Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Banca Generale First Half 2020 Results Conference Call. As a reminder, all participants are in a listen only mode. After the presentation, there will be an opportunity to ask questions.
At this time, I would like to turn the conference over to Mr. Gianmaria Mossa, CEO and General Manager of Banca Generali. Please go ahead, sir.
Good afternoon, and welcome to our first half results conference call. Let's start saying that despite the severe impact of the pandemic and the spike in volatility of the markets, the overall numbers of the bank for the first term and the first half are very, very solid. In terms of total assets, we ended the 1st 6 months with almost the same level of the end of the last year at €68,900,000,000 thanks to basically very, very high diversification of the portfolios and very strong inflows. For the first half inflows were at €2,800,000,000 It's not just about the amount of inflows, but it's also about the quality and we're going to see later that the quality was much better than the previous year. And in terms of financial results, in the 1st 6 months on a year on year basis, the results were in line with the last year, but again the mix was in my opinion definitely better.
And in terms of results in the Q2, of course, the starting point after the correction of the market penalized some specific lines of the P and L. In terms of capital position, as you know, the ECB and Bank of Italy have just published a new recommendation and we're going to see the impact on our dividend policy in the slide dedicated to capital ratio. So let's start from page 4. That is our usual as usual, we represent a short representation of our P and L. So we had a very positive steady growth of almost all the revenue lines with the total banking income up almost 11%.
Operating profits were in line with the revenues, so up 10%, while below the operating line we had some one off and that penalized the net profit. Net profit as we already said is almost in line with the same period of last year close to 132 €1,000,000 where we had also a negative impact by the tax rate at 22% and we update our projection for the full year at this level for this year. Page 5, there is the net profit breakdown. You can see that variable net profit contribute negatively on year on year basis with a minus 4, so from 64.4 to 62.0 while the recording net profit slightly increased up 2.2% at €69,900,000 Once we focus on the underlying, so on the buildup of recurring net profit, we see that on the positive side, we had a very positive contribution of the net interest income and from net fees, while on the negative side we had net adjustment provision and tax. In particular, in terms of net adjustment and provision, we added 2 specific items.
The first one, we update the discount rate for the pension planning and loyalty schemes for our financial advisors. So we update with a lower discount rate and the impact is negative €4,000,000 and then we review the economic scenarios and we penalize the provision for the loans book. So all in all, total core recurring net profit, sorry, EUR 69.9 million. So starting from Page 7, we go through line by line, starting from net financial income. First half, we exceeded €50,000,000 with a significant contribution on net interest income €42,400,000 euros focusing on the quarterly contribution, the 2nd quarter numbers are pretty solid €22,200,000 with margins at €0.77 On the left side of the page of Slide 7, we see the stabilization of total assets and the interest bearing assets at €12,300,000,000 Comparing these numbers with the same period of last year, you can see an increase of the loans to clients up €200,000,000 and financial assets up €1,500,000,000 In terms of yield, we continue to work to have a more efficient cash management, so cash optimization and the cost of cash lower at the gain, so minus 0.03 while yield on loans to client and yield on financial assets are stable to 1.08 and 0.79.
Moving on page 8, we have the gross fees. Total gross fees were up almost €30,000,000 or 8 percent to €382,000,000 And in terms of margins, the overall profitability was at 1.14 with a temporary dip in the 2nd quarter basically driven by front fee and as we already said the market crash in March with a lower contribution on management fees for the quarter. Variable fees almost €20,000,000 so with again a positive contribution and also for July we do expect that positive numbers in the range of EUR 7,000,000 and EUR 10,000,000 in July. Page 9, there is a deep dive of management fees, where you can see on the right, top of right of the slide, the zoom of monthly numbers and it's pretty evident that numbers in April were in line with March, so 51.5 percent and then there is a steady increase and recovery at EUR 54,700,000. In terms of margins, you see a dip at 1.36.
Here you have 2 different trends, recovery of the profitability of the financial rafters up 1 basis point, probably we're going to see another basis point in this quarter, while the finalization comes from funds. So basically it's not about product mix but it's about asset mix, asset allocation mix and in particularly the profitability of 3rd party funds declined 2 basis points and also the profitability of Luxim was marginally lower for a specific initiative on cash products. And we say that considering this is sort of deep link to the asset allocation and not up to the product allocation, we are pretty confident to see a recovery at current levels if market stabilize. Page 10, where is the other side of the gross fees that are other fees. Other fees are the sum of front fees and entry fees sorry and banking fees.
The total contribution of these kind of fees was about 55.6 with an increase in profitability at 0.16. Moving on to the 2nd quarter numbers, you see 2 different behaviors. The banking fees slightly increased despite the market correction and this is basically thanks to a very resilient advanced advisory services, while the entry fees were penalized by 2 factors when the performance of the client are negative, it's more difficult to charge from fees. And then during April and during May was very difficult to structure certificate because the implied volatility was the one of the previous month. So it was very expensive for the client.
So we reduced the activity that has been resumed in these days. On the right of the slide, always Page 10, you see another way to present other fees where the cluster is not between banking fees and entering fees, but it's about new revenue streams and the say traditional fees. New revenue streams jumped to €33,500,000 it means an increase of 60 3% in the period. And again, we are very confident to continue to see an increasing contribution of the new revenue streams and the total contribution of gross fees on other fees on gross fees exceed 15%. Page 11, we move on the cost side.
Let's start from the fee expense. So payout, Payout is down to 53.3 from 54.1. This is basically driven by the fact that last year we had a one off component in the payout to the network, 0.5 percent, you can see in the bar graph on the right of the slide. Overall, cost of growth decreased a little bit because as you know, the recruitment activity is due down in the first half. So the marginal cost of growth decreased and the payout to third parties instead is almost stable.
You have the one off linked to the acquisition of Nexa that will expire next year. Page 12, operating costs. Core operating costs were up 2.5% excluding as usual the sales personnel cost. Core operating cost expected to remain in the range of 2% to 3% over the year, thanks to cost optimization. And if you focus the attention on the Q2, you can see the cost of COVID, it's a one off, it's 0.9, it's basically donation.
And then you see a decreasing value of the changing perimeter that is basically thanks to streamlining personalization NexTAM and NexTAM has been merged at the end of the first half in Banca Generale. As usual, we close this part on cost with the cost ratios. So overall best in class at top level of the market with operating cost on total assets 0.33 and both cost income ratio gross or net of variable cost below variable revenues below 40%. Now the last page of this section is about capital position. As we already mentioned, the 20th July, so yesterday, ECB and Bank of Italy extend the recommendation not to pay any dividend for the full 2020 year.
This morning, the Board of Directors has acknowledged this recommendation and we will take the consequent decision regarding the 1st tranche of dividend payment in the next meetings. It's pretty clear to me that we cannot proceed with the payment of this first tranche. So in this slide, you see both the reported capital ratio as well as the pro form a numbers. We said that the report focusing on total capital ratio, you can see that the reported capital ratio is at 15.7%, so very solid position and the pro form a jumped to above 20%. I confirm the intention to pay these cash as soon as possible.
But from now, of course, it will depend from the new recommendation, I mean to a new recommendation of the regulators and need to call a new general meeting. Page 15, so before changing section, let me sum up this first part. Very good news from net interest income and we are confident to confirm the positive trend in the first half also for the second half. And so we confirm the double digit growth for the year. And as you can see the evolution of numbers, we are pretty confident to do very well.
And then if you think of the market at current level, I do expect also sounds gross fees because the commercial activity is working very well and all the projects all the initiatives are has been launched have been launched in the last month. So there are several initiatives and that can increase the fees. On the cost side, again, we confirm the guidance of 2%, 3%. So on the revenue side, I think the most important contributor is from our Luxembourg platform. You can see at Page 16 that the total assets referring to the managed solution increased particularly well in house funds.
House funds were €7,600,000,000 So it means €400,000,000 above the end of the last year. Also insurance wrappers confirm the level of last year, so very resilient to the crisis, while third party funds and financial wrappers are the ones that suffer most the correction of the markets. Another important number is always on Page 16, bottom right. Here you can see that the cash level of our clients was stable in the 6 months. It means that in the Q1 we accumulate some extra cash and in the Q2 this extra cash has been reinvested.
And so it's really important because the new the net inflows are all about asset management, insurance products or advisory services. About advisory, page advisory mandate, page 17, we exceeded €5,000,000,000 €5,100,000,000 to be exact. And you see that the share of wallet is at 7.6. So let's say that we are well above the initial projection of penetration of these initiatives. And as we already confirmed, we increased the range at 8% to 10% with the goal to achieve 10% of the total assets.
Also because we are very impressed by the spread of the culture of advisory services on the top right of the page you see that 62% of the sales force start approaching clients also with this approach. Page 18, another positive information. This is about our Luxembourg business, Luxembourg platform. Total assets are at 16.7 slightly below say the level over the last year. But if you look at the breakdown you can see the important acceleration of a vaccine and the negative contribution comes from BG Selection.
The focus of course must be on the retail share classes, the one with the high profitability and you can see how important has been the acceleration of Luxim for retail distribution. On the right top of the page you see that now retail plan classes is at €7,600,000,000 It means the highest level ever for the bank, while the institutional front classes decreased from 9.7 to 9.1. Zooming the retail fund classes, you see the growing weight of the Luxim at 4.5 and then you see the gradual reduction of selection. As we already said for each euro of runoff of the BG selection, the target is to collect at least €2 of the Luxe Inc. And at the moment also during the worst half of the year ever we successfully reached this target.
Page 19, you have the details of total net inflows. As we already said, the results year on year is almost flat. But if you focus your attention on the bar graph on the right, you can see the impressive difference in the mix. It seems that COVID and crisis was last year because on year on year basis the numbers on in house fund was 3 times, 3rd party funds twice, insurance wrappers twice and then the outflows in the financial wrappers decreased significantly. And if you look at the numbers in July are almost in line with the Q2 with all these components and products with positive inflows.
Page 20, there is the focus on recruitment. Recruitment closed and say new recruitments were at 28 in the 1st 6 months and we reactivate the recruitment activity starting from May. And so you can see that we successfully recruited 7 new colleagues during the end of May June. And I confirm that July is going pretty well. Focusing on net inflows by net inflow mix by acquisition channel and we are Page 20 on the right bar graph, you see that we more than 80% of the total net inflows come from the existing sales force and the productivity of the existing sales force reached the highest level ever for the bank.
And this is again is a way to see how close our financial advisor were to decline and how to actively manage these situations. So to sum up this part of the presentation, I'm very, very proud of the activity of our financial advisors as well as our employees. Their phased networks is really in good shape. And as I say, July numbers continue to be very solid. So I do expect a second half day over year solid and sounds in terms of net inflows.
The mix of net inflows is going exactly in the right direction with insurance wrappers and the Luxim with a growing interest by all the financial advisors and the client. So again, it's not just about a single product, but it's about a range of very innovative solutions and we continue to release a new version of their insurance wrappers. Just to mention one, the Luxembourg solution. And we are back to normal. And this is really important from the recruitment activity because to me, recruitment is crucial to continue to upgrade the sales force to insert new energies in the network and to continue to ramp.
So this is another positive news. The last part of the presentation is in line with the approach of the Q1 conference call where there is a focus on the 9 main initiatives very supportive for both profitability and new inflows. We clusterize these 9 initiatives in 3 major groups. The first one is about the key business drivers, is about the core engine of our P and L, is about asset management insurance products. And the 3 priorities here are on Luxim, our Luxembourg platform, ESG commercial approach and the insurance wrappers with a particular focus to private insurance initiatives.
On the right, you see the new business levers. These are initiatives already present in the bank that we decided to speed up, in particular lending, private markets and the international BG International Advisory, so the Swiss project. And the bottom of the page, there are the so called new revenue engines, which is about Advanced Advisory certificates and DigiSacs. Now in the next three page, there is a deep dive for just one initiative for Evercutt cluster, just to give you an update on very important project for us. Page 23 is a focus on sustainability.
Sustainability is very important, very supportive for the influence in asset management products. And here you have basically four information. The first on the left top left of the slide is the penetration of ESG products on overall asset under management. We exceeded 9%. Bottom left probably the most important information that is the resiliency of the net inflows of ESG products despite market condition.
And what interests me more for example is the number for the first half of this year that means almost €400,000,000 of new ESG, new net inflows and it's all about asset management products. Top right of the page, there is the spreading of the cultural ESG in the network. 15% of the population of financial advisors have a percentage of ESG product above 20% and 90% of these financial advisors are very active and proactive with the digital support because you know for us sustainability is not just about products, but it's a value proposition, it's a commercial approach and it starts from a proprietary digital platform. Bottom right, you see the numbers on clients. Of course, here is the case of investing just €1 in ESG products, so 40% is just it's a number I do expect.
What impressed me is about the kind of clients with a greater attention of this kind of solution because it's linked to education, it's linked to age and of course to wealth. Wealth is just also a way to diversify more the portfolios. And the age is really important because if you are best in class in something really interesting for younger people for the succession planning and for the continuity of the business in the family of our clients, this is the way. It's not just about a smart home banking, but it's about to build a better world. And you know the commitment of younger population on this topic.
Page 24, we are in the 2nd cluster of initiatives is about new business levers and the focus this time is on lending because for us lending has been a long journey. We focused our attention last year on the IT platform, organization, procedures, teams and now it's time to deliver results and to launch new initiatives And this is because we want to increase the diversification of our assets and it's a way to be supportive to the net interest margin. So in the graph on the top left, you can see the total loan portfolio. You have 2 different dimension granted loans and drawn loans. These numbers differ slightly from the ones in the net interest income because here there is the inclusion also of the off balance sheet bank guarantees.
So here you can see the gradual growth of these numbers. But what is probably more interesting is about the loan, the loan is about the retail, so our clients. And here you see how we speed up this kind of business. We launched several initiatives and we are very close to launching new ones and here you have the list of the major one and we are very confident to close the second half with at least net new granted loans for at least, as I say, €200,000,000 So now also these initiatives will start providing support to the P and L and to the quality of service to our clients. The last focus and it's about our new revenue streams, new revenue engines and the focus is on Digisaxo because again, BG Saxo is a strategic digital and based on innovation partnership.
We worked a lot as you know to be fully and really integrated and it took times. But now we start seeing the payoff. So I always deal with 3 main ways. The first one was about opening up the platform to internal bank and general clients and because the business of direct trading is marginal and it was a way to test the platform. The second way was about opening up the platform to our financial advisors to insert orders on behalf of client and this was extremely difficult because for the first time ever worldwide SACHSO implemented a different layer in the technology in their platform.
So the personification of the bankers. So for them was a great challenge and we successfully achieved this target. We successfully launched Pyle and we successfully run the rollout. The 3rd wave is about opening up the platform to external clients. So not just DG clients, but it's for traders, for clients of other competitors.
And to be ready for the 3rd ways, we have to complete some implementation that it's about the completion of current account features and the completion of derivatives in particular CFD and ForEx. And on the last part of the slide at the bottom you can see the constant increase of volumes in the retail business and the constant increase of the contribution of BG Saxo on the total numbers. And again, it's not just about BG Saxo as we always say, It's about a changing culture driven by advanced advisory services, robots for advisory. On top of that, there is also the technology, there is also the implementation of the new platform. And I'm sure that the contribution of VGSASXO will increase over time.
So just to conclude the presentation and then leave the floor to Q and A. First of all, I want to confirm all the targets we announced during our Investor Day in 2018 in terms of cumulated net inflows, total assets, core net banking income, core operating costs and dividend. And of course, dividend doesn't depend only by ourselves, but it's also about the recommendation of the regulators. But again, we are all committed to distribute our excess capital. We are all committed to be in line with our dividend policy with a payout ratio between 70% 80% and with a floor in the DPS at 1.25.
So as soon as we can, we will ask to a general meeting to distribute an extra dividend. But this the timeline doesn't depend on by our intention. Thank you. And now I leave the floor for the Q and A.
Excuse me. This is the Costco conference operator. We'll now begin the question and answer The first question is from Jalouk Castarari with Mediobanca. Please go ahead.
Yes. Hi, good afternoon. Ciao, Maria, three questions. The first one is on the life insurance business. If I'm not wrong, you restarted selling some Pura Amo Primo, some class fee insurance in the semester.
I was wondering if you had any kind of cap in terms of new business into a pure Ramoprimo product? And how much of the $510,000,000 net inflows in Life in the first half was in this product? I think the commercial name is BG Castor, if I'm not wrong. And the second question is on the one off you mentioned at Page 11 on payout to 3rd parties, this 0.3 percentage points. I wanted to understand a bit more what was this one off about.
And the final question is just a technicality. When you highlighted the increase in the liabilities to a phase, I guess, is the Enassarco contribution. I was wondering which kind of yield curve are you taking to calculate this cost? Some of your competitors are simply using the BTPs 10 years. I don't know which kind of curve are you considering?
Thank
you. Okay. Thank you, Gianluca. So first of all, Life insurance business, let's say that the contribution of traditional insurance product was pretty negligible in terms of net result, while we saw an acceleration in June July, because we organized a campaign. So in July, you will see a total contribution net it's around €100,000,000 €150,000,000 in July.
In June, it was probably close to €100,000,000 but the 1st 4 months the 1st 3 months was negative. So overall numbers now we are checking the numbers that should be negligible in the first half and when I will confirm the number.
Do you have any cap from Genelte Life about the size you can gather on Ramoprimo?
I would say that the cap is something we manage internally because it's about the yield that's expected for the existing clients. So essentially we are well below the cap and we manage tactically this sort of campaign to support inflows. But we are definitely lower to the cap and I do expect an accelerate. If you look at the numbers the wrappers continue to do well. So we are more focused on these than on the traditional life insurance.
When we see a window opportunity, we accelerate and then we close the campaign. You will see that in August for example the numbers in traditional life insurance policy will be negligible and probably negative. On the second topic, let me see, I'm checking out, yes, yes, it's almost negative. I confirm the numbers on the traditional life insurance for the first half that is almost 0. The one off is about a distribution agreement of next time with Ver Capital and then I will hand over to Tommaso if
he has Yes, I think it's linked to the reorganization of the Next Time Group. So we decided to close some contract and has been a transaction and we
paid a cost.
So it's a one off and has been included in the passive fees. And it's a one off, so we are not going to have it in the next years.
And then the first question was about The
first question is linked to the
what is the rate, yes, it's linked to the average BTPs.
So it's something that is going to change according to the movement of
10 years bond or 10 years bond as well.
The next question is from Domenico Santoro with HSBC. Please go ahead.
Hey, good morning, guys. I do have a number of questions. I'll go one maybe. I'll try to be quick. First of all, I mean, we all read sorry to be the bad guy here.
We all read, I mean, the article on the press and the way you responded. And so we know very well the story. I'm just wondering whether there was any sort of reputational issues on your franchise in July, if you see anything because we don't have the sales yet for this month. And whether you're taking some sort of measures or procedure in order to avoid the same to happen again. And maybe this is a time for you to clarify, so we close the story.
On the dividend, I mean, the message, the language from the banks is a little bit different about 2019 because what they say is that this morning, for example, in Ukraine, we just said 2019 is gone And let's look beyond in 2021 whether we can pay. So I'm just wondering whether it's the same for the asset managers or here the message is different because I heard before you saying that the excess capital can be distributed back here. So how can be the formula here? And maybe you have enough capital also to think about some sort of M and A in the future. Then talking a bit about the business.
First of all, margins in the 3rd quarter, you explained by where the Q2 would happen. So it's more a matter of asset allocation rather than products. So just wonder whether margins can come back to the level of Q1 and we can get the same level of gross asset management fees. Same on sales, you're pretty confident, but I mean there was quite a market rebound in the second quarter. So basically, people, they took advantage from that.
So I'm just wondering whether your confidence in getting a similar level of, if my understanding is correct, the sales for the 2nd part of the year, where that comes from Hawaii is so confident? And then just a final comment on the other revenues. I heard you that you said, if I catch correctly, 15% growth or whatever. Just wonder whether you can give us a little bit of visibility short term for the 3rd Q4 in terms of banking fees and the entry fees? Sorry to be so low.
Thank you.
Thanks, Domenico, in particular for the first question because at least I consider the Feet article misleading and misrepresentative of the situation. It's something about Italian securitization issued in 2017, repaid in 2019 with the expected performance in line with the expected performance of clients were happy and the bank was happy. It was about just 2 invoice, 2, for a total amount below EUR 1,000,000 and total receivables in Italy probably are €1,000,000,000 €1,000,000,000 and we were just distributor or investors. So you have the credit broker and you have the servicer that are Italian regulated and they are both in charge of conducting anti money laundering analysis. So there are 2 institutions, 2 legal entity supervised by Banco Vitrano, not one, which is normal during a lending activity.
And again, if you think of the total amount, the timing of the article and the fact that it's really common practice in Italy to factor in activity and receivables for banks is for securitization is well regulated and we didn't have any consequence with both regulators and internal auditors because all the procedures were pretty well managed. So the risk that in 1 bank, commercial bank or in Banque Genaradi or in any securitization, there is one receivable where the state of anti money laundering, the score change over time is granted, is 100%. It's something that can happen anytime for any institution and actually it happens around the world. It happens in the commercial banks in Italy, it happens in the commercial banks in all the developing countries. So I think that there was another goal with the publication of that article because Generali is a very, very strong brand as you know, in particular in Europe.
So internally, but I would say yesterday was a dinner with a manager and say that financial time is past. But I have to be honest with you, I think that the sense of belonging is even stronger. And because when it's about something was so unusual, so distant from the way we are that the reaction was very strong and very positive among financial advisors as well as among clients. If you look at our inflows in the last 6 weeks are very, very positive. So honestly speaking, the impact now exposed is negligible on the reputation side.
Of course, during the event, I was very, very upset, very upset because to me reputation is first just for our clients and our financial advisers. But I haven't seen any significant consequences and if any is a positive one with a strengthening in the sense of belonging to the bank. In terms of dividend, 2019 dividend is not gone because there is my personal commitment to say to pay at least 70%, 80% of the annual net profit and with the floor of 1.25%. So it doesn't depend 100% by just myself because as you know there is a general meeting was to approve the proposal but my intention is to continue to pay the dividend both of 2019 2020 respecting all the recommendation of ECB and the
Bank of
Italy. And so the dividend for 2019 is not gone at least today. And of course, we're going to pay in 2021. I won't pay all the excess capital. I would like to pay what we promised, no more, no less.
And for the other revenues, sorry, it was probably misunderstanding. The 15% is the weight of other fees on total gross fees, 15%. Let's say line by line. Advisory Services, we do expect consistent new inflows in the second half. So now we are at €5,100,000,000 at the end of June.
Probably we can exceed €6,000,000,000 at the end of the year. This is a potential target. Let's say with this market level, It's a challenging target, but we are very committed to reach these numbers. In terms of structured product, I do see a slowdown in the activity because we have already said that the range of €500,000,000 €600,000,000 of new issue per year is the right target. So it means that on quarterly basis you are in the range of 120,000,000 and 150,000,000.
So it's more in line the second quarter than the Q1 in terms of let's say structured product fees. In terms of trading, I consider the 2nd quarter, let's say that March and April to say one off months linked to lockdown and linked to the volatility of the market. So we do expect a normalization in the behavior of clients, but I'm confident to see increasing numbers of clients and of financial advisor joining the new project and the
new initiatives. So robot for advisory, BGSAXO
and advisory services. So I think that the 2nd quarter volumes can be considered a good level sort of floor for the Q4. The Q3 there is always some seasonality. So I don't have any projection. These are best effort of course.
So to raise the bar to the commercial structure to give the targets. Then if we reach the target, we'll be happy. But let's say that I do expect a positive contribution. Thank you, Domenico. Sorry, the last question, I need to answer the on the asset management products and gross fees.
I do see healthy behaviors in the network. So the numbers in July are very significant in this sense because they continue to develop relationship, they continue to switch from current account to asset management products. So we can probably imagine a reduction, let's say, a reduction in the acceleration of this switch. But I really don't see the risk of a reduction, a significant reduction of the risk, so of the asset allocation because it is pretty conservative. So as we start from equity now is around 21%, 22%.
And then we have automatic we have several mechanism automatic switch. And so I think there are several initiatives that are supportive to gross fees. So I do believe that in the Q4 we will close the gap in the Q1. Of course, it would be great to close the gap in the Q3, but again the Q3 is for seasonality effect is pretty different from others. So but in the Q4, it's the target we have.
So to exceed our previous record in total gross fees.
Thanks. Did you take any TLTRO, sorry, June, just basically to get the benefit on the NII?
Did you take any? Sorry, any initiatives on the NII?
No, no. Did you take any TLTRO?
Yes, yes, yes, €500,000,000 So the impact for this year should be around €2,000,000,000 EUR 2,500,000 for this year and then an increase contribution from the next year.
Thank you very much. Thanks.
You're welcome.
The next question is from Elena Pelini with Intesa Sanpaolo. Please go ahead.
Hello. Good afternoon and thank you for taking my questions. I've got 2 questions and one clarification to ask. The first question is on net inflows. July has been, again, a positive month, as you are saying.
So would you expect for this year a higher net inflow compared to last year. And for sure, a higher contribution from Asset Management. But can you give us some flavor on the sales? Then I was wondering if you can update us on the level of performance fees in July? And finally, a clarification about the dividend.
So is it your intention if allowed to pay both 2019 2020 dividend during next year, so in 2021? Thank you very much.
Thank you, Elena. So let's say, first of all, in terms of the target of the net inflows, we are used to update our guidance at the end of September because August September are difficult months. So in September, we decide we're going to decide whether or not increasing the targets. I confirm that the net inflows in July is strong, is in line with the first with the second quarter. Performance fee, as I mentioned before, we are about EUR 7,000,000 in July.
I do not expect a performance fee higher than €9,000,000 depending on the last 2 days of the month. In terms of dividend, you are right. My intention is to pay dividend both for 2019 2020 next year. But again, ECB recommended not to pay for this year and they announced potential new recommendation also for 2021. So it depends also on the behavior of the authorities.
And again, this is our intention when we have to call for a new general meeting because to pay eventually extraordinary dividend you have to ask the approval to the general meeting. So it will be a choice of the general meeting. But again, we are intention to honor the commitment for 2019 2020. Of course, at the current condition, so without any extraordinary M and A activity and with this market situation. But let's say, this is the intention.
We should have already paid. So I don't see the case enough to pay for the future.
The next question is from Angeliki Bayraktar with Autonomous Research. Please go ahead.
Hello. Thanks for taking my questions. Just first of all, on the dividend, sorry to get back to that. I know you have responded already. But just in terms of clarification, you were planning to distribute the 2nd tranche in the month of January.
So I was wondering, is it possible if we assume that the ban is lifted from the 1st January 2021, can you pay with full 1.85 in the 1st month of next year? That's my first question. And also, I presume the currency to 1 ratio that you disclosed, it includes the 2020 dividend accrual in line with the accrual policy that you have. And then another question related to ESG. Thank you very much for the disclosure.
It's interesting to see that ESG gained traction with your clients. I was wondering how does the ESG taxonomy regulation, how is it going to impact the distribution of ESG products at Banco Generali? And is there any need for incremental investments to be compliant with these rules from next year onwards? And then maybe one last question. On your margin, you had disclosed back in the day when you presented your plan a target of 138 basis points to 142 basis points.
That was before Nexium and Valere. Should we now expect a margin more in line with the Q2 2020 level to around 136 basis points? Thank you very much.
Thank you. So let's start from dividends. No, we cannot pay EUR 1.85 billion. We can pay EUR 0.3 billion, so the second tranche To pay the 1st tranche, as I said, we must call a general meeting and pay an extraordinary dividend. This is the first question.
The second question is that in the capital ratio for Wizzia, we all the net profit of the first half, so our net of net profit. The third, ESG, let's say that we are working on with the watchdog to include ESG criteria on the Know Your Customer questionnaire. In the investment policy, let's say that it's we haven't any at the moment any obligation, but of course, if we manage directly ESG products, we must follow an investment policy. But I don't see any constraint out of the investment guidance of the bank. In terms of approach to client, instead all the industry must work out a new questionnaire on the profile of the clients.
The deadline should be in the next 2 years, but I'm not sure about the deadline. And on managing fee margin, we are committed to confirm the guidance. Probably we are definitely close to 1.38 instead of 1.42, but we do believe to be able to confirm this number. Thank you.
The next question is from Filippo Trini with Kepler. Please go ahead.
Yes. Good afternoon. Three questions from my side. The first is on provision on credit. If you can confirm that the numbers that you booked in the second quarter is the bottom and it's just related to core generic provision not to some specific position.
The second is on the tax rate. In slide, you mentioned 22% for this year. But just to understand the clarification, if just for this year and next year tax rate could decline. And the last one is on the performance fee related to Luxim. If it's possible to understand how far you are on the high water market before starting to collect the performance fee from this part of your asset under management?
Thank you.
Thank you. So I confirm provision on credit are generic provision. I cannot say that it's a floor because depends on economic scenarios, so depends on the economic environment. But let's say that I hope so. Tax rate to 2%, 22% for this year and could be a good guidance also for the next year.
It's the result of a mix with more activity, so more revenues in Italy and more conservative approach in the taxation in Luxembourg. So I think that 2.2 can be a target also for next year. Performance fee, depend mostly from what strategies because we have some funds that are already at the high watermark level. So all for example, all the sector funds with the industrial partnership, for example, the Innovation 1, the medtech, the energy are all in line with the top level, so in the high watermark range. Some market neutral and longshore strategy are close or at the high watermark, while more in general bonds and credits as well as equity are between 3% 6% from the top.
Thank you.
Okay. Many thanks.
The next question is from Luigi Tabales with Equitus Sim. Please go ahead.
Yes, good morning. Two quick questions for me. The first one is on the payout to the network. Do you expect to maintain the payout ratio of the 1st half, 1st half in the second half of the year? And the second question on the private markets.
Do you have a medium term target of illiquid private market products to achieve in the asset allocation of your clients in the medium term? And do you expect these products to be neutral or attractive in terms of fees margins? Thank you.
Thank you. So for the payout network, we have a target in the range of 53%, 54%. So slightly above the number of the first half. Product markets, we do not have any targets also because are dedicated to normally cloud clients. But let's say that we do expect to stay in the range of 2.5 €3,000,000,000 in the medium term.
So it means less than 5% of the total assets, between 3% and 5% of total assets. And on revenues, it's not are not the most profitable products, just to increase the quality of service and the value of the asset allocation. So we do not expect positive contribution in the revenues from these kind of initiatives. It's more about Sorry, the payout, £53,000,000 Tomazio, please go ahead.
The payout is total payout including also third party payout of €50,000,000 €50,000,000 So just to be sure that we are talking about
the same figures. We have a target for the payout to the net core that is below 50% and should be around say 40%, 48%, between 48%, 49% depends on the incentive scheme. But we said that overall payout must be below 54%. Thank you.
Thank you.
Gentlemen, there are no more questions registered at this time. I give you final remarks.
Thank you. Thank you for attending our conference call and I hope you will have a great summer. Bye. Thank you all.
Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephone.