Mediobanca - Banca di Credito Finanziario SpA

Good morning. Thank you for joining the call. Commenting the first quarter of this started year, I would like to highlight two main features. The first one has been accelerating investment in our physical and digital distribution platform. This is across the different business where we have accelerated recruiting, accelerated transformation in the digitalization of the group, both in wealth management, in CIB, and in consumer finance. These important investments that are going to underpin the growth in revenue beyond the actual triage plan were coupled with very strong commercial flow, record for the summer quarters, where we have had 2.6 billion of net new money, which is again double the best industry and the best industry level at 10% of TFA. 2.1 billion of net new loans in consumer finance, up 12%, and increased activity in CIB where we have announced 27 deals in the quarter, which is plus 36% year-on-year. So, basically, revenue and profitability of all banking business went up again after one year where we have hit record revenue and results for each of the business. So, Basically, we have had an increase of 6% in net profitability in wealth management, 20% in CIB, and 5% in consumer finance. The main feature was also the growth in fee, which is 30% up compared to a year ago, and this was driven by wealth management and CIB. We have had a spike in consumer finance NII, And this was the positive trend in NII, while the negative trend in NII, which also was intended because we have taken an industrial view about the need to invest and have more TFA, was a temporary drag in NII in wealth management and in CIB because of all-time low credit spread, we didn't want to stack up with loans for two or three years with very, I would say, low profitability in corporate lending and wait for better margin trends in the second half of the year. Efficiency was preserved with the cost income at 43%. And as I said, this notwithstanding heavy investment in recruitment, in opening up new branches in Germany, in mid-cap advisory, in digital channels empowerment in consumer finance. So this was, as I said, and will be a year of important investment. Asset quality confirmed and preserved very strong with 51 basis points within our guidance of 55 basis points of core and net profitability at 330 million, which is slightly lower than last year because of Some extra gains booked in general announced this year with a more normalized insurance contribution. Very strong capital generation with 70 basis points in the last three months and chat one, which is in the region of 15.4. We have just started today the share buyback for 385 million, having been authorized by our AGM and SSM. So if we look at the business, we have had an affirmation of the model of PIB where 600 million euro of liquidity events were gathered in the last three months. Recruitment was very strong with 33 new sales staff and ongoing repositioning in terms of larger portfolio and higher end customer base. Deposit promotion at $750 million was fueled by also the promo that we launched. And very important, this mix is improving fast. We have had 50% of the inflow of TFA in AUM with a very important and steep increase in house product. Last, we did a very important agreement with Adya in Polus, which is going to underpin the next growth of a special situation fund of Polus. In CIB, we continue to work on one end, make it more diversified, more international, more advisory-driven, and you see here important results in terms of growing fees driven by advisory, 63% of fee in the quarter were advisory-driven, much higher than a year ago. And this is coupled with a steady decrease of RWA absorption. We went down in density to 37%, and we have reduced by 18%, 20% the capital RWA intensity of CIB in just one year. Consumer finance super solid print in terms of new business, 2.1 billion of up 12%, and this is on the back of very important reinforcement in personal loan distribution, now as 80% distributed by our direct network, and 36% of the direct personal loan are now distributed digitally. So Compass continued to print an important increase and contribution in NII up 8%. Marginality was up and also net profit was up. So going to slide eight, we are working heavily as this was the main target of our plan to have a stronger industrial footprint, which is feeding high and sustainable growth. why we are investing so much in terms of recruitment and digital. This will create the opportunity with a lower RWA intensity of important capital creation and hence higher distribution to our shareholders. So we confirm our guidance of having in the region of 9 to 10 billion of net new money with strong enhancement in physical and digital platforms. We see RWA decreasing slightly with more selective profitable loan growth offset by optimization. We see basically moderate growth in banking business revenue with NII flat and with fees up double digit in wealth management in CIB. Cost income to stay at 44% on annual basis and core to stay within the 55 basis points of NII. um guidance that we have uh leveraging in part of the overlays abundant overlay dotation that we have growth in eps between six and eight percent material capital generation so higher than what we said previously to to to the market so in the region of 15.5 and 16 and with the growth in parallel growth in the shareholder remuneration cash payout plus any share buyback that will be considered at the end of the year. If we go to slide 10, we see the steep increase we are having in terms of TFA. Imagine that a year ago, just a year ago, we were at $90 billion. Now we are at $103 billion, so plus 16% and plus 4% in a quarter. So this is plus $4 billion. If you look on the right side of the slide, we see how fast Mediobanca Group is growing and is growing at the level that few groups in Italy are doing. Comparison stuck up very well with 10% of TFA. We rank among the best, if not the best, gatherer in Italy, notwithstanding our, I would say, young life in this sector, in this business, and this gives you the potential, the opportunity potential we have in front of us. Loan book was basically flat. In one year, we grew 2%. This quarter, we went down opportunistically 1%. This is on the back of a stronger, I would say, trajectory of consumer finance, a more moderate and selective origination in the rest of the businesses. RWA optimization is ongoing. You see that we have had another decrease of 1% Q on Q, and we are now at 47.4 in terms of overall RWA as opposed to 50.3 of a year ago. So the kind of revenue we are generating are more diversified, more fee-driven, and more international if we look at also what is happening in CIB. Every single business improves its revenue contribution, wealth management, CIB, and consumer. We have had insurance going down 20 million because of non-recurrent item of Generali, and we have had lower contribution of all day function because of decreasing interest rates. Overall, fee went up 29%, so the component of fee within the revenue is more important than a year ago. If we look at the fee, we look at basically quarter to quarter comparison. So first quarter normally is more seasonal. So we have had an important increase in fee in consumer, in wealth management from 108 to 124. This was spread among different components. for sure compared to one year management fee, but also advisory fee and upfront fee were important, while performance fee in our network is a minimal component, much less important component. Important trend also in increase in fee in CIB, where compared to a year ago, we have had a jump, even excluding ARMA consolidation, And we see this as a continuing trend of supporting element from CIB. Consumer finance was even positive in fee because thanks to the buy now, pay later, we are substituting fee from insurance product from fee from buy now, pay later. Altogether, they were up 7% year on year. we decided on NII to basically push on the profitable value-generated lending, which is the consumer one, and to invest money to get more TFA in wealth management, so having more deposits, which naturally have a cost, and on the other hand, to pause in the new loan production in a city because, as I said, low demand and very and all time low marginality are not there to push for important growth and generate a poor return. So the breakdown of the different components. So we have something like seven, eight million less than than than a year ago. So this is spread between the increase in volume and spread in consumer finance page 13. Then lower contribution from wealth management and CIB, we have a higher COF that is 10 million and other minor effect is giving us the trend divided in two pieces, as I said, consumer finance, pretty good, and basically wealth management supporting TFA. On the other end, CIB waiting for better production in terms of marginality. If you see loan yield when are basically aligned to the last quarter in the region of 6%, funding cost is not that different, deposit cost went up. Here, in the past, we have forecasted a lower deposit cost, but as I said, we took profit of very important money money motion event and tfa increase to fund this kind of trajectory cost as i said these are spread in grow the business and regulatory we are doing in in the last two years much more on grow the business you see consolidation of new entities like Arma Partners. This quarter is the first quarter of consolidation, or at least last year we didn't have the consolidation, so we started the second quarter. So this is the comparison with last year. 3 million to start the Germany subsidiary in mid-corporate activity advisory. The rest is an addition of new colleagues to expand the business. And then, of course, there are also digital and regulatory items within this kind of trend. Cost of risk remain well within our guidance, 15 basis points. We are seeing a trend that we have expected both in terms of slight increase in consumer finance driven mainly by the mix. the mix we are producing much more personal loan this personal loan have quite a nicer and better profitability but also they have an associated higher cost compared to other cost of risk compared to other product net net the profitability as you have seen is going up we have used a very low level overlay so 7 million And hence, we reach this level of 51 basis points of core. Gross MPL stays within where it was. We have a slightly less loan in this quarter. So you see this 2.6. Net MPL is 0.8. The coverage is staying where it used to be, so quite high. It's very important the trajectory in terms of capital release that the bank is doing. On page 18 you see that Overall, we have had a decrease of 6% of RWA trend, which is more notable is what is happening, as I told you, in CIB, where from 17.3, we went down to 14.2. So steep decrease aligned to the new vision of CIB, which is consuming much less capital and is producing better results. So divisional return on RWA is quite good. we have had only one decrease, which is generally driven by, on one end, exceptional gain of last year and increase in book value of the participation. Robust capital generation, better than expected. So basically we have generated 70 BIPs. So then we have had some RWA saving, in particular in consumer, and then the 70% cash payout. So this is underpinning our capital distribution and is leaving still a large buffer over requirement of MDA. We have progressed also in our sustainability activity in environment, in social and governance with the old NZPA target and transition plan published and product development. We have also had a publication of 2024 PRB report and CSR initiative, where we have renewed our partnership with Cometa. And lately, we have had our shareholder general meeting, which have approved a number of items which were on the agenda, even include, of course, the share buyback. If we go to the divisional results and basically we say what I can add compared to the start of the presentation, I think the overall 2.6 billion were pretty amazing in terms of net new money divided in three pieces. Private banking 0.9. This is on the back of liquidity events. 0.6, a very important initiative in private markets. We continue to have partnership with the most important operator to distribute a liquid product. We are also reinforcing the liquid product with the new management account format with advisory service. This will be available for clients in 2025. In Premier, we have had a strong recruitment, 30 professionals, and the repositioning, adding new private clients, upper end, and on the other end, cutting exposure to mass market, which is not anymore the mission of MediVanca Premier, is going fast. You see that basically we have increased in MediVanca Premier, you see on page 26, The quality of our network, we have up to 90 advisors compared to June 23, 60 bankers and 40 financial advisors, and this senior component of the distribution network now is 29% as opposed to 23% of more than a year ago. The same, so the TFA related to this senior advisor went up from 34% of June 23 up to 42% of last year. Mediobanca Premier has had very important and interesting net new money also in terms of managed assets. So with the great productivity in terms of net new money per banker and also a level of market share in terms of net-to-money, which is pretty high. So 10% of total net-to-money was raised by Mediabanca Premier. As I said, important agreement with Adia for Polus with a commitment, which is now giving the possibility to Polus to reach approximately 11 billion of AUM, 11 billion dollars including commitment. of which 5 billion in special seats strategy, and this is a partnership which will lead to further growth, even a new initiative of POLUS, and will give us the possibility to expand TFA further. So overall, the progression of wealth management is going as expected. even after more important investment in hiring and also in digitalization. And I think this is important because if we continue to invest heavily, as I said, we will have the possibility to grow faster in the future. CIB, here again, we are having the initiative of the new plan now ready to contribute, already contributing to the numbers. We see the different profile, as I said, of CIB is more advisory driven, is more centered on one end, sponsor driven activity, on the other on two main verticals. One is tech, ARMA contributing heavily and having a quite robust trend also for the future and energy transition, which is printing a number of transaction and will continue to do. This is also coupled with, stronger mid-cap franchise. In Italy, even stronger and now also having the possibility to have cross-border activity and capturing interesting market share in Germany. Markets activity now are almost, I would say, up and running, all of them. I would say BTP specialist, CO2 trading and certificate distribution in Switzerland. So basically, These are initiatives that are contributing to the revenue, which are up 30% year-on-year. Profit is up 20% year-on-year, while RWA is down 18% year-on-year. Last but not least, consumer finance. Here again, Compass surprised us in terms of ability to print very profitable loan mainly done through its own network, so having a different and much better profitability thanks to the ongoing investment. Again, if we keep on investing, if we keep on doing initiatives like Buy Now, Pay Later, buying FinTech, investing in systems and IT, we will have a stronger Compass in the future. which will be more able to print directly loans with different profitability and answer basically you see that between what we have done in the traditional network and the new network and the new initiative of a light which is the new international by now pay later ecosystem for credit solution we are getting the benefit of Important new customer acquisition, as I said already in other call, is 40% of total company's monthly new client. We are enlarging distribution at variable cost. Today we have 29,000 physical and online posts, which is 50,000, 15,000 more than June 23rd. And basically, the partnership with Nexi and the access to the Swiss market are also other option of growth that we are exploiting. So if you see the number in terms of new loans are quite interesting. Page 34 is the sense of making a plus 12% in a quarter, which is normally seasonal. And in fact, we have had Last year, 1.9 million of new loan. This year, we had 2.1. And this was coupled with average loan book yield up 80 basis points. And this gives you the sense of ability and strength of Compass to price the loan. So Compass was able to shift the higher cost of funding to customer over the last, I would say, 18 months. And now we have reached 7.2 percent of a loan book net profitability so as i said asset quality confirmed as healthy as expected we knew that going up in terms of personal loan would have meant also higher core net net as you see on page 36 this is yielding a much better profitability because the the i would say the new loan net of cost and cost of risk is giving a record quarter, first quarter record in terms of overall profitability of Compass with 102 million of net profitability. As I said, insurance contributed always solidly, albeit with a less important contribution because of normalized results due to lower non-operative results driven by less capital gain and FE valuation and some decrease in PNC operating income. Nonetheless, it's still quite a positive contribution. Holding function, nothing to add but the fact that, of course, having lower interest rates environment, we did lower NII. We had lower NII and results. Basically, reiterating the guidance that I've given at the start of the presentation, I think Mediobanca enjoys a quite interesting position in the new interest rates environment because even having an NII flat for 2025 and 2026, we enjoy quite a positive trend in fees, which we see having a double digit increase in 25 and 26. And this should lead as we know to the APS guidance of up six to 8% this year and targeting the APS target of the plan. So the business plan at 26 at the 1.8, which is also a good trend in terms of EPS compared to the system where we could see decrease in EPS and or in revenue driven by lower interest rates. Thank you very much, and now it's time for your questions.

Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. We will now take our first question. Please stand by. And the first question comes in the line of Pamela Zuluaga from Morgan Stanley. Please go ahead, your line is now open.

Hello, good morning. Thank you very much for taking my questions and for the presentation. I have a first question around your campaign for the premier deposit gathering. When should we start seeing the payback of this? Can you give us some color on the benefit that you expect on NII and or fees? And what reassurances can you give us that this pressure on NII is indeed only a temporary effect? And the second question is on capital. You are expecting capital to close around 200 to 250 basis points above your 13.5% target. and you have said before that you might explore further distributions above the one billion buyback that's in the plan. I was wondering if we can have an idea of when we should expect you'll make a decision on this. Thank you.