Earnings Call: Q2 2021

Aug 3, 2021

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Fineco Bank First Half 2021 Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Alessandro Forti, CEO of Fineco. Please go ahead, sir. Good afternoon, everyone, and thank you for joining our 2nd quarter results conference call. Before we start going through the details of the presentation, let me please underline that last quarter once again confirmed our new dimension of structural growth. We are progressively delivering on 2 strategic fulfilling the financial needs of our clients than a bank. First, we are carrying on our initiatives in order to deleverage our balance sheet, which will in turn progressively increase and improve our revenues mix, boosting fees and commissions. Of course, the mix of net sales during the summer months might show an increase in deposits compared to the recent month, but this effect is only temporary and just linked to the seasonality. Therefore, we expect to reabsorb heat, thanks to our increasing effectiveness in transforming liquidity into assets under management. 2nd, Finnek Asset Management is already delivering in its strategic discontinuity and is taking more control of the value chain to further accelerate our investing revenues and margins. The outcomes of our strategic discontinues will be structurally higher profitability, thanks to the jump of investing revenues and the capital light business model, thanks to the deleveraging. Hence, we will have structurally higher room to dispose of it. This will allow us to distribute a higher level of dividends and at the same time to invest more for our growth. Let me highlight that also in the first half of the year, we recorded a record high net profit reaching €185,000,000 and increasing by 2% year on year despite the contribution to systemic charges in the year due to the single resolution fund paid for the first time in 2021. This result is even more valuable considering that it's been achieved in a new normal world and beats the previous record set in the first half of twenty twenty, which was characterized both by low operating costs due to the strict lockdown in place in Italy and by the strong performance of brokerage due to volatility peak. Revenues stood at 403,000,000 dollars increasing by 3% year on year, excluding the nonrecurring items of 2020, mainly supported by the growth of investing. Thanks to the growth in assets under management and the operational efficiency by Finic Asset Management. Brokerage, confirmment and structurally higher floor, also in an environment characterized by a much lower volatility compared to 2020. Operating costs were well under control and the costincome ratio stood at 31.3 percent, confirming operating leverage as a key strength for the bank. Our capital position confirmed to be strong and safe with a common equity Tier 1 ratio at 18.6%. Let me please underline that after decision by European Central Bank not to extend beyond September 20 29 the dividend ban and following the dialogue with the supervisory authorities, the Board of Directors has proposed to distribute a dividend for 2019 2020 equal to €0.53 at the next shareholders meeting on October 21, 2021. Also, our commercial activity continued to strengthen compared to the impressive growth experienced in 2020. After the record net sales registered in the first half, estimated figures for the month of July are around €900,000,000 increasing by about 34% compared to July 2020. The mix confirmed to be strong with about €500,000,000 in asset under management and almost $360,000,000 of deposit due to the summer seasonality. As already said, we expect to absorb this temporary increase in liquidity going forward, also thanks to the pipeline of initiatives that we are delivering. Brokerage revenues are estimated for July at around €15,000,000 This is very good news considering the unfavorable market conditions due to the both low volatility below the average level of 2017, 2019 and low volumes. Nevertheless, revenues are around 30% higher compared to the average monthly revenues in the same period, confirming once again that the flow of the business is now definitely higher. Let's now move on to Slide 5. Before we start going through the details of the presentation, let me please underline that in order to give a better representation of investing fees and in line with prevailing market practice, in the quarter, we went through a recast of some items related to our investing business previously accounted in other lines. In this slide, you can find all details. In particular, we included within the net commissions cost efficiencies achieved by Finney cost management previously accounted under other income line. 2nd, the costs related to the network of financial planners like recruiting, loyalty, FIR and Enazarco previously accounted under other administrative expenses. On top of this, financial planners' incentives that were previously accounted into other product areas had been recasted into investing fees following the change of the financial planners incentive scheme. Please let me add that in the past, we had to apply the accounting rules in line with our previous parent company, which were not taking into account features of our business model. Therefore, in the past, we structurally overestimated our costincome ratio. And this representation now better reflects our real operating leverage as an asset gathering. Let's now move on Slide 6. As announced, we reached a very strong industrial results also in a new normal world with adjusted net profit standing at $184,600,000 in the first half, plus 2% year on year on a like for like basis despite the higher contribution for systemic charges. Among the adjustments of the quarter, let me underline that we have recorded a $32,000,000 one off fiscal benefit related to the realignment of intangible assets under the legislative decree 1,04twenty 20. Revenues stood at €403,500,000 up 3% year on year as we have been able to catch the strong acceleration of the structural trends in place, mainly thanks to the contribution of investing. Operating costs stood at 126,100,000 dollars increasing by 4.7% year on year, excluding costs strictly related to the growth of the business. We will deep dive on costs later on during the presentation. Cost income continued to be very low at 31.3% despite the continuous expansion in assets and clients, thanks to our strong operating leverage and to the scalability of our platform. Let's now move on Slide 7 and start to analyze more in details the dynamics of our results. In this slide, we show our net financial income amounting to $148,000,000 and remaining flat in the first half of the year. Net interest income stood at 100 and $24,300,000 despite the worsening of interest rates environment and profit from treasury management stood at $23,600,000 As you know, the more we will be effective in deleveraging the balance sheet and the more we will be able to slow down and possibly even reverse the growth of our financial investments. This will lead to recurring industrially driven profits from treasury management and progressively improve revenue mix with a higher component of fees and commissions. We will come back later on on our initiatives related to the deleverage of the balance sheet, some of which are about to enter in action, like the 3rd party savings account platform. Let's now move on Slide 8. Fees and commissions stood at $214,300,000 in the first half of twenty twenty one, growing by 10.2% year on year, mainly thanks to the positive contribution of investing brokerage, net of commissions and trading profit confirmed once again a floor structurally higher compared to the past despite the unfavorable market conditions in terms of volatility and volumes compared to both the first half twenty twenty and the Q1 2021. Let's jump on Slide 26 to deep dive on our brokerage business. Brokerage considered once again that after the recent events, the flow of the business is structurally higher compared to the past, regardless of the level of volatility. As you can see in the chart on the top of the slide, in the Q2 of 2021, overall brokerage revenues reached 49,400,000 dollars in the period characterized by low volatility and volumes, resulting nevertheless in a monthly average 46% higher compared to the average monthly revenues in the period 2017, 2019. The month of July estimated brokerage revenues were equal to $15,000,000 around 30% higher compared to the average monthly revenues in the period 2017, 2019 and with a volatility that was lower than the average volatility of the same period. Let me remind you that the growth of the brokerage business is driven by the contribution of 3 structural components. 1st, the deep reshape of our brokerage business. Let me remind you that we have recently launched a new U. S. Options platform and that we have now entered in the authorization phase for our leverage certificates offer. On top of this, we are starting the study phase of the investment certificates. 2nd, the client base using our platform is widening with active investors that have grown significantly in absolute numbers, standing more than 40% above the average level of 2018, 2019. Please note that our active investors have an average of 4 executed orders per month, are wealthy people in their 50s with assets above €200,000 on average. And the vast majority of them has a relationship with our financial advisers for the long term planning of their financial wealth. 3rd, we are continuously increasing our retail market share. Let's now move on Slide 9 for a focus on investing. Let me remind you that over the last few months, we have experienced a strong acceleration towards asset under management as we have been able to catch the structural trends in place in Italy. The acceleration of the investing business is expected also going forward as we are progressively going through the strategic discontinuity in Finnek Asset Management that will allow us to improve the efficiency of the value chain, generating higher revenues and margins. Investing revenues amounted to €122,200,000 in the first half twenty twenty one, increasing by 22.7 percent year on year, thanks to the volume effect and strong net sales into asset under management, driven by higher contribution by Finnequa Asset Management. More in detail, management fees increased by 25% year on year in the first half of the year, while in the Q2 of 2021 increased by 33.1 percent year on year and by 88 0.1% quarter on quarter. Let me please highlight that management fees margins after tax are slightly increasing to 46 basis points, showing a first signal of higher risk appetite by clients. Let's now move on Slide 10 for a focus on our cost. This slide confirms once again efficiency to be part of our DNA and core in our bank, representing a clear and unique competitive advantage. Let me please underline that the first half of the year was characterized by costs directed related to the strong acceleration of our growth dynamics in the new normal world. On top of this, the yearly comparison is affected by the strict lockdown in the first half of twenty twenty, driving non HR costs lower compared to the average level of the period 20 10, 2019. Operating cost in the first half twenty twenty one stood at $126,100,000 growing by 4.7% year on year excluding costs rated to the growth of the business, mainly additional $1,700,000 in marketing costs, mainly in U. K. And not fully in place in the same period of 2020 additional $1,400,000 cost for Finneco Asset Management that is preparing itself for further expand its business, allowing us to have a higher control of the investing value chain. Going into the details, non HR costs stood at 73,200,000 dollars excluding the previously mentioned expenses related to the growth of the business, they only grew by 4% year on year, confirming our strong operating leverage. Finally, staff expenses stood at $52,900,000 in the same period, increasing by 5.6% on a yearly basis, net of costs related to the expansion of the business of Finic Asset Management. Let's now move on to Slide 13 for a focus on our capital ratios. Fineco confirmed once again a rock solid capital position on the wave of a safe balance sheet. Let me please underline that after the decision by European Central Bank not to extend beyond September 2021, the dividend ban. And following the dialogue with the supervisory authorities, our Board of Directors has proposed to distribute the dividend for 2019 2020 equal to €0.53 at the next shareholders meeting on October 21, 2021. Common Equity Tier 1 ratio stood at 18.59 percent, including the 2019 2020 dividend proposal. And this is mainly explaining the quarterly decrease. Leverage ratios stood at 4.03 percent, including the dividend proposal, which also in this case explains the quarterly decrease. Let me please head in line with the optionality allowed by ECB and Bank of Italy Starting from June 2021, we temporarily excluded exposures towards the central banks from the total exposures. Without this exclusion, our leverage ratio would be at 3.81%. Risk weighted assets stood at €4.31 €1,000,000,000 and total capital ratio stood at 29 point 87% as of June 2021, including dividend proposal. Let's now move on Slide 15. As you know, 2021 has made even clear that Fineco is in the sweet spot for growth. In the first half twenty twenty one, the bank has been able to deliver even stronger net sales reaching €5,800,000,000 with a very strong asset mix. July net sales were only the latest confirmation of this big jump in a new dimension of growth. Let me spend a few words on the recruiting. As you can see on Slide 16, starting from last year, we have experienced a strong increase in the interest of financial advisers to join our bank, thanks to our business model, which proved to be the best position to grow in the new landscape. Also, thanks to our unique SymTech DNA. In this regard, please note that we have no need to overpay financial advisers with huge upfront fees and used aggressive approach historically taken by the industry. As a matter of fact, in the new environment, Fineco emerged more clearly as the perfect bank for professionals looking to grow their home business in a sustainable way. Those dynamics were confirmed in the first half of the year, resulting in a net increase of 125 personal advisers in our network as we recruited 68 senior professional and 102 junior with net sales generated organically by the bank at 86% in the first half of the year and much normal level. Let's now skip to Slide 21 and start discussing about our expectations for the business going forward. This slide will summarize our guidance. With regards to our banking revenues, we expect our net financial income to stabilize in 2021 2022 at the levels of 2020. Thanks to the deleveraging of the balance sheet and to the new initiatives in place. For example, our on our tax credit activity, which has already start to give end contribution in the first half of twenty twenty one, we target a potential volume in a range between $1,500,000,000 $2,000,000,000 Overall banking fees in the region between $40,000,000 $45,000,000 in 2021. Going forward, they are expected to grow, thanks to the increase on our client base and to repricing actions. On investing, given the strong growth experience over the last few months driven both by the acceleration in underlying trends and by the first effects of the strategic discontinuity produced by farm, we are again increasing our 2021 guidance to revenues growing in the range between 20% 25% with resilient or slightly higher margins compared to 2020. Going forward, we expect a strong acceleration of revenues and margins. Thanks volumes as we expect asset under managed Internet fees at around $6,000,000,000 per year. 2nd, the implementation of the strategic discontinued Infineco Asset Management, which is going to increase its penetration in Infineco's stock of assets under management with retail net sales expected at around €6,000,000,000 per year. This will result in an increase of banks management fees margins after tax up to around 55 basis points and pretaxmargins up to around 75 basis points by 2024. Brokerage revenues are expected to remain strong with a flow in relative terms with respect to volatility that is definitely higher than in the past. Operating costs are expected to grow in the range between 4.5% to 5% year on year. Please note that there might be additional costs related to Finic Asset Management as we are introducing the previously mentioned strategic discontinuity to improve efficiency on the value chain in the Western business. Going forward, we expect a stabilization in running cost growth compared to 2021 in a range between 4.5 percent, 5% year on year, not including costs coming from the project related to the expansion of Broad and Finic Asset Management. Cost income, we confirm our guidance of continuously declining cost income in the long run, thanks to the scalability of our platform and to the strong operating gearing we have, this excluding costs related to our expansion abroad. With regards to systemic charges for 2021, will be in a range between €37,000,000 €39,000,000 booked within provisions for risk and charges, also including the $2,000,000 charges to the single resolution funds already booked in the Q2. Please note that the more we'll be affecting in the de leveraging of the balance sheet, the more we can decrease our contribution to systemic charges. Tax rate for 2021, we expect hit stable year on year, while going forward, we expect a reduction of around 1 percentage point per year. On our capital ratio, we expect CET1 ratio to remain above the floor of 70% and leverage ratio in a range between 3.5% 4% currently with a combination of both a strong acceleration in the growth of the bank and the distribution of generous dividends. On dividend per share, going forward, we expect that hit constant increasing, also thanks to the progressive delivery on our strategic discontinuities. Customer risk was equal to 7 basis points in the Q2 2021, thanks to the quality of our lending portfolio that is offered exclusively to our loyal customer base. For 2021, we expect a hit below 10 basis points and in 2022 in the range between 10 basis points and 15 basis points. Finally, we expect a robust and high quality net sales with a mix mainly skewed towards asset under management and with a lower component of the positive, thanks to all the new initiatives we are undertaking. Let's now move to Slide 22 to deep dive into the leveraging. The recent events have produced a strong acceleration in the structural trends and have increased the speed at which we are growing. In order to take full advantage from our new dimension of growth and to further build on it, we have recently undertaken a wide set of initiatives that are already delivering higher than expected results. Let me please remind you that the new initiatives will allow us to improve our revenues mix as we are strategically evolving our business model to a fee and commission driven model, becoming more a platform to fulfill clients' financial needs than a bank. Let me now go briefly through the new initiatives. 1st, we changed the incentive scheme of the network, financial planners that is now wholly linked to the net sales in asset under management. This has produced a strong acceleration in improving the quality of our net sales mix. 2nd, we will further increase the productivity of the network through new software developments leveraging on our deep internal IT know how. 3rd, also thanks to Finica Asset Management Efficiency and strong time to market, we can count on a wider product range in order to fully catch the world spectrum of clients' financial needs and effectively convert their excess liquidity. For example, our fund target and pension funds proposition fits the best for risk adverse clients, while the platform for our 3rd party savings account, which is now live in test fees, is perfect for clients with no intention to invest in managed products. Finally, we are improving the quality of our client base, focusing our target market on the upper end, also thanks to the repricing of our banking services in order to better control the acceleration of new clients from traditional banks and be more selective in our client acquisition. All these set of new initiatives will allow us to be more selective in the growth we are pursuing, resulting in a better quality revenues mix, coupled with the leverage of our balance sheet. Let's now move on Slide 23 to deep dive on our Banking business. As you know, we have set a number of industrial initiatives to manage liquidity, improve the quality of our client base and total financial asset mix and in the end, deleverage our balance sheet. Among this, it is worth mentioning the more dynamic management of our treasury together with the possibility to extract profits from our treasury management linked to the leveraging activity of our balance sheet, the increase in the appetite for lending by our clients with no change to our cautious and conservative approach, the already mentioned a new platform to distribute 3rd party savings account the new pricing of our banking services finally, the new platform to manage the tax credits towards the state under the EcoBonus and Superbonus. This will help us in sustaining the net interest income with an interesting yield and no use of capital as the counterparty of the credit is the state. Please note that we can afford to be particularly aggressive on this initiative as our strong operating leverage allow us to cope with the complexity deriving from the granularity of the single fiscal credit managed. And thanks to the fact that we hacked as withholding hedging for our customers on their brokerage volumes. The results of the Q2 already show the first contribution coming from the tax credit, which we are progressively buying. Let me please remind you that we have a volume potential in the range between 1,500,000,000 to 1,000,000,000. Let's now move to Slide 24 for a deep dive on our investing business. As anticipated, going forward, we expect an acceleration of our investing revenues and margins, thanks to a further increase in our network productivity leading to growing volumes and to the strategic discontinuity we are undertaking with Finneka Asset Management. To further extract additional operational efficiency, which will allow us to take more control of the investing value chain. In this slide, we summarize our actions to further improve both the volume effect and Finney cost management contribution. Our initiatives are already proven to deliver, as you can see from our record asset under management leases, which in the first half twenty twenty one were already close to the ones gathered in the full year 2020. Fineco Asset Management performed even better with retail sales already exceeding 2020 results in the further proof that our Irish company is progressively gaining commercial traction. In particular, let me please highlight that Finic Asset Management is convenient to be key in our move to accelerate conversion of deposits into asset under management and it is strongly and increasingly contributing to the group's net sales. As you know, the increase in its volumes will result in the growth of its margin contribution, which will be further improved by the discontinuity in the internalization of the value chain. This will allow Finica's management to progressively and structurally decrease the cost of third parties through a number of initiatives like for example the launch of the new flagship product range fully managed in house new advisory services or lower cost of mandates. I'll now leave the floor to Paolo di Grassia, our Deputy General Manager, for an update on the development of our U. K. Business on Slide 21 29, sorry. Thank you, Alessandro, and good afternoon, everybody. First of 1st half results confirm once again that our one stop solution offering U. K. Is providing to be very well welcome and our marketing campaign is providing a strong boost to quality client acquisition. In the first half of the year, we have already opened more current accounts in the whole 2020, and we are now developing a brand new proprietary model to maximize the efficiency of our marketing campaign based on volatility and client behaviors. The acceleration of our customer acquisition dynamics and the quality of our client base have been concerned in the last few months. For example, as you can see on the second graph on the left hand side of the slide, we are improving the penetration of active clients on brokerage, representing more than 70% on new current accounts in the first half of twenty twenty one. Confirming that we are not attracting heat and run highly speculative and volatile customers, but we are attracting experienced traders loyal and looking for quality offer, the further evidence of the right positioning chosen by the bank. And this translates in a further boost of our revenues generation. On the right hand side of the slide, you can see revenues in the first half of the year being almost equal to the ones recorded in the whole 2020. On top of this, we are continuing to improve our revenues mix in favor of OTC over the counter and listed products, which are now the lion's share of the growth. In Slide 30, we sum up the next steps that are getting us closer to the full launch of our investing offer. In particular, we have now ended the first step of our investing platform as we have widened our offering, introducing more than 20 asset managers and launched our Aiza offer. We are now entering the 2nd step, which will focus on further improving the user experience by building up easy to use journeys and maps to help clients choose the best investment solution based on their goals. On a final note, as Alessandro already described, the 2 strategic discontinuities on the deleverage and on the investing will allow us to further increase our growth plan abroad. At this regard, we by next year, we will be able to increase our marketing expenses in the U. K. While we are preparing the setup to launch our offering in Germany by the first half of twenty twenty two as we think that our model adjusts based on the features of the German market can be very attractive for local clients. Thank you for your attention. And now I will hand it back to Alessandro. Thank you, Paolo. Thank you for your time. Catch this opportunity to invite you to our IT Day that is going to be held on September 9, 2021 at 3 pm Italian Time. Now we can open the call to questions. Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Azura Guelfi with Citi. Please go ahead. Hi, good afternoon. Two questions for me. 1 on investing fees and pharma and the other one on capital. The question on FAME is, if I look well at your outlook, you indicate a significant expansion of margin from 63% current to 75 basis point. And the majority of the flows basically the totality coming from FAMA in the next few years. And this would imply more or less growth of the fees around 20% for the next couple of years. Does this make sense is implied in your outlook? And when I look at the margin expansion, can you elaborate a bit more on what are the main driver? Is it the mandate revision or new product offer and things like that? And what are the key risks you see in implementing these new strategies? The second one is on the capital. You expected dividend per share to grow continuously over the next few years. And is this based on a 50% payout or given your capital and deleveraging that you would like to implement in terms of strategy, it could result in also higher payout or do you expect some of the capital to be redeveloped in other growth opportunity, for example, expansion in other countries abroad? Thank you. So then regarding let me start from investing fees. First of all, the so the calculation you're making are clearly is are in the right direction. And what I would like to underline that it's very important that you look not just to the pretax margins, but it's very important also the after tax margins because considering the fact that the company is based in Ireland. So this clearly is very important. It's remaining important. The main driver and the main risk behind the strategy. The main driver is related to the related to the risk. Let me start from the macro picture. Clearly, the environment is expected to remain extremely favorable considering the combination of low interest rates and rising inflation and this is making accelerating the change in the habits by clients and this is a structural tailwind in our favor. 2nd, as we were mentioning, the productivity of the network, their journey in growing the full tilt net is just at the beginning. And so we expect a continuously growing productivity by them. And 3rd, clearly, there is also a change in the approach by clients that are more and more looking for investment solutions than just buying the single product. And Finica said management is going to emerge as the provider of this investment solution. The most recently launched set of products is a clear demonstration of that. And second, we are going to move in direction of and we are going to remain clearly and our business is going to remain based on the concept of an open platform. But we are going to move in the direction of a rationalization of the relationship with our partners. So, yes, we are going to have a more fruitful cooperation with a more restricted number of partners. And putting everything together, clearly, this is going to make the largest part of the future net sales represented by Finic Asset Management Solution. And this is going to be driven by combination of new net sales and also transformation of the stock. The main risk, so the main risk are clearly mostly in the region of something that is not in our hands to be managed. So clearly, if we enter in a structural long lasting market disruption, clearly, this can put temporarily on hold the strategy, not reversing, but delaying and making, I think, a little bit harder to be achieved. But really, we cannot manage the market. Honestly speaking, I don't see any other relevant risk regard. This is much more a matter of execution in our hands. The bank has a quite robust track record in executing plans and so on. So we are quite confident that we can achieve these results. And on capital, clearly, we are not we think that giving a direct guidance based on the payout doesn't make a lot of sense for a bank that is on the fast lane of growth. We are in a growth story. And so we prefer guide the market in direction of a continuously growing dividend per share trend. And because I would like to return to the concept that what the bank is doing is at the same time accelerating in a big way in direction of increasing the margins and so the profitability of the bank. At the same time, we are making a lot of progress in making our business and a completely capital light business model and so giving to us larger room for distributing dividend. So we prefer not entering the giving a guidance on the payout makes sense for someone that is not expecting not expected to have in front of them a growth story. We are a growth story, so we are confident that our dividend per share is going to continuously going up. And so this is the guidance we are giving. The next question is from Enrico Bolzoni with Credit Suisse. Please go ahead. Hi, good afternoon and congratulation on, I think, very strong results. Just a few questions on my side, please. So one is on your new net sales target you're guiding now for roughly €6,000,000,000 in retail flows. I mean, to be honest, considering the number you've posted, it's pretty conservative. I was just wondering if you can give some color in terms of whether indeed you wanted to be conservative providing this guidance? A second question partially related. So on the adviser, you had clearly the balancing number, if I got it right, is about 30, 40 advisor left. I just wanted to know what's the typical adviser that decides to leave in AECO? Is it because he retires or is it because he decides to pursue different career opportunities? And also linked to that, you're doing quite a bit of junior recruiting. Can you give us some idea of what's the difference in productivity of a junior adviser compared to an experienced one? And I presume it's lower. How long does it take for the 2 to kind of align in terms of productivity? And then very final question. You mentioned in the past that you're launching a seat in the U. K. Can you remind us of the timeline for that? Thank you. So regarding the on the net sales target, I would like to remind that is a net sales target of asset under management product and that they are nearly 100% made by Finic Asset Management Solutions. Clearly, we probably the overall net sales are going to be probably higher than that level. We think that this is an extremely robust guidance. But when we are giving the guidance, we try to avoid to present to investors and shareholders a book of dreams because it doesn't make any sense. So we prefer to present something that is using a wording like challenging but achievable. So all the guidance and results we're presenting are very robustly sustained by extremely evident and very and quite consistent actions. So it's the numbers extremely solid and robust. So this means that we clearly our ambition is to do even better. But as we the same approach we used going through this year, as probably if you remain, we started in giving a guidance on increase of the revenues on investing that was in the region of 15%. Then we moved up to between 15% 20%. And now we are landing on a range between 20% 25%. So we prefer to give to the to bring to the market something that is solid, robust and which we are quite we are confident to achieve these results. The financial planners that live in Finnacle are relatively few of them. The most part of them is related to financial planners retiring. Then we have some financial planners that they are leaving the bank, but they are really very few for joining other organizations. And then we have also the financial planners that we are getting rid of them because they are not matching the requirements in terms of regulatory respect of fuels, conduct and so on. So we are continuously we are taking an extremely rigorous approach in determining if the financial plan is perfectly in line with our expectations. The senior financial planners clearly are they have a level of productivity at the beginning that is definitely lower than the senior financial planners. So in the best case, they are reaching a high level of productivity within a couple of years. But this clearly is that the JV Freshel plant is particularly smart and fast in entering in the new job. And usually in average, junior fracture planers for junior fracture planers reaching a high level of productivity usually takes more or less in 5 year time horizon. We are perfectly aware that it's an investment we are doing, But for us, a priority is not just to be concentrated on the very short term results, but also, for example, to be sure that we are not running the risk to have then a network that is aging too fast because one of the most important problem for the industry, for the financial planning industry, that is an industry that is rapidly hedging because the industry is extremely reluctant in investing in a young talented person exactly because they're not immediately productive from the beginning. But currently, we have our approach that has been always to be to look to the long run. We are clearly, we are very interested in investing on these young, talented guys that are going to represent the future of the bank. On SIP, I'm leaving the floor to Paolo, if you want to give a follow-up question on the point. Yes, yes. We know that SiP is very, very important for the U. K. Offer. We're working on it. Unfortunately, it's strictly linked to the physical presence in the U. K. So we will need a branch over there to launch the SIP. Of course, we stopped the launch of the branch that was already planned because of the pandemic, but reopening the project. So I think probably by the first the end of the first half of twenty twenty two, we would be able to also have a seat in the U. K. Offer. The next question is from Domenico Santoro with HSBC. Please go ahead. Hello. Hi. Thanks for the presentation. Good afternoon. A number of questions from my side. First of all, the guidance that you give on margins because of the internalization of the production at FUM, Can you give us a little bit of color on the phasing on these assets that would be internalized at pharma supporting your increase in margin guidance? In other words, I mean, today, Pharma has, if I'm not wrong, in terms of retail, €13,000,000,000 So as of today, on the total IUM, I increase in revenues because of this of €60,000,000 So how much is going to be? 25% this year, 50% next year and then 100% in 20.40? Can you give us a little bit of color on the phase? It's important because the more you accelerate this process, of course, I mean, you give a number of 2024, but the more you accelerate this process and the more you can get extra revenues in terms of P and L. And I was just wondering whether the phasing of the internalization is also the reason why you give us such a wide range in terms of fee growth in the investing for this year, 20%, 25% apart from market dislocation that could, of course, affect margin? The second question is a bit beyond 2021 on the banking fees because you have a number of initiatives here, of course. And the banking fees have been another driver for growth for fees over the last couple of years. So I just wonder how this €45,000,000 can basically level up next year given that you mentioned quite a growth also in the guidance. The other question is on dividend. I mean, of course, the more you deleverage the balance sheet, the more your leverage ratio will benefit from this process. But the dividend that you paid as of today, the one that you basically targeted for October, fixed the leverage at 4%, but you have more flexibility. So I know that you don't want to mention the payout because I mean your story is so dynamic and all the moving parts basically they influence the final outcome. I just wonder, at the end of 2021, given that you have 50 basis points of flexibility on the leverage, you might be a little bit more courageous in terms of dividend. And what could be the base we should consider for 2021? The last one announced in 2019, which was €0.32 if I remember, cents? And then a final question, the eco bonus. The tax rate that you will take is around €1,520,000,000 if my understanding is correct. Can you give us a little bit of color on how this benefit the NII? What is the health attached to this? Also because, I mean, the more NII you, in theory, you generate from lending tax rate. I assume that the tax rate will remain on your balance sheet, of course, because you need to defend the NII. But the more you get in terms of NII, the less you need to sell bonds. And of course, it's all again very dynamic for your story. And how much was the contribution also in Q2? Thank you. Sorry for the long questions. Regarding the management fee margins, you are completely right. So the faster is going to be our execution, the better risk definition because this is going to accelerate the jump in margins. Clearly, we expect that in 2021 because the we are just we are now working right now on the new initiatives for taking a more direct control of the value chain. So we kind of drew out that some the beginning of some possible effect can be emerged and be materialized also before the year end. But again, we prefer to be extremely cautious because if this is going to happen, it's going to be very welcome, but we prefer. So we our approach is that we think that to have progressively the most part of initiatives going up and running through 2021. So clearly, 2022. So 2020 2 is going to experience an absolutely very interesting jump in the investing revenues. And but with a big and it's going to be, let me say, a little bit a kind of a geometrical progression because in 2000 for example, in 2023, it's going to be really big and going forward. So because it's just the reason why we are not giving an exactly precise indication of the timing because we have initiatives that which we have to rely on the approval by the local central banks. So we are extremely confident that because we are working in a country that is incredibly efficient and cooperative with what we are doing. But clearly, we prefer to be to remain again cautious, not giving an indication that on evolution that we are not in the position to completely manage because we and so we our idea is to exactly the same we did immediately after the announcement of the discontinuity is progressively is to give to the market the more precise indication. So probably going through the Q3 results, we are going to have in our hands more even more precise indications regarding also the time horizon of the new initiatives. And we and our idea is to progressively become more and more precise in guiding the market also on the distribution time of the increase of these margins. But the same approach we have used on progressively guiding the market higher on the revenues growth on investing because we started on the guidance on 50% growth and now we are in the range between 20% 25%. So the more we progress and the more we are going to become precise on giving an indication also on the timing. Banking fees going forward Can I just sorry, can I pardon me? Can I just basically ask a follow-up question to clear an idea on this and we have everything clear? Is this phasing influence in a way your guidance for this year, first of all? So 20%, 25%? No. No. No. And the other question is, in 2024, how much of the assets you imagine are going to be as far as the production is concerned, internalized by farm more or less? Lorena, may you give me any help on this? Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, that's in front. Yes, Thank you, Alessandro. So in our estimation, we are working on from 45% to 50% in a range between 45% to 50% of penetration of Finnacle Asset Management on assets under management on total assets under management. Okay. Thank you. On the banking fees going forward, we for example, what is a developing story because we are taking a little bit by surprise by the very strong growth we are experiencing in terms of client acquisitions and inflows because what we were expecting considering the introduction of the new pricing on our banking services, the introduction of the close that is giving us the right of closing the accounts of clients with too much and too high level of liquidity. We were expecting an increase in the quarter of clients, but to some extent, a kind of deceleration of the client acquisition, but is happening exactly the opposite. And so this clearly the more clients we are taking on board and the more clearly is boding well for the evolution of the banking fees. And the reason why we are not giving and we are just giving an indication of a growing banking thesis because it's a developing story. So the resilience of our growth of base of clients is taking us by surprise. So probably the tailwinds represented by the structural disruption in the relationship between traditional banks and clients clearly is the tailwinds is stronger than we were expecting. And so this is the reason why we are not we think that is not the case to give any precise guidance on the banking fees that are expected to go to keep on going up in any case. On dividend, you're completely right. The more we are stabilizing the growth on the base of deposits and the more flexibility we have in because we are not just increasing the we are not just expected to increase the profitability of the bank, we are expected to have larger room of disposing of this profitability. And the reason why we are not entering in the game of giving a precise indication on the amount of dividends and on the payout is because Fineco remains a growth story. And so we want to be so we're guiding the market in direction that on which we feel absolutely confident that our dividend per share is expected to keep on growing. But at the same time, we want to be we want to maintain the flexibility to capture all the opportunity for making our growth even more robust. So in this case, I'm referring to the expansion abroad. Clearly, the more we are going to see the favorable conditions and then the more we are going to take advantage of this. And so for this reason, we think that to enter in an approach that is reached and with a low level of flexibility on dividends doesn't make a lot of sense for a growth story like we are. So we think that we are a unique combination of a fast growing company, at the same time is extremely relaxed on continuously increasing the dividend. But we want to remain and we want to maintain the flexibility to get all the opportunity offered by in terms of growth by this extremely fast changing world? And on the tax credit, again, I'm asking to Lorena to give any more precise indication on which is the kind of yield we are expecting to get on the tax credit. I want to remind that the tax credit are not waiting on the balance sheet because they are completely they are not Lorraine, if you can elaborate on the yield? Yes, yes. So we expect a yield in the region of 1.4%, 1.5%. It depends on the mix of the tax credit we are buying because there are tax credit with a duration of 5 years or 10 years. We buy from retail customers, but we buy we are buying also on the secondary market by institutional counterparties. And we expect that this is very interesting yield for us. Yes. I would like to reiterate the concept that Fineco is in a unique position because we have a combination of growing and predictable profitability. So this is allowing to us to be quite confident when we are buying tax credit. This is not the same it's the same story for example, traditional banks that for them the profitability is less predictable because we know that for example tomorrow morning there is another recession. Clearly, we don't we hope that this is not going to happen. Clearly, for traditional banks, this is going to have a huge impact on the profitability. This is not our case. So our profitability is predictable, continuously growing. And also we have this extremely favorable situation represented that we are acting as a withholding hedgeants for our brokerage clients. And this is giving to us a even larger room for buying credits by clients. And finally, FiniQ is incredibly efficient from an operational point of view because this is a business incredibly complex from the operational point of view. This is the reason why many organization they are giving up on buying tax credits. Sorry, this €1,500,000,000 is a stock that can be generated reasonably soon before the end of the year or is more a target of 1 year, 1.5? As usual, we prefer to be very serious without avoiding to sell book of dreams. Lorena, correct me if I'm wrong. Our goal is to fulfill the full capacity during going through 2021 and going through 2022. Probably by the end of 2022, we expect that to be at the full capacity. Yes. Thank you very much. Thanks, Odi. The next question is from Angeliki Barakpari with Autonomous Research. Please go ahead. Good afternoon. Thanks for taking my questions. First of all, could part of the margin uplift that you're guiding as an outcome of the actions that you're taking at Foneco Asset Management get completed away over time, meaning that you benefit from around 12 basis points uplift by 20 24, but maybe the underlying trend of the industry competition effectively means that you have to lower margins across the some products. I would like to get your thoughts on that. On that. And second question, are the financial advisers remunerated more for the fab products relative to 3rd party products? And third question on the Germany launch. Will this be with online brokerage first? And is it fair to consider that you will offer very competitive prices relative to the Italian market given competition in Germany is much higher? Thank you very much. Yes. The margin gap at least is mostly driven by operational efficiency. So this means that we are in the position to be able to give to our clients. So it's the perfect combination which we are here to give to our clients and on the new products and higher level of convenience because we are recovering in a big way efficiency and at the same time increasing our margins. For this reason, we think that this guidance is not under the threat of increasing competition by the market. On the pressure lines, I would like to remind that overall, generally speaking, Shinneco remains among the decently large players in the asset gathering industry, the most competitive. So we're going to be for sure the last ones and suffering any potential pressure on that. In any case, we have also interesting projects also for we started also in internalizing also, for example, passive funds that is a way of giving to our clients an extremely convenient product, but at the same time retaining internally in a quite interesting level of profitability. And we cannot rule out going forward to extend our internalization, for example, to the ETFs where that is an extremely appealing. So no, we that guidance has been given to the market considering also the the expected pressure that is going to build up on margins on the industry. Regarding the financial planning simulation, the answer is yes. The financial planners are getting more on the Finica Asset Management products. But this is mostly driven by the fact that on our Finic Asset Management solutions, we are able to have a much more effective and efficient, for example, risk management process in place because on the Finnacle Asset Management products, we had the possibility to have the look through of the composition of the funds in real time. And when we are looking to the original retail strategy on the platform, They look through in the best cases available with a temporary lag between 30 up to 60 days. So clearly, there is so the I was referring that is a perfect combination, which the clients are getting more convenience than surprising on the new generation of products. The bank is increasing the margins and the financial planners are paid more. And on Germany, the answer is yes, we're going to be we're going to offer an extremely competitive pricing. And if you look to what the pricing we have in U. K, you have, in my opinion, a good proxy of the kind of offer we are going to bring in Germany. I would like also to remind that in Germany, the conditions offered to the market are a offered to the market are a little bit less convenient than they are peers. And so we think that with the pricing we have in mind that it's not a secret, it's again, if you look to the pricing we are using in UK, this kind of pricing is going to be extremely competitive and disruptive on the German market. I don't know, Paolo, if you're going to give some more flavor on this point. Yes. Maybe that we are planning to start in Germany with the full range of products we offer in Italy, meaning also investing since the beginning. So we will be offering brokerage the full offer, investing the full offer in more than 60 asset manager and of course, the banking also. And then, yes, the pricing, we know very well, it's very important, but it's not the only thing. I think probably the our strength is to put together pricing with a range of products, a one stop solution and of course, the reliability of the platform and most of all the customer care we offer, which is a very high level. Thank you. Just to confirm, there will not be a physical financial advisory in No, just digital, yes. No financial advisor. The next question is from Luigi Gabelli with Equita. Please go ahead. Yes. Good afternoon to everybody. Three questions for me. The first one is on the UK and Germany initiatives. You elaborate a little more on the strategy for your growth abroad, in particular in Germany? For example, I know it's too early, but some targets, initial targets in terms of customer acquisition, mix of sales or target of asset under management or timing of the expected breakeven in Germany based on U. K. Experience? The second question is on the distribution of third parties savings account. What is the expected contribution from this initiative? And the last question is on more general on the M and A and evolution of asset management industry in Italy. And if you expect in particular a change in the competitive scenario going forward also in light of the recent interest for Deutsche Bank Financial Advisor Network or statements of foreign players to enter or strengthening the presence in Italy? Thank you. Regarding the first point, I think, Paolo, that probably you agree that on Germany, it's clearly too early to start on giving such a precise indication because we are studying the we are preparing the plan for entering Germany, but now to give a precise indication on we are going to use the same approach we have used in U. K, so extremely relaxed. We are going to leverage on our huge operational leverage. So we're not under pressure and so but at the moment we think that it's a little. For sure, also the same case of U. K, the operational breakeven is going to be reached relatively in an easy way, thanks to the operational efficiency we have. I don't know, Paolo, if you want to elaborate a little bit more on the point. Yes, yes. For Germany, it's too early. We have a precise plan in our head, but it's too early to talk about it, I think. And yes, great operating leverage. Probably within 1 year, we will be able to cover it. And the cost, the structural cost, again, it would be a mix anyway of our main strength. As I said before, pricing, reviews, customer care, range of products, the solidity and revenue of the class among these things, I think there could be very, very stronger in every country of Europe, actually, not only in Germany and in the UK. And you're using the usual approach. The more positive feedbacks we're going to receive in the market and the more money we're going to put on the table. So and what we can get incremental approach. On distribution of third party savings accounts, as we say that we are now in the phase of the family and friends phase. We expect to open the platform by the probably by the end of the month. I don't know, Paolo, if you can confirm that probably it's going to be at the end of the month. Yes. So we're going to open, yes, by the in a week or 10 days, we're going to be open, yes, I concur. And the contribution, we expect and we are quite confident to have an absolutely interesting contribution in our journey for deleveraging the balance sheet because practically we are going to accelerate the absorption of liquidity by the most reluctant clients in buying asset under management solutions. So this clearly is we are going to start initially with the 1st bank and progressing, we are going to add some more banks going forward. And on the competitive scenario, we have not such a great interest in what's going on because as we can confirm that we are not interested in any external option for growing because our organic growth is so strong, so big that clearly we it's practically every year we are is like to acquire the middle sized network of a middle sized banking network. And so we really we have no absolutely no interest in what's going on at the moment on the market. We prefer to remain fully concentrated in making our organic growth gaining momentum and the tailwinds are incredibly strong and keeping on reinforcing that clearly we think that it would be a massive mistake to waste time in for chasing external opportunities. Thank you. The next question is from Andrea Vercellone with Exane. I still have quite a few. Hopefully, they're quick. First one is on your guidance on tax rate going forward. I understand the logic as to why it drops. I was just wondering whether your guidance is for 1 percentage points dropped every single year until 2024 or a shorter period? Then on launch in Germany, can you give us an idea of the one time cost that you plan for next year in terms of setup, marketing expenses, recruiting. Actually, no, there's no recruiting because it's completely online. Just to know similar to what you did for the U. K, how much we should expect in terms of launch costs? Then on capital, I was just wondering if the €250,000,000 RWAs that you flagged in Q1 related to Brexit are still there in H2. And what dividend accrual assumptions that you have made for the first half of the year? I understand you will pay whatever you pay. I just want to know what is in the capital calculation. Then on bond disposals, I would like to know if there's any accounting or practical limitation as to how many you can sell every year. I believe it's 10% of the total, but I'm not sure. In the sense that if your deleveraging is very successful, well, in theory, you could sell a lot of bonds in the early years. I just want to know if there are limitations to doing so. Then you may choose to do it or you may choose not to do it. Then on dividends going forward, it wasn't clear to me the question has already been asked, but the answer wasn't clear to me. You mentioned progressive dividend policy. What wasn't clear to me is from what base progressive? And finally, on FAMA, again, I understand the logic as to why margins expand, gross margin expand. You have also mentioned that financial advisers are paid more for distributing some managed products as opposed to 3rd party managed products. Is it then fair to assume that the line item, I don't remember how you call it, but compensation to financial advisor is also going to increase geometrically as PAM's margin will do? Thank you. So let me start from the so I'm asking my colleagues if they can scroll the so I can see that. So regarding the tax rate going forward, clearly, I'm asking to Lorena to confirm that I'm not wrong that the drop is 1% per year up to 2024, I suppose, Florian? Yes, it's correct. It's correct. Yes. So regarding the one off cost for Germany setup, and for sure, they're going to be lower than the UK because the process is going to be more straightforward considering the more direct passporting, I think that Germany is part of the European Union and so on. But Paolo, if you want to give to be even more precise of the estimating potentially the one off cost for Germany? Yes. It's going to be for sure less than what we spent in the U. K. Is going to be in the region of less than €1,000,000 probably. And yes, this is pretty much the amount. Yes. And in terms of advertising budget, Because obviously, you set it up, but then you need to make yourself known. That could be several 1,000,000, I suppose. Yes. But it's too early to say because it depends on the because we prefer to have a precise idea of the market because when you present in U. K, when we started initially, we have been very prudent in starting on spending money because before spending aggressively on market, you have to be sure that what you are presenting is absolutely perfectly fitting to the market conditions. And clearly, we think that we are what we are setting up is quite good for the German market. But until you are not there, you cannot be completely sure that all the small single details are perfectly working. So it's we prefer to be extremely flexible at this point because if everything is absolutely perfect and perfectly working, the market. So also because but on this point, probably power can be even more precise considering that Germany at the beginning, the largest part of the business at the beginning is going to be represented by brokerage. And so on brokerage, it depends also on the market conditions. So Paolo, on the point that so if there is volatility on the market, it's worth the case to spend in marketing. But if the volatility is not there, like for example, in this period of time, it doesn't make a lot of sense to spend money. I don't know, Paolo, if you want to point. Yes, of course. First of all, we're going to spend the first 6, 8 months of 2022 to fine tune the engine because before spending a large amount of money, we need to be sure 100% the engine is working properly. And then we will start spending a few money to test the process basically. So we see the full steam at the end of 2022 and the 100% full steam in 2023. So reasonably speaking, next year in Germany and unless we found in an incredibly favorable condition in which everything is perfectly working. And also the market is incredibly favorable for brokerage with volatility spiking up again. So I'm not managing that we're going to spend in a big way marketing in Germany. It's going to be much more in a setup period of the business. I don't know, Paolo, if you share my picture. 100%, yes. On the capital, I don't know, Lorraine, if you want to there is a question on risk weighted assets and the dividend accrual, if you want to give an more precise answer. Okay. Thank you. So regarding the risk weighted assets related to Brexit, we have started to progressively decrease our exposure towards UK. And in the Q2, we have reduced the UK exposure by €71,000,000 in terms of risk weighted assets. And regarding dividend And going forward, which kind of guidance we can give on this point? Yes. Our expectation is not our expectation, our proposal is to reduce completely the exposure towards U. K. If equivalent U. K. Be considered as equivalent European country with a 0 risk exposure? Exactly. Because the plan, we are moving, progressing because clearly, this position is completely unreasonable because to charge 100% risk weighted assets on the U. K. Exposure doesn't make any sense considering that we have other countries that are not part of the European Union, that they are not they don't have the same penalized treatment. So we think that but in any case, so the plan is if this is not going to happen, the plan is progressively to get rid completely of the U. K. Exposure. And on the dividend? Regarding the dividend, in the first half, we had accrued in common equity Tier 1 capital €87,000,000 of net profit, of which €32,000,000 related to the impact of fiscal realignment of goodwill. This is represented 70% of payout ratio, excluding from the net profit, the positive impact of fiscal realignment of goodwill. And regarding the bond disposal Regarding the bond disposal, yes, we have a limit that is 10% of the total amount of bonds that we have at the end of the previous year. Yes. But regarding the point raised by Andrea, that indicates that we have in a faster than expected deleveraging process, we can sell more clearly. Yes, yes, absolutely. But we have Yes, yes. We have so big amount of bonds that it's quite impossible to have. That. Yes. And regarding the dividend, the dividends going forward, progressive dividends, Polish, from what base progressive? Lorena, it's still yours, please. Alessandro, you have already answered to this question without giving a precise guidance on that. So the point remains the same. So I want to be sure that we got your questions in the right way. So we are quite absolutely confident on being able to so to keep on growing our dividend per share. And this takes the combination of continuously growing profitability and larger room for disposing of this profitability. But we prefer not giving a precise indication on the payout exactly because FIMICU is a growth story, so for this reason. But the question was from what base we are seeing? Yes. The question was not on payout, which obviously depends on the earnings. It's more, if you say growing, the only references we have got is the special dividend you will pay in Q4, which, however, relates to 2 years or the dividend you paid in 2018. We have no other reference points. So then if it's, I don't know, below 2018, we will be telling you, you said it was going to be growing, and it didn't. I don't know if you will or will not, but just to be somewhere guided in the wrong in the correct direction, let's say. So let me be clear. I understand that, Lorena, we will So our objective is to so our constraint is the leverage ratio. And our goal is to maintain a leverage ratio above 3.5%, ratio can be distributed as dividend. And so around 70% of dividend payout is a number that could have a sense for us. Yes. Okay. And on commissions to retrocessions to financial advisers? The margins that we are giving as so the 75 basis points pretax and what was 50% what was the 55%. 55%. 55%. They are clearly, they are considering so correct me if I'm wrong, Lorena, they are considering what is paid to financial planners? Yes. It includes also So these margins are embedding automatically the higher payments that you're going to make to financial planners for the increase of the penetration of senior asset management. So these margins are, from that point of view are net margins, not gross margins. All clear. Thank you. Gentlemen, there are no more questions registered at this time. Mr. Forte, would you like to add any final comments to conclude the conference? Thank you very much for attending our conference. Thank you once again for the extremely precise and extremely important questions you made to us. And as usual, if you need to make some more deep diving in our numbers and concepts, please feel free to make us a call for arranging a follow-up. Thank you again. Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.