Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Banca Generali First Quarter 2020 Results Conference Call. As a reminder, all participants are in 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 Molso, CEO and General Manager of Banca Generali. Please go ahead, sir.
Hello, good morning, and thank you for attending our Q1 results conference call. And I hope you are all safe. Before starting with numbers, I would like to share with you how we have been managing the situation since the outbreak. And so in Page 3, you see the 3 main pillars of the strategy. 1st of all, of course, to protect our clients, our people and more in general, our stakeholders through working from home, continuing communication and medical assistance.
The second pillar of the strategy was to stay very, very close to our clients without, of course, their physical presence, but being proactive in giving continuous communication on products, markets, investment solutions and providing innovative products, for example, to manage liquidity. The 3rd pillar of the strategy, of course, was about action to support our country. 1st of all, we provide liquidity to small and medium enterprises. Thank you to our innovative approach to securitization. 2nd, we provide facility, credit facilities in line with the recommendation of the authorities and third, of course, we stay very close to the health system and health organization through donations.
So now moving on to numbers, and I'm at Page 4. Let's say that during the first 4 months of this year, we saw a very, very high volatility in our total assets linked to the market, of course. We reached a maximum in February, and then we closed March with €65,200,000,000 and we partially recovered in April with total asset at the end of April at 60 €7,000,000,000 On the advisory services side, numbers are pretty good because we more than offset the fall of the markets with inflows. So at the end of April, we have assets higher than the asset at the end of the last year. And probably the most positive news is about inflows because we closed the Q1 with EUR 1,500,000,000.
It means almost EUR 500,000,000 per month. And the mix and the quality of these inflows are among the highest for the bank. Net profit at €79,100,000 thanks to solid operating trend and positive contribution from variable fees. And moving on, on the capital position. As you know, during our AGM, all of the in the 23rd April, we approved the dividend policy for this year.
So the capital ratio one considered the 1st quarter contribution of the net profit. And in working out capital ratio, we exclude also from equity, the dividend matured in 2019. So with this consideration, total capital ratio resulted at 15.5%, so well below well above, sorry, the capital ratio requirement. Page 5, there is our usual representation of P and L. We change the representation of the gross fees, splitting it in 2 parts, the gross recurring fees and the variable fees.
Let's say that the result of the Q1 is definitely higher than the Q1 of the last year, thanks to the contribution of almost all items. Net financial income up 20%, net recurring fees up 16%. And as a result, total banking income was 26% higher than the Q1 of last year. If you look at operating costs are inflated by the change in the perimeter, And you will see that we have adopted the conservative approach below the operating line. And the tax rate is a little bit higher than in the past due to a one off in the tax in the payment of the dividend from Luxembourg to Italy.
It means that basically since the amount of this dividend from Luxembourg to Italy was twice the amount of the previous year, The taxation is a little bit higher and impact a couple of points on the tax rate. So before analyzing line by line, Page 6 offer a breakdown of the net profit between variable net profit and recurring net profit. And as you can see on the left side of the slide, the recurring net profit is almost stable, but I think that the quality is definitely higher. On the right of the page, you can see a graph with the contribution of both operating and non operating items. The first operating items up EUR 11,400,000 the non operating items down 11.3%.
So at the end of the day, the result is the same, but the quality is much better. Moving on to Page 8. Let's start with net financial income. In line with expectation, total net financial income for the Q1 at 24.2 percent with the contribution of the net interest income at 20 percent at €20,000,000 Now we are pretty confident of increasing a little bit the projection for this year. So you can consider a double digit growth as a full year result.
Why? Because we are confident to increase marginally the yield on the financial assets above 0.8%. And we are confident to maintain at least the same level of total assets. So last time, we said 1 single digit. Now we are definitely above 10%.
Page 9, there is the split between gross recurring fees and variable fees, which is a new slide. If you look at on the left of the slide, you can see the increasing importance and relevance of entry fees and banking fees. Now they account for almost 15% of gross recurring fees and allowing us to maintain almost stable the yield on total asset also in these difficult times. While variable fees closed the Q1 with a contribution of €53,400,000 in this case, our projection for the year is of an increase of other €20,000,000 €30,000,000 maximum. So a little bit lower than the previous projection.
Page 11, you can see the other recurring fees. So in particular, banking and entry fees. Impressive, the acceleration on 1 year on year basis, €29,700,000 versus 17,800,000 a great part of this increase is explained by the new revenue streams. And you can see it on the right of the page, on the right page, on the right graph of the page, sorry, with an increase of €10,000,000 over the sum of certificates, advisory fee plus an increase in retail brokerage. So now the yield on these other fees, other recurring fees on total assets is around 0.17%.
Moving on to sorry, I skipped 1 page, sorry. I don't know why. I skipped Page 10, sorry. So Page 10, there is a focus on the management fees. So if you come back to this page, Page 10, you see the trend of management fees and on average managed asset and the margin.
You see a reduction on margin of about 3 basis points, which is some round effect. This is basically linked to a different way to get the commission from the financial wrappers because you take the commission only once per quarter at the end of the quarter. So we took the commission in probably in one of the worst day of the quarter in terms of total AUM. So we are pretty confident to see a recovery of these 2 basis points in this quarter and in the next one. So now coming back to Page 11, we already described the trend in banking and entry fees.
So we can move on Page 12, where we have the fee expenses. On this side, good news, total payout ratio down from 54.6 percent to 53.4%. This reduction is basically driven by a reduction in the payout to the network in both components, so cost of growth and ordinary payout. While in the payout to 3rd parties, you see a small increase is driven by one off and that is a consequence of the integration with Nextel, but we are confident to confirm the range 5.5, 5.6 for the end of the year. So again, good flexibility in the structure of the course for first of all, for the network and for the 3rd parties.
Going on to the operating costs, Page 13. Here you can see that the core operating cost increased by 3 point 8% from 46.5 percent to 48.3 percent. And you can see the contribution to cost of the integration of Nexcan and Valeur, dollars 5,100,000 of which $1,200,000 of 1 off of cost for the integration. You can also see the contribution, the cost related to COVID-nineteen. We estimate overall costs at €1,800,000 of which €1,000,000 of donation.
And also for operating costs, we slightly review our guidance, reducing the range 3%, 5% to a range 2%, 3%. And we are, as I said, confident also to see a slightly reduction in the cost of growth. Page 15, we have the capital position. Capital position, as I said, see the total capital ratio at 15.5. This is the effect of the mark to market of the banking book for the part had to collect in sales.
And as I already said, the 1st quarter capital ratio are excluding the net profit of the Q1 as well as the 2019 dividend. In terms of liquidity ratio and leverage, we continue to maintain a very strong position. So just to sum up this first part of the presentation, I'm very proud of the increasing diversification in the revenue streams, in the revenues and also within the management fees with a positive contribution of all the products innovation we launched in the last 2, 3 years. And I can say also that the operating leverage is working very well and the overall costs are under control. With a projection for the full year, as I said, slightly lower than previously communicated.
So now move on to the chapter related to net inflows, assets and recruitment. So Page 17, we closed the Q1 of the year with a reduction of total assets of EUR 3,800,000,000 with a performance a negative performance in the range 7%, 8%, minus 7%, 8% and with a negative performance of managed solution in the range 11%, twelve percent. During April, we have recovered part of this performance with an overall performance since the beginning of the year for the total assets at around 5.5 6%. As you can see in the slide, on the top right, Managed Solutions, The best relative best performers are in house funds and insurance wrappers, while the most hit are 3rd party funds first and then financial wrappers. Next page, Page 18, a focus on total net inflows.
We said very, very strong inflows for the Q1, €1,500,000,000 If you look at the breakdown of the managed solutions, you can see the positive contribution of insurance wrappers, more than €200,000,000 and the positive contribution of Luxembourg platform, almost €300,000,000 and while negative sign in both in house funds and financial wrappers. Page 19, you can see the contribution from existing sales force, highest level ever, 79%. It's not about percentage, but it's about absolute value because it implies something like EUR 1,200,000,000 in 3 months coming from the existing sales force. And the outflows are almost in line with last year's. And while the recruitment trend, of course, is frozen at, let's say, we are around 25 now, 24, we expect, of course, that this can be probably hit by the lockdown.
So now we change our projection for the recruitment for full year from the range 80, 100 in the range 70, 80. So 20 financial advisers, less than previously expected. Page 20, there is a focus on the numbers, the April numbers, positive in terms of quality, 100% coming from managed solution. As we already said, the total assets at €67,000,000,000 and asset under advisory, €4,800,000,000 So to sum up also this second part, I would say that I'm pretty confident on the quality of the inflows in the coming months. And I just see a sort of delay in the recruitment activity because we are more and more perceived as a safe harbor and probably the right place to work in an uncertain world.
So as I said, I think that recruitment is a very important activity, and I see even higher opportunities in the medium term due to the fragility of the banking system and the perception of our brand. Now the last part of the presentation is the business update, Page 22, and there is the slide we presented during our full year results conference call. Just to remind you that we identified 3 main blocks of initiatives. The first block is about our core business, and it's about the focus, the strategic focus on our Luxembourg platform, the new commercial approach on ESG and SDGs, plus the focus on the insurance solutions. The second block, it's about new business levers, and it's about the launch of new initiatives in the lending space, the acceleration in the private markets and the internationalization.
The 3rd block that is in the bottom of the page are the 3 new revenue engines that you know pretty well. So advanced advisory, certificates and Digisaxo. And now we're going to through these blocks with a particular focus on the first one. So Page 23, focus on Laxim. What impressed me more is the constancy of the inflows quarter by quarter.
You can see it on the top right of the page, €500,000,000 €600,000,000 per quarter and also April May are working pretty well. This is due to a continuing innovation of solutions, a well diversified portfolio plus new services that we have launched we have been launching since the 2nd part of last year. The first one that we continue to innovate is about the what we call twin mix that are scheduled to switch plans. So the client invests immediately all the amount of money in the platform and then we gradually switch from low risk to high risk solution. We have an amount of EUR 400,000,000 of services activated.
And on top of that, you have to add also initiatives that we launched during the crisis that is a dedicated fund to manage in the next 6 months the sort of liquidity plus fund. So we have almost €600,000,000 that in the next 12, 18 months will be converted in higher volatility solution. And then you have the traditional accumulating saving plans. And also this, it's a new opportunity for the bank. First time we're focusing our attention also on selling plans for upfront clients.
And also during these last 2 months, pretty challenge, we continue to see positive numbers in the new contracts. The second part is about the, say, the sustainability new commercial approach. It's Page 24. This is very important strategically because we are sure that it's another way to approach clients. We develop a proprietary platform, as you know, where clients can personalize their preferences in terms of sustainable development goals.
And on top of the platform, we developed also a dedicated offer. In the graphs, you can see in the first one, the net inflows. So part of the acceleration of the inflows for the existing sales force comes also from this new project, almost EUR 1,000,000,000 in the last five quarters. And let's say, the share of ESG assets on total managed assets now account for 7.7%. I confirm we launched the initiative with Generali Italia.
We manage unit linked. We are focused on ESG solution. And let's say that inflows are around €300,000,000 since the launch. Page 25, you see the 3rd component of the core business. It's about insurance.
Insurance products account for almost 37% of our total investments. And you see that we continue to have positive inflows, almost €800,000,000 And we are confident to accelerate the share of wallet for the top, top clients, thanks to the launch of our Luxembourg LUX Protection Light. It's a very innovative solution at the European level. And this needs the necessary the presence of the client because it's pretty important to share the strategic relevance of this kind of solution. At the moment, we have something like between €50,000,000 €100,000,000 of net inflows, but I'm confident to see higher number in the next months.
Page 26, you see the 2nd block of initiatives on the new business levers. On lending side, we've just launched Lombard Plus for professional clients, and we are leveraging a new offering on the state guarantee fund with credit facilities with a guarantee up to 90% provided by government agencies. So this will allow us to increase the numbers of lending, and we expected for the full year more than EUR 200,000,000 of new lending new loans, sorry. The second is about private market. We continue to see a great interest in our securitization activity that it works pretty well and allow us to offer more advanced advisory services.
You know that we have in pipeline 2 dedicated initiatives under the brand of BG4 Real, the Altif and the FIA. And these two initiatives can have a boost also from the recent law announcement of a higher contribution for such a kind of solution and products. Last but not least, we have the internationalization. In these 2 months, we start seeing growing interest in receiving advisory services in Italy, but with at least part of the booking in Switzerland. We already closed operation for €17,000,000 and we received some request for about EUR 200,000,000 and we will see what happens in the next months.
But of course, the opportunity to diversify also the booking center, it's really relevant when uncertainty increase. The Slide number 27, it's about the new revenue engines, so the 3rd pillar. We know pretty well this slide. You see advanced advisory services, where now we reached 7% of total assets, and we are pretty confident to continue proposing this kind of service to our clients. So we raised our expectation in the range of 8%, 10% at the end of the next year from 7%, 8% this year.
Structured products, you know we have a target of €150,000,000 and I confirm this target for the following quarters. We saw an acceleration last year in Q1 of this year, but let's say that it was for particular condition, market condition. When the volatility is very high, it's pretty difficult to give solution high quality solution because we offer this kind of solution for product clients and our product placement where you need the price in one day. And so the counterpart different problems in providing these kind of prices when the volatility is so and it moves so quickly. So we need stabilization on the volatility to resume the previous volumes.
But we are pretty confident to confirm 1% for quarter. While brokerage fees, brokerage fees accelerate, accelerate thanks to an acceleration in the volumes and particularly in the 3rd in March. I see 2 reasons under this acceleration. 1 is a structural trend of the bank. You can see the graph.
Thanks to the partnership with Saxo, thanks to the focus on advisory services. I'm very, very confident to see raising volumes over the next quarter. And then there is a one off driven by the volatility. So also these three strategic new revenue engines will contribute in the medium term to increase more and more the diversification of our revenues. The last page, we start this presentation with an update on COVID.
And I would like to close with a focus on the number of operation and the quality of the operation during the lockdown, because I'm very impressed by the results, the quantitative results, the number of operation and the resiliency. First of all, let's start on the left side of the slide, where 9 out of 10 financial advisers complete operations fully digitally. And this is a confirmation of the great investment we did in the last 3 years to be ready. 2nd, 10 out of 10 complete training programs, thanks to our new very innovative training digital platform. 2nd, if you look at clients, 2 out of 3 complete operation digitally and 1 out of 3 leverage new operation processes we launched for the crisis, in particular, the possibility to give orders also via call from call and via mail.
So this is another example of great flexibility of the bank and great very, very innovative approach in technology, not just as a front end for our financial advisers with our RBG BGE advisory platform as also in terms of processes and procedures. On the right, you see the number of operations. That is a sort of proxy of the commercial activity. And we focus on 2 particular topics. We exclude trading because trading in March increased everywhere.
But we focus on 2 different activities, pretty complicated in such a challenging time. The first is about assets transferred. This is commercial activity, when a client transfer position from one bank to another one. And you see that the numbers of transfers in, so from an external bank to Banca Generali, was in line with the last year when the markets were pretty different and when COVID didn't exist. And if you look at the out, it's lower than last year.
It means that the churn rate of the clients is lower and lower. The second focus is on fund activity because during challenging time, the risk to see significant outflows on funds is real. And here you can see that the operation in is even higher than the last year. The operation out are definitely lower. And what surprised me more, and I'm very proud of this, that the advisory activity, so this which the repositioning of their clients accelerate.
So it's a way to say that our financial advisers were proactive. Great quality, you know this is our core business, this is our competitive edge and this is the element that make me very confident on the future. Thank you. And now I hand over to Q and A session.
Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session. The first question comes from Gianluca Sorari of Mediobanca. Please go ahead.
Yes. Hi, good afternoon. I have three questions. The first one is on the flows you reported in April. The quality in particular was very strong.
I think we have to go back to 2017 see mutual funds reporting $370,000,000 of net flows. You also mentioned in your speech that you are placing a unit linked ESG unit linked on behalf of Generali Italy. I was wondering if that helped to reach that number. And which kind of margins do you have on the unit linked you manage on the house of General Italia? The second one is on an update on performance fees in cash in April, if it's possible, please?
And the third one is on the incredible results you are achieving in the new revenue stream. I understood that in some cases, they might be a bit affected by volatility and the contingent situation, but you're running well ahead of 2,001 targets in all the 3 business areas. Where do you feel more prudent in increasing your 2021 targets? And linked to that, we discussed with one of your competitor if the increase in brokerage fees are VIX related or more structural. I think you mentioned that it is probably a bit of both.
But do you have any data to share with us regarding April in which volatility went down, but it seems that revenues remained as good as in Q1. Thank you.
Thank you, Gianluca. Starting from Unit Link, Unit Link numbers doesn't account for the inflows of April. We keep well separate. We provide numbers only for the financial advisers. And what kind of unit link?
Historically, we provide some advisory on the unit link, in particular with some risk engine approach. But since the end of the last year, we focused on managing activity and proactively some unit linked with the focus on ESG. So we define 5 different portfolios with different bias in SDG goals. And we are offered through the trade agents. And we start in November.
So now we are at EUR 250,000,000 more or less of underlying invested also in our funds because at the same time, we launched also some dedicated solution, ESG solution in our Luxembourg platform. So just to sum up, no inflows of unit linked, general unit linked accounts for the inflows that we communicate to the market.
Okay. Thanks. The promise
fee in April 0. We have some strategies that are not distant from the high watermark. And then we still have the runoff of selection. And we have some projection for performance fee selection for June that is around €810,000,000 Targets for advisory, brokerage and certificate. I think that certificate are at full speed.
EUR 150,000,000 to EUR 200,000,000 is the target we have in mind, and I don't see room to increase significantly and structurally these numbers. Advisory fee, I'm positive. I see room to increase and accelerate, and this is the reason why we increased also the target of the percentage out of total assets. And then brokerage fees. While I'm very confident to see increasing volume for the bank due to the partnership with Saxo and due to the focus on advisory.
I don't see any structural shift on this kind of activity. And I can give you some flavor because we have the advantage to see the numbers of Saxo that is an international platform. And the numbers, in particularly, in May, are very, very low compared to the March 1. So it's normal. Brokerage fees are correlated 100% with volatility of the market.
So it depends on your expectation on volatility. But if we expect a stabilization, brokerage fee will diminish. No way to change structurally the attitude of investor, investors, in particular in Italy. And I think it will answer all the questions. Thank you, Gianluca.
Yes. Yes, very clear. Thank you.
The next question is from Luigi De Belles of Equitasium. Please go ahead, sir.
Yes, good afternoon. Three questions for me. The first one is on the financial asset. Can you elaborate on your strategy on financial investments and on Italian government bond in particular? Or would you invest more in BTP given current rate or not?
Second question on capital position, where do you see the Jet 1 and RWA evolution for the next quarter and at the end of 2020? And the last question on Switzerland and international growth. Could you give us an update on strategy goal for 2020 in terms of inflows, recruitments and banking license? Thank you.
Thank you, Luigi. Let's start from the banking book. We set a target of Italian government bonds in the range of EUR 5,500,000,000 and we are maintaining constant this exposure to the Italian government bonds because we run several back tests. And also in a very, very extreme scenario, we could, let's say, react positively to the hurt, to the consequence. So for example, downgrading or something like that.
So for us, 5, 5.5 is manageable. And the rest part of the banking books is investing in other European government bonds, part in financial and corporate of very high quality. We started to diversify the banking book also thanks to some illiquid solution, but it will represent maximum 5% of the whole portfolio. And in terms, let's say that we project a yield on the banking book in the range of 0.8%, 0.85%, so not such a big increase, but necessary to provide a double digit growth in the net interest margin. And second, capital position.
We have in mind the range of 14.5%, 15.5 percent, as I'd say, in the projection. But since we are maintaining probably a much prudent approach in this moment to the banking book than what we expected in the past, The capital ratio could be a little bit higher. And about international growth, for us, international growth means 3 things. The first one is to provide, to say, a very, very innovative services of multi booking center to Italian clients in order to maintain the investment services in Italy and to diversify the deposit of the asset. This is our first priority and I think also the most important in terms of inflows.
And we confirm increasing interest in this activity. Let's say that the only risk is that you need the physical presence for this kind of activity. 2nd, the second business line in Switzerland is to develop a dedicated distribution channel there. And at the moment, recruitment activity is frozen. But I don't honestly see the urgency to accelerate also because then we have the 3rd priorities that is to provide portfolio management solution through our insurance vehicle from Switzerland.
So we provide unit linked by our Luxembourg platform solution, some unit linked that are managed directly by Switzerland. So if you think of these three goals, the most important is the first one. And I think that we will see positive inflows, in particular in the second half of this year, significant inflows. I have a target around between €300,000,000 €400,000,000 in, let's say, Luxembourg platform insurance solution for private insurance, we do expect the target around €200,000,000 €300,000,000 to sum up to the first number I gave you. And while in terms of development of a distribution channel in Switzerland, this must be considered as an opportunistic approach.
So if we see the opportunity, we're going to buy assets. But my priority in this moment, you also do the context of the situation, are to achieve the first two goals. Thank you.
Thank you.
The next question is from Elena Perini of Banca EMI. Please go ahead, madam.
Yes. Good afternoon and Congratulations for your results. I've got essentially two questions. The first one is about the recovery you mentioned in the customer's assets at end April, EUR 67,000,000,000 if I remember well. Can you split for us in managed assets, traditional life products and banking and banking products just to have an idea, not precise numbers?
Then the second question is a follow-up on the guidance that you provided on the net interest income. Have I understood double digit increase for this year as my line was not very good at that time. And then another follow-up, if I may, on the level of risk weighted assets. The question which was posed by my colleague before as I'm not sure to have understood well. Thank you very much.
Sorry, Elena. Can you repeat the last question? Sorry, the line will be disturbed.
Yes, yes. I'm sorry about that. It was on the level of risk weighted assets, I think, at year end or the trend. It was the question which was posed by my colleague before for a follow-up. Thank you.
Okay. Thank you, Elena. So the recovery. The recovery was well spread among all the asset management solutions. So let's say that if you consider that at the end of March, the loss was around 12.5 percent.
Now we are in the range of 8%. And that is well spread among funds and unit linked and discretionary accounts. The second demand is on capital, catch up with the question of TCR. And I answered that we have in mind the range of between 14.5percent15.5percent. But considering that we are confident to achieve a double digit growth in the net interest income, Probably, we will save, let's say, save some extra capital because we decided during this quarter and the next quarter to have a more conservative approach in investing in risk weighted asset.
So at the beginning, we set the target that I already said. Due to the crisis, we decided to reduce a little bit the use of risk weighted asset in the banking book, also because we see the opportunity to reach double digit growth in the net interest income, also saving part of the capital that we had in mind. When I say double digit growth, I mean that we are closer to 20% than 10%.
Okay. Thank you very much. Very clear.
The next question comes from Alberto Villa of Intermonte. Please go ahead, sir.
Good afternoon. I have three questions. The first one is on the management fees that were down. You explained the 2 basis temporary factor. I was wondering if the current turbulence of markets is posing any acceleration in the margin erosion or if you are confident to keep on a stable margin or a very slight decrease of margin, as you mentioned in the past?
The second question is on the tax rate. Apart from the spike this quarter, if you can provide us a guidance for 2020 in terms of tax rate that you're expecting? And the last question is a more strategic one. The current situation has created a lot of disruptions. You mentioned a lot of elements in your presentation, especially on the short term.
I was wondering if you can share with us what are your thoughts for the industry in the midterm, if you expect acceleration or any specific area of interest that could be a risk or an opportunity for your company? You mentioned the opportunities on the government side. Well, any thoughts on that would be helpful. Thank you.
Thank you, Alberto. Let's say that in terms of margin, I do not see an acceleration in the erosion of margins. I confirm a very slight, slight decrease in the next 2, 3 years. Of course, there is a more conservative approach in this space. So you saw the switch.
And I think that it's healthy to have some resources to reinvest when we start seeing a normalization. So I see upside, in particular, in our Luxembourg platform, more than downside in the Luxembourg platform. Where we see some downward pressure is, of course, for the runoff of the selection that is continuing, but it's slowing as expected and some little more down pressure on the, let's say, in the Financial Rubber Solutions. But at the same time, I see some more space on the insurance wrapper. So in the end, the sum should be almost 0.
And second topic, tax. So the tax rate suffered for a higher dividend this year, as explained. The result of taxes for this year will be will depend on the mix of revenues. We do expect a tax rate in Luxembourg in the range of 10%, 12%. And you know when there is the tax on dividend, it's around 4% and when the tax in Italy for the other revenue stream.
So it depends on the mix. If you have lower performance, normally you have a little bit higher tax rate, but it's in line with the historical average, I think. The 3rd topic is about my view on the midterm for the industry. I'm very positive for the industry, not only for Banca Generali because I see the need of the increasing need of advice for entrepreneurs, for and also for savers. So and the banks will be more focused on the balance sheet side, not on the services.
This is my perception. So I see the opportunity in the recruitment, but recruitment to me is not just about financial advisers, but it's only also for clients. And so I'm positive structurally for inflows for the industry as a whole. Then if the question is, do you see also some consolidation? I don't understand how small companies can survive in such a kind of environment.
Thank you.
The next question is from Federico Brada of UBS. Please go ahead, sir.
Yes. Hello. Good afternoon. And thanks for taking my questions. Just three questions for please.
The first one is a follow-up. If you can please actually give us the percentage of how much of your embedded assets calculate the measurement fees at the end of the quarter rather than on the average run? The second question is if you could give us a little bit more color on the feedback from clients on the Saxo platform, brokerage platform, especially given the fact that March was a pretty volatile environment as we all know. Just wondering if clients if you could share us a little bit more feedback from clients and if you can remind us how many clients actually now have full access to the platform and what stage is the implementation of this process? And then the last question is more related on performance fees.
I mean, after the changes that some of your competitors made in the last years, you will be the main with the highest contribution from variable fees. So I was wondering if this is something that is fine for you or you would consider maybe some changes in order to increase your reliance on non performance fee earnings? Thank you very much.
Sorry, Federico. Can you repeat the first question? I'm sorry, but the line is really disturbed. Sorry, just the first question I get.
No worries. The first one, if you can please tell us how the size of the assets, managed assets, which charge performance sorry, management fees at the end of the quarter rather than on the average loans. S? You say in the presentation, yes. No, no,
no, it's clear. It's clear. And now it's clear. I start with Saxo and then I hand over to Tommaso to give you the numbers on performance fee. Saxo.
Let's say that Saxo, as an average, in the last 3 months, account for 15% of the revenues. And in April, we opened up the platform to the B2B2C model. So until now, it was only for the B2C and internal clients because we wanted to test the platform. We had to complete the integration for, for example, derivatives and so forth. So I can say that after a first wave of platform only for the B2C of internal clients on April In April, we opened up the platform also to the B2B2C.
That means that financial advisers can insert order for the clients on behalf of clients. The 3rd wave is about opening up the platform to the B2C also for external clients. And we project this launch by the end of the first half of the year. So the numbers and the contribution to the revenues start to be significant because it's 15%. It's in line with our projection, and we see an acceleration in the second half when we will complete the release and the rollout on the 3 targets of clients: direct clients with a direct access to the platform, financial advisers and external clients.
These are the 3 ways. The first is done. The second has been completed in during April. And the last will be in June. The third question is about performance fees.
So, Tommaso, if you can
Yes. Performance fee are calculated on our Luxembourg platform, which is at the end of the quarter was around €15,000,000,000 of assets and in April we had rebound. So now it's around €60,000,000,000 of assets. Performance fee, as we said before, are expected to be low in April, but we have an expectation of positive performance fee by the end of the next quarter, especially in June, because some compartments are near to the high volumark level. So it could be if the market remains at the same level, we could have some performance fee in the next quarter, especially in June.
The range that we expect is between, I was we said before, between €8,000,000 10,000,000
And the last question on the performance fee calculation. I do not see in the short term any changes. We are thinking of a dedicated offer for different targets of clients, and we are working on a new offer and will be launched probably in the last part of this year. And we are considering also a different mix of revenues. So different mix between measurement fees, front fees and performance fee.
We don't have any deadline. We are just considering to develop also a dedicated offering for other targets of clients to increase the penetration of such a kind of products on the total wallet of our clients.
Thank you very much.
The next question comes from Angeliki Baidari of Autonomous Research. Please go ahead, madam.
Good afternoon. Thanks for taking my questions. Just 2 on my side, please. First of all, you mentioned in the beginning of the call that you have suspended some loan repayments from clients and financial advisers. Could you give us the amount of these loans that are effectively now in moratorium?
And what is the outlook for cost of risk this year considering the change in the economic environment? And the second question, the lower recruitment of financial advisors should have some impact, I would imagine, on that cost of growth and in general on the payout to financial advisers this year. So could you give us some guidance for this line item or the P and L, please?
Okay. I start with the payout, and then I hand over to Tomasso for the lending. On the payout, I would say that we have a target for the ordinary payout ratio that is in the range of 36%, 37%, and we confirm this target, while the cost of growth depends mostly on the volume and on the mix. And I think that in this case, let's say that we have normally a range between between 12% 14%, more or less, and we are probably in the lower range of demand probably. Depends on the acceleration of recruitment in the second part, but I'm pretty confident to stay under the level of the last year.
Tomasso, please.
On the lending side, if I if you understood correctly your question, the monetary, we had small amount because we just have €10,000,000 of payments which have been postponed and €100,000,000 of exposure, more or less. And I mean, we don't see this have any impact in terms of net interest margin because, of course, it's just cash postponement of the payment, but the interest still occurred in the lending book. So it's just a very small impact for us.
Thank you very much. And with regards to the potential impairments on loans, you don't see any spike there for this year?
No, because our lending are always lombards. Basically, we are over collateralized, and so we don't see any major impact from that. The level of the guarantees is still very high. And so we are we think that we won't have any pressure on that also if there is, let's say, the market goes down.
This is a great advantage for our bank because we have our lands are over collateralized. So we do not see we do not expect any, say, NPL in the future, even if we assume very, very difficult context and very, very deep recession in Italy.
Thank you.
The next question is from Domenico Santoro of HSBC. Please go ahead, sir.
Yes. Hi, good afternoon. Thanks for the presentation. Very clear, everything. Just a couple of follow-up on my side.
First of all, Page 26, when you talk about lending to SMEs via the state guarantee, Are we talking about the loans backed by guarantees as per the Credit Agricola in Italy? And if yes, I mean, those loans are pretty unattractive in terms of interest. So I'm surprised that if the answer is yes, you would leverage on this considering also the narrative that if banks that leverage on this lending, there will be also counterargument in terms of distribution of dividend. Is it correct? Are we talking about those loans?
Thank you, Domenico. Let's say that, first of all, you are right. We are in Slide 26, we are dealing with the lending activity with the guarantee of MCC, Mediocredito Centrale, who provide a coverage up to 90% of the loan. And we are providing this kind of facility only for our existing clients. And we have a target maximum at EUR 200,000,000 between EUR 150,000,000 EUR 200,000,000 maximum.
It's just about the guarantee at 90%, non the guarantee at 100%. In the guaranteed 100%, you must apply a predefined rate yield at 1%. In the one we are providing, you can have a target that is a little bit higher. For us, it's in the range of 1.5%, 2.5%. And in terms of capital absorption, I don't see significant impact because if there is the guarantee, the risk weighted asset is equal to 0.
Yes. This is very clear. Of course, you started with the query. My question is, given that it's already fixed at this point, the payment date for the dividend for 'nineteen, how confident you are because, of course, this is a discussion that I have every day with investors. How confident you are to pay this dividend according to the talks that you had with Banco of Italy, how realistic it I mean, the leverage use utilization of this guarantee, it might preclude you in a way to be totally independent in the distribution of dividend, which is I mean, I cover the banks.
So this is largely the narrative that basically investor they use for the banks, for the traditional banks.
Okay. I got the question, sorry. As of today, I'm confident 99% because we just postponed the dividend payment in October. And let's say that we do offer this kind of lending just to be, say, in line with the recommendation of Bank of Italy of providing liquidity to our existing clients. The ancillary services and we are providing these facilities to be compliant with the recommendation of regulators.
I don't know if Tommaso wants
Basically, I mean, it's something that we offer especially to our clients. So it's in many cases, it's also, let's say, a transformational landing that we already have. So also the impact in terms of leverage we don't expect to be to have any problem from this point of view. But the main point is that we offer to our clients and just basically for that is a change of the actual lending that we have. In many cases, some entrepreneurs can ask to access this kind of lending, and they are probably changing the guarantees there.
I think that they are collateralizing this lending activity.
All right. Understand. Very clear. Then can I ask you also a follow-up on margin and sales? First of all, I understand your point about margin compression over the next couple of years.
But what about more short term guidance for the Q2? I was just wondering whether the market effect on March is all in the gross margin that you presented in the slide or shall expect some further decline in the Q2? And then net sales for the end of the year, I know it's a very difficult situation, very volatile. Just wonder whether we should keep it as a consideration, the one that you're presenting in the plan as a fair number for this year as well as a normal run rate? Thank you very much.
Let's say that in terms of margins for asset management products, with these markets, you should consider the number of the Q1 as a sort of floor. So some recovery in the second quarter basically due to the discretionary accounts if the situation is confirmed as of today. So it will be below the last year, but higher than the 1 March. In terms of net inflows, we confirm our target of €4,500,000,000 even if probably the contribution of new financial advisers will be lower, while probably the productivity of the existing sales force will be higher and in line with this Q1.
All right. Thank you very much.
Mr. Mosa, at this time, there are no questions registered.
Okay. So thank you very much for the participation, and I'll wait for you for the next conference call. Thank you. Bye.
Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephone.