Finecobank Banca Fine Spa

Good morning. This is the Coruscant Conference Operator. Welcome and thank you for joining the Fineco Bank 4th 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 morning, everyone, and thank you for joining our fourth quarter 2024 results conference call. Net profit in 2024 reached a new record high at $652.3 million, up by 7.1% year-on-year. Revenues achieved $1,316.5 billion, increasing by 6.4% year-on-year, supported by all our product areas. Net financial income is increasing by 3.4% year-on-year, investing by 11.7% year-on-year, thanks to the volume effect and the higher control of the value chain by FinEQ Asset Management, and the brokerage is up by 30% year-on-year, thanks to the enlargement of our active investors. Operating costs were under control at $332 million, increasing by 6.1%, excluding costs related to the growth of the business. Cost-income ratio was equal to 25.2%, confirming operating leverage as a key strength of the bank. Moving to our commercial results, we are clearly experiencing a step up in our growth dynamics. And for 2025, we expect a higher asset under management and deposit net sales compared to 2024. This is underpinned by the positive tailwinds from the structural trend. And we are leveraging on this solid momentum through a more efficient marketing activity. Also, we have recently released our new advertising campaign where we are marketing with a more aggressive stance our main concept of transparency, innovation, and quality. The result of this acceleration has been clearly visible in 2024 and is further improving at the beginning of 2025. First of all, in 2034, we recorded for the second year in a row the new record in terms of client acquisition, with new clients increasing by 27.8% year-on-year. This trend saw a further improvement in January, with around 18,800 new clients, by far our best result ever. Second, our net sales confirmed to be very solid, with 10.1 billion inflows in 2024. In January, total net sales saw a further acceleration at $887 million, up by a strong 53% year-on-year. In terms of mix, January is characterized by the usual monthly seasonality for asset under management, with net sales at a solid 221 million, and with FinEco Asset Management at 215 million retail net sales. Asset under custody was equal to 1.18 billion, and deposits at minus 512 million, as our brokerage clients, they've been very active on the platform buying Govis on the beach after the strong increase in yields. thus resulting in very solid brokerage revenues estimated at around 21 million, up by 26% year-on-year. Our capital position continues to be strong and safe, with a common equity TR1 ratio at 25.9 and a leverage ratio of 5.22. We are very pleased to propose to the next Annual General Meeting a dividend per share of 74 euro cents increasing by 7% year-on-year. On the right-hand side of the slide, you can find the summary of our 2025 guidance more in detail. Investing revenues are expected to increase low double-digit versus 2034 with a natural market assumption. Banking fees are expected in a slight decrease in 2025 versus 2034 due to the new regulation on instant payments On brokerage, we confirmed 2025 expected revenues stronger with a continuously growing floor thanks to the enlargement of our active investors. For 2025, we expect operating costs to grow around 6% year-on-year, not including 2 million of additional costs for growth initiatives in a range between 5 and 10 million, mainly for marketing, FinEcos asset management, and AII. Finally, in 2025, we expect a payout ratio in a range between 70% and 80%. Let's now move on to slide five. As announced, net profit in 2024 reached a new record level at $652.3 million in a very challenging macro scenario with an outstanding increase by 7.1% year-on-year. Revenues achieved 1 billion and 316.5 million, up by 6.4% year-on-year, and we have been able to catch the strong acceleration of the structural trends in place. The growth of our net financial income increasing by 3.4% year-on-year, supported by our high quality and capitalized net interest income. Net commissions increased by a sound 7.6% year-on-year, underpinned by the solid contribution of our investing business, up by 12% year-on-year, and our brokerage business up by 9.6% year-on-year. Trade profit increased by 30.9%, mainly thanks to the higher brokerage activity. Operating costs are at $332 million, well under control and increasing by 6.1%, including costs strictly related to the growth of the business, mainly additional costs for Finnecoset management to further expand its business and having a higher control of the value chain, additional marketing costs to catch the strong momentum of the business. Let's now move to slide 6 for a deep dive on the performance of the investing business. Investing revenues reached 367.5 million in 2024, increasing by a solid 11.7% year-on-year on the back of both growing volumes, thanks to our best-in-class market positioning and to the higher efficiency of the value chain for FinEco Asset Management. 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. Our set of results is particularly remarkable, given the more challenging market environment for asset management industry. Let's now move on to slide seven. In this slide, we are representing the two main sources of growth for our investing business going forward. On one hand, Finneco Asset Management is increasing the control of the investing value chain. Its contribution to the group net sales has been consistent over the cycle, thanks to the incredible time to market in delivering new investment solutions perfectly aligned with what the clients are looking for. As a result, the contribution of Finneco Asset Under Management out of the total stock of Asset Under Management has been steadily growing and is now equal to 37.7%. On the other hand, being a platform, SNAIC is the best place to catch the latest trends in terms of client investment behaviors. There is a clear change underway in the structure of the market with clients increasingly looking for quality, efficient, and fair solutions. All of this is channeling a strong demand towards advanced advisory services with an explicit fee, where Fineco is by far the best positioned in Italy, as you can see down in the slide. Let's now move to slide eight for a focus on brokerage. Brokerage registered an maximum in 2024 with 217.1 million, its second best just after the pandemic year. The start of 2035 has been very promising with 21 million revenues in January. This is confirming a structural increase in the client's interest to be more active on the financial market and building up a clear bridge between the brokerage and the investing world. The brokerage business represents the best sign of how fast the structural financial market is evolving as a whole. as technology is driving a swift change in clients' behavior thanks to higher transparency. For this reason, we still consider the brokerage Italian market very much underpenetrated, and we see a strong opportunity to grow despite already being the market leader. Let's now move to slide 9 to further deep dive on the potential of our brokerage business given the most recent developments. As you can see in the graph on top of the slide, on the left, our base of active clients has recently seen a substantial increase, around 20% higher compared to 2023, and with a 40% step up compared to the level recorded during 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 recent increase in rates environment has resulted in renewed interest gobies, with Finneco emerging as the platform of choice for clients. In the graph down in the slide, we are showing the executed orders have been increasing in 2024 compared to 2023, and they are back at the pandemic levels, despite the poor market environment for brokerage overall last year. Let's now move on to slide 11 for a focus on our capital ratio. Finneco is confirming once again a capital position well above requirement on the wave of an S6 balance sheet. Common equity TR1 ratio at 25.91. Leverage ratio at 5.22. And total capital ratio at 35.78 as of December 2024. And the risk-rated asset was equal to 5.06 billion. As for liquidity ratios, liquidity coverage ratio is at 909%. And the net stable funding ratio at 382. With the ratio, high-quality liquid assets from deposits is at 77%, well above the average of the industry. Going forward, we confirm that we will continue to generate capital structurally and organically thanks to our capital-like business model. Now let's move to slide 17. Let's now focus on our 2025 guidance. On investing revenues, we expect a low double-digit growth versus 2024 with a natural market effect assumption. Banking fees are expected with a slight decrease compared to 2024 due to the new regulation on instant payments. Brokerage revenues are expected to remain strong with a continuously growing floor thanks to the enlargement of our active investors. Operating costs are expected to grow at around 6% year-on-year, not including a few millions of additional costs for growth initiatives in a range between 5 and 10 millions, mainly for marketing, financial asset management, and artificial intelligence. Cost income, we expect to hit comfortably below 30%, thanks to the scalability of our platform and to the strong operating gearing we have. On the payout ratio, we expect for 2025 in a range between 17% and 80%. On leverage ratio, our goal is to remain above 4.5%. Customer risk was equal to 5 basis points. Thanks to the quality of our lending portfolio, we expect a hit in a range between 5 and 10 basis points. Finally, we expect robust and high-quality net sales with increasing asset under management and deposits flows and the continuous strong growth expected for our clients acquisition as we are in the sweet spot to keep on adding new market shares. Let's now move to slide 18 for a deep dive on our growth opportunities. Fineco enjoys a unique marketing position to capture the long-term growth opportunity resulting by the quite significant Italian households' wealth and the fast-changing clients' behaviors. In the graph, you can see the strong potential of our growth given the stock of financial wealth of the Italian families. As you can see, our market share is still pretty small, and the room to grow is huge. We are particularly positive on our future outlook as we are enjoying a clear market positioning on which we don't have no competition. The most recent market trends are leading to a switch in client investment yields. Infiniti is the only big player with a service model truly based on transparency, efficiency, and fair pricing. Moving now to slide 19, the step up of our growth trajectory is clearly materializing, as you can easily see on our slide. recent client acquisition. On top of the slide, you can see the impressive acceleration of new clients. As in 2024, we have set the second record here in a row, and we recorded in January by far our best results ever. This acceleration is very healthy because it's based on the quality of our offer and not on aggressive marketing campaigns, for example, with a short-term rate remuneration. As a result, all our new clients are improving the matrix of the bank by bringing more deposits for more business for our brokerage and investing solutions. In the box down on the left, you can see that it's not just about quantity, but we are also seeing a strong increase in the underlying quality of our new clients, like on the private banking and brokerage. The cumulative growth of high-quality clients over the last two years is now translating into better and safe dynamics as shown in our most recent monthly updates, allowing us to be particularly positive on our growth trajectory going forward. Finally, let me remind you that we see a sizable mix-shift opportunity coming from a huge stock of companies of our clients both over the last couple of years, Given that a large percentage of this has a short term maturity, this will give our financial planners an unprecedented opportunity to improve client mix into asset under management. Thank you for your time and we can now open the call to questions.

Thank you. This is the Corsco 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. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one at this time. The first question is from Enrico Bolzoni of J.P. Morgan. Please go ahead. Excuse me, the first question is from Panos Elinas of Morgan Stanley. Please go ahead.