Finecobank Banca Fine Spa

Good morning. This is the Coral School Conference operator. Welcome and thank you for joining the FinEco Bank first quarter 2025 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 first quarter 2025 results conference call. Before moving into the details of the presentation, let me stress that Fineco is recording an incisable acceleration of its growth dynamics, supported by a very healthy underlying quality. Our growth is leveraging on our superior customer experience and on our fair and transparent positioning, not on short-term aggressive offer. This approach is mirrored in the quality of our revenues mix, which is entirely recovering with a very low percentage of upfront fees and no performance fees at all. Let's now move to the first quarter results. Net profit in the period reached $164.2 million, up by 11.7% year-on-year. Revenues achieved $329.3 million as growth of non-financial income offset lower interest rates. Investing increased by 11.3% year-on-year thanks to the volume effect and the higher control of the value chain by Finneco Asset Management. And brokerage is up by 29.7% year-on-year, thanks to the enlargement of our active investors and higher market volumes. Operating costs were well under control at $87.2 million, increasing by 7%, excluding costs related to the growth of the business, as we anticipated the timing of some expenses expected throughout the year. Cost income ratio was equal to 26.5%, confirming operating leverage as a key strength of the bank. Moving to our commercial results, the underlying step up in our growth dynamics become crystal clear month by month. And for 2025, we continue to expect a higher asset under management and deposits net sales compared to 2024. despite the challenging macro context. 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. The results of this acceleration has been clearly visible in the first four months of 2025. First of all, in the first quarter, we acquired around 50,000 new clients, up by around 40% year-on-year. In April, new clients at around 15,000, up by 31% year-on-year. Second, our net sales were 3.2 billion in the first quarter, up by a strong 44% year-on-year. In April, total net sales saw a further acceleration at around 1%. $1,250,000,000, up by a very strong 48% here only. The mix was very positive, despite the strong market volatility in the month, with solid asset under management at around $200,000,000 net sales. Deposits were at around $150,000,000, and asset under custody at around $800,000,000. as our brokerage clients were very active on trading on the platform. As a consequence, brokerage recorded 22.5 million estimated revenues, up more than 20% year-on-year. Our capital position confirmed to be strong and safe, with a common equity tier 1 ratio at 24.1% and a leverage ratio at 5.34%. On the right-hand side of the slide, you can find a summary of our 2025 guidance. Despite the market correction since the beginning of the year, our diversified business model allows for an unchanged outlook for our non-financial income, only with a different mix. More in detail on investing revenues, given the elevated market volatility and uncertainty We are now sharing a sensitivity. Every $1 billion change of asset under management on May the 1st generates around $4.5 million of revenues from May the 1st until year-end. Regarding imports, just a clarification. So this is a rounded number that we give to the market in this way for making everything simple. The perfectly precise sensitivity is 4.7 million of revenues every 1 billion of change. Banking fees are expected in a slight decrease in 2025 versus 2024 due to the new regulation on instant payments. On brokerage, we confirmed 2025 expected revenue strong with a continuously growing floor thanks to the enlargement of our active investors. For 2025, we expect a record year for revenues. For 2025, we expect operating costs to grow around 6% year-on-year, not including a few millions of additional costs for growth initiatives in a range between $5 and $10 million, mainly for marketing, Finnecos asset management, and AI. Finally, in 2025, we expect a payout ratio in range between 70 and 80%. Let's now move to slide five. As announced, net profit in the first quarter of 2035 reached 164.2 million in a very challenging macro scenario, with an increase by 11.7 here on here. Revenues achieved 329.3 million, up by 0.7% here on here, thanks to the acceleration of non-financial income, which has been able to assess the decline in interest rates. Net commissions increased by a sound 9.2% here and here, thanks to the solid contribution of investing, up by 11.4% here and here, and brokerage up by 12.6% here and here. Trading profit increased by 56.3% here and here, mainly thanks to the higher brokerage activity and market volume, operating costs at 87.2 million, while under control and increasing by 7.7%, excluding costs strictly related to the growth of the business, mainly additional costs for finical asset 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, artificial intelligence as we are launching projects to further boost our network productivity. Let's now move to slide six for a deep dive on the performance of investing business. Investing revenues reached 94.5 million in the first quarter, increasing by a solid 11.3% year-on-year on the back of growing volumes thanks to our best-in-class market position, and of the higher efficiency of the value chain through FinEco asset management. The quarterly comparison is characterized by the usual seasonality on the financial advisor costs related to FEER and the NASARGO, that they are higher at the beginning of the year, to other commissions in the fourth quarter of 2024 related to operating efficiency reached throughout the year by Finic Asset Management, which are booked each year in the fourth quarter and by lower calendar days. Let me please remind you that 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 the asset management industry. Let's now move to slide seven. In this slide, we are representing the two main sources of growth for our investing business going forward. On one hand, FinEco asset management is increasing the control on the investing value chain, Its contribution to the group net sales has been consistent over the cycle thanks to its incredible time-to-market in delivering new investment solutions perfectly aligned with what clients are looking for. As a result, the contribution of Finnecos under management out of the total stock of asset under management has been steadily growing and it's now equal to 38.2%. On the other hand, being a platform, Fineco is the best place to catch with the latest trends in terms of clients' 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 a record first quarter with 69 million revenues. April was another strong month with 22.5 million revenues. driven by the increase in market volumes, building up on solid floor of higher revenues, driven by our large active investor base. Average revenues so far in 2035 are around 19% higher versus 2020, which are much more healthier underlying dynamics. This is driven by the structural increase in clients' interest to be more active on the financial market and building up a clear bridge between the brokerage and investing world. As such, 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 client behaviors thanks to the higher transparency. For this reason, we still consider the brokerage Italian market very much under-penetrated, and we see a strong opportunity to grow despite already being the market leader. Let's now move to slide 10 for a focus on our capital ratios. Nico confirmed once again a capital position well above requirement on the wave of a safe balance sheet. Common equity tier 1 ratio at 24.10 we were quarter on quarter decrease mainly due to the CRR3. Leverage ratio at 5.34% and total capital ratio at 33.08% as of March, 2025. And the risk weighted asset was equal to 5.57 billion. As for the liquidity ratio, liquidity coverage ratio at 888%, and net stable funding ratio at 390%. While the ratio high quality liquid assets on deposit is at 78%, 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 life business model. Given the strong acceleration in our growth, we are taking more time to have a clear view on deposit net sales going forward as the underlying dynamics are strongly improving. If, despite the strong acceleration in our growth, there will remain excess capital, we will decide on the best way to return heat back to market. Now let's move to slide 16. Let's now focus on our 2025 guidance. Let me remind that despite the market correction since the beginning of the year, our diversified business model allows for an unchanged outlook of our non-financial income, only with a different mix. More in detail on investing revenues, given the elevated market volatility and uncertainty, we are now sharing a sensitivity Every $1 billion change of asset under management on May 1st generates around, and again I'm coming back to the precise number, $4.7 million of revenues from May 1st until year-end. 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. For 2025, we expect record revenues. Operating costs are expected to grow at around 6% year-on-year, not including millions of additional costs for growth initiatives in a range between 5 and 10 million, 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 a hit for 2025 in a range between 70% and 80%. On leverage ratio, our goal is to remain above 4.5%. Cost of risk was equal to 5 basis points, thanks to the quality of our lending portfolio, and we expect a hit in a range between 5 and 10 basis points. Finally, we expect robust and high-quality net sales with an increasing asset under management and deposit plus, and the continued strong growth expected for our client acquisition as we are in the sweet spot to keep on adding new market shares. Let's now move to slide 17 for a deep dive on our growth opportunities. Cineco enjoys a unique market positioning to capture the long-term growth opportunity resulting by the huge Italian households' wealth and the fast-changing clients' behaviors. In the graph, you can see the stock potential for our growth, given the stock of financial wealth of the Italian families. Our market share is still small, and the room for growing is huge. We are particularly positive on our future outlook, as we are enjoying a clear market positioning, on which we have no competition. The most recent market trends are leading to a swift change in client investment behaviors, and Finneco is the only big player with a service model truly based on transparency, efficiency, and fair pricing. Moving to slide 18, the step up of our growth trajectory is clearly materializing, as you can easily see on our recent client acquisitions. On top of the slide, you can see the impressive acceleration of new clients, which is further building up in the first four months of 2035. This acceleration is very healthy because it's based on the quality of our offer and not on aggressive marketing campaign with short-term rates remuneration. As a result, all our new clients are improving the matrix of the bank by bringing more deposits and more business to our brokers and investing solutions. The cumulative growth of high-quality new clients is, month by month, translating into better net sales dynamics, allowing us to be particularly positive on our growth trajectory going forward. In the box down on the left, you can see that it's not just about quantity, but we are also seeing the strong increase in the underlying quality of our clients. the 44% increase of our total net sales can confirm. Let me also spend a word on deposits, where net sales have been overshadowed by massive use of our investment platforms by clients. In the first quarter, inflows of salary slash pension and net bank transfer had totaled $8.6 billion versus $7.3 billion in the same period of last year. Deposits Net sales before investments in asset under management, asset under custody, are equal to 2.8 billion, up by more than 50% year-on-year. This is a further confirmation of the strong acceleration of our growth and allowing us to be very optimistic on deposit net sales going forward. Finally, let me remind that we see a sizable mixed shift opportunity coming from the huge stock of our clients booked 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. We can now open the call to questions.

Thank you. This is the Corusco Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 under touchtone telephone. To remove yourself from the question queue, please press star and 2. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Luigi Dabelli's Equitasim. Please go ahead.