so shall we derive from this guidance that you see the nii going down in 24 vis-a-vis 23 so that's my first question the second question is on the nii but with a more medium-term outlook if i look at your slide number 34 when you provide the details of your bond portfolio I was wondering, first of all, if there is some action that you can implement to change the sensitivity of this portfolio to the rate environment that is implied in the forward curve. Because I see that you have a lot of bonds with a relative long duration, with actually a relative long maturity, which have a yield that is below 100 basis points. So we have a lot of them expiring beyond the 2027. So this clearly creates structural deflation to your NII, all has been equal. So I was wondering whether there are some actions that you can implement to change your sensitivity here. And secondly, regarding the floating leg of this portfolio, I see that the expectation for Euribor three months uh are incorporating a decrease between 100 and 150 basis points at the end so this is creating a um still an edwin to your floating rate portfolio going forward uh so i would like to know if you can have some counterbalance exactions here and to wrap it up shall we assume that in 2025 we will see the bottom of the of the nia in terms of trajectory all has been equal And second question, if you can provide us a guidance for the sales, net sales of FAM. And the last one on the cash balances of your private clients. I see them still in the region of 12%, which is still there for a couple of quarters now in a race environment, which for those clients of clients offer, you know, relatively appealing remuneration. So I was wondering whether, you know, what can... you do in terms of action on the product or strategies to try to capture these assets into asset management products and avoid the appetite for plain vanilla products like government bonds is increasing. Thank you.

First of all, let me, because I'm trying to put together some of your questions because it seems that the most part of your questions are related to the evolution of the net interest income. So let me clarify a point. Because the reason why we are now guiding the market on the overall revenues is for a very simple reason. Because, first of all, when we are guiding purely on the net interest income means to make a forecast and assumption on the level of rate. the timing of the change in the level of rates, and clearly we don't have the crystal ball for doing that. At the same time, it's pretty evident that considering the business model we have and so on, there is a very clear correlation between what the rates are doing and all the other components of the bank. So let me be even more precise. If, for example, the rates are going to be higher than the market is expecting. I'm referring, for example, to the forward rate curve. It's reasonable to expect a positive impact on the stock of our liquidity, but with probably lower volumes and probably a little bit of a headwind for the asset management business. And at the same time, probably it's going to be even, in many cases, supportive for the brokerage. If you expect rates going lower than the market is expecting, it's clear that we are going to have a negative impact on the stock of deposits, a positive volume effect on the deposits as well, and then even stronger than expected impact on the assets under management. And brokerage is going to do pretty well as well. And putting everything together, this makes us extremely comfortable in guiding the market on the bank consolidating in terms of revenues at the record level we reached in 2023. That clearly we think it's an absolutely outstanding achievement. So to give a perfectly precise guidance on net interest income, Doesn't make any sense if you're not attaching to this and forecast on interest rates. But this is up to you, because there are analysts, there are expectations on rates, and so you can make all your calculations. My suggestion is not making the mistake to not considering that the full component of the bank, because it's not just the the net financial income moving, but it's all the other components moving together. So, and regarding the, if we have in mind to take some action for changing, which is our interest rate sensitivity, the answer is no, we are not planning to take any action there. So our net interest, sensitivity is going to stay in the region of 116 million euros and so this is not expected to change anytime soon because we are not putting in place for example edging and replicating portfolio strategies for a very simple reason because we have a different kind of business model respect traditional banks and so our goal is to run a completely safe business model. And so clearly, and moving forward, so this more or less is our comments on the net interest income. Guidance for Finneco asset management and sales. Also here, we are not guiding anymore on volumes, but we are guiding on revenues. because we know that there are, also in this case, very important correlation. For example, if we have a rate probably going down as the market is expecting, probably we can expect and lower these investments on the insurance wrapper. And so this is positive for volumes and less positive for the margins. If we have rates remaining higher, we can expect these investments on the insurance wrapper continuing, and this is clearly, it's less positive for the volumes, but more positive for the margins. And the most part of the, what is reinvested by these investments is captured by financial management. So this is the reason. And so what we are, when we are guiding the market, again, we are guiding on the, looking to the, overall expected change in the revenue generation that we are confirming that we expect in low double-digit growth of the revenues generated by investing. On the liquidity, on the 12% liquidity of the private banking clients, this is a percentage that is expected to, it's difficult to to think to have this percentage of liquidity moving even lower, because as we explained, these clients are starting on approaching what is a real structural physiological level below which they cannot. The most part of the growth in our asset under management is going to be driven by the acquisition of new clients. the clients bringing additional assets because our private banking clients are not static because we are continuously increasing the share of wallet on these clients. And as we explained throughout the month of February, we are going to deploy a quite very important, interesting set of new product solutions that are expected to give a clear boost to the volumes on asset under management and the margins as well.

One clarification. On the NII, you mentioned 116 million euros of sensitivity, which I take as for the usual 100 basis points arrival, because you mentioned this, right? Yes. Thank you. Thank you.

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

Hi, good afternoon. Thanks for taking my questions. So one, sorry to go back there again. Just wanted to get some extra color on the assumptions that underpin your revenue guidance and the NII guidance more specifically. I appreciate that it's very difficult to foresee where the curves will be. Can you at least give us some color in terms of what sort of deposit level you expect? Does it assume a stability? Does it assume a further decline? I'm asking also because in February now there's going to be another BTP placing by the government, which usually is a drug on liquidity for the system as a whole. So I just wanted to hear your thoughts there. And then alongside that, last year you launched this cash park initiative where you were remunerating part of the new liquidity coming to the platform. Can you give us any color in terms of what sort of volumes are you seeing into this product? And more generally, do you see an increasing competition for new liquidity? I'm asking because one of your peers in Italy has always been offering very generous remuneration on new liquidity, which arguably led to very strong flow. So I was wondering if you were thinking of doing the same. That's my first question. My second question was on capital. You guide for an increase in leverage ratio. Can you give us any color in terms of what you plan to do when it comes to the 81, which I believe is callable in December this year? And then my final question was on the insurance products. Can you remind us how much IUM you still have in these products which are in outflows? And do you expect that eventually we'll all be invested and invested elsewhere? Thanks.

So, first of all, let me give you a little bit more of a color on the assumptions behind the net interest income. First of all, as you can imagine, the auctions taken by the governments are not anymore a surprise for us because we know perfectly that every year the government is going to take auctions. And so when we are given the guidance, we are embedding the expectation to have the government Taking in place at least three auctions. And usually, so one is in the springtime. In this case, this is going to be at the end of February and ending at the beginning of March. Then we expect another auction that is going to be probably, is going to be by before the summer break. And then there is going to be another one during the fall. And what to expect, that is, Clearly, we don't know exactly which kind of appetite is going to emerge by clients. It's clear that the more you have rates going down, and there always going to be the appetite by clients for this option. But overall, we are embedding conservative assumptions, and so we are embedding the expectation to replicate exactly what has been done last year. And overall, in the guidance we were giving, there is embedded an expectation for still declining deposit space throughout the year. And so this is what you are embedding in our guidance. Regarding cash park, let me a little bit make some clarity on the volumes, impact on the P&L, on the financial income, P&L of the bank, and the rationale behind. So the volume at the end of December was 700 million. The impact in terms of the financial income of the bank is, as we had the opportunity to say several times also in the past, is completely neutral. So there is no impact, nor negative, nor positive, on the financial income of the bank for a very simple reason. What we pay is exactly more or less what we get in terms of marginal reinvestments we are doing. And the rationale behind is purely in order to have the full range of possible solutions of interest by our clients. Because for us, what is important is not to lose our commercial traction. So if we are in an environment in which everybody is offering 10 deposits, we have to offer them as well, also in the case we are not considering these as the most efficient solutions for the clients. And regarding the competition of liquidity, the competition is in place by many months, so now the impact that we are experiencing is absolutely stabilized, so there is not anything brand new. You are referring to an offer made by a peer. We have to remember that is an offer that is on a six-month horizon. And so what we are observing that is not really encountering any particular interest by our clients in terms of loss. On the capital, yes, we confirm that we expect a growing both CT1 and more importantly, leverage ratio. And our plan, now we are waiting for the green light by the ECB for, and as soon as we are going to receive the green light by the ECB, we are going to recall the AT1 that is going to expire by December. And we are going to go, we are going to go on the market. On insurance, we have more or less still 14 billion in asset under management there, of which the largest component is represented by Uniclint. And then what is the component that is on which we added these investments is on the so-called gestioni separate, ramo primo, and the remaining component is more or less 4 billion. 4.7 billion. But as we had the opportunity to explain several times, For us, the disinvestment by these products overall is more positive than negative for a very simple reason, because these solutions, again, I'm repeating, the ramo primo are the solutions characterized by far by the lowest margins for the bank. And so the more we have clients disinvesting by these products and the more we are able to capture this with other solutions and the better risk for the margins.

Thank you. Just very, very helpful. Just two small clarifications, please. So one, I think you mentioned that you still expect a decline in deposit. I just wanted to understand, do you expect a decline in deposit on those months where there's going to be the BTP placing or for the year as a whole, 2024 versus the current deposit level? And related to NII again, on the cash park initiative, do you plan to continue with this initiative? I know you lowered a bit the interest rate, but is it going to remain or at some point you might consider taking it out of the market? Thanks.

So first of all, let me make a clarification because we are observing that there is a kind of obsession on the evolution of deposits month by month. Let me remind a point that probably it seems that is not, probably it's our fault we have not been able to explain this correctly. So Fineco is running what is by far the platform of reference in Italy for brokerage. So we are in control of 27% of the overall volumes of the Italian Stock Exchange. And more than 50% of the retail clients that they are trading on the market. Trading means clients that they are operating with a short-term horizon are using our platform. So this by definition is driving the growth completely unpredictable short-term impact on the liquidity of the bank. Because when, for example, as we explained, when the market, for example, when you have a hill going up and, for example, equity is going down, by definition, clients for trading purposes are buying. And they are doing exactly the opposite when, for example, you have the market reversing. This is completely unpredictable because For example, the clients in January, the reduction of deposits being completely driven by these kinds of clients. So these are traders that they are, for example, they booked long hand maturity on bonds with the idea to take a profit as soon as we have a declining yield. Same story, there is the clients are trading on stocks and so on. So this is completely, and this kind of liquidity can be reversed anytime, in any moment. So this is the reason why it's completely misleading to try to get a kind of idea of the future evolution of the bank for all the years by one single month. It's completely insane. Particularly when you are referring to a bank that is running, what I'm saying, is the platform or reference in Italy. There is no other country in Europe in which there is a single player that is in control of such a huge market share. So this, by definition, is driving the liquidity, but it's driving as well commissions on brokerage, for example. And this liquidity that has been exiting can be reversed tomorrow morning. But we cannot make a forecast, honestly speaking. So we think that it's completely a waste of time. And the example has been last year, because the market was expecting... We are projecting 4 billion, more than 4 billion of the client deposits. At the end of the story, the decline has been pretty much aligned with what we were expecting to happen. The temporal dimension cannot be forecasted for a very simple reason, because the clients are trading. And so we are very happy to have a very powerful brokerage platform. Because now it seems that to have a brokerage platform is a minus. We don't think so. We think that it's a great value. in our business model. Because sometimes there has been, I remember, analysis saying, I think that FinEQ is a problem because they have the brokerage platforms. And so the clients are buying and selling BTPs. This is the first time in which to have something that is bringing an incredibly powerful and valuable business, it's a problem. So this is my personal point of view. So everybody has the right to have its own. And the cash back, yes, we're going to continue because it's natural. It's going to support our commercial traction and it's going to stay on the shelf until it makes sense. So if tomorrow morning we have the rates going back to zero or negative, the cash back doesn't make any sense. At the moment, it makes sense, and so it's going to stay. And again, I'm repeating in order to be completely clear on this point, it's completely natural, it also impacts on the bank, on the financial income and P&L.

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

Yes, hi, good afternoon. Alessandro, three questions. I understand you don't want to share with us a guidance on asset management flows, but you improved investing revenues from high single digit to low double digit. So I was wondering if you can at least qualitatively comment on the quantitative aspect related to flows versus margins. So you expect an improvement in margins. And linked to that, the new products you mentioned that are going to be presented in February are then equity, fixed income, if you can give us a bit of color to understand also the trajectory in terms of margins. Second question is, if I understood correctly, you provisioned 11 million for Eurovita. um can you uh tell us technically what happened here i think you are not in chronos so uh what are these 11 million uh related about the third and last one is on the new floor of 4.5 leverage i understood also that the trajectory in terms of deposits is going to be a bit subdued during 2024 So the 4.5 seems cautious, or if you can tell us why you defined your appetite at this level. Thank you.

So regarding the qualitative comment on the asset under management, first of all, clearly, our suggestion is not to take any kind of misleading conclusions by the flows of January because January is the definition amount which the activity is extremely, we have just a couple of weeks of activity and depends in which kind of the cycle you are in terms of your new product. So for example, in January, we had the spike of rates that has made the solutions we had not any more competitive for the client. And so now we have this kind of gap at the moment. But there is the new pipeline of solutions that is coming. So throughout the month of February, we are going to have the brand new solutions completely, perfectly aligned with the new market conditions. Second, we are ready to enter in a new segment of activity that is going to be very interesting both in terms of volumes and margins. We are going to give more color on this as soon as we are going to launch the solutions. And the new products are a blend of fixed income and equity solutions as well. But overall, the reason why we are absolutely relaxed on improving the guidance on the asset under management is exactly for these reasons. Because volumes are going to be here. And also we have a quite very interesting pipeline of solutions that are going to be also creative in terms of margins. And at the same time, we are extremely happy to see that the percentage represented by the Finneco State Management Solutions is continuously on growing. But this is not driven by because we are forcing our financial planners doing that, but this is driven by the capability of Finneco State Management to deliver properly and with the right timing the right solution. And this is exactly what is going to happen throughout the month of February. And on the 11 million Euro Vita, this is part of the overall arrangement that has been taken in order to rescue the company. This is not clearly, this has involved all the distributors involved in the process. So this is part of the agreement. So there is anything particularly strange in what... And the 4.5% level, yes, you are right. It is cautious because the minimum level is 3%. But as has been also always our case, we want to keep on running a business characterized by being incredibly robust, safe, and so we want to keep on managing it so.

If I may, are you planning to increase the percentage of entry fees that at the moment are very low? And secondly, if I'm not mistaken, you will recall the 81 and you will roll it over. So is there any chance you might use this extra 0.5% for shares by BEX? Thank you.

What is... So our level of entry fees is incredibly low because we think that to run a business in which the entry fees are the largest part of what you're doing is clearly, we think it's not a good choice, it's not sustainable. At the same time, to run a business in which you have just 1% of your revenues represented by entry fees, probably it's a mistake as well. So it's possible that we can have an increase of these entry fees going forward. And on the AT1, another very important element that is pretty clear that the bank is going to keep on generating continuously new organic additional capital. And throughout the year, we are going to be a little bit more precise regarding what we plan to do looking forward with this structural organic generation of new capital.

Thank you.

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

Good afternoon. A few questions from my side. One is again on the net sales. I understand you don't give a precise guidance there, but how can we compare with the $8.8 billion you made in 2023 overall? I guess the mix is difficult, but maybe overall you can give us an idea of what you think about the starting point of last year in terms of overall volumes. Also, considering that you are accelerating in the acquisition of new customers, a great number in January, in general, I would like to understand if you expect this trend to continue and which kind of clients are you getting, are Similar to the past, there are any difference in terms of how you source the clients or the quality of the clients, the assets they can bring, just to kind of understand what this contribution could look like in the future. And the second question is on the provisions you provide indications on the the systemic charges for 2024. Is that right to expect a significant drop in 2025 onwards from what we know right now about these schemes? And basically, that's it. Thank you.

So on the net case, we gave a precise guidance. It's clear that the very strong acceleration we are experiencing in the client acquisitions Clearly, it's boarding extremely well going forward. By definition, when you have a new client entering the bank, there is a seasoning period that you have to go through in order to have the client exploiting the full potential. But again, if we always the most important driver in the growth of the bank has been the capability to increase the market shares, the capability of acquiring clients. And considering what's going on, this is making us extremely positive on the future evolution of the net sales of the bank, clearly. And so this is the only thing that we can say. Then, to tell you exactly the perfect timing on which this is going to be translated in media and estate, it's impossible. But it's clear that, by definition, such a powerful acceleration in the client acquisition, the definition is with a certain kind of temporal leg is generating a strong growth. This has been always the story, and so this is going to be the same case also now. The kind of clients we are getting, this is an extremely, we are keeping on getting a very important component of high quality clients because there is an increase in acquisition in all the clusters. It's very important to consider that Fineco is a business model able to fulfill the need of an extremely broad range of clients. So we are accelerating in the acquisition of the high-quality clients, but this, in any case, I don't remember in which part of the presentation is, but there is a page that is pretty clear, is the progression we have on the private banking activity. Fineco is, we are growing at a speed that is nearly four times the speed at which is growing the industry in the upper end of the client. So we are confirming that in this acceleration of client acquisitions, we are accelerating as well in the high quality clients. At the same time, we are also accelerating in acquiring, for example, young clients because we try to work also on the future of the bank. So the new trading account that is with less features and so on, is working incredibly well. So it is an extremely very well-balanced growth in terms of kind of clients that we are taking on board. On the systemic charges, I'm leaving the floor to Lorena, our CFO, if you want to be a little bit more precise on what we can expect on the systemic charges going forward.

Yes, thank you, Alessandro, but it's quite easy to answer to this question because Yes, for 2025, we expect a significant drop because the single resolution, both single resolution fund and deposit guarantee scheme reach the target level, the single resolution fund at the end of 2023 and the deposit guarantee scheme at the end of March 2024. So going forward, we expect potential contribution related to the increase of guaranteed deposits or related to bank failure. But we expect a significant drop.

Okay. Thank you very much.

The next question is from Isabel Hetrick with Autonomous Research. Please go ahead.

Hi there. I just have two questions, please. So the first is going back to the cash parking promotion. And I was just wondering, so you said it has no cost to the business, which I get, but do you see any potential upside from ability to convert these deposits into higher margin AUM? And then the second question is on dividend per share. So you talk again about an increasing dividend this year, but there was quite a substantial increase clearly on the 23 dividend over 2022. So could you just quantify what the increase, should we expect it to be a similar quantum, slightly lower? That would be great. Thank you.

Regarding cash backer, So we repeat the cash back, the rationale is to keep perfectly up and running our commercial traction. There is absolutely, it's completely natural in terms of impact on the financial income of the bank because what we pay is what we get. So it's going to be because there is no kind of misunderstanding on this point. in terms of usually the clients, the potential for converting this in asset under management. I want to be very, very, very frank and honest. Usually in terms of transformation asset under management, there is a much bigger potential in the bonds. So in the asset under custody, but this is the history. So the definition, As soon as, as much as we have a decline in rates, that is exactly what the market is expecting, because it seems that today's conversation is mostly focused on net interest margins, so it seems that everybody's convinced that the rates are going to go down. And the history is exactly always the same. As much as you have interest rates going down, the huge potential in terms of the biggest amount of fuel for the asset under management is going to be driven by the asset under custody, not by the cash park. Because cash park is mostly attracting the interest by clients with a short-term horizon. So to think to transform the cash park investment in asset under management, yes, you can do that, but we have to be extremely careful. realistic. The percent that you can expect to transform in asset under management is pretty small. On the contrary, the percentage that you can expect to transform from the asset undercast in asset under management is by definition huge. So the story is going to be repeated during the process of declining rates that started in 2000s starting in 2012, going to until a couple of years ago. This has been one of the biggest drivers of the growth of the asset under management industry. And this story is going to be repeated. So if you want to look to the potential fuel for asset under management, look to the asset under custody. So this is the reason why we are extremely pleased by the the very large increase we are experiencing through our platform on assets under custody. And on the dividend per share, clearly it's not reasonable to expect that because we increased our dividend per share by 40%. 41%. 41%. So if your question, I want to be sure that I got correctly your question. If your question, if we can expect to increase by another 40% Yes, but it's clearly not because it's impossible. But we expect to increase further our dividend pressures going forward. Yes.

Okay, great. Thank you. But in terms of like absolute, so in terms of a Euro cents increase, not a relative increase.

Never we give an... such a precise guidance, what we can say that we are on track for delivering a higher dividend per shares respect the record level we delivered in 2023.

Okay, thank you.

The next question is from Filippo Prini with Kepler.

Please go ahead. Philippe Poprini, your line is open.

Yes, sorry, can you hear me now?

Yes.

Yes, sorry, I'm sorry. I'm starting again. First question is on the redemption of money from the policy of Eurovit after the redemption in December and December or redemption of January. This money is still parked on the current account of clients or being part of that has been redeployed in other investments? The second is on your guidance on operating costs for 2024. You still basically keep 6% growth plus other initiatives of growth. Does this guidance include the effect from the new collective labor agreement for the banking employees? And the last one is a clarification on the other 81 bonds that you got, the 200 million 81 bonds that was not recalled yet. Do you plan to not recall this bond again, not even in June, not even in December, so nothing for this year?

Thank you. Regarding the redemption of money from Eurovita, let me say that the largest part has been reinvested by the clients, yes. So what is still remaining on the current account is relatively small. And on cost, yes, in the guidance is embedded the expected impact by the new contract for the banking employees. And on the AT1, I'm leaving again the floor to Lorena. So, Lorena, if you want to.

Yes. So regarding the 81, we have decided not to recall the 200 million 81, the prior placement, given the market condition. Also, please note that in any case, each six months, there are call dates giving us plenty of places. Regarding the 300 million euros of 81 that will have the first call date on December 2024, we have included the 81 in the EMTM program in order to have more flexibility in terms of execution, in terms of amount to be issued, and because the EMTM allows to speed up the issuance process. We are waiting, as already said by Alessandro, the approval by regulators for a potential call during 2024. And we will evaluate what to do according to market conditions.

Thank you.

We have not decided yet what to do. We will evaluate according to market conditions.

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

Hi, everyone. Just following up on your point that you made before that lower rates can trigger AUC to move towards AUM. So my question is, given that it is unlikely that we go back towards zero negative rates where we were pre-COVID, do you think that eventually, I mean, there is the risk that clients will always keep higher AUC rates and that this reversal will eventually, you know, could be postponed essentially indeterminately. Because, you know, how low these rates need to go to push clients out of AUC? Do you need them to go back to zero? Because my understanding is that we will always be, you know, around 200 to 50 basis points. I'm talking about the short-term rates, like three months you arrive or... What are your thoughts on this?

Thank you. This is a very good point because, again, I'm not telling you anything that is particularly strange. It's just the story repeating. Just looking behind, we can have more or less an idea of the behaviors of clients. The propensity of clients in investing in assets undercasted in bonds and so on tends to decline quite rapidly the more you have rates going down. So it's not a linear process. Usually there is a kind of trigger level, a level of shorter rates below which the appetite by clients for buying bonds and gogis tends to go down quite rapidly. And the trigger level is when you have shelter rates in the region of 3%. As much as you move down below 3% historically, the appetite by clients for buying bonds is declining quite rapidly. I'm very pleased to hear that it's on the same line when I was listening to some comments made by the CEO of Intesa that is been always extremely vocal and say that this is going to emerge as by far the biggest opportunity for the industry. So this is the reason why sometimes I'm a little bit confused when I'm seeing that everybody is, when you're looking to the forward curve and say, come on, we have rates going down and this is going to be a problem for the net interest. Think without realizing that this is going to emerge as the the restart of the golden age for the asset management industry, asset gathering industry. But based on our experience, the story, usually the trigger level that it makes really the difference when you have rates moving in the region of 3% and lower. You don't need to have rates going down to zero.

All right, thanks a lot. So it's very interesting. So let's say your level and the sensitivity level starts at, you say, 3%.

Also, without going back too much, if you look to also when there has been the acceleration of what has been called the cash-sorting process, because the cash-sorting process has been relatively stable until you have rates between 2.5. When you have the acceleration of rates above... 3% that this has happened during the end of 2023, the beginning of 2000, the end of 2022, the beginning of 2023, then we had the sharp acceleration by the clients. And the same story is going to be repeated. So if the market is right in what is expected, so rates going down, below 3% level, it's practically sure that we are going to expect a big jump on the asset management business.

Thanks a lot.

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No, thank you to all of you for attending our conference and particularly for the extremely interesting questions. And as usual now, we are starting by now, we are available for questions. moving through a big dive, more colors, more numbers, and so on. So thank you again.