Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Banca Generali 2019 Preliminary 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. Gian Maria Mossa, CEO and General Manager of Banca Generali. Please go ahead, sir.
Good afternoon, and welcome to our full year results conference call. Let's start saying that 2019 results are for several aspects the best ever. On commercial side, we reached €69,000,000,000 of assets, €5,100,000,000 of net inflows and €4,700,000,000 of assets under advisers. On the financial side, net profit at €272,000,000 and the core net profit at €150,000,000 So thanks to these results and thanks to a very solid capital position, we're going to propose a dividend at €1.85 per share. Last but not least, all the initiatives we announced during our Investor Day in London are well on track And they will contribute positively also to the results of this year.
So starting from Page 4, there is a focus on the dividend proposal to the AGM. It is a 2 step dividend at the highest end of the guidance. In particular, the proposed EPS is €1.85 as we already said, of which €1.55 to be paid on May 2020 €0.3 to be paid on January 2021. So the overall payout ratio on total earnings is at 78% 79%. And this 2 step dividend payment has been introduced in order to smooth the dividend trend over the time.
Next page, so page number 5, you see our usual short representation of the P and L. Total banking income up 28.6 percent, operating profit up 41.1%. Also once included investment and cost for accelerating the strategies for M and A and some one off. If you consider then the contribution below operating line was positive, let's say positive, thanks to lower adjustment and lower tax rate. So net profit $272,000,000 the best ever for the bank.
Page 6, there is a representation of net profit trend just to give a medium term view. If you look at the graph bar, the gray part is about the variable net profit and you can see the volatility over 10 years, while the red one is about the recurring net profit. And you see this that's still improved over the times with impressive growth of 181% over the last 5 years. The driver of this growth is basically the asset expansion. Overall assets in 5 years increased 89% and this is connected to 2 main factors.
The first one, the increase of the FA network, up 24% and second, most important, the increase of the portfolio average of our financial advisers, more than 50% in 5 years. So from page 8, we go through the single line of the P and L, starting from the net financial income. Total net financial income increased 5%, despite the reduction of trading income and the negative impact of the IFRS 16 implementation. So in particular, if we focus on net interest income in 2019 was at €74,000,000 like for like basis 77.5 percent. And if we focus on the last quarter, the 4th quarter was in line with the third one.
For net interest income, we confirm for this year a one digit growth even in a context of lower yield compared to the last year. On Page 9, you can see the contributors of this increase of net interest income. First of all, asset expansion, €11,800,000,000 You see loans to bank, a reduction from €1,500,000,000 to €1,200,000,000 a slight increase in the loans to client from 1.8 to 1.9 and a significant increase in the financial assets up to €7,800,000,000 The second reason of this increase in net interest income comes from higher total yield. And on the bottom of the page left, you can see a breakdown of the 3 main contributors, in particular, a better management of liquidity, so loans to bank, the yield is at minus 0.12. The yield on financial assets increased at 0.82.
And then there is a marginal reduction in the yield of loans to clients, which is linked to the launch of lumbar solutions for retail clients at 1.13. On the right of the page, you see the loans portfolio that, as we said, is around €2,000,000,000 and we have more than €4,000,000,000 of collateralization. So 0 risk, 0 credit risk in this case. And on the bottom of the page, you see the classification of the banking book. In particular, 83% is held to collect, 17% held to collect in sales.
And if you look at the bond classification, total Italian govibonds are below 70%, plus 18% in European govibonds and 13% in corporate and financials. We continue to maintain a very conservative approach, bond maturity at 3.5, bond duration at 1.6. Moving on to management fees. Total management fees closed at $646,300,000 up 2% from the previous year, but with a very different trend during the year. If you compare the first half with the second, the latter is up 6% and the last quarter reached €169,000,000 Even most important, you can see the stabilization of the margin and we are confident to see this level of margins also for this year on like for like basis.
So once excluded the Nexaam and Vallejoer to compare the numbers historically. The most important news, I think, is at page 11, because banking and entry fees had an impressive acceleration, up €18,500,000 or 27%. And also the profitability of this revenue increase from 0.12 to 0.14. Looking at the quarterly trend, you can see a further acceleration. Q4 at €27,400,000 It means almost €10,000,000 higher than the previous quarter on the previous period in 2018.
So this strong acceleration is driven both by advisory structured product and brokerage fee. The always on page 11, on the right, you can see another way to present numbers. So we split the overall banking entering fees between the traditional components and the new revenue engines. So the green bar, as you can see, is stable or declining over time, while the darker red is about the new revenue engine. So from 14.9 €1,000,000 in 2017 up to 46.4%.
And as I said, more to come this year. Page 12, where it's a deep dive on the new revenue engine. Let's start with Advanced Advisory, 16.9 percent of gross fees, thanks to asset expansion, €4,700,000,000 asset under advisory and stable margins above 46 basis points. Structural Products gross fees at 13.9, well above the target 2021, thanks to more than €500,000,000 of new issues. So it means with margins between 2% to 5%.
Brokerage fees up to 15.6%. Here you see 2 different trends, a reduction in institutional brokerage fees and acceleration in the retail brokerage fees. To see the acceleration in brokerage fees, there is the graph of the quarterly retail volumes, 3rd Q4 of last year, €2,300,000,000 of volumes. And if you compare these with the same period of the previous year, you see the impressive acceleration. 3rd quarter 2018 was €1,100,000,000 Last, performance fees at €147,400,000 In terms of margin, it implies 0.32% on total on assets under management and 0.23% on total assets that is slightly above the historical average.
These performance fees in absolute terms are driven by asset expansion. Total assets of our Luxembourg platform increased by €2,800,000,000 and the contribution of the new Lux SIM to the overall performance fee now is above 50%. On the fee expense side, total fee expense at €391,000,000 with a payout to the network well below our threshold of 50%. And thanks to a lower cost of growth and it's very, very strong in the existing sales productivity. And also the payout to third parties declined driven basically by the renegotiation with the 3rd party asset manager.
On the operating cost side, the increase was of €24,600,000 of which 16 refers to one off like moving offices, like implementation of IFRS 16 and acceleration of the strategy plus M and A activities, so Valour and Nexstar. So focusing on sales, Sales personnel expense up $1,500,000 so a sound commercial activity, while core operating costs up €8,700,000 that it means 4.8%, so in line with our guidance. Focusing on the breakdown of the core operating costs, you can see that the G and A increased more or less 2%, 2.3%, while the acceleration was about the staff cost, 7.5%. This is linked to 2 main factors. The first one, we hired top talented people for the new initiatives.
So very important to well equipped for these new initiatives. And second, of course, we pay higher performance related enumeration for the top management and the middle management. Page 16, you see the cost ratios. Operating cost on total assets, 0.32, best practice in the market. And cost to income ratio were well below 40%, so also excluding performance fee.
On Page 17, you see the capital position. CET1 at 14.6%, total capital ratio 16.1%, also after including: 1st, the full application implementation of IFRS 16, almost 0.9%. 1st consolidation of Next Time Invalor and the dividend payout proposal for the AGM with a payout ratio of 79%. Liquidity ratio are well above the average, continue to increase and the leverage is well above 4%. So 3 main messages for this third part.
First part. First of all, the net interest income will continue to contribute positively at this year. 2nd, management fees are accelerating and we are very confident to keep stable margins over years, of course, like for like. And 3rd, the new revenue engines are well above expectation, and they will contribute significantly also this year. So now let's move to the commercial results, starting from total assets.
Total assets at €69,100,000,000 an impressive increase of €11,500,000,000 thanks to very solid inflows, 5.1,000,000,000 as well as very strong performance, €4,200,000,000 And in particular, if you look at the performance, total assets up 7.2% with a performance of the pure managed solution at 11% and the performance of the traditional insurance solution at 2.7%. So we more than offset the negative performance on 2018 and I can say that our clients are very satisfied with these numbers. Page 20, you can see the total asset breakdown. It's impressive the acceleration of managed solutions, up €6,700,000,000 traditional life policies up €1,100,000,000 and banking products up 3.7 percent. Overall, the managed solutions weighed 49.3% on total assets.
And if you look at on the top of the page on the right, the breakdown of the managed solution, you can see that almost all components increased. So it's a well diversified portfolio. Page 21, there is a focus on asset under advisory. First of all, now assets under advisory account for 6.8% of total assets. And you remember, we gave a target between 7% 8%.
And the best practice of the market is at 17%. We are very confident and we will review these targets probably in June. Why this such an impressive acceleration? 2 main reasons. First of all, we are seeing an increasing number of active financial advisors.
Now almost 60% of the financial advisor network provide these kind of services to clients. And second, an acceleration in number of contracts. It's not just about absolute numbers, but also average contract for financial advisers. Page 2,222, you can see a focus on our Luxe symbol platform, almost 25% of total AUM. First in the center, you see an asset by Sika.
So Luxim accounts for €10,600,000,000 On the right top, you can see total assets in terms of share classes, where you can see the important acceleration of the retail fund classes from 5.5 to 7.2 and the continuing growth of the institutional client classes. Just as a reminder, the price of institutional share classes selection and Luxim are almost in line. So this which do not provide any penalization or any P and L. On the bottom of the page, you see retail and classes and the breakdown. So the Luxim account for €3,600,000,000 and we continue to see the runoff of the selection now is at 3.4%.
Consider that we see a slowdown in the runoff. So the LACIM activity more than compensate the numbers of the selection and we are very confident of the numbers of percent is slightly above the numbers of 2018. On the left, you see that the mix is similar, but the trend is completely different. If you look at the graph on the right and you see the red bar, the contribution of managed assets started very slowly due to the crush with the market. So $100,000,000 and close with $1,000,000,000 And we continue to see this acceleration also in the 1st part of this year.
Page 24, another way to see at the inflows is by acquisition channels. 76% of net inflows comes from the existing sales force, definitely above our range of 55%, 60% and is well spread among the FAs. And also the black bar is in line with the past that is about the financial advisor leaving the company. In terms of recruitment trend, as we announced several times last year, we slowed down the activity, so 86 new colleagues. You can see a recovery in the last quarter, 27 new colleagues.
And I confirm that from this year, we will start again with our, let's say, standard path, so around 100 financial advisers per year. So it means 10 per month with some seasonality. Page 25, there is a focus on the inflows on January. In January, sorry. First of all, total net inflows very strong, €438,000,000 You can see a comparison with January of the previous year is impressive, the acceleration of Laxim and BG Steel and Libero and you see lower interest in the traditional insurance policies.
And again, also in February, we are seeing an acceleration in the Luxim and in insurance wrappers. So very confident to have also great number in February. Assets under advisory continue to perform better than expected. We are almost at €4,900,000,000 so almost €200,000,000 above the number at the end of 2019. And the recruitment activities started pretty well, 8 new colleagues in the year.
So in the 1st month, sorry. So again, to sum up this part, 3 takeaways. The first one, last year, we saw an impressive acceleration of total assets with a significant performance. So clients are happy. And we more than offset the negative performance over the previous year.
The commercial activity is very strong and sound and is well spread among the financial advisers. This is probably the most important thing for a sustainable growth. And 3rd, if you look at the overall mix, the overall mix has been changing and improving over time significantly, and we're starting the right way the 2020. So the last part of the presentation is about business update. And as you know, our 3 year business plan is based mainly on a multi project approach.
And I'm pretty sure that this year, we'll see the impact of all initiatives for the 1st year. And we divided all the initiatives in 3 main blocks. What we call key business drivers, it means new initiatives on core business And in particular, there are news on Luxim, ESG commercial approach and wrapper solutions. Then there are new revenue engines that will start providing support to the P and L this year and will include I include lending, private markets for retail clients and internationalization of the bank. And the last but not least, there is a cluster of the new revenue engines that started contributing significantly last year.
So advanced advisory, certificate and BG Saxo. And consider that on these three initiatives, we are planning a dedicated roadshow for our financial advisers to keep the focus very, very high. So now let's go through these 3 plus 3 initiatives to give you the flavor of the number of initiatives and how we are implementing the strategy. Page 28, we start from Luxim. You remember that the Luxim is a project based on innovation of the investment solution and on the concept of diversification.
And you have a representation in the pie chart. The first graph, the gray bar represents the inflows, the quarterly inflows. And you know we start launching the Lux SIM with different waves. And in the second half of this year, there will be the 4th wave. And you can see the correlation of numbers with waves.
So again, we deliver on promises. When we launch initiatives, we see an immediate impact on the numbers. There is a new initiative in the lab scene that is about saving plans. During our Investor Day, we said now we will provide solution also for affluent, upper affluent clients. We worked on that topic and on the second half of last year, we start providing these new services to clients.
And if you look at the numbers of January, are pretty impressive. So €50,000,000 of net inflows for the overall plan and February is still accelerating. So again, this can create a good support to the inflows over the years to the Luxim. And the last but not least, Luxim is a pretty recent story. So we launched it, let's say, couple of years ago and we start working on retail last year.
And if you look at the participation rate of the financial advisers, we have just at the beginning because 50 phase are with 0 of with total exposure of less than 5% of total So we are confident to see an acceleration this year. Page 29, you see the sustainability approach of Banca Generali. First of all, thanks to Generali, we had the opportunity to present our new commercial approach on SDGs in Davos because we think we are 1st mover on this topic. So it's not about products. It's well above and beyond product because we allow, thanks to a proprietary platform, the clients to select their own sustainable development and goals.
And we optimize portfolios and we provide the reporting to emphasize the positive impact on society of the investments. If you look at on the top right of the page, you see the inflows connected to this new platform. And I have to be honest, the number are very impressive and is probably the number that impressed me more because we had €800,000,000 of net inflows, thanks to this new proposition. So it's a new it's on top of the existing proposition. It's a different way to build the investment solution driven by the personal feeling and the personal choices of clients in terms of sustainable development goals.
And we've just started also collaboration with Gentale and we provide this approach for a dedicated unit link in Generali Italy. Page 30 is the 3rd levers of core business. So we said, the Laxim, very strong support from several initiatives. ESG, a new commercial approach, very supportive for inflows. And now the insurance solutions.
In the last quarter of the last year, we introduced a new concept of Stila Libero. And this explained the acceleration of the last part of the year of numbers and the good start of this year. And we are ready. We've just launched a new very important initiative. It's called Lux Protection Life.
What is about is Luxembourg solution generally launched a very, very efficient, in my opinion, probably best in class private insurance solution. You know that this kind of solution are probably the most wanted product in Europe. Last year, almost 20 €3,000,000,000 of inflows, of which 7 are from Italian clients. And now we are there. We are ready.
We start work on this product. The first inflows are pretty impressive. We are accelerating and I'm confident that also the large protection life will provide the support to the numbers of our insurance wrappers. So moving on other initiatives. So new revenue engine that will start providing support to the P and L and value to clients.
Page 31. 1st of all, lending. Last year, we worked a lot. We worked a lot to build a new team. We worked a lot to create a new platform and to optimize processes and procedures.
We delivered and we can start seeing the numbers because in the last quarter since we completed the journey, the lending activity accelerated. So almost 50% of the all activity over the last year was about the last quarter, the Q4. So we are confident to reach the targets we announced during our Investor Day and there are several initiatives ready to be launched. Page 32, a new initiative is about private markets. As you know, we started providing this kind of solution few years ago.
We are considered best practice for professional investors with €1,500,000,000 We decided to extend this kind of offer also to clients not professional, but only among after affluent and product clients. And with strict control on the maximum exposure on these products. So we have threshold at 10% or 20% depending on the client of the clients. We are going to launch 2 new initiatives, 2 new solutions. The first one is a TIER, so an investment fund.
And the second one is an Antif, coherent with a new regulation, European new regulation. Common characteristics, 1st of all, very, very well diversified, multi asset and multi asset manager with an overall exposure to private debt at 70%, so in line with the risk profile of our client. Here the target is on a 3 year time horizon of €1,000,000,000 So in line with the targets we already reached with professional clients. But it's another way to provide quality and services to our clients, starting from managing reputational risk. You know we are different.
We think that first of all diversification, second the solution we propose must be in line with the risk profile of our client and we start very slowly to see also the appetite for this solution. Page 33, where is the internationalization. The internationalization project has 2 legs. The first one is about Italian clients with an Italian private bankers in Italy and investment solutions in Italy willing to diversify the booking center. So I manage money in Italy and I deposit this money in Switzerland.
We launched this service with advisory service, it's called BG International Advisory at the end of the last year. We already closed €60,000,000 of contracts. There is a great appetite, but we want to proceed very slowly. And I'm confident that we will gain momentum with initiatives because you have to think of all the Italian clients that once in the life apply for capital shield, voluntary disclosure and so forth. You have €150,000,000,000 of Italian assets abroad.
2nd leg is about a dedicated distribution channel in Switzerland. We acquired Valeur. We complete this acquisition in October last year, so with some delay. And now we start with the commercial activity. So to conclude, the 1st year of our 3 year business plan closed in line or above the several targets that we set in terms of asset growth, sustainable profitability, shareholders remuneration.
And we are really confident to deliver also this year. So now I open the floor to questions. Thank you.
Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer The first question is from Gianluca Ferrari with Mediobanca. Please go ahead.
Yes. Hi, good afternoon. I have four questions, if I may. The first one is on the level of deposits you are keeping to the ECB. If I recall correctly after the Q3 2019, you still had €750 ish million.
I was wondering if at year end this amount declined and if so what was the level at the end of the year? The second question is on margins and the outlook on margins given that the runoff of the retail class of selection is slowing down. So I was and by the way, the margins on the selection of retail were pretty high in the past. So I was wondering if this is giving a bit of support to the 140 basis points you reported. And also linked to that, if you can share with us the margins on the 2 closed end alternative funds you just mentioned during the speech?
The third question is on the pretty relevant 11% weighted average performance to clients. It is much better than the one reported by some of your peers. And I guess this is also due to the fact that your pricing is much more sustainable than others and by the way with less equity exposure. So I was wondering if clients do have the perception that you are returning better results with lower costs and if this is giving an opportunity or still the sensitivity is pretty low on this point? Last is a clarification on the DV.
Should we think about the ordinary DPS going forward? So I guess you said in the past you want to give a story of Banca Generali paying a gradually increasing DPS. So is the 1.55 or the 1.8 the new base for the 2020 DPS? Thank you.
Thank you, Gianluca. So let's start from the first one, then I will hand over to Tomaso. But I think that the deposit in ECB are almost in line with the last year. I have in mind the €600,000,000 at the level between €600,000,000 €700,000,000 but Tomas will be more precise on this topic. On margins, you are right.
I said that in one of the last conference call that 2020 will be a turning point for two main reasons. The first one is a slowdown in the outflows of selection. And I think that we still see, at least for the first half, some outflows and then a reduction. I'm sure that next year will be much better. And second for the reduction of the weight of the traditional insurance products on our offering because you know the traditional life insurance policies have a lower margin for the bank.
So for these two factors, I'm confident and I think that these two initiatives support the overall margin in the management fees. Ben, you know that all the new revenue engines have been launched also to eventually compensate any reduction and to be sure to maintain the guidance we announced during our Investor Day. But let's say the worst is over, so I'm confident. And further, the perception of the clients on the total cost and performance, I would say that my impression is something is changing. And as usual, these changes, of course, thanks to media, so the press and regulators.
And my impression that the focus on total expense ratio is increasing. Probably it's not something about the next quarter, but for sure in the next 1 or 2 years, something will definitely change also on the client side, driven by external factors, as I said. So I think that in the medium term, our total expense ratio will provide an extra support for our financial advisors. And also on the new alternative funds, we decided to have the margins in line with our, say, asset management products. And Tomas will be more precise, but let's say that it's almost in line with our Luxim, probably a little bit lower.
And so it's in line with the discretionary accounts basically. And last but not least, to be very, very concrete, the floor, let's say, for next year will be 1.55%. Of course, we have in mind different numbers, but we have to be sure to give a steady growth in absolute terms. So to me, 1.55 is in the new floor. Of course, we are working to overachieve the results as usual.
Thank you.
Thank you.
You want to add anything more on the
on liquidity? I confirm that we have the tiering with the ECB, which is around €700,000,000 And so also at the end of the year, we had more or less the same exposure, probably a little bit more because we had some more liquidity, but that was the range at year end.
Yes. Just another thing. On the, let's say, private markets, there, there is a real risk on total expense ratio. And we worked a lot to stay around 2.5% as overall ongoing charge. So we position the bank much lower compared with, let's say, the main, let's call, competitors.
Okay. Thank you.
The next question is from Elena Perini with Bancaimi. Please go ahead madam.
Yes. Good afternoon. And my congratulations for your results, which were very, very good indeed. Then I've got 2 questions. The first one is on your outlook costs for the current year, if you can elaborate a bit more considering that you will have Valeur and Nexum consolidated on a full year basis?
And then the second question, which is also related to this and to the previous ones of my colleague on your margins. What kind of progressions would you expect in your net result considering the EUR 150,000,000 current as a basis. And I don't know if you have I know that is difficult, but I don't know if you have any expectations on performance fees considering also the level of January. Thank you very much.
Thank you, Elena. So on cost side, the second like for like basis, we confirm our guidance 3%, 5%. The overall impact of Next Time Envalor should be around €20,000,000 but €90,000,000 full year impact. And on the recurring revenues, let's say that I'm very impressed by the acceleration of the new initiatives as well as the numbers of our Laxim. So I'm very confident.
If the markets hold on these levels, you will see very, very impressive numbers in general and asset management products and in all the initiatives. Performance fees for the 1st month were very strong, the performance fees, around €30,000,000 pretty impressive. And we have all the Luxim at or very close to the highest level. So it depends on the market. We are very, very focused on the core revenues.
And I think that in particular in the second half, all the initiatives will be up and running. And this is very supportive and sustainable because we are not focused on single initiatives that are, let's say, that we discussed about 9, but there are also others that for the sake of time, I didn't present. So I'm confident because I see that the commercial activity is really sound and I see the capacity of the bank to deliver these new initiatives.
Okay. Thank you very much.
The next question is from Domenico Santoro with HSBC. Please go ahead, sir.
Hi, good afternoon. Thanks very much for the presentation. I do have a couple of follow ups and I beg your pardon actually if you already answered part of this question, but I missed the initial part of the presentation. On the cost, including the acquisition, does it make sense because of the new perimeter? Does it make sense a number of €235,000,000 more or less for the next year.
I was just wondering whether I'm correct working out all the math. And I remember that you gave a top of the range guidance of EUR 60,000,000 for 2021, including, of course, acquisition and other. So I'm just wondering whether that number still makes sense or at this point is too high. Then on the sales for this year, wonder whether you can give us a sort of a guidance in terms of sales. On the new initiatives, I mean, there is a big chunk of revenues that is emerging in your P and L.
In part, as you mentioned during the call, you already basically reached some of the targets. So I'm just wondering whether you can give us more visibility on this revenue stream for this year. And then on the dividend, sorry to be long, well done actually for smoothing over the payment of the dividend. That will be helpful for the shares. How shall we look at this additional part as a one off, as an extraordinary dividend?
Because given the performance fees, you're probably going to have another very good year. So I'm just wondering whether for the benefit of our model, we can use the 7% to 80% as a number for the payout. Thank you.
Thank you, Domenico. So starting on cost side, you are almost right on the numbers you mentioned. On the sales, I would say that the beginning of the year was very, very strong. February is going very well. The target of our business plan is 3.8%, 4.2% from the Italian business, the traditional Italian business.
Let's say that we are well on track. It's probably too early to review the target. But let's say that I'm confident. When you see that 80% of the financial advisers provide positive inflows, they say that it's not my priority. I see very, very strong results and the priorities on, let's say, margins and on diversification.
In terms of new revenue streams, new targets, I'm we are thinking of organizing a roadshow in June dedicated to these new initiatives. And in that occasion, we will communicate new targets for all the initiatives. And on the dividend side, let's say that the dividend policy won't change. So the payout ratio will be between 70% 80% of total earnings. We want to keep some flexibility in splitting the dividend just to be sure to stabilize and to have a solid, let's say, stable growth in absolute terms.
So we changed the mechanism in terms of the opportunity to have different steps just to move the absolute level. But let's say that the range, 70%, 80% won't change over time. And Camacho, do you want to add something
on cost? On cost, let's say that I confirm that your expectation is in line with our internal forecast for next year and that also we can confirm the evolution that we did on total cost and on core cost for in our investor presentation. Let's say that this year has been 1 year where we had some exceptional costs, which were more linked to the new acquisition and also to the integration of those new entities in the group. And so we have been also accelerating all the initiative because we had a very strong P and L in the year. So we decided to start to invest in the initiative.
That's also the explanation of the evolution of our growth in the last year.
Sorry, can I just ask a follow-up on the dividend because I mean it's important? The decision to pay this $0.30 was related to the level of performance fees or there are other parameters that we should take into consideration, please?
No, the level of performance fee, you are right. So we consider the variable profit as a part of the sort of stabilizer of the absolute dividend. So when the performance fee exceeded the expectation, we try to move the dividend in this way.
Okay. Many thanks.
The next question is from Alberto Vila with Intermonte. Please go ahead,
sir. Good afternoon. Three questions left from me. The first one is on the inflow mix. You mentioned the improvements you are seeing and they were evident in the second half of last year and even in January.
I was wondering if you believe this is mostly due to the market performance, the low yields or it's more kind of structural and so we can expect it to continue even in tougher eventually market conditions going forward. I remember in the past obviously with the risk off attitudes a lot of clients may be changing their asset allocation towards traditional life products. I was wondering if you believe this inflow mix will continue even in the future. And so if we can expect if you can give us an idea what's your target in terms of inflows into managed assets for this year? And the second, the disconnect, is the contribution you're expecting coming from recruitment, which was very low in 2019 due to the reason you mentioned.
You now are looking at addition of 100 new financial advisors. So I was wondering if you expect the mix to go back to the historical average in terms of contribution of recruitment or if you still believe the organic growth will be sound and strong even in 2020? The second one is on the Switzerland. You mentioned in the past that you wanted to have a banking license in Switzerland. I was wondering if there are news on that side.
And the final one is on the Luxembourg Protection Life product. You mentioned in Slide 30. I was wondering if you can elaborate a little bit more on that product if you think it's kind of significant add on in terms of future net inflows and how it compares in terms of margins to the others products? Thank you.
Thank you, Alberto. So inflows and mix, On one hand, you know there is you're right, there is a correlation between market performance and quality of the inflows. On the other one, I think that we did a great job with Luxim and with the insurance wrappers to reduce this correlation. So I expect significant contribution from these two kind of products even with some more volatility in the markets. Of course, in case of crash is another story.
But let's say that normal volatility, I can confirm a positive mix with a contribution of the Lux Sim and of the insurance wrapper at least in line with the last year. Recruitment, I have in mind a contribution of existing sales force at 60%, so a little bit higher than what we communicated during our Investor Day, so between 60%, 65%. Just because I think that the health of the network is pretty impressive in this moment. There is great interest on the bank, brand awareness and so forth. So I would say 60%, 65% would be a great target with an increasing contribution also from recruitment as we said.
Banking license, you are right. We set as a deadline, let's say, the end of March to inform all our strategic choices. So I confirm that we are really interested in having a banking license in Switzerland. We have 2 options: Greenfield, so changing, as I say, the license of BGB Valleur. Let's say that to set up a new banking license in Switzerland, it takes from 6 to 9 months or an acquisition.
But you know the first rule of acquisition, the first two rules is 1st, nonputational risk and second, must be accretive for the shareholders. So we are keeping the 2 option and we will decide I think in the next 2, 3 months. And the last, sorry, the Luxembourg Protection Life. So it's let's say that the problem is private insurance. The main difference is with the existing offering, so for example, Lombard, is that is has a greater flexibility.
You can mix traditional life insurance, for example, French products with, say, the financial markets, financial investments. You can mix liquid as well illiquid assets. And you have also some insurance riders. So it's a very well organized product. It's a real wrapper.
And we can provide both deposit and portfolio management from Italy as well as from Switzerland. Margins are almost in line with our BG Stile Libro. Consider that the clients of these kind of products are normally private or ultra network. So if you offer insurance wrappers to clients with €20,000,000 of course, the margins are a little bit lower than the average of our clients. But it's almost in line with the condition we apply in Italy.
So let's say that in my opinion, there is a great momentum with initiatives and you have no alternative to Lombard. So could be a success. Thank you.
The next question is from Federico Braga with UBS. Please go ahead, sir.
Yes. Hello. Good afternoon, everyone. A few questions from my side, please. The first one is on the fee margins.
I mean, on a blended basis, on a pro form a basis, including also the acquisition, am I right to say that the gross management fee margin is around 137, 138 basis points? And if so, if you can confirm these and what you would be your guidance on a pro form a basis for 2020? And what would be the impact also from flows coming from Switzerland on the pro form a fee margins in your opinion? And more in the longer term, given where rates bond yields are now, would you expect what's the impact that you would expect on fee margins and especially for insurance wrappers and insurance products? And the second question is on the recruitment activity for 2020.
If you can please give us some guidance on what we would expect to be the cost of growth for 2020, given that you expect some pickup in the recruitment. So if you expect a little bit up from 11% of 2019 and if yes, to what extent? The last question is on the real asset initiatives, just to have an idea of what are the incentives for your financial advisers on these products, if you plan to pay the same percentage in terms of distribution fee as a percentage of the recurring fees of the management fees? Or you expect to pay higher payout on these products and more in the longer term? What do you think is the incentive of your financial advisers to push significantly to push on this product given the fact that they cannot move this asset away in a scenario where they should decide to leave Banca General in future?
Thank you very much.
Thank you, Federico. I start to answer the question then I hand over to Tommaso. First of all, on pro form a basis, I would say that the dilutive effect of Time and Perre should be around 1 basis point, I would say, 1 maximum 2 basis points. So if we say EUR140 1,000,000 to EUR 141 for the ordinary business, it could be slightly lower 140. And in Switzerland, Switzerland shouldn't be so dilutive.
It depends on the target of the client. But let's say that at least for the first leg, the profitability should be almost in line with the Italian one. Cost of growth probably a little bit higher than 11%, but lower than the average of the last 3 years. And 4th, real asset activity. As I said, 1st of all, the margins of these products for us is in line with the existing offering.
We do not incentivate the financial advisers on these initiatives because misselling is would be an agner. And I'm really worried about same initiatives of some competitors. You have to manage it with care this kind of solution. It's value if you sell properly. And let's say that it's true that it could be a way to retain clients.
But as I said, the max exposure would be around 10% and consider that we have traditional life insurance policies that are in some cases 25%, 30%, probably in terms of retention is much stronger the effect of the traditional life insurance than real assets. Real assets work if clients understand very well the liquidity risk that in our case, in our minds as a positive payoff in particular now, so it's a place to invest. First of all, for professional, second for private clients. And this explain why we extend this service on the upper half and the private clients. On I don't know if Tommaso wants to add something.
Let's say that coming back on the acquisition of Valera and Exxon,
the impact on the full year is 1 basis point in terms of dilution of the margin. So it should be around 5.59 percent. And let's say that to evaluate this, we have to compare the profitability of those assets to the price of the acquisition, which has been so in line with the profitability of those assets. And looking forward, we have to integrate, of course, the clients and the offer that today we provide to those clients with the one of the Banca Generali. So for example, for Nextum, today we don't have any insurance penetration.
We don't have banking solution. And so to evaluate the evolution of Nexa, we have to think also that we will have an activity of cross sell and up sell of the offer.
And on the sorry, on the ordinary payout ratio for liquid solution is in line with the ratio of the managed solution.
The next question is from Filippo Pini with Kepler. Please go ahead.
Yes, good afternoon. Two questions, if I may. The first one is on your guidance of NII or a single digit growth. Could you tell us how much that should come from an increase of the lending to client? And second is on your capital ratio.
Now you are at 14.6% in terms of CET1 ratio. Should we expect this ratio to going closer to the 16.5%, 17% of the past years? Thank you.
Thank you, Filippo. So in terms of net interest income, I do not expect a significant contribution from lending for this year. I expect that we start with the commercial activity. The full effect will be next year. So great part of the increase will be driven by the banking book, still driven by banking book.
So, let's say that you will see some contribution of the lending activity in the second half and most important next year. And the second question was about capital ratio. Let's say that we are confident to see higher capital ratio during the year, not necessarily at the historical leverage level because for optimizing the banking book and to diversify some capital will be absorbed in the banking book.
Okay. Thank you.
Thank you.
The next question is from Angeliki Bayraktari with Autonomous Research. Please go ahead.
Hello. Thanks for taking my questions. Three questions on my side, please. First of all, what is the minimum CET1 threshold level for management? And how low can the CET1 ratio be from the current level, considering your future distribution plans as well as M and A?
Related to that, does the higher distribution this year indicate a lower appetite for bolt on M and A deals going forward? Also considering the 2 acquisitions that you completed in 2019? And last question, could you please update us on your relationship with Generali and whether you consider your parent would have any interest in reducing its stake in case of a more transformational M and A deal? Thank you very much.
So thank you for that question. First of all, we set at managerial level a sort of floor at around 13% for CET1. That is well above Bank of Italy requirement. And they said that the appetite for acquisition is always the same. What I'm seeing is that in my opinion, the prices especially in Italy are still too high and we don't need any acquisition to confirm our targets.
So if we see any opportunities, we'll take an advantage for our shareholders. But we are not in a hurry. So as usual, it's more an opportunity when I press the acquisition. And I'm confident to deliver results with or without acquisition. But now in this moment, I don't see the targets in Italy.
You say that when you see recovery in the market, all the players seem to be much better than a few months before. So we need to see some uncertainty in the market to see again some opportunities. Generali, I'm sorry, but I think you should ask this question to them. I can say that I'm very happy with Generali. We can offer best solution and I think that is a great value today in these markets having Generali as a 1st shareholder and we help them on some initiatives.
So there is a great satisfaction from both side. And I don't see it I don't know anything about any reduction of stake at this moment. Thank you.
Thank you.
Mr. Moza, there are no more questions registered at this time.
So thank you very much for attending our conference call. And if you have any other question, please let us know. Until the next time, bye. Thank you.