Good afternoon, this is the conference call operator. Welcome, and thank you for joining the Banca Generali Full Year 2025 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 afternoon, and thank you for attending our full year results conference call. Before we get into our results, I want to quickly comment the market reaction to the recent announcement of a U.S. initiative called Altruist. That basically is a tool, an artificial intelligence tool for the automated tax planning. In Italy, it's, it's, largely irrelevant just because, now, for any investment-related taxation, the tax situation is handled directly by the withholding agent, so basically the banks or the financial intermediary, and not by the client. The volatility on our stock today comes from this U.S.-centric situation that simply doesn't fit with the Italian wealth management context, and even less with Banca Generali, also because we are not a brokerage platform.
As you know, and we said it several times, Italy has a unique economic and social environment, where the wealth is still mostly invested in liquid assets. Think of real estate or private companies, not listed equity. It remains very much a sort of, say, family affair. In this context, our clients look for discretion, human guidance, and not automatic answer or interaction with the machine. It never happen. Confidentiality, privacy, are crucial, not negotiable in the long-lasting relationship with our financial advisors. For this reason, the idea that an AI tool could, let's say, commoditize advisory in Italy doesn't make any sense.
If you think of Banca Generali business, is built on trust, personal relationship, long-lasting relationship between a senior professional and our client, and several capabilities and expertise. When we help our client, basically, we must understand both their head, but also their stomach, and nobody wants that their very personal information can be stored inside a machine. In Banca Generali, I think that AI is a great accelerator. It's not a replacement of business. That make, I think doesn't make any sense. AI will help our bankers work better and faster, while of course, the human judgment, discretion, closeness to the client will be mainly of our financial advisors. That's the reason why we don't see any strategic risk in today's news. Again, AI is, will be disruptive in a positive sense.
Dealing with clients is another business, especially if, if it is about ultra-high-net-worth individual with very significant wealth and invested, as I said, also in illiquid assets. And again, illiquid assets means not only private market, but it means real estate and in their own company, almost the time, not listed one. And again, family is a different concept, is something very confident, it needs trust, so nothing that you can solve out with technology. Having said that, let's start, as usual, with the major achievements for last year. Page 3, let's say that we achieved new record high in terms of net profits, recurring net profits, and total assets. Commercial activity was very solid, with an acceleration in the last part of the year, with the conclusion of the M&A headwinds.
Thanks to solid commercial and financial results and capital light approach, we will propose an increase in the dividend per share in the next, in the next AGM. Now, Page 4. Net profit. Net profit closed, as we said, at a record high, EUR 445.8 million, driven by recurring net profit, about EUR 360 million. A lower contribution of variable net profit, basically for lower performance fee, and then, a one-off in terms of tax refund for total amount of EUR 39 million. The reason behind the solid result in recurring fees is driven basically by a solid net financial income and solid gross recurring fees.
Starting from net financial income, page five, we closed the year to EUR 355.5 million, of which greatest part comes from the net interest income. As you can see, the quarter, the last quarter closed at EUR 82 million, thanks to asset expansion and a pretty stable net interest margin yield, at 1.95. That is in line with our guidance to stay above 1.9. Next page, Page 6, total gross fees. We closed the year at EUR 1,131 million.
If we focus on the fourth quarter of last year, you see that the growth compared to the same period of the previous year is at almost 11%, while the variable fees contribution was lower than the previous year, with a positive contribution in the fourth quarter, EUR 43 million, and almost all the assets at or close to the high water mark level. Next page, we will deep dive on the gross recurring fees, starting from the investment fees. Investment fees closed at EUR 976 million, basically driven by asset expansion and stable margin. Fourth quarter number, EUR 255 million, with an increasing contribution of both management fees and advisory fees. The overall management fees margins is stable at 1.41. Next page, other fees.
Here, you see an acceleration from 130 - 154, almost 55, basically thanks to the inclusion of Intermonte business and a solid traditional business. Starting from banking fees, here we have the completion of the phase-in of the new pricing, so a lower contribution from the traditional business and increasing contribution from Intermonte. Focusing on brokerage commission, overall result, EUR 75 million. Fourth quarter, almost EUR 20 million. Very solid brokerage activity of our clients, plus Intermonte contribution. Last, entry fees. You know, we started the first half of last year with lower numbers. In the second half, we saw an acceleration. Part of this acceleration was driven by also the new capabilities, thanks to Intermonte, so with greater penetration of structured products.
In the-- considering only the fourth quarter, the result was, probably the best ever, at EUR 16.6 million. Moving on, Page 9. On the cost side, let's start with the, the total fee expenses. Overall total fee expenses closed at EUR 600 million, with, all the payout ratios at or below our guidance. In particular, the payout, to our phase for the ordinary part, closed at 34.6, below the target of 36%. The incentive closed at 11.1, below the target of 12%, and also the payout to third parties closed below the target of 6%. The fourth quarter ended at 5.8. As a final result, the overall total payout ratio to the network, excluding the payout on net interest income, closed at 51.5.
That is definitely below our target of 53%. Again, a great control of the payout and very flexible model linked to the revenues. Next page, operating costs. Operating costs closed at about EUR 360 million. This is basically due to some one-off and the change in perimeter. Starting from change in perimeter, you see the inclusion of Intermonte, EUR 38 million. The sales personal costs, so the part linked to the relationship manager, so employee banker, closed slightly lower, just because some bankers decide to move to the financial advisory network with a mandate. These are, this is a positive news. In the core non-items, you can see an overall contribution of EUR 13.5 million with an acceleration in fourth quarter.
This is basically linked to the cost of Mediobanca tender offers, the setup of two major initiatives, insurbanking, Intermonte, plus some projects to optimize the organization of the bank. Overall, bottom of the page, you see core operating cost in the range 6%-8%, close at EUR 288, almost EUR 5 million invested in IT, IT infrastructure modernization, AIT, AI, and data related projects. As you can see, the fourth quarter looks higher than the other quarters, but is characterized by high seasonality. If you compare fourth quarter with the same period of the previous year, you see that the increase is around 6%. Also the core operating costs, so excluding investment, is well under control.
Page eleven, the last page on costs. Operating costs on total assets flat, at the minimum level, 0.8. The cost/income ratio adjusted for Intermonte, with a slight increase, due to this one-off cost. Page 12, to sum up, very proud to have exceeded for the first time in the bank, EUR 1 billion in total banking income. Costs characterized by one-off. If we focus on the total non-operating charges, the overall total non-operating charges decreased to EUR 105 million, thanks to lower regulatory contribution and lower provision. I'm confident to see lower numbers for this year and for the future. In the P&L, we included at the non-operating level, also the EUR 39 million of positive one-off, as already commented to the tax refund. Overall, tax rate closed, close to 24%.
This is basically linked to a higher contribution of Luxembourg. We confirm the guidance for this year in the range of 26.7%. Let's move to the section two: Balance sheet and capital ratio. Here, as already said in different conference calls, it is an active business, so asset expansion business. You can see that the overall total deposit increased to EUR 15.8 billion with an important contribution in the acceleration in client deposits at EUR 13.8 billion. We say that the asset expansion, so the client deposit expansion, more than offset a small decrease in the net interest margin, as we commented at the beginning. The net interest margin driven by cost of funding, the yield on bearing assets.
Cost of funding slightly decreased to 0.77%, and as you can see, Page 15, the same can be said for the yield on interest-bearing assets, down to 2.81%. A quick comment to the total assets, EUR 18.5 billion. On the positive side, expansion in the banking book, financial assets to EUR 12.8 billion, and also expansion of the loans to client, about EUR 2.5 billion. Page 16, let's move on capital and liquidity ratios. Also, for last year, we confirmed solidarity ratios. If we start from Total Capital Ratio, close to 19%, also once included several one-off, consider the impact of CRR3, Intermonte first time consolidation, a higher banking book risk absorption for change of the model, and so forth. It's a very solid Total Capital Ratio.
Leverage ratio, very high, 5.6. Liquidity ratios, rising over time at liquidity coverage ratio 337, and stable funding ratio 245. Overall, very solid and liquidity ratio, solid capital and liquidity ratio. The next page, Page 17, we see the dividend proposal. First of all, we confirmed the total payout at 76%. In terms of DPS, it implies a dividend of EUR 2.9 per share, and we will pay this EUR 2.9 in two tranches. The first one this year, for a total amount of EUR 2.2, and the second tranche next year for a total amount of EUR 0.7. This will allow us to be consistent with our goal to add for a constant increase of, in absolute terms of dividend.
I take this opportunity also to remind you that we are close to pay the second tranche of the DPS for the results of 2024, and we will pay on the 23rd of February, EUR 0.65. Let's move to the next section. The total assets and inflows, we closed the year above EUR 113 billion, 2/3 invested in assets under investment. An important slide is number 20. Page number 20, you can see the strong expansion of financial wrappers, and of the overall wrappers. Financial wrappers increased by EUR 1.8 billion in just one year.
The overall wrappers account for more than 50% of the managed solutions, and even more important, and consistent with our target, the overall in-house funds overtook for the first time, the third-party funds. You can see bottom of the graph, where in-house funds amounted to EUR 13.2 billion, or EUR 1.3 billion higher year-on-year, while third-party funds grew slightly at EUR 12.6 billion. This is basically driven by inflows. Page 21, you can see the overall results, EUR 6.8 billion. Better mix, EUR 4 billion, investing Assets under Investment. Focusing on Assets under Investment, you see an increasing contribution of both components, assets under management and advanced advisory. Concerning assets under management, Page 22, you can see that most of the increase is driven by wrappers and in-house funds.
We confirm with structural shift from third-party funds to in-house funds, at least in relative terms. Page 23, there is a detail of the net inflows by acquisition channel. Let's say that the existing network contribute at the same level as the previous year, despite the tender offer, so very positive reaction of the existing sales force. If we focus on net recruitment, EUR 1.9 billion, the underlying is characterized by two different trends: a strong contribution of recruitment of free bankers in Switzerland, Aequitis, for an amount of EUR 800 million, and a very limited contribution of recruitment in Italy, penalized by the uncertainty, so EUR 1.1 billion.
Overall, numbers are close to the numbers of the previous year, so 166, this is also thanks to an acceleration of the numbers in the fourth quarter, after the close, after the termination of the headwind linked to the M&A issue. Page 24, we have also a quick update of how we started the year. Considering January is always a volatile month, let's say that if you compare in absolute terms, inflows better than the previous two years, so EUR 0.5 billion, of course, there is a conservative asset allocation, it's always the same story in January.
The signs from recruitment confirm the positive mood of the last quarter of last year, where is not only a question of numbers of recruitment, but it's more about the quality. We expected a significant contribution for recruitment for this year. Last, now we will give you an update on the two major projects, Intermonte and Universal Banking, and then some guidance, some targets for the full year. Let's start from Intermonte, Page 26. You already know this page. Basically, we confirm that we will double before the 2030, the net banking income from EUR 40 million to EUR 80 million - EUR 90 million. Of this increase, 25%-30% will be already achieved this year.
As you can see, the cost/income will decline. It means that the increase, the synergies will present the same payout cost/income ratio as the bank. Why, we confirm these numbers, with a, a even more positive mood? As all the initiatives we are rolling out, are working much better than expected. The first one is about the synergies in terms of structured product, internalization of derivatives. You see at the left of the page, you see the acceleration of the fourth quarter of last year of the structured products, we already mentioned it, and I can confirm the beginning of the year is higher than the same period as last year. We started also to internalize part of the margin in structuring products, thanks to Intermonte. Intermonte hedging accounted for 14% percentage point.
Let's say that you're gonna see an increasing contribution once we gonna complete the full integration, optimization of the IT platform. It should happen in the second half of this year. Managed products. We already launched two dedicated funds, Luxembourg funds, we focus on Italian large cap and small cap. We already collected more than EUR 100 million, and we have just launched a new financial wrapper with the proposition of protection, and where the hedging strategy is covered 100% by Intermonte. Last but not least, probably the most important part of the synergy and the partnership, investment banking, 160 meetings. Finally, the first two mandate signed, other 8-10 close to be signed. This is amazing.
It's amazing, just because the feedback from Intermonte is amazing, the feedback from the private advisor is amazing, the client really appreciate the synergies between private banking and investment banking. Starting from the long-lasting relationship of the private banker to develop, to leverage on the capabilities and competencies of Intermonte. As you can see, the kind of advice is well diversified, is about, of course, M&A, is about ECM capital market, debt advisory, and so forth. Page 28, moving on to insurbanking. There is an update of the Generali hybrid product. Overall assets closed at EUR 7.4 billion, so stable year-on-year, with a higher contribution of in-house funds from EUR 4.1 billion-EUR 4.5 billion. Overall margin are stable over time at 0.64. Page 29, an update on Alleanza partnership.
Of course, we confirm the target, but again, also in this case, the mood is more optimistic. Why? Just because we started. We started piloting the distribution banking products. We selected 100 private advisors at the end of last year, and we tested all the procedures, processes, platform, and we open up 270 new current accounts. There is great enthusiasm. For this reason, during the convention of Alleanza, the 5th of February, Alleanza announced the starting of the rollout of Conto Unico, so the current account dedicated to Alleanza, to all 2,700 private advisors within this year. Quick comment on Stile Unico. Stile Unico is a unit-linked, so we are talking about insurance wrappers.
We roll out, we completed the rollout on to the 2,700 private advisors last year, and the first numbers are encouraging, with more or less EUR 100 million of net inflows. Solid evidences from Intermonte and Alleanza. Very positive on the short, medium, and long term of this partnership. Now, from Page 30, a quick update on targets for this year. First of all, net inflows, so volumes, we increased the guidance compared to the guidance of last year, from EUR 6 billion to inflows, at least at EUR 6.5 billion, with the assumption of stable financial market. We see a confirmation of the structural rebalancing between different distribution channels, and we are very optimistic on recruitment, recruitment activity.
We are also confident to increase the product mix, the quality of the inflows, so we set an initial target of Assets under Investment from the previous 3.5 to the current EUR 4 billion. This is again, with the assumption of stable and stable financial market, starting from the large share of gov bonds and corporate expiring this year, and the perception that the overall Assets under Investment exposure is reverting the to long-term averages. Last Page, 31. Some financial targets. First of all, net interest income. We increased the range of the net interest income for this year, in the range of EUR 330 million-EUR 340 million. Driven basically by asset expansion, so more client deposits and stable yield.
We confirm both the management fee margin range and the core operating cost range, waiting for the new, three year strategic plan that we will communicate, and we will announce, probably in the second half of this year. Just to close, I'm very optimistic on, on the bank, on the financial advisory network, and on the results. I perceive, as, we start a new season, and, I see further synergies under the winged lion. Generali is important for us, and will be even more important in terms of synergies for the future. I will hand over for the Q&A session.
Thank you. This is the 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. First question is from Luigi Tramontana, Kepler Cheuvreux.
Yes, good afternoon. Many thanks for the presentation. A clarification on the provisions for risk and charges, those of EUR 49 million that you booked in the fourth quarter. Can you please give us some insight on that, what is due? The second question is on the inflows. In 2025, you clearly outperformed your guidance with EUR 6.8 billion. I'm a little bit surprised that you expect your net inflows for 2026 to be lower than last year, given that we do not expect Mediobanca to launch another offer on you. This is a joke, but I would like to understand why do you expect the other assets in flow to be lower than last year? Thank you.
Thank you, Luigi. Let's start from the inflows. As you know very well, Intesa prefer to start with a conservative approach and then over-deliver, EUR 6.5 billion, I mean, is the highest guidance never communicated from the banking perspective, and with a better quality. We will be more focused on the quality than on the quantity, but as usual, the target have been set to be overachieved. Let's see. Some conservative assumptions from the beginning of the year, also to see the dynamics and the context. I will hand over to Marco, but let me give you the flavor of this line.
To say that in good time, I think that the best things to do is to be very conservative in the provision, especially for potential litigation on the performance of specific products. We decided to clean up, let's say, the overall position in terms of provision for some illegal initiatives, and then happy to release in case of different behaviors. There is some problem, we say, behavior behind it, but for more disclosure on that, I will hand over to Marco.
Thank you, Gian Maria. Let's say that in provision we have mainly three categories. Basically, we have the provision for the expense for the retirement, basically, which is an actuarial provision that is performed every year. Then the other two components are linked more to commercial initiative. We have been very, very conservative this year because also we have the benefit on the other side of the fiscal refund on dividends. We decided to be very conservative. Although if we compare the overall provision, they are lower compared with the previous year.
Going forward, we expect that of course, this provision will go, will go down, because we have been very conservative in the, in 2025.
Very clear. Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. Next question is from Marco Nicolai, Jefferies.
Hello. Thanks for taking my question. The first one would be again on the... If you can come back a little bit on the sell-off that we are seeing today. Yeah, I agree with, with your initial words. Like, it seems unwarranted, especially for a business like Banca Generali, very much skewed towards private and high net worth customers. Can you please repeat, you know, the, the main reasons why for you this is overdone, especially for Banca Generali? Also maybe can you spend a few words on what could be the upside of artificial intelligence for your business? The second question on the costs. I've seen the guidance on the OpEx, you refer to the core OpEx in your guidance.
Can you give us an idea of in general, what do you expect in terms of perhaps, other non-recurring items that you could see also next year in the cost base? Thank you.
Yes, thank you, Marco. Let's start by saying that if you look at the initiative, the U.S. initiative, Altruist is basically a tool, an AI tool, to let's say, to work out tax planning. As you know, in U.S., it's something that is on the shoulder of the client. Finding a way to offer a cheap solution to a sort of automation of this tax planning, it's significant in U.S. In Italy, it cannot be applied just because, you know, we already take care of this tax planning when it's about the investment-related taxation instead of the client. Let's say that we handle it directly through the revolving, the revolving agent, so it's a bank, there's the financial intermediary.
This is the first consideration, but let's say that, basically, what Altruist is proposing in U.S. is not applicable in Italy, okay. A different context. You have to consider, in, in the case of Banca Generali, our business model. We are the most exposed player to the high-net-worth individual, in the range of EUR 1 million-EUR 50 million, more or less. In that segment of client, the priority is to manage the overall wealth, bringing it closer to the family needs. It's about family protection needs, it's about succession planning, it's about, of course, tax efficiency. It's something different for, for, from what we define tax efficiency in U.S. Basically, the tax, tax efficiency in Italy means leverage some specific vehicles, for example, the insurance one.
When you deal with the total wealth of the client and the needs of the family, now it's all about, of course, with some rational behaviors, but great part of the conversation is driven by the stomach of the client, and they ask for confidentiality. It's almost impossible to store all the information they provide in a machine, just because it's so personal, that is the first question and the first need of the client, to be assured about the use of this information. Again, they start discussing these kinds of topics, thanks to a long-lasting relationship with client, with the banker. It's about the human touch, the closeness of the client, the closeness of the banker.
Of course, we provide a open-ended platform with the best of IT, the best of product, the best of human financial advisory, and so forth. The essence of our business is that one client is different from the other one. Is different, not for the product or asset allocation, but for the how they build their wealth and how they connected with wealth with their family. It's a very complicated business, very personalized business, and it's basically made by, made up by human touch and physical presence. I spent most of my week meeting with top clients. It's a different story. In the, if you consider brokerage platforms, I mean, it's about technology, and there can be some threat from technology itself or from innovation.
If the model is based on the competencies, the professionals, and the long-lasting relationship, on non-standardized needs, it's much more complicated. Let's say that doesn't make any sense to consider any digital disruption as a threat to this model. AI, instead, can be an accelerator. It can be an accelerator, of course, a standard approach for the bank, more efficiency to the bank, and this is a standard for any bank. We are managing a very important process to change the culture. We launched a project with ambassadors across all the functions of the bank, and ensure that we are approaching AI in the best way.
The real game changer is for the financial advisors, just because our bank, compared to any other bank, is more complex, more complicated, just because we want to give the possibility to have plenty of services, of products, and of opportunities. For the financial advisor, it's much more complicated to be up-to-date on all work, on everything we provide. Simplifying the operating process to the financial advisor, providing them the next, let's say, offering for the client with the all the information, make the relationship much easier. It's a way to simplify the selling proposition and to optimize the operating machine for the financial advisors. In this sense, I think that you can be more efficient in the bank and more productive for the financial advisor.
We should see an expansion of multiple, not a correction in the market. The second question is about the non-core cost. Short introduction by myself, and then I hand over to Tommaso. Let's say that Intermonte, I do expect stable cost. Sales personnel, I do expect stable or declining costs, except for any particular recruitment. One-off costs, in terms of, let's say, consultancies or stuff like that, I do not expect an impact as last year, sorry. Overall, we should see a reduction of this component.
Yes, I confirm that, of course, no, core costs exclude sales personnel, if we are changing perimeter, so we will include in 2026 Intermonte in the core cost.
We expect a reduction of the non-core component linked to one-off, because we don't, we do expect to have another tender offer by anyone, and not only Mediobanca . Of course, also the project of Alleanza and integration Intermonte have been included in major part in 2025, and we don't expect the same amount of one-off also next year. On average, if you look at the long term, the pure non-core items have been around EUR 4 million- EUR 5 million, and we expect in 2030, the next year, we will have the same amount. Overall, the guidance is applied on non-core costs, but also on the total operating cost, since it's the same, it's the same increase that we expect.
Thank you. Can I follow up?
Please, please follow up.
Like, you know, to basically benefit from this AI benefit, revenue synergies, essentially, like, Do you need any investment beforehand? Do you, do you foresee any, you know, major expense you need to put through before enjoying this, these revenue synergies? And like, if you think about a time frame, like, would you think about, I don't know, these benefits coming over the medium term, over the long term? I don't know, any colors on, on these points.
Yes, I, I do expect a positive impact already next year. We're gonna launch some specific initiatives in the second half of this year, and I'm sure that will imply a higher product productivity. No, I'm positive on the contribution starting from next year. In terms of lean processes in the bank, this cultural shift is already happening, so I, I do expect an overall increase of quality and efficiency in the bank. We have plenty of projects, so we can finance this project with the savings in, let's say, ordinary business. The reason why we do not see, or we do not expect an acceleration on cost despite the insurbanking, despite Intermonte, despite other very important project, is due to the fact that we consider some savings from the existing business, thanks to AI.
Thank you.
Sorry, just to complete the first question. We are considering different partnerships with AI provider. We spent almost 18 months discussing with the major initiatives in the AI private banking company, the fully digital platform. Again, I do see opportunities of collaboration, not of competition, considering our business.
Okay, thank you very much.
For any further questions, please press star and one on your telephone. Mr. Mossa, there are no more questions registered at this time.
Okay. Thank you so, so much for participating to our conference call, and happy to answer on support conference call to any further question. Thank you. Bye.