Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca Generali's nine-month 2020 results presentation. 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. Gian Maria Mossa, CEO and General Manager of Banca Generali. Please go ahead, sir.
Good morning, and welcome to our third quarter results conference call. Let's start by saying in a nutshell that these first nine months are among the best ever for the bank. We reached the highest level in terms of assets at EUR 70.4 billion, the highest level in terms of managed solutions, EUR 34.5 billion, and the highest level in terms of assets under advisory, EUR 5.4 billion. These numbers are the consequences of a very sound commercial activity, with total net inflows at EUR 4.1 billion in the first nine months of the year. As a consequence, all the operating components increased significantly, while the net profit has been in line with last year due to one-off components. In terms of capital position, we provide two different measures, the stated TCR and the pro forma.
The stated is once we reallocate the first tranche of the dividend to the equity, while the pro forma continue to consider the capital ratio X, the first tranche of dividend, I can anticipate the numbers are continuing to increase. We confirm our intention to distribute this amount of monies as soon as possible. We will come soon on this topic. Page four, there is our usual representation of P&L. First of all, it's pretty evident that there's a sound increase in total banking income, 10%, driven by net interest margin and net fees. Cost like-for-like basis, so excluding the two acquisitions, are in line with our expectation, with core costs up 2% year-on-year. As we said, the net profit are in line with the record year of 2019, due to basically higher provision.
If you look at the scheme at page four, you see that we added a piece of information. We align the contribution to banking funds. Contribution to banking funds jumped from - EUR 7 million up to -EUR 11 million. Another negative impact in terms of provision is that we have changed the discount rate for the different provisions. Provision for Social Security, provision for the portfolio valuation, and provision for example, the fidelity plan of our network. Tax rate at 22%, that is in line with our medium-term guidance. The result is the net profit at EUR 196 million. If the number is in line with last year, the quality, in my opinion, is much better. You can see it at page five, where we have the breakdown net profit, two main components, recurring net profit on like-for-like basis and variable net profit.
Recurring net profit increased from EUR 108 million to EUR 116 million. You see on the right that on the positive side, in the build-up, net interest income and net fees contribute positively for more than EUR 13 million. On the negative side, you see a negative impact of the increase of provision and the level of tax. Slide seven. As usual, let's go through line by line, starting from net financial income. Net financial income in the first nine months jumped to EUR 77.1 million, with the trading income almost flat and the net interest income increased by EUR 13 million. On quarterly trend, you see that in the third quarter, the contribution, the net interest income increased at EUR 24.7 million. This is also thanks to the TLTRO contribution.
The yield of net interest income in the third quarter reached 0.86%. This increase in the net interest income is confirmed and is driven by basically asset expansion. Interest-bearing assets increased EUR 1 billion in the last 12 months. We optimized cash management in the banking book, - 0.04% compared to - 0.13%. A stable financial yield on financial assets and a marginal reduction in the yield loans to clients, basically because, as you know, we introduced Lombard solution. We reduced marginally the risk of the lending activity. Page eight, we go through the gross fees. Gross fees increased by almost EUR 40 million, pretty impressive jump, i n the third quarter, due to some seasonality effect, we haven't achieved the highest level for the year.
You see that the first quarter is still a little bit higher, but we are confident to exceed these numbers in the fourth quarter for this year. If you look at margins on total assets, you see that Q2, we bottom out with 1.12%, and the number for Q3 is at 1.13%. In terms of variable fees, third quarter was pretty good, with a contribution of EUR 27.2 million. For the fourth quarter, we do expect a smaller contribution. In particular, October closed with EUR 5 million, and we do not expect other significant contribution for November and December. Page nine, there is a focus on management fees. In this case, we achieve the highest level in the third quarter with EUR 170.5 million.
This is driven by basically the asset expansion of EUR 50.8 billion, and the average assets in the third quarter, and as we said, a gradual recovery on margins, 1.37%. Overall, in the first nine months, total management fees amount at EUR 496.8 million. Next page, slide 10, we see other fees, banking fees and entry fees. Also, in this case, year-over-year, the increase is pretty impressive, more than EUR 18 million. On the quarterly trend, you see a lower contribution, EUR 22.8 million, basically due to some seasonality effect and market conditions. We had a lower contribution in terms of structured product. We accelerate on this initiative at the beginning of the year, and we announced a sort of back to normal for the second part of the year, and October started pretty well.
On the right of the page 10, you see the contribution of the new revenue streams. Also, in this case, the increase in the last 12 months is pretty impressive, is almost EUR 14 million, and so the total contribution is at EUR 45.6 million. We can see the breakdown at page 11. At page 11, there is the representation of the three new revenue engines and the target that we announced during our roadshow in London at the end of 2018. BG for Advisory, so asset under advisory, t he contribution for the first three quarter is at EUR 18.3 billion, and we do expect to exceed EUR 24 billion for the full year. It means that we reach the upper band of the range one year in advance. Certificate contribution at EUR 12.3 million, and the target at the end of 2021 was EUR 10 million.
Also in this case, we are confident to exceed EUR 16 million. Brokerage fees, we close at EUR 15.1 billion, the third quarter. We are pretty confident to exceed EUR 20 billion, so it means one year advance the lower band of the range. All the projects are in line or in advance compared to the targets, and I continue to be very optimistic in both trading and advisory services, while the structured product, as I said, we reach the target, and from here, it will be ordinary business. Page 12, we move on to fee expenses. From this side, positive news. The total fee expense closed at EUR 305.4 million, where the payout ratio to the network closed at 47.2%, so it means 1 percentage point lower than the previous year. Here you have the ordinary payout component that is in line with our targets. It's around 36%.
Cost of growth, a little bit lower year-on-year basis. This is basically due to a lower activity in the recruitment. There is the termination of one-off items. For the end of the year, we do expect a number almost in line with last year because we've seen acceleration in recruitment. Payout to third parties. P ayout to asset managers is in line with last year. Payout to others increased by EUR 0.5 million. This is basically driven by the payout for the robo-for-Advisory platform for UBS. From this year, we do expect a progressive reduction of this cost. You will see in the next 12, 18 months, again, a reduction of the percentage. Page 13, we move on to operating costs. The core operating costs increased by EUR 2.6 million or 2%, basically the increase is driven by the volume expansion.
You can see that G&A increased by EUR 1.8 million, due to an increase in depreciation, that is about all our investments, while the staff cost is in line with last year. On top of core operating costs, we have an increase in sales personnel cost, this is driven by commercial activity. It's going better than expected. EUR 0.9 million, the cost of COVID, EUR 14.6 million is once we include in the perimeter Nextam and Valeur. Slide 14, you see the cost ratios. We are best- in- class. Operating cost on total assets at lowest level ever, 0.31%, confirming the good number of last year, cost income lower than 40%, both the reported and the ones adjusted by performance fee and other variable components. Last page of this section is about capital position.
Focusing on TCR, you can see that the first nine months of this year closed at 16.5%. This is a pro forma with an increase of 0.8%. Consider that we applied a payout ratio on the net profit of this year at 80%, so it's a very conservative approach. On top of this 16.5%, you have the impact of the reload of the first tranche of dividend for 2019. It accounts for 5.2%, so the final result is in TCR above 20% at 21.7%. Let me spend some more words on the dividend policy and on our intention. I confirm the intention of the bank to distribute all the dividend 2019 in next year. It means that the second tranche is confirmed, that it is EUR 0.3 in the first quarter.
We will call for an AGM next year, and we will ask to distribute also the first tranche, so EUR 1.85. On top of that, we confirm our intention to distribute at least EUR 1.25 for this year. Summing up the two main components, it means that at the end of next year, in one or more tranches, we will pay a minimum of EUR 3.1. It means a dividend yield higher than 10% as of today price of the stock. Just to be clear, EUR 0.3 is the second tranche, and it will be paid in the first quarter. We will ask to pay also the first tranche, that is EUR 1.55, sorry, and then a minimum of EUR 1.25 for the result of this year. Of course, this depends on any other recommendation of ECB.
We are pretty positive that sooner or later, we will be able to distribute capital in excess. To sum up, I'm very proud of this first nine months results, because the revenues are very sound and solid and are the results of two different elements. It's really important to understand our business model. On one end, you know, we announced at the end of 2018 a multi-project approach. We released several initiatives: asset under advisory, structured product, brokerage, wrappers, wealth management services, and so forth. This gives different opportunities in the commercial approach. This is the first element. The second element is a financial advisory network able to leverage these capabilities, this platform to increase productivity. A very diversified approach in terms of revenues and the most efficient distribution channel. Page 17. We deal with total assets, EUR 70.4 billion, as we said.
In terms of managed solution, a new record high, EUR 34.5 billion, where if you compare this number with the same number of the first nine months of last year, and we are at the top right of the page, you see that in terms of stocks, all the different kind of products contribute positively: in-house funds, third-party funds, financial wrappers, and insurance wrappers. Traditional life policies are pretty stable. This is the confirmation of a change of approach. We want to keep almost flat and change the stock of traditional life policies and focus more and more on insurance wrappers and in-house products. If you look at the numbers for the first nine months, you see that in-house funds and insurance wrappers are the higher contributor to the increase.
As we announced, now we are more focused on these kind of solutions in order to maintain the yield inside the traditional life policies for the existing clients, and to focus on the development of other line of business. In banking products, from EUR 18.3 billion to EUR 19.3 billion, so EUR 1 billion up, where you see a higher contribution of current account. This is basically driven by uncertainty. Page 18, a focus on our BG Fund Management Luxembourg company. Also, in this case, we achieved a new record high, EUR 17.2 billion. Focusing on the right of the page, you see on the top the representation in terms of share classes, where on a year-on-year basis, you see that institutional fund classes are flat, while the retail fund classes jumped by EUR 1.2 billion.
That is pretty impressive because if you look at the second bar graph, we are running off our Selection. In one year, we reduced our total exposure to Selection for an amount of EUR 600 million, while the Lux IM increased by an impressive EUR 1.8 billion. It means that for every EUR 1 of reduction in Selection, we recorded EUR 3 in Lux IM. Page 19. There is the focus on net inflows for the first nine months. We accelerate in terms of total inflows, EUR 4.1 billion compared to EUR 3.8 billion. Different positive news. First of all, this year, inflows has been pretty constant over the year, this is pretty impressive to me. The floor is EUR 1.3 billion. If you look at the contribution of the managed solutions, all the different families of products contribute positively to the final result.
On the recruitment side, page 20, as we announced, we resumed the recruitment activity. In the third quarter, we had 24 new colleagues joining the bank, split equally, 50% coming from FA networks and 50% coming from retail and private banks. I'm confident to continue with this path, and we do expect, in the fourth quarter, a number close to 24, 25 new colleagues. In terms of total net inflows by acquisition channel, I'm on the second graph on the right of the page. You see that the contribution of the existing sales force is probably the best ever at 78%.
In the next page, we give also an overview of the numbers for October, one of the strongest months of the year for the bank, above EUR 600 million compared to EUR 367 million of the last year, where you see that the mix is more conservative due to the uncertainty and the second wave of COVID. Overall, total net inflows reach EUR 4.7 billion compared to EUR 4.1 billion of the previous year, and managed solutions exceed EUR 2 billion towards EUR 1.2 billion. For this reason, the state of health of our financial advisors, we decided to raise the target for total inflows for this year from the initial number of EUR 4.5 billion to EUR 5.5 billion. It means at least EUR 800 million in the next two months.
In the last section, we decided to give you an overview on our financial advisory networks, because we received a study provided by a consultant list company, Reply, on the state of health of our industry. They ran this study analyzing numbers from 2008 up to 2019. In this study, Banca Generali tops the rank, so ranked first, both in terms of asset expansion, as well as in terms of the growth of the portfolio average of financial advisors. We decide to present these numbers. Numbers are slightly different from the research of Reply. Probably in the research of Reply, numbers are even better. We would like to emphasize and to take your attention on the impressive track record in terms of asset expansion, in terms of the increasing portfolio average.
That is basically driven on the turnaround and the change of strategy in 2013, where we decided to focus more and more also on private clients. It just published also the MAG study on the private banking industry. This year, we ranked third. First is Intesa, second is UniCredit, but we are definitely the fastest growing company in this rank. If we start from page 24, we have three pieces of information. Number of financial advisors. In this period, we increased by 26%, while in the industry, we saw a significant consolidation. In the top five, excluding Banca Generali, a steady numbers. The second information is about assets. We increased assets with a multiple of 3.5x. It means almost 50% higher than the industry. Industry closed at 2.4x, and the top five, 2.6x. The third information is about assets per financial advisors.
This is probably the most impressive information, an increase of EUR 21 million, again, 50% higher than the average of the industry. Increasing the asset per financial advisor in a context in which you are expanding the number of the financial advisors, means that you are recruiting the best in the market. Another information that probably impressed me even more is page 25, because we ran another exercise. We decided to clusterize all the financial advisors in two main cluster. In 2013, we decided to accelerate in the strategy. We decided to open up the architecture to focus on digitalization and wealth management. From 2014, we start recruiting also from the private banking industry. Here, the two clusters are, the first, all the colleagues recruited starting from January 2014.
The second cluster is about the most experienced financial advisors, the colleagues in Banca Generali before 2014. If you focus your attention on the last column, you see that at the end of the day, the portfolio average of the two clusters are almost the same, EUR 34 million and EUR 35 million. I t means, basically, that this acceleration in the strategy in 2013 allowed us to recruit, on one end, the top bankers in the network, and on the other end, to help our financial advisors to increase productivity, efficiency, reaching a portfolio average that is 50% higher than the industry as a whole. Page 26, there is another piece of information, in my opinion, very important. That is about the sense of belonging, the trust in the company.
When you successfully help financial advisors to increase the portfolio, to increase their remuneration, there is a sort of increasing sense of belonging and recognition in the brand. The translation of all of this is about the numbers of FAs leaving the company. The FAs that decide to exit the bank. Again, focusing on page 26, on the first graph, you see that in the first nine months of this year, 31 colleagues left the bank with a portfolio average of EUR 7.2 million. Focusing on these 31 financial advisors, on the right, you have a pie with a breakdown of the reason behind this decision. For competition, it is just about 29%. It means nine colleagues. You have network optimization. It means that we let these financial advisors go away. Then, other. Other reasons means pension, it means negative event, and so forth.
On the second graph, on the bottom of the page, you have the churn rate. These nine colleagues left the bank, and it means that nine out of more than 2,000, the churn rate is below 0.5%. That is really, really impressive because you know, in our industry, it's easier to expect 5% instead of 0.4%. Last two slides is a deep dive on the results of the first nine months in terms of contribution to the net inflows by cluster of financial advisors as well as cluster of clients. Just to give you, again, an idea of the quality of these results. Page 27, you see the inflows organized by FAs vintage. You have financial advisors who joined the bank before 2008, before 2013, before 2018, and then the most recent colleagues, 2019 and the first nine months.
Again, I would like to focus your attention on the last row, where you see the net inflows per financial advisor by cluster. Colleagues in the bank, at least since 2007, contribute positively to the total inflows by an impressive EUR 1.3 million each on average, EUR 1.5 million, EUR 1.9 million. It means that even if a colleague has been working for Banca Generali for 15 years, at least, we continue to have a very positive and significant inflows. This is the best result we can achieve to be sustainable. Page 28, there is the same exercise in terms of clients, three main clusters. The existing clients, total clients amount at almost 300,000 clients with an asset per client around EUR 220,000 . Because it takes account also of all family and so forth. It's total assets divided by number of head in our customer base.
The new clients, almost 13,000. It means that also during this difficult year, lockdown, COVID, we successfully expand our customer base, with a portfolio average of EUR 150,000. Reactivate clients, this is very positive for a business like ours because it means that you have clients that in the past decided to leave the company, then thanks probably a brand repositioning, we successfully attract them again. It's almost 5,000 clients for EUR 115,000. Then you have the churn rate, the exit, amount at 8,000, and the portfolio average is around EUR 20,000. Are the marginal and the smaller clients in our customer base. Just to sum up, I think that to fully understand Banca Generali, you must keep in mind two main element.
We can approach new businesses, we can launch very complex project because we have the best financial advisors in terms of quality and in terms of productivity. We can then implement the strategy and take advantage of the several initiatives to provide better quality to the clients and to expand their business. I'm confident to continue to obtain great results in the short term, and we are fully aware that the situation is pretty complex. We are all focused in working on the strategy for the medium term to continue to have such a kind of numbers and to continue to over-perform the industry and the market as a whole. Thank you.
Thank you. Sir, would you like to begin the question- and- answer session?
Yes. Thank you. Hand over for Q&A.
Thank you. T his is the Chorus Call conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. The first question comes from Domenico Santoro of HSBC. Please go ahead.
Hello. Hi. Good afternoon. Thanks for the presentation. I do have three questions. The first one is on dividend. We don't know yet whether ECB is going to lift the dividend ban in December. Maybe there is going to be a cap to net profit, as we heard from the banks. I mean, the language from ECB has been more and more negative recently, but you are not under the supervision of ECB, but the national regulator. We have seen also some banks in Germany, the cooperative ones, paying the dividend, given they are basically under the German regulator. I'm just wondering, how should we look at this, entering into 2021, whether you had already some talks with the regulator because you seem pretty confident. Of course, your business is completely different from commercial banking. The second question is instead, on M&A.
Actually, this time, you had been on the press for different reason compared to the summer. My question is, in the event of a change in the ownership, what do you think the financial advisor network needs in terms of condition in order to preserve the quality of the franchise that you showed in these slides has been pretty resilient and has improved quarter by quarter? Is it the autonomy of the network that needs to be guaranteed? Is it better condition, better payout? A little bit of your thoughts on this will be helpful given that you have been on the press, considered a target actually over the last couple of months. A question on the pricing mechanism. We know that there is going to be a change, that is going to favor more recurring fees.
Can you please give us some color on this, and whether in the short term there's going to be any loss of revenues or instead this is going to be accretive? Thank you.
Thank you, Domenico, for the three questions. Let's start from the dividend ban. You are right. There is some skepticism on the possibility to pay dividends. I think that, from next year, the different business model will matter. I had informal talks, and at the moment, I haven't any significant news. M y impression is that the business model is a key driver of the decision. It will be a key driver. I strongly communicate that the retention of extra capital has just two negative effect. The first one, that it's lowering my return on equity because my business model cannot change. The second, that I cannot distribute liquidity in the market, so paying the dividends.
I would like to add also a sort of, let me say, unfair competition, because if you limit the payments of dividend at Banca Generali, for example, and you do not introduce this ban for competitors, or if other banks in other regions can distribute, you are creating asymmetry in the market. For all these reasons, I'm pretty confident. Let's say that it doesn't depend by my opinion, but I'm pretty confident that something will change next year. Even if you decide to cap the dividend you can pay in terms of percentage of net profit, consider that we still have all the net profit of 2019. Let's say that we are talking about a lot of money. If we find a way, I think that we can easily pay at least the EUR 3.1.
I'm talking about EUR 3.1 because I'm applying some cap on the distribution of dividend this year. I'm already applying a very conservative approach. The second question, it's very interesting question. I think that the bank works very well because the perception of the financial advisory network is that there is a full commitment in providing the best solutions and the best products for them. We are a B2B2C company, we are all focused in providing at the second B, the most efficient and powerful platform. It's about product services, technology, and so forth. Plus, you have to consider that it's not just about this focus 100% on the business. There is also the autonomy, because we can decide our priorities, there is the brand. These are the three key elements. Focus 100% of this business, autonomy, independency, and a strong brand.
This is not about better condition, better payout. I think that we are in line with the market, and the financial advisor won't change the brand for few basis points. Price mechanism. We have been working for the last two, three months to complete a review of our Lux IM platform. We are also reviewing our product offering, our banking offering, and also some insurance products. The idea is to offset part of the potential reduction in the performance fee for the next years by increasing margins in different initiatives. We will give full disclosure of this approach in the call for the full year results. I can tell you that first of all, we are exploring the new mechanism for performance fee, and in terms for the Lux IM, it won't change significantly. Again, we are working to start increasing the profitability in several initiatives, several products.
It's not just about saying, I want to increase management fees or administrative fee. This is more complex, and it's all based on idea to share this approach with the financial advisor network, with regulators, to be sure of the sustainability of these initiatives. Thank you.
All right. Thank you very much.
The next question is for Mr. Alberto Villa of Intermonte. Please go ahead, sir.
Good afternoon to everybody. Just a couple of questions from my side. The first one is your view on the fact that the entire industry is currently sit on a lot of liquidity. Customers seems to be more inclined to keep a high level of cash. Do you think you can tackle this issue, and do you think this is partially due to the pandemic period we are living in, and it's going to be temporary, or you think it's a more structural issue? If you think that in the future, you have been successful with the managed assets inflows, obviously this year as in the past. Do you think you can experience a further acceleration going forward? What are the drivers there, in your view? The second one is on recruitment. You mentioned that you're expecting an acceleration in the fourth quarter.
I was wondering if there are specific areas in which you're growing, so if you're focusing on private bankers, if there is any, let's say, part of the competition that offers more opportunities than others to grow. If, given the low activity you have had in the past months, you are entering into 2021 with a little bit of lighter contribution expected from recruitment to net inflows for next year, or you think this is not going to have any impact. The final question is on the performance fees. You mentioned you don't expect November and December to contribute. I was wondering why, if markets may nicely rebound, is there any specific reason why you mentioned this cap to performance fees? Thank you.
Thank you, Alberto. Starting from liquidity, let's say that part is definitely linked to pandemic, and so I consider it temporary. How to tackle it? We are exploring some dedicated initiatives, in particular for the beginning of next year. I think that also some potential changes at the regulatory level could provide support to switch some of this cash into products. Consider, for example, there is also some trends in the market, because in Germany, for example, you see that more and more banks has launched negative yields, and also some digital banks, N26. Let's see also the trend of application on negative yields. Basically, I think that there is a temporary component that will be managed as soon as the pandemic finish. Recruitment, no particular target. Consider that in our business, we are perceived as the safest harbor, at least in Italy.
We have a very strong brand. I see raising interest coming from retail banks, private banks, financial advisors. No specific target. It's very well-diversified. We receive several solicitations from the market, and now we are considering how to prioritize these potential candidates. The impact for the new year, it will be almost in line with the previous years. I do not see any significant changes. While for the performance fee, it's just a very prudent and conservative approach. I have, let's say, a negative view in the very short term on the market after this rebound. We are very close to the high-water mark in almost all products. Of course, if you see a potential rally for the end of the year, we will take advantage.
No technical reasons, no reasons to say we won't participate to this rally, but it's just determined by a very conservative view on the next weeks. Thank you.
Okay. Thank you.
The next question is from Gianluca Ferrari of Mediobanca. Please go ahead, sir.
Hi, good afternoon, everyone. Ciao, Gian Maria. Three questions. The first one is on the NII, the EUR 2.5 million increase quarter-on-quarter. If I understood correct, 1/2 of it is due to the EUR 500 million TLTRO. I was wondering, what about the other 1/2? It is linked to the expansion of the loan book more than interest-bearing assets or the other way around, or a mix of the two? Linked to this, I think you gave us a guidance of a double-digit increase in NII this year. I guess we are getting much closer to a 23%-25% increase year-on-year. I was wondering if you can update a bit this guidance for 2020. What about 2021? I guess there will be some [inaudible] on some initiatives you made in 2020. I was wondering what should we expect for 2021.
The second question is on the asset management, and I have two sub-questions here. The first one is the 1 basis point increase in margins in the third quarter. I know it is very small. I was wondering if there is any particular effect, like a change in the mix or a new product that are explaining that increase in profitability. Also looking at page 17, if you can remind me the reason behind the drop in financial wrappers that you have experienced this year. The final question is on certificates. What should we expect in Q4? I think you have been very clear in saying that second half should be a bit more quiet than the first half in terms of production. At the same time, you said October started pretty well on certificates.
More than certificates, I was wondering more on the entry fees overall, if the fourth quarter will be closer to EUR 5 million reported in Q3 or closer to EUR 11 million reported in Q1. What should we expect in terms of entry fees, given a bit of erratic trend this year? Thank you.
Thank you, Gianluca. Let's start from net interest income. Let's say that the delta Q3 on Q2 is a mix of factors. Not specific initiatives. You have some positive effect on lending and portfolio expansion and so forth. No particular initiatives. We do expect a Q4 slightly lower than Q3 or in line. It's very close for the two. For 2021, now assuming, let's say, a negative scenario for the yield, at this level or even lower, and a normal activity in lending, we should have almost the same result for this year. Any improvement in the yield stabilization could give marginal increase. In terms of profitability of asset management products, I think that we will see a steady recovery of profitability, first of all, because we are focusing our commercial activity on more profitable products. Think of, for example, insurance wrappers.
Think of, for example, the Lux IM. We stopped the commercialization of traditional life insurance, and in this moment, we pay all the attention on these kinds of solutions. I'm pretty confident to see steady recovery on this. Financial wrappers, why this trend? Let's say that on one end, we ran off some products. It's not exactly financial wrappers, but we include in this definition. Second is due to performance. We suffered a little bit, in particular in the financial wrappers, more focused on the European markets. Certificate, quiet is the right word. In the last three months, I want a total focus on saving plan, on the solution I mentioned before, and more than on specific structured initiatives. If I have to guess, I would say that we will be in the middle of the range between the third quarter and the second one.
Let's say that this is a very positive activity, the structured products. Now, we want to focus on asset management insurance products. We think that we can optimize portfolios. It's time to invest gradually, and so we will achieve this goal. Thank you.
Thank you.
Next question is from Mr. Luigi de Bellis of Equita SIM. Please go ahead, sir.
G ood afternoon. Just one question on the Switzerland. Could you update us on your strategies for the Swiss activities and target for 2021 in terms of the inflows and asset under management? Thank you.
Thank you, Luigi, for the question. Let's say that the Swiss activity has two main goals. The first one is to develop a new business, and it depends significantly by the lockdown and the pandemic, because we have to recruit new colleagues. The second driver is about defensive mode, because it's a way to offer diversification of the booking center, the diversification of portfolio management, for example, for the insurance wrapper in Luxembourg. This business is working pretty well. It's a way to say that in case of a spike in volatility, we are ready. We do not plan significant inflows, because we do expect the end of the pandemic in the second half of next year. We are setting up all the initiatives to be ready, both to accelerate the recruitment as well as to provide this diversification.
We will ask to the board of director to start the regulatory trend to ask for a new license in Switzerland, because we think that to be ready to provide and to accelerate on this business, we need a license. At the beginning, we explored the opportunity for some M&A activity. Honestly speaking, I met almost all the boutique banks in Switzerland, and it's difficult to close a deal accretive for the shareholders and without reputational risk. For all these reasons, we decided to start the effort for a new license. Probably we will see the positive effects starting from the second half of next year. Again, consider it is another way to diversify our offering. It's not just only a sort of hedging from tail risk, but it's also a way to provide a multi-boutique center approach.
When you, for example, open an insurance policy in Luxembourg from a private insurance for internet or individual, the idea to be managed also from different countries works pretty well. Thank you.
Thank you very much.
The next question is from Elena Perini of Intesa Sanpaolo. Please go ahead, ma'am.
Good afternoon. I've only one question left, and it is on an overall outlook for 2021. Putting all together what you were saying about the net interest income that will likely stabilize compared to this year, and also the fact that performance fees will likely be lower, I was wondering what is your outlook for the net profit for the next year, if you expect a flattish trend versus a quite good year given the pandemic like this one. If you are confident that you can increase margins, as you were mentioning, and then offset some negatives on revenue side and start a growing path. Thank you.
Thank you, Elena. P ersonally, I'm pretty optimistic on the outlook for 2021 because I'm pretty confident on, first of all, the commercial activity, so growth. I'm sure that we will achieve the targets of our three-year business plan, and both in terms of inflows and as well as the financial targets that we announced in London. In terms of margins, I think that if the market stay at these levels, there is room to increase a little bit margins, as I said, for several initiatives that we are launching. These initiatives will be launched, say, between the first and the second half. The full effect will be in 2022. I do not expect a significant negative impact on performance fee.
First of all, because the change of the mechanism will be gradual and will be probably more in the second half, and will complete this journey in 2022. As I said, it doesn't mean to reduce significantly the probability to achieve performance fee, but it's just tiny changes on the Luxembourg platform. We estimate a potential negative effect around 20%-30% of the total performance fee. We do expect to offset this change in the medium term with new initiatives, as I mentioned before. Let's say that if you consider the lockdown, traditional banking are facing probably the toughest period of their life, smart working and compliance issue and so forth. Our entrepreneurs are very close to clients, even if probably in a different way, and are providing, on average, better services than the traditional financial channels.
It's a question of quality, it's a question of professionals, it's a question of a business model. I'm very confident to exceed the market and to over-perform compared to, let's say, the benchmark or the financial advisors, and even more if you consider the distribution as a whole. When the commercial activity is sound and solid, and you are confident to grow, and the margin are in line or even a little bit higher than the ones we reach this year, you must be optimistic. Thank you, Elena.
Okay. Thank you very much.
The next question is from Angeliki Bairaktari of Autonomous Research. Please go ahead.
Hello. Thanks for taking my question. Just one left on my side. Could you give us an update on BG SAXO and when the platform will effectively be rolled to other clients, and not just your existing client base? Thank you very much.
Thank you, Angeliki. Hello. BG SAXO, we are very close to the last release of the platforms. It implies the joint account and single account, and the derivatives instruments. We are pretty confident to open up the platform to the B2C clients within the end of this year. It's one of the revenue streams we support. It's behind my optimism for the future, because we are very close to realize the partnership, thanks to the complete journey of the platform, thanks to the third wave opening up the platform to the direct clients, B2C. There are also other topics important. For example, the acquisition of BinckBank from Saxo, because clients will be a part of the deal with Banca Generali at the end of next year. I see several positive news in terms of business opportunity for BG SAXO. We are very close.
The second wave, so the B2B2C, so supporting our financial advisors with this new platform, is going very well. I'm confident also to accelerate in the B2C business. This explains why I'm so confident on the contribution of the new revenue engines for the next year. Thank you.
The next question is from Filippo Prini of Kepler. Please go ahead.
Good afternoon. Could you give us an outlook for evolution of operating cost for next year? If I may, on performance fee, a couple of clarification. The EUR 5 million that you disclosed for October are coming, we can say, evenly from BG Selection and Lux IM. If the planned change of mechanism calculation of performance fee for the second half of next year could accelerate maybe faster than expected the rollout from BG Selection to Lux IM in the meanwhile. Thank you.
Thank you, Filippo. The cost projection for the next year are in line with our guidance over the three-year business plan, 3%-5%. Depending on the pandemic and depending on the revenues, it can be closer to 3% or 5%. For performance fee, let's say that the runoff of selection is independent from the performance transformation. I'm pretty confident that in the second half, probably with the new Lux IM platform, we probably could stabilize also the outflows on selection, because we will work also on these kind of initiatives. The idea is that in the performance fee mechanism, the watermark will be in a time horizon that is longer than one year, and this will be applied also to the BG Selection in 2022. We will review all the prices of both the SICAV in order to continue to maintain the assets also in the Selection.
The net result will be a marginal increase in the profitability of the two SICAV, and the net result, in my opinion, will be a reduction of outflows in the BG Selection, and not vice versa. Thank you.
Thank you.
Mr. Mossa, at this time, there are no questions registered, sir.
Okay, thank you, and thank you for having attended our conference call, and hope to hear from you soon. Bye.