Good afternoon. This is the conference call operator. Welcome, and thank you for joining the Banca Generali first quarter 2019 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Gian Maria Mossa, CEO and General Manager of Banca Generali. Please go ahead, sir.
Good morning. Welcome to our first quarter results conference call. 2019 started very well. I can anticipate that we see further improvements in the numbers in the second quarter. We closed the first quarter with EUR 61.1 billion of total assets. That is the highest level ever for the bank, thanks to very good performance of the underlying assets, and thanks to solid inflows. You already know that in the first quarter, total net inflows were at EUR 1.4 billion. Considering also the inflows in April, we are very close to EUR 2 billion. In terms of a phased network, we exceeded 2,000 financial advisors. Probably even more important, we exceeded, in terms of portfolio average, EUR 30 million each. You know that for us, portfolio average is a proxy of the quality of our financial advisors. On P&L, reported net profit at EUR 66.6 million.
That is one of the best quarter ever for the bank, thanks to a growing diversification among the recurrent revenues and a positive contribution of performance fee. Recurrent net profit has slightly increased at EUR 32.4 million. We maintain a solid capital position also after the first implementation of IFRS 16. That implies a one-off of 0.8, 0.87, depending on the capital ratio we consider. In the next slide, or slide page four, we have a focus on the new accounting principle, IFRS 16. That is the new accounting standard for lease contract. It has become effective from this year, January 1st. Basically, you have two main impacts. The first one is on the P&L. The second one is on the balance sheet.
On the P&L, the impact is negative in the first year of the lease contract. Then you have a recovery in the second part of the contract, because at the end of the day, it's a zero-sum game. Looking at in the bottom of the page, on the left, you can see the impact on the P&L. You have a restatement of some items from rental cost to depreciation. You have some passive interest. Total impact is around EUR 400,000. On the balance sheet side, instead, we already said that the impact is about 0.8 for the CET1. 0.87 for the total capital ratio. Coming back to the results, page five, we have a snapshot of our P&L.
We have a very solid increase in the total banking income, +17%, mainly driven by an increase in the net interest income, as well as in the gross fee, we say that performance fee played a very important role. On the cost side, we have some one-off, an acceleration of the cost for the implementation of the strategy. Net is an increase of 7.5%, net of one-off and IFRS 16 is 5.8%. In this quarter, we have also positive contribution from the items below the operating line. Net-net, the net profit is EUR 66.6 million. At page six, we can see the breakdown of the net profit in two main components. As we said, the recurring profits and the variable profits. Variable profits increased from EUR 17 million to EUR 34 million, thanks to the sharp recovery in the market.
While focusing on the recurring profit, we have a positive impact from the net interest income, so the recovery and the normalization of the yield, a temporary drag from the management fees due to the dip in January. We will see later during the presentation also the recovery in the management fees. Now in the next session, we will see, as usual, all the single items, starting from the net financial income, page eight. Like-for-like basis, as you can see in the chart, the net interest income increased by EUR 1 million. This EUR 1 million is partly offset by the implementation of IFRS 16. The net result for the quarter is EUR 15.9 million with a marginal increase in the yield of the net interest income from 0.7% to 0.71% on year-on-year 0.64%, 0.71%.
In the quarter, we had also some trading gains linked mainly to the trading on currencies. Page seven is useful to understand what's happening on the yield of the different parts of our total assets. First of all, we reached EUR 10 billion of total assets, as expected, the liquidity in the quarter went down below EUR 1 billion, as announced in the previous conference call, in favor of the banking book. In the table below, you can see below the bar chart, you can see the different yields. Two positive aspects. The first one is that the cost of retaining cash decreased from 0.25% to 0.21%, the yield in financial assets increased at 0.8%. I'm very positive on the positive contribution of net interest income in the next quarters. We continue to maintain a very conservative approach.
As you can see, maturity and duration for both total portfolio as well as held to collect and safe with a maturity of 1.4 and duration 1.0. Page 10, there is a focus on management fees. Management fees are slightly down on a quarterly basis due to the impressive correction of the markets at the end of December. First quarter at EUR 155 million. I think that's really interesting to focus on the monthly trend. There is a focus on the trend in the monthly management fees. As you can see, in January, there was a contraction from EUR 52.3 million to EUR 50.6 million, then a progressive recovery up to March EUR 52.8 million. We are very optimistic on the management fees also for the second quarter, thanks to the expansion of the assets and rebalancing in the mix of the products.
The total profitability on the management fees in March was 1.42%, in line with our business plan. Page 12, we can see the other fees. The other fees increased at EUR 17.8 million. On a year-on-year basis, we have an increase of around 7%, despite a significant reduction in the entry fee linked to the managed portfolio. You know that the front fee in the insurance and the asset management product are strongly linked to the performance of the market. After the correction in January and February, these entry fees were very poor. Despite this negative contribution, overall, other fees climbed at EUR 17.8 million, basically thanks to a significant acceleration in advisory fees. On the other entry fees, in particular, the focus on certificate and structural product, you know that this is part of our business plan.
In the first three months, we had new issue for EUR 50 million. In April, in just one month, we almost doubled the total issue. There is an acceleration on the deployment of this new initiative on the network, and I'm very confident of the next quarter on the positive contribution of front fee as well. Next page 12, performance fee. As I said, positive contribution for the quarter. Also, the second quarter started pretty well. In the first quarter, the total performance fee was at EUR 35.2 million. That equals to eight basis points on total managed assets. The new performance fee mechanism applied to almost 50%, and as I said, in April, we had a very positive contribution of both offering, the first mechanism to work out performance fee, and the new LuxIM. More or less in April, the contribution was 50/50.
Page 13, we see the cost starting from fee expense that overall decreased by EUR 2.4 million, from EUR 96.7 million to EUR 94.3 million. Payout to the network. You know in the first quarter, there is a strong seasonality, some one-off, it's difficult to comment the single data. Let's say that overall, we are confident to confirm our target for the full year. For the payout to third parties, you see how we continue to reduce the overall cost of the third party, let me say, for a sub advisory mandate to our asset management Nextam platform. Page 14, we can see operating cost. The total cost suffered two main things. The first one is one-off. One-off for moving the quarter and one-off for IFRS 16, then an acceleration of the strategy.
Again, due to this seasonality, I think it is important to confirm our year-end guidance in the range of 3%-5% increase in the core operating cost. On the right side of the page, you see the breakdown of core operating cost, this is useful to you to understand the restatement. As you see, we have higher depreciation for EUR 4.4 million and offset by lower rental costs of EUR 4.7 million. On top of that, there are the passive interests that we already commented in the net interest margin. Page 15, we have some ratios. Operating costs on total assets reach the lowest level, 0.33%, cost income confirms the efficiency of the bank with a cost income adjusted, excluding performance fee and some one-off cost at 40%. Page 16, we have the capital position. First of all, we confirm ratios well above the SREP ratios.
As we said, there is a one-off impact due to the full implementation of IFRS 16. Third, very conservatively, we assumed 100% of earnings, of first quarter earnings, as a retention for covering the dividend policy, the new dividend policies of EUR 1.25 as a floor, as a dividend paid for 2019. To sum up, looking positively at the second quarter, I like to say that we see an acceleration of most of the revenue sources, in particular, positive news on management fees. We saw a normalization in March, we have seen an acceleration during this quarter. Very positive trend in April in May for the fee linked to structured products, a strong acceleration also in advisory fee, coupled with the guidance, the cost control, the guidance of 3%-5% in the safe core cost.
Moving on to total asset and inflows. As we already said, we reached the highest level for the bank in terms of total assets, EUR 61.1 billion. I said that in April, May, we see a further expansion of total assets. I think that it's very positive to see managed solutions where we have a well-balanced mix between à la carte funds, with an acceleration of our LuxIM offering, the wrappers, with increasing interest in the insurance wrappers. Page 19, look at the net inflows. Net inflows for the quarter up to EUR 1.4 billion. Two very positive aspects. The first one is about assets under administration, because as we said, there is a growing interest in the assets under advisory and in structured products.
Second, if you look at total net inflows by acquisition channel, that is the chart in the middle of the page, you can see that the total contribution of the existing network reached 75%, probably one of the highest levels ever for the bank. The negative contribution of the FA who left the company is at -4%, probably is one of the lowest levels ever for the bank. Very low churn rate, high standardization of our existing sales force, the growing contribution of the historical financial advisors. The last information on this page is about new assets under advisory, here we are well above our expectation with a number for the first quarter above EUR 3 billion, that is almost 5% of our total assets, with an increase of almost EUR 0.7 billion in the first quarter.
Where the profitability, let's say, continues to maintain very solid in the range 45-50 basis points as a gross fees. Page 20, you see the network. We exceed 2,000 financial advisors, as already said, we exceed the portfolio average EUR 30 million. Moreover, even more important, more than 90% of total AUM are managed by financial advisors with more than EUR 15 million. That, for us, is the minimum level to provide this kind of advisory in the long run, in the long term. Almost 68% of financial advisors exceed this level of EUR 15 million. This is, as you know, something unique for the bank compared to the benchmark and to the competitors. On the right of the slide, we see the recruitment trends. In the first quarter, 19 new colleagues.
Again, as you know, in this first part of the year, we continue to maintain a conservative approach, waiting for the full disclosure of the cost for the competitors, then we are confident to normalize the path of growth from recruitment. We confirm the guidance of 100-120 financial advisors for the end of the year. Page 21 is the focus on April numbers. As I already said, we are very close to EUR 2 billion from the beginning of the year. In April, total new inflows reached EUR 545 million. Here you have plenty of new positive aspects. First of all, we are 35% in managed assets with a growing interest in our LuxIM platform. Second, we continue to see positive trend in advisory fee contract. Third, as already mentioned, more than EUR 40 million in new issue of structured product.
On the right of the page, you see also recruitment for April at seven new financial advisors, with total new recruitments from the beginning of the year at 26 new colleagues. To sum up, first of all, in the first four months, we see a tremendous interest in the advisory fee contract, well above our expectation, a significant acceleration of one of our driver of our strategic plan. We have several initiatives to maintain this path also for the year. Second, a well-mix in the assets under administration, so the stock and bonds, with a growing interest in structured products. Part of this, you see under the advisory contract. A progressive return of interest in asset management products, particularly in our LuxIM offer. Page 23, we start with a business update. The first part is on our Luxembourg platform.
We exceeded, in the first four months, EUR 15 billion of total assets. In particular, at the end of April, we reached EUR 15.5 billion. This is the highest level ever for the bank. This is due mainly to two reasons. The first one, an impressive performance of our product. In the first four months, up 9.4%, as well as a growing interest in terms of new inflows, with net inflows of our LuxIM up to almost EUR 600 million. Third, you can see in the bottom of the slide, the growing contribution of our new offering at 54% on total AUM. Page 24, as I promised, you see an information of the cost of our LuxIM. We compared our offering with the top peers, so the listed peers, the top four, five players in Assoreti ranking, plus the top 10 asset managers in third parties or international asset managers.
You can see that ongoing charge, the weight average for Banca Generali of the LuxIM is about 2%, against an average of these 15 players, so peers and third-party asset managers, of about 2.2%, with a minimum of 1.8% and a maximum of 3.1%. On the left of the page, you see the asset breakdown by asset class. As you know, these 51 new investment strategies aims at driving a more diversified portfolio. All the strategies are built to increase the diversification for our clients. You can see that it's a well-balanced portfolio between equity, fixed income, multi-asset strategies, as well as liquid alternatives. To cut the long story short, we are very comfortable on our LuxIM platform. We see raising interest, we are almost ready to launch the third wave to complete the offering. The second focus is on our digital mindset pillar.
Again, here we are well above our expectation. There was a tremendous acceleration in the release of the strategy. As you know, on the front end, until now, we were considered the best in class from the financial advisory perspective, but not from the client. Now I can say that we are ready to be best in class also for clients. We have just released our new mobile banking app. They say that the rating and the reviews are very positive. You know that we have been working on this new app mobile banking for the last 18 months. We are very proud of this release. We complete the deployment also of the fully digital onboarding process to open current accounts. We conclude the piloting test with Saxo for the cash product. We started the rollout on the network.
In June, we will start to be up and running also with the Saxo initiative. The third part, page 26, is about the three strategic operations of the last year, just to give you an update. Starting from Valeur, the closing is expected by the end of June, the beginning of July. We are seeing a very high interest and very positive feedback, both from clients and bankers in Switzerland. There's a great interest in the brand, in the project. We are confident to accelerate in the second part of the year also on this part of the pillar. You know that the strategy has this as a new revenue engine, to export our model also internationally, in Switzerland. Nextam Partners also here, good news. First of all, the closing is expected by the end of June and the beginning of July.
In the next two weeks, we will be in with the network to present the new strategies, the new portfolio management lines developed in cooperation with Nextam. We are ready to start also this very important part of the project to relaunch also the portfolio management lines. Last but not least, we started the process to buy 20% of the stake in BG Saxo for the governance. The internal pilot was successfully complete, as I already said. We are ready to launch the rollout on the network. Again, here we will have some extra positive news from the new release of the app version of Saxo in the second part of the year. All the projects are progressing very well in the right direction. The feedback from the networks, the financial advisors as well as clients, are very good.
I can say that the second quarter started very well. I'm positive to exceed numbers starting from this year. Thank you. Now we are ready for answering to all the questions.
Excuse me, this is the close call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Gianluca Ferrari with Mediobanca. Please go ahead.
Yes, good afternoon, everyone. I have three questions. The first one is on the net interest income. I understood the one-off effect of the IFRS 16. What should we expect for full year 2019? Is something around EUR 65 million a proper assumption? The second one is on the mix of inflows. Year to date, most of the flows went into less traditional and banking. We also saw a bit of decline in the margins of the asset management business, 141 basis points. I was wondering if in April you are seeing some changes and some normalization in terms of flows with most of the flows going back in asset management products and maybe with a higher risk profile from clients in terms of asset allocation. The last question is more something a bit provocative.
I saw your chart where you are comparing your pricing with that of peers, and you are in the low end of the range. It seems that some of your competitors are even repricing, and at the moment, we are not seeing any attrition in terms of outflows. The question is, why don't you raise fees then? Thank you.
Thank you, Gianluca. Let's say that starting from the last question, I normally consider the short term and the long term. In the short term, it's difficult to see the full effect of some strategic choices. I'm pretty sure that it's not the right time to increase prices. We have to increase the quality of services. If you look at all the asset manager, so the international players, so the best in class, are reducing prices. My impression that there is a major focus on the short term than in the long term, and as you know, instead for the bank, the long term comes first. There is no free lunch, honestly speaking. Second, on net interest income, I'm very confident to overachieve your EUR 65 million target.
I'm definitely sure to be much higher. On the mix of the inflows, consider that in the first quarter, we decided to focus on the traditional life insurance and to launch in the best way the advisory service, the advisory fee-based contract, which is mainly driven by asset under administration. Now that the project is fully in place, and that there is a stabilization also on the client side, we started seeing also positive inflows, in particular in the LuxIM and stabilization in portfolio management solution. I see a rebalancing in terms of products. I still see a more conservative approach in terms of asset allocation. I don't see the case for an increase in the equity exposure in the next months. In terms of profitability, I see room to increase the profitability of the average first quarter.
The numbers for April and May confirms a positive trend in general terms in the asset management products. Thank you.
Fantastic. Thank you.
The next question is from Filippo Prini with Kepler. Please go ahead.
Yes, good afternoon. Two questions. The first one is on trading profit. Could we take the figures that you realized in the first quarter as basically the total amount, more or less, that you plan to generate on a full year basis? The second one, just clarification on the slide 23 of the presentation on evolution of LuxIM weighted assets. I see that you plan to increase these assets by EUR 400 million at the end of the year, with most of the increase from LuxIM. Does it mean that you do not plan any runoff of the existing BG Selection and BG Sicav in the meanwhile? Thank you.
I start from the second question, I leave the floor to Tommaso Di Russo for the first one. Let's say that we have a projection of outflows of EUR 100 million per month in the selection, EUR 1.2 billion in full year. We are pretty confident to cover every euro of outflows in the selection with EUR 1.52 in the LuxIM retail distribution, while we should have a positive contribution from the institutional share classes, thanks to the expansion of the wrapper solution. On the second question, Tommaso?
On the second question, the trading gains of EUR 4 million in the first quarter are mainly linked to some activity on clients which operates in currencies, it's a normal operation of our clients. It depends, of course, it's always linked to the market, so we can use to extrapolate the trend for the full year. I think that in the first quarter, we have been very active in this activity. Maybe it could be a little bit lower than one quarter for four.
Exactly. As you know, we expect a lower contribution from P&L, in the profit and loss in the banking book. As Tommaso said, it's not exactly traditional banking book activity, is partly linked to the trading activity on currency market of our clients. Again, we see positive sign compared to our initial projection, we don't see still the same contribution of the last year.
Okay, many thanks.
The next question is from Elena Perini with Banca IMI. Please go ahead.
Yes, good afternoon. Just on performance fees, I was wondering if you could update us with the amount you gathered in April, because you talked about the mix, which is approximately 50/50 between the new method and the old one. I was wondering about the amount. Thank you very much.
Yes. Let's say that the April performance fee are driven mainly by the very good performance of the products. Most of them reach the high-water mark level. In April, we are above EUR 20 million, and they say that 70%-75% of the total assets are at or very close at the high-water mark level. Between minus one and zero. As you know, the new performance fee mechanism, the LuxIM mechanism, is based on 12 months high-water mark. If the markets confirm this level, there is opportunity to see a further acceleration of performance fee for the next quarter. The projection of the BG Selection instead is almost zero. More to come probably from LuxIM and not from BG Selection, depending on volatility of the market, of course.
Okay. Thank you very much.
As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, you may press star and one. Mr. Mossa, there are no more questions registered at this time.
Okay. Thank you all for the participation on the conference call. Bye.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.