Earnings Call: Q1 2021

May 11, 2021

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Finaco Bank First Quarter 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 Foti, CEO of Fineco. Please go ahead, sir. Good afternoon, everyone, and thank you for joining our Q1 results conference call. Before we start going through the details of the presentation, let me please highlight the main strategic developments we are undertaking as we have entered in a new dimension of structural growth, given the strong acceleration in the long term trends. The Q1 of the year marks a turning point in our story as we have introduced a wide set of initiatives to progressively become a more platform fulfilling the financial needs of our clients than a bank. The new dimension of growth is generating, 1st, an acceleration of the deleveraging of our balance sheet, which will in turn progressively increase and improve our revenues mix, boosting fees and commissions. 2nd, a strategic discontinuity in Finacro Asset Management, which is entering in a second wave to take control to take more control of the value chain to further accelerate our investing revenues and margins. Let me write that in the Q1 of the year, we recorded a record high net profit reaching €95,000,000 and increasing by 3% year on year despite the full contribution to the single resolution fund equal to $5,800,000 paid for the first time in 2021. These results is even more valuable considering that has been achieved in a new normal world and compares with the best quarter of 2020, which was characterized both by low operating cost due to the strict lockdown in place in Italy and by the strong performance of brokerage due to the volatility peak. Gross operating profits stood at $144,000,000 increasing by 7% year on year, excluding non recurring items of 2020, showing the soundness of our industrial growth. Revenues stood at $218,000,000 increasing by 8% year on year, excluding non recurring items of 2020 and mainly supported by investing in brokerage. Operating cost well under control and confirming operating leverage as a key strength of the bank with costincome ratio at 33.8%. Also during the 1st month of the year, our commercial activity continued to strengthen compared to the impressive growth experienced in 2020. After the record net sales registered in the Q1, April recorded almost EUR 950,000,000 inflows with an outstanding mix, 95% of assets under management and EUR 622,000,000 outflows in liquidity, confirming again the efforts of the bank in reducing deposits and improving the asset mix. In April, we also registered strong brokerage revenues estimated at around $17,000,000 This is a very good news considering the unfavorable market conditions due to both low volatility and volumes. Nevertheless, revenues were around 50% higher compared to the average monthly revenues in the period 2017 2019, confirming once again that the flow of the business is now definitely higher compared with the past. Let's now move on to Slide 5 and start commenting our Q1 results. As announced, we reached very strong industrial results also in a new normal world with net profit standing at €94,700,000 in the quarter, plus 2.7% year on year on a like for like basis. Gross operating profit stood at $144,500,000 increasing by 7.2% year on year, excluding non recurring items of 2020. Thanks to very strong revenues reaching a record high level of $218,200,000 up 8.4 percent 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 in brokerage. Operating costs stood at the $73,800,000 increasing by 4.5% year on year, excluding costs strictly related to the growth of the business. We will deep dive on cost later on during the presentation. Cost income, continued to be very low at 33.8%, 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 to Slide 6 and start to analyze more in detail the dynamic of our results. In this slide, we are showing our net financial income, including net interest income and profits from treasury management. This is in order to give a better representation of the overall contribution coming from the way we are managing the investments of our clients' liquidity. Going forward, 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 revenues mix with an higher components of fees and commissions. The graph of the left hand side of the slide, we are representing the first things of this process as our net financial income reached €75,100,000 in the quarter, growing by 4.3% year on year and 17.1% quarter on quarter. Net interest income remained resilient at 61,800,000 dollars despite the worsening of interest rates environment and profit from treasury management stood at 13,200,000 dollars Let's now move to Slide 7. Fees and commissions stood at 118 $700,000 in the Q1 of 2021, growing by 13.1% year on year and by 22.8% quarter on quarter. Thanks to the positive contribution of all product hires, in particular, investing in brokerage. Trading income, net of non recurring items and profit from treasury management, reached $23,900,000 in the quarter, thanks to the strong performance of brokerage. Let's jump now on Slide 26 to deep dive on our brokerage business. Brokerage confirms confirmed once again that after the recent events, the flow of the business is structurally higher compared to the past and regardless of the level of volatility. As you can see in the chart on the top of the slide, in the Q1 of 2021, overall brokerage revenues reached a new quarterly record at EUR 65,000,000 increasing by 2% year on year despite a much lower market volatility. As anticipated at the beginning of the call, also revenues in April were very strong reaching $17,000,000 in a month characterized by low volatility and low volumes. This is very good news for us as revenues were 50% higher than in the period 2017, 2019, confirming once again that the flow of the business is now higher compared to the past. 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 in the first half of twenty twenty one, we will launch our leverage certificate offer, becoming issuer, market maker and distributor through our platform. 2nd, the client base using our platform is widening with active investors that are have grown significantly in absolute numbers, standing well above the average level of 2018 2019. Please note that our active investor have an average of 5 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 market share. For example, our market share in Italy on equity traded volumes increased to 27.8% in December 2020. Let's now move on Slide 8 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 investing business is better also going forward as we are preparing a strategic discontinued Infinec Asset Management that will allow us to improve the efficiency of the value chain, generating higher revenues and margins. We will deep dive on these initiatives later on during the presentation. Investing revenues amounted to €69,400,000 in the Q1 of 2021, increasing by 13.8% year on year and 6% quarter on quarter. Thanks to the volume effect and stronger net sales into asset under management, driven by higher contribution by Finic Asset Management. More in detail, management fees increased by 17.3% year on year and by 7.4% quarter on quarter. Let me please highlight that the quarter is also showing a first sign of higher risk appetite by clients, resulting in management fees margins, slight increasing to 63 basis points. Let's now move on Slide 9 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 Q1 of the year was characterized by cost directly 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 Q1 2020, driving non HR cost to their lowest level of the last 10 years. Operating cost in the Q1 2021 stood at $73,800,000 growing by 4.5% year on year, excluding costs related to the growth of the business. Particularly in the quarter, we spent additional $2,400,000 in marketing cost, mainly in UK and not in place in the same period of 2020, dollars 700,000 additional cost related to our financial advisers as we have higher contribution to Fyr in the Nasarco due to the strong net sales recorded at the beginning of the year. Please note that these contributions had a fixed annual limit and that is mainly filled in the early month of the year. Additional $1,000,000 cost for Finney Asset Management that is preparing itself to further expand its business, allowing us to have a higher control of the investing value chain. Finally, additionally, additional €200,000 related to cost for the customer care as the new current accounts almost doubled. Going into the details, non HR costs stood at €47,500,000 excluding the previously mentioned expenses related to the growth of the business. They only grew by 3.8% year on year, confirming our strong operating leverage. Finally, staff expenses stood at $26,200,000 in the period, increasing by 5.7% on yearly basis, net of the costs related to the expansion of the business of P and A cost management. Let's now move on Slide 12 for a focus on our capital ratio. Finnacle confirmed once again rock solid capital position on the way of a safe balance sheet. Let me remind you that following the extension of the recommendation by CBN Bank of Italy on December 20 20, we will refrain from paying dividends until September 30, 2021. Let me highlight that our intention is to give back to our shareholders our excess capital at the first window of opportunity. With this regard, let me please remind you that the core Tier one ratio is not the constraints for us. And thanks to the initiative the bank is undertaking, we expect the leverage ratio to stabilize in a comfortable zoning range between 3.5% 4%. Common Equity Tier 1 ratios stood at 26.5%. Let me please note that the quarterly decrease is mainly explained by temporary increase of risk weighted assets post Brexit related to our treasury exposure to our U. K. Financial counterparties. Going forward, we expect this component to significantly reduce as the regulators should pronounce on the treatment of exposure towards UK counterparties, making them equivalent to the European ones. In case of different treatment, we will significantly reduce our existing exposure. Risk weighted assets stood at €4,208,000,000 increasing compared to December, mainly due to the previously mentioned temporary effect related to the UK counterparties exposure. Total capital ratio stood out at 38.4% as of March 2021. Let's now move on to Slide 14. As you know, 2020 has made it even clear that Finnacle is in the sweet spot for growth. And in the Q1 2021, the bank has been able to deliver even stronger net sales, reaching EUR 3,300,000,000 with a very strong asset mix. April net sales were only the latest confirmation of this big jump in a new dimension of growth. Let me now spend few words on the recruiting. As you can see in Slide 15, starting from last year, we have experienced a strong increase in the interest of financial advisors 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 Fintech DNA. With this regard, please note that we have no need to overpay financial advisers with huge upfront fees and use the 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 Q1 of the year when we recorded a net increase of 69 personal financial advisers in our network and led to net sales generated organically by the bank to a much normal level at 86% in the Q1 of the year. Let's now skip to Slide 20 and start discussing about our expectations for the business going forward. In this slide, we summarized our guidance for 2021. With regards to our banking revenues, we expect net financial income to be flat year on year, thanks to both a resilient net interest income and a higher profit from treasury management coming from our valuable financial portfolio. Going forward, we expect the net financial income to stabilize, thanks to the acceleration of the deleveraging of the balance sheet, to the improvement of the steepening of the curve and to the new initiatives in place like the buying of tax credits. Overall, banking fees in the region between €40,000,000 45,000,000 dollars thanks to the smart repricing launched in 2020 and to the additional fees from the new pricing on the new current accounts. On investing, we are increasing our guidance on revenues growing by around 20% with resilient or slightly higher margins compared to 2020. Going forward, we expect a strong acceleration on investing as we expect a further increase in our network productivity, leading to our higher volumes. And we will implement the 2nd wave in Finnequa Asset Management, which is going to take even more control on the value chain that will give a boost to margins and revenues. Brokerage revenues expected to remain strong with a floor that is definitely higher than in the past. Operating costs are expected to grow in a range between 4.5% 5%. Please note that there might be additional costs related to Finian Asset Management as we are introducing the previously mentioned strategic discontinued to improve the efficiency of the value chain in the investing business. Going forward, we confirm our guidance on a continuous decline in cost income in the long run, thanks to the scalability of our platform and the strong operating gearing we have. With regards to systemic charges for 2021, they are expected to stay in a range between €35,000,000 €37,000,000 booked within provision for risk and charges. Please note that the more we will be effective in the leveraging of the balance sheet, the more we can decrease our contribution to systemic charges. Our capital ratios, we expect the core Tier one ratio to remain above the floor of 70% and leverage ratio above 3.5. Let me please add that thanks to the progressive rollout of our industrial initiatives, we expect the leverage ratio stabilize in a comfortable zone in a comfortable in a range between 3.5% 4% currently with the combination of both a strong acceleration in growth of the bank and the distribution of generous dividends. Capital risk was equal to 9 basis points in the Q1 2021, thanks to the quality of our lending portfolio that is offered exclusively to our loyal customer base. For 2021, we are confirming the guidance in a range between 10 basis points 50 basis points even in this environment. Finally, we expect robust and high quality net sales with lower components of deposits, thanks to all the initiatives we are undertaking. Let's now move to Slide 21 to deep dive into all the initiatives the bank is undertaking. The recent events have produced a strong acceleration in structural trends and have increased the speed at which we're 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 as HEPLOR net sales figures confirmed. Let me please remind that the new initiatives will allow us to improve our revenues mix. As already said, the Q1 marks a turning point in our growth story 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 only 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, we are introducing a strategic discontinued Infinec Asset Management that will allow us to improve the efficiency of the value chain in the investing business. 4th, we are improving the quality of our client base, focusing our target market on the upper end. As already anticipated in the previous quarter, in February, we introduced a new pricing for new current accounts to better control the acceleration of new clients from traditional banks and to be more selective in our client acquisition. Finally, the launch of the new platforms leveraging on our Syntech DNA. 1st, the platform to distribute third party savings accounts. It will be live in June with the 1st provider, while others will follow later on. And we give we will give clients another alternative for their deposits. This platform can be considered a perfect example of open banking. The second platform is allowing us to manage tax credits towards state, which we are progressively buying. All these set of initiatives will allow us to be more selective in the growth we are pursuing, resulting in a better quality of revenue better quality revenues mix coupled with the deleveraging of our balance sheet. Let's now move to Slide 24 to deep down in our investing business going forward. As anticipated, going forward, we expect an acceleration in 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 within a cost management to further extract additional operational efficiency, which will allow us to take more control of the investing value chain. Finic Asset Management is confirmed to be key in our move to accelerate the conversion of deposits into assets under management. Let me please highlight that our Irish company strongly and consistently contributed to the group's net sales. For example, in April, it recorded its best results here in terms of retail net sales equal to more than EUR 500,000,000 inflows confirming to be on the right path to fully catch its strong growth potential. Let me remind you that the increase in volumes will result in a geometrical growth of its margins contribution and that our Irish company is on its way to develop a new product range based on an advisory services by third parties, which is going to make the value chain even more efficient. Finally, during the year, it will be adding new solutions focused on equity and sustainability on the back of the increasing demand by customers. Finally, please note that we are observing and increasing the risk appetite by clients and this could translate any improvement of margins going forward. I now leave the floor to Paolo di Graca, our Deputy General Manager, for an update on the development on our UK business on Slide 29. Thank you, Alessandro, and good afternoon, everybody. Our one stop solution offer in the UK is proving to be very well welcomed, and our marketing campaign is providing a strong boost to quality client acquisition. In the 1st 4 months of the year, we have already opened more current accounts than in the whole 2020. Thanks to the acceleration of these dynamics, we confirm to reach our first target of 30,000, 35,000 good clients well before the initial time horizon we estimated. As you can see on the left hand side of the slide, since the start of our marketing campaign, we have recorded a strong acceleration in our customer acquisition dynamics and in the quality of our client base, in particular, in the last few months. Let me please highlight that the stickiness on our active clients is very high and equal to 90%. This confirms that we are not attracting hit and run highly speculative and volatile customers, but we have attract we are attracting experienced traders loyal and looking for quality offer, a further evidence of the right positioning chosen by the bank. On the second graph, you can see that we are further improving the penetration of active clients and brokerage, now representing more than 70% on new current accounts in the Q1 of 2021 and confirming once again that we are targeting the right clients with the right offer. This translates in a further boost in our revenue generation. As you can see on the right hand side of the slide, we are building up on the strong acceleration we experienced in 2020. As revenue in the Q1 2021 were more than half of the revenues generated in the full year 2020. On top of this, we are continuing to improve our revenues mix in favor of over the counter and listed products, which are now the lion's share of the our growth. Together with our huge operating leverage, this has allowed us to be profitable, excluding marketing expenses at the end of the Q1 2021. Finally, on Slide 30, we sum up the next steps that are getting us closer to the full launch of our investing offer. In particular, please note that DI's accounts are now live and already recorded more than 680 subscriptions in just 2 months. Let me add that we launched new promo to attract clients from traditional banks, and we are step by step introducing more fuel in our investing offer. Finally, through the year, we will continue to enlarge our fund offer with a wide pipeline you can see in the slide. Now thank you for the attention, and I will hand it back to Alessandro. Thank you for your time. And 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 Adzuragwesi with Citi. Please go ahead. Hi, good afternoon. A couple of questions, mainly on the outlook and on the cost and investing fees. You have improved your guidance for the fee income. And if you could give us some color if it is mostly linked with the improvement in flows that you are expecting? Or is it also linked more to a more resilient margin? And how do you see margin evolving also linked with the changes that you have implemented at Farm. The other point is that you have given detail on the various P and L line, but you haven't given a bottom line, if you want, guidance. And you've been on the press of saying that you expect net profit to be resilient year on year. Would you expect do you confirm these? Or do you expect it to be a little bit better? And if I may on efficiency, usually you should have a very strong efficiency and this quarter we haven't seen these because of the if you want growth. But if we strip these out, basically, we implied and looking at your guidance, the implied run rate for the next quarter will be below the Q1, excluding extra cost of sum. Would that be reasonable? And how could we think about these extra cost in pharma? Thank you. Thank you, Dror. So let me start from the outlook on investing fees. So let me split the enhancements into components. There is the first component that is related to the 2021, which clearly we the increase of the guidance is driven by a combination of, first of all, we expect that the productivity of the financial plan is better to keep on building up. Thanks to the deployment of new solution, new technology and so on. And so the second, clearly, we expect an improvement of the margin mix related both to the increased appetite by risk appetite by clients And also clearly that the more we have a growing contribution by Finica Asset Management and more clearly is translated in higher revenues and margins. And this is the first component. Then there is the second component and because these elements of 2021 are going to stay with us also in the following years. But on top of that, clearly, the big discontinuity on which we are working is to capture and much bigger slice of the value chain because at the moment, we are leaving on the floor a lot of money. And clearly, we are going to remain consistent with the concept of an open architecture, but we are going to put in place solutions for capturing this absolutely enormous amount of money that has left on the table. Just I'm trying to give you the practical example in order to give you the flavor what I mean. The most recent product has been launched by Finica's management. That is the China target, that is the accumulation product on China, in which clearly we are using a tracking index for replicating the exposure to the equity Chinese market. At the same time, we are entering in the securities lending transactions for extracting value to give to clients in terms of remuneration of their liquidity. And this product is an example in which I think is going to remain completely in our group without sharing and nothing externally. But this is just and then we have many other initiatives that are going to be put in place. So going forward, clearly, we can expect a really massive increase of the investing margins in the coming years. It's more or less the same concept when we launched Kinica Asset Management at the beginning. We say that we were expecting a large contribution and now we are entering the 2nd wave. So this year, clearly, we expect that the guidance has been increased. The increase of the guidance is not fully reflecting the numbers that we are experiencing right now because the numbers are definitely very well above our expectations. But we are we prefer to remain to still remain to remain cautious. And so this is the reason why we are guiding the market in the region over an increase in the region of 20%. And then clearly, we expect that going through our our towards year end and particularly next year that the contribution of the new initiatives by Fini Asset Management is going to play a very important role in making the investing revenues growing in a big way. Bottom line guidance. The bottom line guidance, clearly, we think we are quite confident that when we look to their consensus of the market, generally speaking, we are quite confident that we can beat this consensus considering putting together the resilience of the financial income, the very strong momentum of investing fees and clearly the much higher floor of the brokerage business. And on cost efficiency, yes, you're right. Clearly, in the first part in this Q1, we had some extraordinary components like the higher marketing cost driven mostly by the UK, That's simple fact that in the Q1 of last year that we had no cost on UK. Also there is the seasonal impact that this year has been much stronger. That is the contributions to the retirement of financial planners that as we described during the presentation is a fixed amount. But clearly, the faster is the growth in the at the beginning of the year and the more you're reaching the ceiling. So in this case, considering the absolutely the very high results achieved in the 1st part of the year. This ceiling has been achieved faster than usual. And so these more or less are the so is the picture. The next question is from Domenico Santoro with HSBC. Please go ahead. Hello. Hi, good afternoon. Thanks for the presentation. I do have a number of questions. First of all, on the net financial income. I apologize for breaking down again the 2 components. I know that you gave us a guidance for 2021 on the combined contribution of the 2. But I want a little bit more color, if you don't mind. First of all, you benefit from large trading gains in the quarter. Of course, as you said in the presentation, the more you're able to change the balance sheet to move off balance sheet assets and the more you can also be more dynamic in the management of your bond portfolio. But I just wonder what should be this revenue stream going forward, if you have an idea? Also because I guess you have quite significant unrealized gains on your bond portfolio. So this is the first question. The second, on the net interest income stat. So these are EUR 61,000,000,000 to EUR 62,000,000,000. Shall we consider this a sort of clean number for the next quarter? And can you also mention, please, if you could give us a bit of color on how this can evolve, sorry, in the 2nd part of the year, given that you have part of your bond portfolio swapped into variable rates? And if you can give us also a bit of color how the economics attached to the eco bonus can be in the 2nd part of the year? The other question is on banking fees. I appreciate that you give us the full number for 2021. Also, what could be the additional revenue stream coming from the distribution of time deposits? So just wonder whether this 40%, 45% is a sort of floor and it can go up over the next years because of all the initiatives that you have in place. Brokerage, I understand that you say in the in your guidance a flow definitely higher than in the past. I'm just wondering whether 2021, it can be better even compared to 2020, which was a very strong year. This is the line of the P and L, which is more difficult for us to model, but you have a number of initiatives in place. So appreciate if you could give us a guidance. And then you now mention, if we come to dividend, I know everything is up in the air because it's conditional to the ECB removing the ban. But you mentioned now 3.54%. So my understanding is that you're moving your bar in terms of leverage ratio more close closer to the 4%. So are you starting to think about how you're going to please your shareholders coming back to 2019 dividend? Or it's going to be a distribution of excess capital in terms of excess, what you have in excess of 4%? Sorry for the long, very long question. Thank you very much. No, thank you very much, Domenico, because you are giving to us the opportunity to deep dive in some very important components. As we said at the beginning of the presentation, this quarter is marking a quite relevant discontinuity with the past. So the reason why we are now showing the net financial income, so putting together net interest income and profits from treasury management because this is strictly related to the change in strategy by the bank and that is the deleveraging on the balance sheet. So the bank has started some months ago in moving in that direction. And clearly, the more effective we are going to be and clearly, the more this is going to reduce our dependency on the financial investments. So this is pretty high. And considering that the recent evolution on our deposits embedding any impact by the most relevant initiatives we are putting in place, because the initiatives related to the introduction of the close for closing the accounts to clients characterized by a too high level of liquidity has not started yet because the for the time at the moment, the only result has been the introduction of the clause is ringing as a wake up call for clients and this is contributing and accelerating the asset under management business, but the bank has not moved yet in direction of starting or getting rid of these kind of clients. 2nd, clearly, there is no contribution by them, the temp deposits platforms. And so for this reason, we are extremely confident that this process of deleveraging is going to continue. And so clearly, the more we are affecting that direction, clearly, there is a clear correlation between net interest income because and treasury management because we are going to become more and as you are correctly underline, we are sit on a quite large unrealized potential capital gain on the portfolio clearly. And so it's and clearly this is and the more we are going to move in direction of deleveraging of the balance sheet and the more we can progressively release a portion of this. The only unless there is an absolutely gigantic increase in interest rates. But in this case, it's not a problem in any case because the next future reinvestments we are going to make on the remaining part of the liquidity is going to be made at a much higher rates. In any case, if we are looking forward, because for 2021, it's now the guidance of a flat financial income is a done deal. Regarding the following years, clearly, there is everything is moving in that direction because the combination of the effectiveness of what we are putting in place for the leverage in the balance sheet. The very clear improvement driven by the steepening of the yield curve because clearly another very interesting effect that this year considering that we are starting on accelerating in slowing down the growth of deposits. We are we practically we stop of investing. And so we are postponing our investments on the longer horizon. So the combination of the measures keeping on working on producing the balance sheet. The steepening of the hill pool. Also, we expect progressively an interesting contribution from the credit from the fiscal credits we are buying because this is going to play in a material impact going towards year end, but the largest part is going to be next year. If we put everything together, we are absolutely fine and confident that the financial income is going to be absolutely is going to remain stable. And this is the reason why we are putting together the net interest income with the treasury because they are absolutely interconnected. Giving you a separated guidance on net interest income, respect to the other part, in our opinion, doesn't make a lot of sense considering because they are strictly related for the reasons I was explaining. On the 3rd on the temp deposits platforms, clearly, the main goal is not going to bring revenues, but to accelerate this process of deleveraging on the balance sheet. And but we also we expect then going forward also some decent profitability by this, but it's a little bit too early. But again, the main goal we have with this the introduction of this platform is to accelerate to reinforce the process of deleveraging of the balance sheet. Brokerage. Brokerage, clearly, why we are so interested in capturing the floor of the business? Because first of all, the fact that we've been able to deliver higher revenues in the Q1, respect last year that has been the real big guy, the real big quarter in the brokerage. Because if you look to the revenues generated quarter by quarter by brokerage, the real big numbers has been achieved in the Q1. And considering that these results have been even higher in a context characterized by a much lower volatility. And for example, the month of April is for us has been an absolutely extraordinary month Because if we look to the volatility of the month, the volumes has been one of the month characterized by the lowest level of volatility over the last few years. Nevertheless, the €17,000,000 it's a big number. So same story. We clearly, we are not in the position to predict the level of volatility volumes. But if you're going to be extremely pessimistic and conservative, you can assume that for all the year long, volatility and volumes are going to remain the same of April. But honestly, I don't think that this is going to be the case because just the most recent days is marking 108 big rates change in the market conditions. But if you assume that the situation remains multiplied by using this floor as for evaluating the for estimating the revenues generated by brokerage and so on. But this is up to you. It depends. For us, clearly, we cannot manage volatility and so on. But for us, what is extremely reassuring that in a month like April that has been absolutely disgusting in terms of conditions of brokerage, the revenue generator has been absolutely amazing. The question on dividend is very important because clearly one of the main results generated by the deleveraging of the balance sheet that practically we can say that the constraints of the leverage ratio is definitely over. So it's not anymore existing because just slowing down and slowing down at the level where we are now, the leverage ratio is not going to bite anymore. So FiniQ is going to become a really and really completely capitalized fully capitalized platform that is and so clearly, we there is this is boding well for having much more ammunition for satisfying our shareholders' appetite. So clearly, we can and we can clearly think to increase the what we are paying in terms of dividends or we can have a we can use a portion for increasing dividends and another portion for putting a little bit more money on our expansion abroad. But clearly, practically, Finneco is becoming a cash machine that is practically not consuming any kind of capital, both in terms of Core Tier 1 and more importantly, the leverage ratio because leverage ratio has been starting from the listing the most relevant constraints. Now with this brand new direction of the bank, the leverage ratio is not going to be any. And clearly, the range the target range is embedding clearly in a distribution of the excess of capital that we have accumulated over the last couple of years following the ECB directions. So clearly, this is absolutely very important, and thank you for raising the point. Can I ask a very quick one, a follow-up, just to be clear what you mentioned before on the net financial income? And to be clear, I understood well. Is it correct to assume that from now on, whatever is the impact of all these measures on NII, which are not only, of course, interest rates related, so market related, but also conditional upon the way the balance sheet will move going forward, are going to be compensated from additional revenues from profits from treasury? Yes, yes. So clearly because clearly we decide to make the life of our shareholders a little bit easier. So we putting together because you can have different combination because you can clearly, the decline in the contribution on the from the treasury portfolio can be driven exclusively in the assumption that there is such a massive increase in interest rates that clearly is increasing the potential capital gain portfolio. But in this case, clearly, the reinvestments of the remaining portfolio is going to be done at a much higher rates. And in any case, is at the moment, there is pretty heavy then that next year, the reinvestment of the running of portfolio is going to be done at a level of rates that is definitely higher respect the initial expectations? And also clearly there is the contribution of the progressive building up of the platform for the fiscal credit. Clearly, it's a little bit time consuming because we are buying clients by clients these small tickets and so they are progressing. But clearly, we are extremely confident this is going to bring in progressively a very interesting contribution. So if we put everything together because it's very difficult to give you a perfect idea of the combination of net interest income, some because it depends on the speed and the depth of the deleveraging on the balance sheet. But putting it in together, the guidance that we think it's absolutely sustainable is to look to the financial income, this is going to remain absolutely stable and also going forward in the following years. So that EUR 280,000,000 that you realize in 2020, that's the reference for us for 20212022 in a way, correct. Yes. Thank you very much. Thanks for the clarification. The next question is from Luigi Develis with Equitosim. Please go ahead. Yes, good afternoon. Just one question clarification on investing. Can you give us more color about your strategies and driver to accelerate the conversion of liquidity deposit in asset under management? Or better, can you quantify the potential impact expected by your actions to speed up the conversion or an expectation of a percentage of conversion do you expect in 12, 24 months period? For example, how much are the real eligible assets to be converted? And if this is already in the guidance? Thank you. Regarding vesting, as I was anticipating, we had to split we had to split the enhancement into components. 1 is the business as usual. So we expect clearly the then a continuous acceleration in direction of a better business mix for the reasons we explained because the incentive scheme, the financial plan is just in direction of asset under management. We can afford to do that because the growth in terms of net sales is coming by itself. Because as we were explaining, Fineco is experiencing an absolutely gigantic flight to quality in our direction. 2nd, the journey of continuously deploying technology for improving the productivity of our suppliers is continuing. So we are just at the beginning of this journey. And so we are extremely confident the productivity of financial planners is good. 3rd, the client we are acquiring different from the past now, our client acquisition is massively secured in direction of investing clients. So because we progressively we moved up in the upper end of the client base. And so the new clients are joining the bank, our clients that they are structurally interested in investing. And so by definition, the percentage of liquidity remaining is extremely low. And so our point of attention is much more in direction of the old clients of the old clients of the past. And the second component clearly is the huge change in the interaction that we are going to have with our platform. So at the moment, we are leaving on the market and a huge amount of money that is completely pocketed by 3rd parties. What we are going to introduce in terms of change of interaction with the platform, product structures and so on is going to make for us possible to recover a quite sizable component of this amount of money that is left on the market. I would like to remind that Sineco is still in the at the very initial phase of taking control of the failure chain of our investing process. Because differently from the industry that is by many decades that has been extremely accurate in capturing the food value chain. We are just at the beginning of this process. Now the timing is the right timing and so we expect that this is going to bring a quite sizable acceleration in investing revenues on top of what we are doing now. Thank you very much. The next question is from Alberto Villa in Termonte. Please go ahead. Good afternoon and congratulations for the results. Alessandro, just a couple of questions about the foreign operations because on the Italian operations, I think my colleagues have asked you almost everything. First of all, it's just a general comment. I'm pretty fascinated by the moving towards the platform rather than a bank. And I think the ramification of this change is pretty wide. And you explained to us what you mean, but probably it's something that we have to digest a little bit over time. But I was considering if this transformation as a platform also may accelerate your expansion abroad. So I have a couple of questions on the foreign operations. First of all, on the U. K, maybe you mentioned during the presentation, but I missed it. When you think to get to 30, 35 good clients and out of the 15,000 clients you currently have, how much of them are good clients? And secondly, you also mentioned during some press interviews that you are considering entering new markets and this is not totally new, but you mentioned Germany as a potential priority. I was wondering if you can share with us if there are any step forward on this direction? Thank you, Alberto, for your question. So regarding the first question, so if it's clear that the transformation of Fineco much more in a platform and respect it to be a bank. And so through the deleveraging process, clearly is opening the way for also an acceleration of the expansion abroad. I want to be even clear on the point because clearly, the most relevant part of the leveraging of the balance sheet is going to have quite sizable impact on the profitability of the bank. Because just for example, we are not considering everything related to the systemic charges and so on. But more importantly, it's going to change completely also the capital ratios of the bank, because consider that Tineco is running and for the most part in the capital light business model And we know everybody that is familiar with our equity story. They know that the only real point of attention was represented by the leverage ratio. Now with this strategic change, clearly, this constraint is going to be completely removed, but immediately. So just also this year, the regulatory situation is not going to be any more a problem for us. And clearly, this is what does it mean? This means that we have a much higher level of resources that we are freeing up that can be and so we can move in direction of a blend of an even more generous treatment of our shareholders in terms of dividends and at the same time also putting a little bit more money in what we are doing abroad. But this clearly is possible, thanks to this transformation. And this transformation is because one question that someone can make is what why now and not before? The reason is pretty simple, because the structural trend supporting our business, thanks to the most recent events, they have accelerated in a big way. And so now we can afford the luxury of the site exactly which kind of clients we want to take on board and which kinds of clients we don't want. And this is a great privilege. And this is the reason why now we can definitely say, come on, we can grow in a big way, but in the right direction. And so the answer is absolutely yes. With this change in strategy is going to but it is industrial driven. It's not that we wake it up in the morning and say, come on, we want to change the strategy. We realized that this was the right timing for definitely freeing up the 100% of the resources of the bank. And so regarding the what's going on, so probably, Paolo, if you're going to elaborate a little bit more on the questions raised by Alberto on the expansion abroad, also the next countries and so on. So please, Paolo, if you want to jump in. Yes, yes, Alberto. So the first question, when do we think to get to 30,000, 35 1,000 clients? If we keep on going with this space, probably, I would say, at the end of the half of 2022, we will be probably there, maybe even earlier than that time. And on the question how many good clients we have, so basically, more than 70% of the new current accounts that we acquired are active in trading. And so it's very, very high, the percentage of good clients we have just for the reason that we are addressing our marketing campaign advertising to the right target market. As we said many times, we don't need and we don't want to attract heat and run clients, attracted just because maybe there is a very volatile market that is that kind of clients we're not interested in. And so very, very high very, very high we have the good clients basically acquiring good clients to answer your question. And on the next countries, we are working on a plan just to be ready to expand in other countries. Of course, our focus is on Germany as the next country, but also we think it's very interesting for us also, Spain. And so in the next probably few months, we will be able to give you more color also in this direction, but we are working on this plan these days. Any case of Berto, just for coming back to the transformation, what FinEx is doing is practically is what probably traditional banks that we realized in several years that this is the right direction. Because the only what is going to make a difference between a relationship with your clients is the experience you are giving to them. And so you don't need to and so this is the concept of platform. This is the reason why it's so important. And clearly, Finneco, we have a gigantic advantage because our real strength is the platform. And so for our clients, what is important is to fulfill their needs. And so we come to the conclusion that it was totally useless to maintain the burden of everything that is connected to be in a full fledged bank because we don't need that. So we don't need to and so. Okay, interesting. Thank you very much. The next question is from Enrico Bolzoni with Credit Suisse. Please go ahead. Hi, good afternoon. Thanks for taking the questions. Just 2, 3 questions, if I may. So the first one is, again, on the the reb the rebalancing of the portfolio. Is it fair to say however that the larger this number is for example this quarter means that actually you brought down the curve a lot of the existing bonds. At the same time, I should expect for the next quarter quite a bit a drop in NII because clearly a portion of the portfolio, very high yield has been sold and possibly rolled over with new bonds at smaller yields. So I just want to understand whether I should expect for the next quarter even stronger treasury revenues because clearly now you need to basically keep it going and at the same time lower NII. So if the 2 are going to affect each other, but also grow in size respectively. My second question is on the recruiting of financial advisors. So clearly, there's been a bit of an acceleration. So I see more advisers that want to join Fineco. Can you give just a bit of color in terms of why they want to join? Do you see them coming from some other competitors? What are the things that they don't like from the other players and then basically they make you they make them wanting to join Fineco. And then finally, a question on the international presence. I appreciate that in the UK things are still in the early phases, but would you consider in medium term, say, not too far future also the possibility of offering financial advice also to other countries, for example, in the UK in a similar way to what you do currently for Italian clients in Italy? Thank you very much. Yes. So on the net financial income, it's difficult to give a precise guidance quarter by quarter because it depends on the speed of the acceleration of the deleveraging market conditions and so on. So we think that the best guidance is to overall to have an year end and stable net financial income. But only speaking, it's extremely difficult to make such a precise forecast of the evolution quarter by quarter for exactly for this reason because the deleveraging process of the balance sheet is, as you can expect, is not perfectly linear because it's related to execution of some activities and so on. So it's and so we think that the best approach for the evolution of the net financial income is to use the guidance we are giving. So we in a stable net overall and stable net financial income going throughout the year end and then the following years. But clearly, we as much as we are going to deep dive in the process of deleveraging the balance sheet, the more we are going to be we are going to deploy the initiatives and progressively we are going to give even a higher visibility and granularity in what you can expect on the financial income. On the recruiting of financial planners, clearly, we have not changed our mind. So we remain convinced that it's a mistake to overpay financial planners for making them joining you. I'm sorry, we didn't change our mind. What is changing in the market? What is changing that who is deciding to keep on doing the job of a financial planners is realizing that to get in a high upfront premium is important. But it is even more important to have in place the right conditions for remaining on the business successfully going forward? And which are the conditions for being success? First of all, efficiency, technology, because now everybody has realized that in this brand new world, if you want to interact with your clients in an efficient way, you need to have a business partner characterized by a very high level of technological efficiency. Otherwise, you're not able to fulfill your clients' needs. 2nd, your business partners to be put you in the condition to be efficient because if you are submerged by tons of papers and so on, clearly, it's not going to work. 3rd, this new world is accelerating in direction of making transparency and fairness more and more important. So and so the possibility to have a business partner that historically has been characterized by fairness and transparency is growing incredibly important. Who is joining us? There is the largest part is represented by bankers because the real big revolution is happening there. Because at the moment, we are observing that everybody is excited on the so called the reflection trade, so that the traditional banks are going to experience and come back. But what is everybody is missing in the story that, yes, this probably is true. But what is missing in the story that the world has changed and traditional banks are not absolutely great in terms of service model, business model to comply with the needs, the new needs of clients and so on? And who is working in the commercial network of Asian banks and they are realizing this that the word characterized by branches and so on is over. And for example, we are observed what the reason absolutely shocking trends underway with the banks closing branch in a big way, but not ready yet in providing the alternative service model to clients. So now we have tons of clients that they are hoofers of their physical branches and we've not really very well working new service model. And who is working in the banks are realizing this. They understand that probably if they have the ambition to keep on doing this job in a decent way, they have to look in another direction. And by definition, Finico is the perfect landing spot. So this is what's going on. So for this season, we expect that our we expect a continuous growth of our of the dimension of the network. And this is absolutely good because we have on one hand the increase of the productivity. So the efficiency of the engine is improving, but at the same time also the dimension of the engine is growing. That's not bad. Regarding the again, I'm changing I'm passing the Paolo, if you want to make additional comment on the international presence, the financial advice like we are doing in Italy, if you want to make some comments on this point? Yes, yes. Of course, we know there is a huge potential also outside in the also in the UK, but in the Rest of Europe in offering consultancy and financial planner connected to our platform. But for us, it's still too early to think about these kind of steps. So we have to establish the platform, the online platform and establish the operations, and then we will see from there. But the first phase for us is to be ready in different countries in Europe as soon as possible. And then from there, we will see. I agree that there is a huge potential also in offering outside the financial planning to clients. Thank you. And actually, sorry, if I may, a short follow-up question. I know you touched it already. On the margins, fee margins, so the 63 basis points clearly with the mix shift people becoming and farm as well productivity. Is there any numbers at all you can give in terms of medium term guidance? So can this become a 70 basis point? Can it become a 75 basis point? If I look, for example, just the flows you got in the last 3 months, is there an average you can give us in terms of marginality for these new assets going in farm and or in products with higher margins? It's not we think that it's a little complex to give such a precise guidance. What we can say that we are positive on the fact that the margins slowly, but still they can go up for a combination of and better mix and continuously growing contribution via Finic Asset Management. So we think that there are there is room for continuous growth in the margins. But it's probably in order to have a discontinuity, a big jump in the margins, we have to expect for the 2nd wave that we are preparing in Finic Asset Management being deployed, but this is going to happen more in the during the last next year than this year. So but in any case, we think that it's and considering that Fineco is by far the most convenient player in the market and the fact that we are happy to keep on delivering convenience to clients at the same time with margins that they are going up. We think that it's an absolutely good. The example of the Target China, we recently launched it's perfect because it's a great product, because we so there is a smart usage of passive funds together with the securities lending. The result is an incredibly efficient product, incredibly profitable for us, at the same time very convenient for clients. So this is the direction which we are going to move much more aggressively in the coming months. Thank you. It's very helpful. The next question is from Angeliki Bayraktari with Autonomous Research. Please go ahead. Good afternoon. Thanks for taking my questions. If I may ask and apologies if you have already answered to that. I'm not sure I fully understand what is changing at Finnego Asset Management. And what does the sort of strategic discontinuity actually entail? And are you sort of making some hires of personnel there that could look to move more products sort of in house or sort of sub advisory in house? And how could this affect the cost guidance that you've given? You've said 4.5% to 5%, but there could be some extra cost for farm there. So I would be interested in understanding sort of what could be the size of those extra costs and also what you're trying to achieve in practical terms in Ireland? And second question, we have seen recently, especially in the U. S. Market, retail traders moving a little bit away from market from capital markets and going a lot into Bitcoin. Is that something that is asked, is demanded by your sort of more active traders at the moment? Is it something that you could launch down the line? Or are you still very cautious on that product? What is changing in Finica's management? What is changing in Finica's management that at the moment, we are leaving on the table several 100 of 1,000,000 of euros of commissions that we are sharing with someone else. And clearly, I'm not saying that we are going to get back the full amount. But clearly, we think that a very interesting company is going to be brought back in our platform. So in which way exactly what you were suggesting, we are going to have a growing conference represented by a much larger core conference represented by passive solutions combined together with smart investing strategies. The example of the China product is extremely. 2nd, they're moving accelerating and moving from sub advisory mandates to advisory services and so on. And clearly, and everything is means that we need to put a little bit more of resources in the company, but we are just talking about a few additional millions of users. So what we are going to get in terms of increase of margins and what we are going to spend more in terms cost, clearly, there is an absolutely amazing marginal costincome ratio. So this is the last problem we have. So the real point of attention that the amount of money that we are still leaving on the table is absolutely huge and we are in the process of bringing back an interesting part of this. Clearly, this is not going to happen tomorrow morning, but this is the direction we are going to take better. And so this is going to have an absolutely sizable impact on the revenues generated by the investing business. On Bitcoin, on the cryptocurrency, yes, there is demand by clients, but we are fully aware that we are missing some opportunities, but we prefer to remain on the still on the sideline because we want we think that there are still some tail risk in the cryptocurrency world that and we think that we are not inclined to take tail risk. So we prefer to miss some opportunities and waiting as soon as we realize that these risks are manageable. The risks are mainly related to the custodian part of the story and also everything related to the anti money laundering issues. So regarding this point, the situation is not clear is not clear enough. And so we prefer to stay on the still on the sideline. Thank you very much. If I may add, I think in one of your older presentations, you had mentioned the potential for a CFD with sort of cryptocurrency underlying, so effectively mimicking the performance of cryptocurrencies. Is that something that you could still launch? Or are you now going to wait? As soon as we are going to have an official something official and for example, as soon as because there are rumors to have the possibility of introduction of the on the future contract on cryptocurrency. In the case there is such a kind of a move at this point, we are going to introduce NCSD on cryptocurrency. But we prefer to wait for having an underlying that is traded on some kind of an officially regulated market. Thank you. The next question is from Filippo Prini with Kepler. Please go ahead. Yes, yes. Good afternoon. Three brief The first one is on the ARPU of U. K. Client, if you can give the ARPU of the Q1 this year and also the comparison with the ARPU of the past quarter? The second is just a clarification. Remember that you mentioned in the last presentation that the realized gain of your investment portfolio amounted to EUR 1,000,000,000. Just an update of this figure at the end of the Q1. And the third one is on your market share on the guaranteed deposit in Italy. That is the reference parameter to the contribution to the systemic fund. If you can share us which is your expectation of reduction of your market share due to the strategies you are implementing and then the saving of contribution to the systemic fund? Thank you. On the ARPU on the U. K. Clients, just the introduction, we think that we don't think that it's considered that the business is structurally improving with the enlargement of the solutions we offer to clients. Clearly, it doesn't make we think it's not a KPI that we think that it's worth the case to use. But I don't know, Paolo, if you're going to elaborate more on this point, probably you are in a better position than me. Yes. Basically, the ARPU is still very good. It's nearly lower than the first Q 2020 because obviously, it was a stellar quarter in terms of volatility and activity of the clients, but it's still in line what we were expecting. And so I think that probably yes, I agree with Alastair, that is not the best key indicator to use right now, but still very good. We're happy what we see and it's stable if we consider the Q1 Q of 2021 is a different Q and still the ARPU is quite the same. Regarding capital gain, at the moment, the potential capital gain is in the region of EUR 600,000,000. This clearly is reflecting the quite important rise in interest rates, the steepening of the hill curve. Clearly and this is a perfect you're giving to me the opportunity because it's a perfect relationship between capital gain and what's going on net interest income because clearly this is clearly has made the perspective for, for example, for 2021 definitely better than we expect what we were expecting in terms of reinvestments. So clearly, they are this is the reason why we think that considering the leveraging on the balance sheet and so on, we have to keep everything tightly together and so on. So at the moment, in any case, we are talking about more or less €600,000,000 of euros of still unrealized capital gain on the portfolio. The market share on guaranteed deposits is, I think that is going down because also the probably the Lorena, our CFO, can be more precise on the point. And but the most recent numbers are showing that our market share is starting or going down. I don't know, Lorena, if you want to. Yes. Thank you, Alessandro. Good afternoon to everybody. Yes, we have a market share at the end of September 2020. That is the date in which we have contributed to the deposit guarantee scheme and was is in reduction, and it was at 2.9%. We reached also a market share above 3% 3.5% in the previous periods. So it confirms that it is It's reasonable to expect considering what's going on that our market share is probably is going to keep on going down. Yes. Okay. Thank you. Mr. Forti, there are no more questions registered at this time. Thank you for all the questions. And as usual, feel free to make us a call if you need to make some more deep dive in numbers, concepts and so on. And thank you again for attending our presentation.