Finecobank Banca Fine Spa

Good afternoon, this is the Coruscall Conference Operator. Welcome and thank you for joining the Fineco Bank First Quarter 2024 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 first quarter 2024 results conference call. Net profit in the first quarter of 2024 is $147 million, up by 12.4% year-on-year, excluding systemic charges due to a different seasonality compared to 2023. Revenues at 327 million, increasing by 11.4% year-on-year, and supported by all our product area. Net financial income is increasing by 14.8% year-on-year, investing up by 13.5% year-on-year, thanks to the volume effect and the higher control of the value chain by Finneco Asset Management. And the brokerage is up 2.2% year-on-year, thanks to the enlargement of our active investors. Operating costs were under control at 79.3 million, increasing by 6.7% year-on-year by excluding costs related to the growth of the business. Cost-income ratio was equal to 24.2%, confirming operating leverage as a key strength of the bank. In the first quarter, Fineco confirmed once again outstanding commercial performance thanks to our organic growth strategy. First of all, we recorded a strong acceleration in our new clients' acquisition in the first quarter, increasing by 24% year-on-year, with a further acceleration of 2023 record here. In April, we recorded the latest confirmation of this powerful underlying trend with new clients growing by 36.6% on the same month of 2023. Second, our net sales confirmed to be very solid at 22.2 billion In April, with net sales at $844 million, of which deposits positive for $38 million, asset under management at $195 million, despite $215 million outflows from insurance business, and with unique asset management recording $209 million retail net sales. Asset under custody was equal to $610 million. Brokerage was very strong with estimated revenues up to $17 million, increasing by 50% compared to the average revenues in the period 2017-2019. Our capital position confirmed to be strong and safe with a common equity tier 1 ratio at 25.3%. and a leverage ratio of 5.16%. On the right-hand side of the slide, you can find a summary of our 2024 guidance. More in detail, our revenues, we expect them at the record level with an improvement of the mix in theory of commissions. Thanks to investing revenues, expected to increase low double-digit 2023, with a natural market assumption going forward. Banking fees expected stable versus 2023. Brokerage, we confirmed for 2024, expected the revenues stronger with a floor higher versus pre-COVID period. On operating costs, we expect a 6% growth year-on-year in 2024, not including additional costs for both finite cost management, and marketing expenses. We expect our cost of risk in a range between five and 10 basis points in 2024. And finally, we expect in 2024 a growing CT1 and the leverage ratio here and here. Let's now move on to slide five. As announced, net profit in the first quarter of the year stood at 147 million, increasing by 12.4% year-on-year, excluding systemic charges due to the different seasonality compared to 2023. Revenues at 327 million, up by 11.4% 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 14.8% year-on-year, supported by our high-quality and capital-light net interest income. Net commission increased by a sound 6.4%, driven by the solid contribution of the investing, up by 13.6% year-on-year, and brokerage business, up by 5.3%. Trading profit increased by 15.6% year-on-year, mainly thanks to the higher brokerage activity. Operating costs are at 79.3 million, well under control, and increasing by 6.7% year-on-year, excluding costs strictly related to the growth of the business, mainly additional costs for financial management to further expand its business and have a higher control of the value chain, additional marketing costs to further improve our growth and catch the strong momentum of the business. Let's now move on slide six for a deep dive on the performance of the investing business. Investing revenues reached 84.9 million in the first quarter of 2024, increasing by a solid 13.5% here and here. 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 mostly driven by recurring management fees with no performance fees at all. Please note that the quarterly comparison is characterized by the usual seasonality on financial planners' costs related to FEER and the NASARCO that are higher at the beginning of the year and to other commissions in the fourth quarter of 2023 related to operating efficiencies. reached throughout the year in the value chain on the institutional classes by Finneco Asset Management, which are booked each year in the fourth quarter. Let me please underline that this set of results is particularly remarkable, giving 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 service hoofer 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 adding new market shares. Let's move now on slide seven for a focus on our asset management company. Fineco asset management is progressively delivering in having more control of the investing by the chain. The contribution of the company to the group asset under management net sales remained strong at 94% in the first three months of 2024. At the end of March, the contribution of Finicost Assets Under Management, half of the total stocks of Assets Under Management Bank, moved from 32.2% in the first quarter of 2023 to 34.9% in the first quarter of 2024, and in April is 35.1%. As shown by the most recent NEXIS numbers, FAM has been extremely effective in quickly developing the right set of products to catch what clients are currently looking for, and most recently entered in the segment of investment certificates. Let's now move on slide eight for a focus on brokerage. Brokerage once again registered an excellent quarter despite the poor market conditions. This is confirming a structural increase in the client's interest to be more active on the financial market, building up a clear bridge between the brokerage and the investing world. In the quarter, revenues were equal to $44 million, resulting in a monthly average around 60% higher compared to the monthly average revenues in the period 2017-2019. thus confirming a structurally higher flow. As a reminder, HEPRIL recorded estimated revenues at 17 million, 50% higher than the average in the period 2017-19. 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. On this, let me add that in the last few months, we were experiencing a further enlargement of our active investors, which are growing much wider also compared to the post-pandemic period. Third, we are continuously increasing our retail market share. Let's now move on to slide nine, to further deep dive on the potential of our brokerage business, given the most recent developments. Let me spend a few words on the most recent trends in our brokerage business. As you can see in the graph on the top slide on the left, our base of active clients has recently seen a substantial increase, around 20% higher compared to 2023, and 40% step up compared to the level recorded with the pandemic. The drivers of such an increase are all structural. Namely, we are delivering on a number of new initiatives, like the new brokerage-only account and the new platform Finneco X. The new market structure is confirming the bridge between brokerage and investing. The most recent increase in the rate environment has resulted in a renewed interest in Govis, with Fineco emerging as the platform of choice for clients. In the graph down in the slide, we are showing that the executed orders have been increasing this year compared to 2023, and is back to the pandemic levels, despite the poor market environment for brokerage in the last month. Let's now move on slide 11 for a focus on our capital ratio. Sineco is confirming once again a capital position well above requirement on the wave of safe balance sheet. Common equity TR1 ratio at 25.29% and the leverage ratio at a very sound 5.16%, while risk-weighted assets were equal to 4.69 billion. decreasing both year-on-year and quarter-on-quarter. Total capital ratio at 35.94% as of March 2024. As for the liquidity ratios, liquidity coverage ratio at 864%, and net stable funding ratio at 369%, while the ratio high-quality liquid assets from deposits is at 71%, well above the average of the industry. and position FinEco as the best positive outlier, as you can see on slide 12. Going forward, we confirm that we will continue to generate capital structurally and organically, thanks to our capital life business model. The excess capital we are going to generate will be partly used to further invest in our organic growth opportunities, while for the remaining part, which in any case will be the most relevant one, By the end of the year, we are going to define the amount and the terms for the distribution to the market. Let's now move to the slide 14 for a focus on the acceleration of our commercial dynamics. Let me spend a few words on the strong acceleration in our new 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 here, the clients here to date were 27% higher, indicating a very promising start of 2024 on the 2023 record here. These outstanding results has been achieved keeping our marketing strategy unchanged when it comes to new client acquisition. It effectively translates in a quality and sticky client base key to grow a healthy business in a long-term horizon. 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 AI 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, particularly strong throughout the digital channels. Let's now move to slide 18 for a deep dive on our transactional liquidity. The granularity and stickiness of our deposit base is confirmed quarter by quarter. Our clients have an average ticket of around 17.5 thousand euros, and the median ticket of 4,500 euros. On top of this, different from other players, mostly focused on brokerage and investing, our successful one-stop solution relies on a fully-fledged banking platform with 50% of our clients' credit in salary and pensions with us. Down in the slide, we show our usual breakdown of the deposits net sales, where we once again saw an abrupt increase in the net new liquidity before investments. As you can see, up to the end of April, the bank effectively collected more than $6 billion of liquidity coming from salary and pension and $3.9 billion from the net bank transfers. After the expenses in cards, bills, and taxes, deposits were upped by $2.6 billion. Once taking into account investments in assets under management and assets under custody, the final result is minus 0.7 billion of deposits net sales. On the graph on the right, we confirmed the trend in terms of liquidity flows per cluster of clients, clients with total financial assets up to 100,000 euros, increased amount of liquidity in the bank, and 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. For private banking clients, the liquidity as a percentage of total financial assets is at 10% as of April, at 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 slide 20 for a focus on our guidance. Revenues are expected at the record level. We've an improvement in the mix in favor of commissions, thanks to investing revenues, for which we expect a low double-digit growth versus 2023. We've a natural market effect assumptions. Banking fees are expected stable compared to 2023. Brokerage revenues are expected to remain strong. We have flow in relative terms we expect 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 unique asset management and marketing expenses. Cost income, we expect it comfortably below 30% thanks to the scalability of our platform and to the strong operating gearing we have. On the capital ratio, we expect a growth in C1 ratio and leverage ratio, currently with the combination of both and strong acceleration in the growth of the bank and the distribution of generous dividends. On leverage ratio, our goal is to remain above 4.5%. We expect a higher dividend per share for 2024. Cost of risk was equal to 5 base points, thanks to the quality of our lending portfolio, and we expect it to in 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 the continued strong growth expected for our clients' acquisitions, as we are in the sweet spot to keep on adding new market shares. Thank you for your time. We can now open the call to questions.

This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Enrico Bolzoni with JP Morgan. Please go ahead.

Enrico Bolzoni, your line is open. Sorry, can you hear me now? Hello? Yes.

Can you hear me now?

Yes.

Okay, sorry. Yes, thank you for taking my question. So the first one, looking at your April statistics, so an uptick in IOM flows over the month, so I was wondering if you can provide some additional colors. At the full year results, you mentioned that you had a few products in the pipeline that you were expecting to launch. So it would be interesting to know if you can give us some color of whether some of these new launches contributed to the uptick in IOM flows? What was the contribution of certificates, possibly, that I think you launched at some point in March? And going ahead, looking at May and in June, is there still a substantial pipeline of new products that you're going to launch over the next couple of months? So this is my first question. My second question relates to the NII. Can you just give an update, please, in terms of what is the current volume in the cash park initiative and currently how much are you remunerating these amounts? And then finally, a bit more of a general question, you changed slightly the way you phrase your guidance for this year. So now you're saying that you expect 2024 revenues to be at the record level while previously you were indicating to be at a similar level compared to 2023. So I just want to clarify, does it mean that now you expect an uptick in revenues year-on-year compared to previous guidance? And you haven't changed within that the guidance for investing revenues. So you still expect low double-digit versus 2023 with neutral market effect, which clearly has not been neutral. So can you try to give some additional color there on whether you now expect higher investing revenues compared to your previous guidance at the end of Fulia 23 results? Thanks. Thanks.

Thank you for your question. So let me start by giving you a little bit more of color on the asset under measure flows. First of all, it's clear that the situation there is improving, is improving in terms of momentum, and this is particularly remarkable considering that in the past frequently we gave the the message that in order to have an uptick in the asset under measured flows, one has to expect a decline in the short-term rates. The short-term rates remain at a high level until so far, but in the meanwhile, the situation is improving because probably what we are observing is that the clients are starting or realizing that it's just... looking to Govis is not a great idea in terms of diversification of portfolio. Second, there are our advisory platforms that they are really gaining a strong momentum because this is signaling a change in the structure of the market as well because now clients are really more and more interested in Govis ETFs, but they want to get them through an advisory service. And this clearly, we think that is going to emerge as the real future for the industry. And we are really experiencing really good numbers. In the meanwhile, FinEco asset management is incredibly effective. The main point of strength FinEco asset management is represented by his capability to continuously understand what is really requested by clients of financial planners, and they are incredibly efficient in bringing direct to the market in a very short period of time. So this process is going to continue, and so we think, and in the case on top of this, we have also in the beginning of decline of rates, this can be also even better for the evolution of the asset under management businesses. A second consideration that we keep on considering the large accumulation that has been made by the clients on Govis as an absolutely gigantic opportunity looking forward. So overall, we think that in any case, what's going on in terms of volumes on the asset under management is definitely promising. On the net interest income, On the cash park, as we say, it's not bringing a particularly huge contribution to the evolution of the net interest of the deposits. The rationale behind is mostly represented by the need of giving to the clients the full range of the potential products of interest. The running remuneration is 3%, so this means that we are able to get a small positive margin on the cash park initiative. Regarding the third question, you are right. We introduced a slight change in the guidance of revenues because the new guidance is clearly embedding an expectation for higher revenues with respect And on the investing revenues, as you can imagine, in the low double-digit area, the range, because it's ranging from 11% to 15% increase, and so we think that it makes sense to remain consistent with this guidance.

Thank you. Sorry, just two small clarifications. One, if you can give us an update on the volumes in the cash park at the moment. And the second is whether you haven't launched yet the products that you mentioned you were about to launch with the full year results or if you already launched some of these. So what does the pipeline look like?

At the moment, the overall stock of the represented by Cash Park is in the region of one billion or less. And we are still on the progress of launching the new products and services. The process has not finished yet.

Thank you. The next question is from . Please go ahead.

Hi, good afternoon. Two quick questions for me. One is on the brokerage, which lately in the last few months and also in April has been confirmed to be very, very strong. And I guess this is the evidence of all the action that you have put in the past. Can you elaborate a little bit more on what could become the new initiative and new market structure that you are talking? When I look at the asset undercast, the split, it seems that there has been a big increase recently. also in the equity and a mix that is not just related to bonds, but that could continue to sustain the brokerage revenue in the future. So if you can give us some color on that. The other one is on the investing fee again. Sorry, I'm coming back to margin here, because when I look at the margin, I get the quarterly seasonality Q4 to Q1. But I'm just trying to understand if the product mix could have affected the margin and how do you see this to trend over 2024? And if I may, comparing your strategy versus the bank, it's never accurate. But banks are showing very, very strong fee results and a refocus on fees. Do you see any change in customer attitude or behavior or competitive landscape? Thank you.

Thank you. On the brokerage, so let me, so the brokerage is perfectly current with what we have been repeating of the last recent past. So the brokerage is doing incredibly well because as we were explaining, the overall environment for brokerage is not such as great because volatility is remaining pretty low. and so on. Nevertheless, what is emerging is a clear change in the structure of the market. So what is still perceived as a problem for the industry, that this booming attention by clients for God is emerging as a gigantic wake-up call for the Italian families. And this is contributing in enlarging the number of clients and families that they are more and more interested in interacting with the brokerage platform. And this is a trend that we are observing very clearly because we have by far the largest brokerage platform in Italy. And second very important point, statistically wise, every time that the client is entering in the platform, starting initially, for example, in just buying Govis, Then there is a quite significant percentage of this client that progressively they're starting on using also other instruments and trading on other assets. So what's going on at the moment on the Govis is, in my opinion, an absolutely spectacular opportunity that is in coming for a bank like we have, both in terms of brokerage evolution and both in terms of the investing evolution of the investing business. Another very important point that this is going to be connected to your last question that this rising rate and interest by clients for Govis clearly is also contributing in changing the structure of the market. So because now the clients are more and more interested in using an extremely efficient and fair and transparent approach when they are interacting with the market. And this is connected to the, when I was previously answering to the previous questions, to the concept of the booming activity on the advisory platform. So in two years, so the structuring, the market is clearly changing in terms of enlarging of the base of potential clients. Second, clearly this is leveraging on an absolutely best-in-class platform, and the bank has been very, very effective in continuously producing new features, new solutions. We were mentioning the new platform, the new trading account, and many other initiatives around the pipeline. On the investing fees, clearly the most relevant impact on the margins is, as usual, as you can imagine, represented by the tradeoff between, because the evolution of our investing business is a combination of a big growth of advisory platforms and the FinEco State Management Solutions on the other end, and the larger these investments that they are continuing on the insurance wrappers. The insurance wrappers are characterized by very low margins. So overall, the situation is extremely very well-balanced, and we don't see any visible and significant pressure on the margins, exactly for these reasons. Because on one hand, we are progressively having the clients leaving the products characterized by the lowest margins and entering the new products. Comparing our strategy, I agree, I share the point of view of the traditional banks, particularly there are some banks, for example, like Intesa, that is continuously repeating that what's going on on the Gaudis and so on is going to emerge as a gigantic opportunity for the investing business, and we totally agree on this point. On which The point on which we disagree with traditional bank is that in the meanwhile, the landscape is deeply changing. And I'm referring to the big growing interest by clients for extremely fair and transparent products and services. We are experiencing a booming request by clients for GOVIs and ETFs in the advisory wrappers. And so what we expect is absolutely in volumes, potentially, and a huge opportunity on the investing business. But at the same time, you have to be prepared in addressing these in the proper way, because the market is definitely changing. And sorry, but we remain convinced that Fineco is by far the best position of player for capturing these structural changes that are underway in the market.

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

Good afternoon to everybody. I have three questions here. The first one refers again to the launch of new products that you anticipated with the Q4 conference call in February. My perception was that this launch was imminent. I haven't seen that much of it so far. So can you please share with us what is now the timeline for this? During the call of the Q4, you mentioned that you would have targeted products with an higher upfront fee component. If you can give us an update on this commercial strategy for the rest of the year. The last two questions, one is on the BTP Valore. Can you share with us what was the subscriptions that you had in the previous uh issue the one in march uh this year and the last one is on the comment on your excess capital you were pretty much you know clear into saying that at your end you will decide what to do with the uh with the excess capital that is not going to be allocated to organic grow so shall we expect for 2025 some plans and what are your priorities there? Would you prefer extra dividend or share buybacks?

Thank you. Let me start by the first question. First of all, the launch of new products is continuously underway. So clearly we don't make public announcements to the market, but it continues. So every month we are launching brand new solutions for our clients. So we launch the solutions more focused on exposing clients to credit risk. We are launching solutions that are blending an exposure to fixed income together with an exposure to equity. So this is, for us, a business as usual. So practically every month there is a continuous launch of new solutions. The solutions we are launching are clearly continuously put in currency with the interest that is emerging by the clients. As I was explaining before, the main point of strength that Finnecos Ad Management has that is incredibly fast and effective in transforming in a new solution what is emerging as a brand new need by the clients. We never, we announced a big shift in direction with products with high upfront fee because this is not part of our DNA. So probably it's possible that going forward we can have some kind of increase in the upfront fees, but we are going to remain very well below what is the average of the upfront fee charged by the market. Regarding BTP Valore, there is what we are observing. Today is the second day of the placement, and there is a very clear, evident deceleration of interest by clients. But this is not taking us by surprise, because as we were explaining, there is, first of all, The genuine cash sorting is in any case finishing because the so-called rich clients that hit the bottom of their liquidity and so also with a high interest rates environment in place, their appetite for buying even more goddess is clearly going down quite rapidly. Second, clearly there is now an The displacement is clearly colliding with the evidence that a client that wants to get a decent, efficient asset allocation cannot put all his eggs in one basket. And so this is contributing in a decrease in appetite by clients for this initiative. And we are not surprised by this. On the excess capital, the bank is expected to keep on structurally, organically generating excess capital because this is part of our business model, capital light, fast growing. And in terms of priority, as we explained, we are going to part of this excess capital is going to be invested in supporting our organic growth initiatives. Then the remaining part, that in any case is going to remain the largest part of this excess of capital, by the year end we are going to give more details in terms of amount and technicalities used in order to get back to the market this excess of capital and clearly In these details, we are going to have an indication in terms of combination between extra dividends shared by bank and so on. So this is the plan. And that's all. Yes.

Thank you. Just to follow up on the question on the BTP value, I was referring to the last, not the current offer.

The last offer. The last has been more or less 800 million, if I remember correctly.

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

Good afternoon. My first question is on the net provision for risk and charges, the equivalent of the 63.6 million last year, if you can guide us on 24 and 25 on that specific line. The other question I have is again on BTPs. If I recall correctly, you have 5 billion of BTPs maturing in 2024, if you can confirm this amount. And if you have any idea on how much you will retain and switch into asset management solutions. And the last one is on banking fees. I was wondering why they declined to 12 million in Q1 2024 against 14.6 million in Q1 last year. Thank you.

On provisions for risk and charges, I'm going to leave the floor to Lorena, our CFO. So please, Lorena, if you want to give more color.

Thank you, Alessandro. Good afternoon to everybody. So in this line, as you know, we account the contribution to the systemic charges. In 2024, the deposit guarantee scheme has reached the target that is equal to 0.8% of Italian guaranteed deposits. And this is related to the guaranteed deposit at the end of March 2024. And the final contribution will be communicated by Fondo Interbancario del Deposito, so Italian Deposit Guarantee Scheme in June, but we have accounted 35 million in this for 2024. We don't expect significant changes in this number. And this is the last strong contribution to the Deposit Guarantee Scheme. Going forward, what we expect for the following years is that the deposit guarantee scheme and also the single resolution fund that has reached the target at the end of last year, additional contribution could be happen. in the event of the bank's failure or in case of increase of guaranteed deposit, both at system level or individual level.

So, for this is the last... We can say that after this last contribution, we don't expect any significant impact because we don't expect any... major failure by banks, and we don't see any, and the growth of our deposits is going to remain definitely very well under control, so we don't expect any significant additional contribution after this last one.

Sorry, Lorena, can you remind us the contribution of provisions linked to recruitment last year was around 13, 15 million, is that correct? So I presume next year we will only have those kind of provisions, right?

Yes, yes, yes, exactly.

And should be to the tune of 15 million-ish?

Could be, could be, yes.

Okay, thank you very much.

Regarding BTPs, yes, we expect more or less, yes, 5 billion euros of BTP maturing during the year. And what is going to happen here? There is, on one hand, clearly there is a very important correlation with the evolution of rates, so that the more you have repeating the short-term rates starting on going down, and the more this is going to be, and the more successful we are going to be in moving this sparring BTPs in asset under management. Second very important trend that is a trend that is definitely building up that more and more clients are interested in putting their Govis or buying the new Govis into the advisory platform. So practically they say, okay, fine. And the same story, the more you have short-term rates going down and the more you're going to have growing appetite by clients for receiving an assistance in order to get a more efficient allocation. But the biggest driver for sure is going to be represented by the evolution of short-term rates. But in any case, this massive buying by clients of COVID has built an absolutely gigantic opportunity for the future evolution of the investing business. This is the story repeating. Regarding the banking fees, the client, if you don't, Lorena, if you want to get again the floor.

Yes. Thank you.

Yes, the decrease is mainly related to the repricing on current account. As we came back on the 2019 repricing, which was produced into negative interest rates.

Yes, because when the interest rates were negative, we introduced a fee on the current account in order to compensate the negative rates, but with the agreement to roll back to the old pricing as soon as interest rates were going to return positive. Because this has been the more or less the indication also received by Bank of Italy. We know, we are aware that many banks, they didn't do that, but clearly we prefer to be perfectly compliant with the indication received by Bank of Italy.

Very clear. Thank you very much.

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

Yes, good afternoon and thank you for taking my questions. I was wondering about insurance outflows as they seem to have stabilized around 200 million per month. Do you see any improvements going ahead or do you think that you will continue in trying to recapture those flows through FAM. Then if we look at the first four months brokerage revenues, well, if multiplying by three, but I know that probably it is not... correct to do that, but we would go very, very close to the 2021 level. So do you expect a significant improvement compared to last year, at least in line with the improvement that you have in the first four months? And then I was wondering about your tax rate because it was slightly below the 30% in the first quarter, so I don't know if you can give us some guidance or a range for our models. Thank you very much.

Thank you for your question. Let me start by the by the first question. So, as we explained, for us, this investment by the clients of Insurance Wrapper is not a great point of concern regarding the margins and revenues because this product is characterized by extremely, a very low profitability for us because Finneco differently by the most part of the players, we don't have an internal factory. on insurance, we don't have in place any binding agreements. And so overall, our margins are pretty low. So the disinvestment is not a big issue. At the same time, going forward, the evolution of the disinvestments on the insurance wrapper is going to be mostly driven, again, by the level of rates. The more you have shorter rates going down, and the more you can expect this this process stabilizing. In any case, I would think what's going on there, Finacost Admin is expected to keep on playing the lion's share in capturing what is invested by clients on the insurance wrap. On the brokerage revenues, as you are familiar, brokerage is is characterized by some level of, it's not so predictable, but for a very simple reason, because you have elements you are not controlling, like the volatility, the volumes of the market. But overall, looking to the last few months, what is pretty evident that the pace of the business is definitely stronger than in the past, because the that the last few months has been characterized by an absolutely normal, if not below the average level of volatility. And the brokerage is growing for structural reason. And so on one side, we cannot give you a precise indication of the evolution of the revenues of brokers, but at the same time, we remain extremely positive on the long run through the evolution of brokers. because the growth is driven by structural components. And what is still sometimes perceived as a problem in the market, so this big appetite by the Italian families in directly buying Govis, this is emerging as an absolutely gigantic opportunity for the brokerage world as well, because it's just waking up clients is enlarging the pie. And so the number of families that now have become, are starting on becoming familiar in interacting with the market has grown up significantly over the last few years. And so, sorry if I'm a little bit boring about this rise of rates and the big jump by clients in the direction of God, is emerging as an absolutely great opportunity brokerage, but in investing as well. And on tax rate, Lorena.

So the decrease quarter on quarter, so the decrease in the first quarter of this year compared to the last quarter, 2023, is due to the recurring effect at the end of the year due to the dividend distribution of in the fourth quarter of 2023, because the consolidated tax rate increased at the end of last year because of the Italian taxation of the dividend. For 2024, we expect a slightly higher tax rate, around 31%. considering both the introduction of the global minimum tax that will leave farm tax rates at 15% from 12.5%, and the abrogation of the fiscal benefit that is called ACE, or Notional Interest Deduction, and it was abrogated, and so this is the reason why we expect a slight increase

Okay, thank you very much.

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

Hi, I have two questions for me. Firstly, on the financial advisors, what are you targeting for this year in terms of onboarding? And then on the private biking initiatives, you mentioned the launch of the new tools. Are these mostly focused on the productivity of the advisors, or is it more for the end client to use directly? And then my second question is on the customer growth, obviously positive trends. You mentioned the data-driven marketing and opportunities from AI to drive lower client acquisition costs. Do you see any opportunities for cost savings arising from AI in client support or servicing of these clients or any other areas? that can drive further cost savings. Maybe if I may, to add one third, just on the brokerage on slide eight, at the bottom chart, you show the number of brokerage clients increasing year on year, but the share of the active investors is steady at 92%. So does this mean you see both active investors and also traders coming on the platform? Is that something you are seeing? Just to check. Thank you.

So on the financial advisors, what we are targeting, we are not giving to us any specific target in terms of number and recruiting, because for us what is important is which kind of financial planners we are recruiting. So we remain focused on recruiting mostly financial planners coming from banks or banking employees. and young people that we are preparing for the profession. We are not interested in, for example, in taking part to the game of overpaying financial planners for making you joining the bank, because at the moment we have a kind of a return on the market of some of the bad practice of the past. So there are some players that are back again on the market overpaying financial planners for convincing them in joining the path, but clearly we know that this is not a sustainable strategy, but we are extremely satisfied by what's going on because we are taking on board exactly the kind of financial planners we want to get. Regarding the new tools on private banking and And I would leave the floor to Paolo. Paolo, if you want to give a little bit of color of what you are doing on that side.

Yeah, basically, in the product banking side, we are improving the platform with products. We are going to introduce, for example, more private... equity funds and credit funds. We are connecting the platform to a multi-brand platform in that sense. And this is something that is going to come soon after the summer. We are connecting right now the platform. We think this is something that is not going to be massive in terms of numbers, but it's going to be quite useful to better position the bank in the private banking segment. Of course, also the next question on the AI, I can give you some color. We started a new team internally in the bank totally focused on artificial intelligence and we are planning to basically attach AI pretty much everywhere in the next years. So, of course, we have to prepare first the platform and then plug the artificial intelligence inside. But, you know, there are many, many opportunities outside, and we are talking to many counterparties, too, to see what are the best strategies to basically develop AI services, both to direct to our financial planner. We think they're going to use massively AI in the next years, and we're preparing the platform just to do this, and also for the direct clients, especially in the brokerage platform. And on the marketing side, we are using already artificial intelligence. It's something I would say quite basic but quite powerful also. We use AI basically to better profile the customer we want, so the prospects, and to pay less basically the contact that we buy outside based on the profiling of the clients. Also, this is very promising. A good part of the increase in customer acquisition in the last few months is due to the use of the artificial intelligence inside our marketing platforms. Of course, this is the first usage of AI, but again, we believe that it's going to be much, much more used in the next few months and years.

Paolo, if you want also to make a final comment on the The last question is on the brokerage.

Yeah, we are seeing incoming clients. First of all, because right now we are pretty much the only platform in Italy to offer a service, not just an execution service, but it's a full service. It's the old things that our clients buy. And the level of the service is very, very high and at the moment unmatched in the brokerage arena in the Italian market. So we keep on acquiring new clients, as Alessandro said before, because we developed a lot of new services platform. We improve the platform almost every day, releasing small pieces of the platform and you know, making usability even easier, adding new products, features in the platforms. Fineco X, for example, we release every week some new features, and this is probably the best marketing you can do because, you know, clients, they feel they're, you know, we follow them, we follow their requests, and it's probably the best marketing to, you know, push them to do word of mouth. And also the brokerage account is the 100% brokerage account released almost probably eight, nine months ago after the summer, before the summer. It's going very well and attracting young generation of investors, putting a lot of attention on the new financial products. We're very strong, as you know, in ETS. accumulation services in ETS and, you know, new generation are, you know, mostly concentrated in this kind of product that we are best in the market also in this kind of offering.

So... Yeah, and Paolo, if I may, just going back to a very basic concept, if you are, but many of you, you are perfectly aware of this, if you are an Italian client, and you are really interested in moving in the direction of very efficient and fair way of investing, referring, for example, ETFs, GOVs and so on, there are not many places around in which you can do that. So because if you go, for example, in a traditional bank frequently, this is just they are not offering the service or is offered with conditions that are absolutely not coherent with the expectation of the client. what we are trying to transfer that there is also in Italy there are underway some massive changes by the clients and we are definitely the best position of place thanks to the combination of an absolutely amazing platform and the remaining part of our one-stop solution.

Yeah, I would say just to close that it's It's not just the pricing or the execution that we give, it's the whole thing. So it's basically the journey that the clients are experiencing with the platform, Fineco platform, before buying, during buying, and after buying the stocks, EPS, bonds, mutual funds, or whatever.

Because during the first four months, everybody is just focused on the copies, but for example, The clients bought more or less 1 billion of ETFs, and a large part of this is moving into the advisory platforms we are providing to clients.

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

Good afternoon. Thanks for taking my questions. I have two, please. So first, you've guided to you now expect revenues to be higher this year than in full year 23. So could you just try and quantify that? Do you expect it to be like low single digit, percentage higher, mid to high digit? That would be useful, please. And within that, Do you expect the investment revenue to drive most of the increase or do you now expect NII to be greater than where you were expecting for your results given the higher for longer rate environment? And then secondly, on the brokerage side of the business, a number of your peers who've already reported had quite strong brokerage revenue numbers due to increased engagement from clients with U.S. equities, which are a more profitable trade for them. So if you can provide any color with U.S. engagement from your client base, and if this is a benefit at all to the brokerage revenue you report. Thank you.

Regarding the first question, it's clear that, as you know better than me, the combination of revenues is significant. is strictly dependent by, for example, evolution of rates, because if you have rates remaining, as the market is saying, higher for longer, probably you can expect a higher contribution by the financial income and a lower contribution by the investing. Brokerage is moving by its own. If rates are going to go lower, it's going to be the opposite. What is clear is that Thanks to our business model that is extremely diversified and so on, there is a clear compensating effect. And so this is making us, together with the support generated by brokers, that as I was saying is growing by itself, is making us decently confident that revenues can be They are going to be higher this year than last year. And going forward, as much as we have more visibility, we are going to start on giving a little bit more precise indication of the range of this. And on the brokerage, yes. I don't know. I'm just looking to Paolo. Also in our case, we had the clients, again, the interest by our clients on U.S. stocks is not just a trend that has emerged recently. It's a continuously growing trend. And this is particularly strong here in Italy because in Italy, the overall dimension of the Italian stock exchange is not current with the total amount of wealth of the Italian family. So by definition, the Italian clients has been historically extremely attracted by trading on the U.S. market and the trend is clearly continuing. I don't know, Paolo, if you want to.

Yeah, it's a very, for us, it's a very important market. We have a big chunk of execution every day that comes from the U.S. market and it's a very profitable business also because there is the effects involved in the execution, even though we are very, very fair on effects, but still we are making money also on this leg. And, yeah, we do marketing. We try to enlarge the market, the U.S. markets also among our clients, and it's a very promising and good trend.

Thank you. Very clear.

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

Hi. Good afternoon. Just one question from my side. I was wondering if you can give us some idea what's your ambition in terms of certificates, business volumes, and profitability going forward, and what is the reception of these kind of products by Intermonte? I guess, the advisors and the clients, both of them, and also the same kind of question for the advisory activity. Thank you.

First of all, as you are probably familiar, Sineco is a relatively brand-new player in this arena, and so clearly we think that the certificate business is going to progressively become an and a quite interesting business for us, but clearly takes time because we have to, we have to, there is, our financial planner, they have to understand, they have to familiarize with these products because our network has never has been a network particularly active on certificates. And so exactly like Rome has not been built in one day, Also, in this case, we have to be patient, but it's not a brand-new story. And the same point on the clients, but we remain absolutely very positive. Every time that you are launching a brand-new initiative, you have to be decently patient. So it's going to become a great business for us.

Okay, thank you.

And on the advisory, I mean, what kind of potential, let's say, share of the assets you think you can... The advisory business is going to become, in our opinion, the real game changer in the investing industry in Italy because this is pretty heavy in the trend. So it's... And what is making me a little bit surprised that still the industry is reluctant in understanding what's going on. Probably in our case it's easier to spot the trend because we are managing such a large brokerage platform. And so we are observing the way the clients are changing their behaviors. So I'm not just referring to the smart young clients. I'm referring to traditional clients that more and more are overlapping with the brokerage world. And the advisory platform are becoming the real only way of capturing the attention, particularly of the big clients. And so this is going to become a real game changer in the industry. For us, this is absolutely by far the best news because Fineco, we started as a first mover in 2008. It's a business we have now more than 28 billions of euros of assets on which clients are... No, now it's my... Correctly, Lorena is correcting me. Now we are very close to 30 billions. So 30 billions of assets... out of $55 billion of overall asset under management, are represented by assets on which clients are paying a fee, an advisory fee. This is absolutely unique and amazing. But again, in my opinion, in our opinion, what is the most relevant message, this is a gigantic trend that is underway. And this is going to change very rapidly the shape of the industry.

Very interesting. Thank you.

The next question is from Luigi de Bellis with Equitas. Please go ahead.

Yes, good afternoon. Just a follow-up on the advanced advisory services. So can you give us an idea on profitability compared to your average margin for investing and how much of these assets in advisory business are now assets under custody? Thank you.

The profitability, it depends on which client you have in front of you. Because clearly on the very rich clients, the profitability tends to be lower. But on the other clients, it's not too much different from what you have experienced. But clearly our case is quite unique because Fineco is characterized by being always charging fair commissions and fees. So if your question is, what does it mean for us? This is not going to make such a gigantic difference. If your question is, what does it mean for the industry? This is going to be a big shock because the industry is used to charge to clients much higher fees. And at the moment, we have the asset under custody that is under the advisory is close to $6 billion. Yes, fast-growing is on the fast lane of growth. This is the fastest-growing trend.

Thank you very much.

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

Thank you to all of you for the very interesting and stimulating questions, as usual. Then if you have the need for some more deep diving, please make us a call for having a follow-up. Thank you again for participating to our call.