Earnings Call: Q3 2020

Nov 9, 2020

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Fimeco Bank Third Quarter 2020 Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. To the signal and operator by pressing star and Vivo on your telephone. At this time, I would like to turn the conference over to Mr. Alessandro Porti, CEO of Fileneco Bank. Please go ahead, sir. Good afternoon, everyone, and thank you for joining our Q3 2020 results Before we start going through the details of the presentation, let me please underline the key message of the quarter. This set of results confirms once again the soundness of our business model, able to deliver Sustainable and Industrial growth in every market condition and to accelerate growth in the current complex situation. Adjusted gross operating profit stood at $397,000,000 in the 1st 9 months of the year, Increasing by 31% year on year, thanks to the growth of our very well diversified stream of revenues. Adjusted net profit increased by 23% year on year, reaching $246,000,000 in the period Despite the increased contribution to systemic charges during the Q3 of the year, operating costs very well under control with Cost income ratio declining by 4.8 percentage points year on year to 33.1 percent for your time. And confirming operating leverage is a key strength of the bank. The 1st 9 months Of the year recorded that the strong acceleration in the commercial activity with net sales equaling 6,400,000,000 increasing by 40% 46% year on year. These results have been organically generated as only 6% for taking my questions. Thank you. Let me please remind you that this result has been reached for your participation. We have no aggressive commercial offer and with a strong contribution from asset under management. Also thanks to the success for the next question. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Extremely robust at $739,000,000 and the solid asset mix despite a temporary lag In the pipeline of new products by Finica Asset Management due to a slowdown in the authorization process in for the question. In the next few months, we expect to transform the strong amount of assets recorded, Thanks to the launch of the new solution at the end of October November. As for brokerage, Estimated revenues in the month of October were around $13,000,000 increasing by 12% year on year, for your time. With October 2019 being the strongest month of last year, nevertheless, Despite the volatility has been contained with the exception of the last few days of the month, Revenue sales have increased by around 28% compared with the average monthly revenues In the period 2019, 2019 equal to around $11,000,000 This is confirming once again for your time. Finally, let me please highlight that at the end of October, S and P Global Ratings upgraded our bank's outlook to stable. Indeed, according to macroeconomic environment in Italy than purely commercial banks to our digitally innovative and well diversified business model, which is only marginally focused on lending activity. Let's now move on Slide 5 And start commenting our 9 month results. As announced, Our diversified business model allowed us to reach once again very strong industrial results despite the complex scenario With adjusted gross operating profit at $122,700,000 in the Q3 of 2020, Up by 13.8 percent year on year. In the 1st 9 months, adjusted gross operating profit reached $397,500,000 increasing by 30.8% year on year and adjusted net profit totaled at for your question. $246,300,000 in the 9 months, up $22,700,000 year on year Despite the higher contribution of systemic charges, costincome decreased to 33% despite the continuous for 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. As you can see from this slide, adjusted revenues in the 1st 9 months stood at €594,200,000 up 21.5 percent year on year, Thanks to the contribution of whole product areas as we have been able to capture the acceleration of the structural trends in place. Operating costs stood at $196,700,000 increasing by 3.8% year on year, Net of $4,500,000 of marketing cost in U. K. Please now go through the following slides to analyze for more in details all the dynamics of our results. On slide 7, Let's start with net interest income dynamics. Net interest income in the 1st 9 months of the year on which we will deep dive later. The lower interest rates environment led to a reduction in average gross margins for your time. On interest earning assets from 1.23% in the 1st 9 months of 2019 to 0.03 percent in the same period of 2020. Finally, Cost of funding decreased to 0 basis points in the quarter due to the lower due to lower USD LIBOR. Please let me remind you that our cost of funding related to the deposits in euro, which represents 96% of our total deposit, Let's now move on to slide 8 to deep dive on our industrial actions for your time. As you know, being a public company allows us for your time. To couple our high quality balance sheet and our low risk investment strategy with a more flexible management of liquidity. Therefore, we are able to undertake industrial actions to sustain our net interest income and to partially offset the pressure coming from the worsening interest rates environment. Among the actions we are undertaking, it is worth mentioning, 1st, a more dynamic treasury management resulting in yield enhancement strategies like collateral switch or unsecured lending in order to get an extra yield on the top quality paper in our portfolio. 2nd, the enlargement of for taking the next question. The scope of our investments towards investment grade non European govies in order to exploit opportunity also in markets for your time. With more interesting yields, we are also starting to invest in financial corporates, senior bonds for your time. Also to a lower extent. 3rd, we are going to take full advantage of the ECB measures Designed to contain the side effects in of its accommodative moderatory policy, namely tiering and TLTRO. Point underlying as in the results we are presenting, there is nothing coming from TLTRO because the TLTRO is going to start on for giving to us a contribution starting by the end beginning of next year. Finally, we are expecting an increase for taking the demand of our lending products by our existing good clients due to the low interest rates environment. Please note that we are not changing our cautious and conservative approach. Let's now move on to slide 9. Finette fees and commissions stood at $307,600,000 in the 1st 9 months, Growing by 26.6 percent year on year, thanks to the contribution of all product areas. Trading income, Net of non recurring items reached $78,100,000 increasing by more than 131% year on year, driven by the strong brokerage performance in the period. We will deep dive more in-depth in the following slides. Let's move on to Slide 10 for a focus on brokerage. Brokerage acted once again as the perfect countercyclical business and it is producing structurally higher revenues Compared to the recent past, in the 1st 9 months of the year, overall brokerage revenues stood at 178,000,000 for your time. Increasing by 81 percent 84% year on year. On the top of the slide, You can find the chart showing the monthly brokerage revenues since our listing. As you can see, brokerage revenues for your time. The period are structurally higher. October has been another strong month confirming that the floor of the business has increased. This is true regardless of the level of volatility, thanks to the contribution of the 3 structural components. The first comment is the deep reshape of our brokerage business we have undertaken. Please note that this is for your time. The bank is extremely efficient, fast, agile in for your time. Improving the platform, broadening the offering of products with new instruments and best in class solutions, expanding regions, which plants they can trade. We are improving the efficiency of internalization hedging on which we can leverage, thanks to the dimension and quality of our volumes And to the technology we have in place. Finally, we are in the process of vertically integrating certificates, for becoming issuer, market maker and distributor through our platform. Considering that the leveraged certificates At the market size of around $13,000,000,000 volumes and estimated revenues of $100,000,000 We have a strong potential for increasing our market share through the vertical integration of the business. Just for As a matter of information, at the moment, the number of commissions produced by the certificates for us is just in the region of just So we are far away from our natural market share on the business. So this is absolutely An absolutely very relevant project for us. 2nd, the client base using our platform is widening Because the structure of the market is changing after the recent events and there is an increasing interest into financial markets for your participation by clients. 3rd, the increase in our market share. Let's now move to slide 11 for a focus on the last two components. The graph on the left hand side of the slide for joining us today. Thank you, everyone. Thank you, active investors are remaining stable in terms of percentage of total clients. But in 2020, they have grown Significantly in absolute numbers, standing well above the average level of 2018 for your participation in 2019. Please note that active investors have an average of 4 executed orders per month. All this confirms that building up that is building up of an overlap between brokerage and investing business As those clients are not speculative traders, but active investors realizing that the current situation for your time. In addition, let me remind you that despite Finnick is a market leader, Our market share keeps on growing. On the graph on the right hand side of the slide, you can find a very strong evidence of this trend. The graph represents the top 10 banks of origin of our new brokerage clients. A very interesting note is that new clients are coming from traditional banks and not from vertical brokerage peers. On top of this, the number of new clients doubled In the 1st 9 months of 2020 compared to the same period of 2019, once again showing Let's now move to Slide 11 for a focus on investing. Investing revenues amounted to $179,800,000 in the 1st 9 months of the year, Increasing by 5.7% year on year, thanks to volume effect and strong asset under management net sales, for your time. Driven by higher contribution of gathered products and services and Tufine Asset Management. Investing revenues in the quarter have recovered from the levels of the previous quarter, for your question, which was impacted by the negative market performance in March. Please note that management fees increased by 8.9% quarter on quarter and by 3.7% year on year, while management fee margins have remained Let's now move on Slide 13 for a focus on our cost. Going forward, we expect our investing revenues to keep on growing And as a result of the combination of stronger volumes effect and resilient margin despite the cautious approach for your participation. As you know, Finneco is a flexible and fast moving company, and we are undertaking many actions for your time. Let me let please go into the details of our actions for your time. To strengthen both the volume effect and the increase in operational efficiency by Finic Asset Management. The strong volume effect will be driven by combination of 1st, robust asset under management net sales, And we are in the sweet spot to capture the acceleration in structural trends. 2nd, a new project aimed to offer even better quality solution to our clients with a strong focus on risk management. Since our Irish company allows us to have a daily Look through on its solutions, we expect a strong acceleration in direction of Fineco Asset Management. For your participation in financial planning and productivity, thanks to our cyber advisory approach. Additional operational efficiency, for example, on fund administration cost, custodian cost and some. 2nd, the increase in Finic Asset Management volume will result in a geometrical growth of its margin contribution because company is developing a new product range based on advisory services by third parties. This is going to make Finic Asset Management for taking the questions. Let's now move to slide for your questions. The slide once again confirms efficiency to be part of our DNA for your time. And core in our bank representing a clear and unique competitive advantage. Operating costs stood at 196.7 €1,000,000 in the 1st 9 months of the year, growing by 3.8% year on year, Excluding $4,500,000 of marketing expenses in U. K. Staff expenses stood at 7 to $3,500,000 in the period, plus 10.4% on a yearly basis, mainly due to the increase in the workforce for your questions. Related to the business development and to the internalization of some services after the exit from UniCredit Group. Non HR costs stood at $123,100,000 flat year on year, excluding UK marketing expenses. Let's now move to slide 15. For your participation. This slide, we summarize the breakdown of the bottom line in the Q3. Within the provision for risk and charges, we accounted our contribution to the systemic charges for $28,000,000 of which $21,000,000 related to the usual contribution to deposit guarantee scheme increasing year on year according to the market share on guarantee deposits And $7,000,000 related to our first yearly contribution for Banca Popular Divari. Let me remind you that these contributions are estimates and adjustments could be made in December when we will receive for the official communication. On top of this, we also accounted $2,300,000 of provisions due to the repricing on current accounts. As a reminder, the authority has to delay to the end of the year the application of smart repricing for 20 to a cluster of clients that opened their current account in the past years under an online commercial initiative. Although we are fully convinced that our decision were correct, we maintain our usual prudential approach not to challenge the regulators. Let me remind you that in the Q4, we are going to refund to that cluster of clients the banking fees paid during the year, and therefore, we will have for the release of provisions for the same amount. Finally, let me confirm that the full effect of the smart repricing for your time. On the whole, customer base will be in place starting from January 2021. Let's now move to slide 16. As you can see on the left hand side of this slide, commercial loans So with the usual strict control on credit quality, let me remind you that our lending is offered exclusively to our loyal customer base and how our deep internal IT culture allows us to fully leverage on big data. This translates into commercial cost of risk very well under control, decreasing at 11 basis points as of September 2020, in line with our guidance of the cost of risk between 10 basis points and 15 basis points, Which is confirmed also considering the present context of COVID-nineteen outbreak. Expected losses for mortgages and personal loans remain very low, thanks to the quality of our lending portfolio. As a confirmation of the quality of our lending book, we granted only less than 300 request for Mortgages' moratorium. We will deep dive more in-depth in analyzing our lending offer on the next slide. Let's now move on Slide 17. For 2020, we confirm our guidance on mortgages, Yearly new production in the range between €600,000,000 €700,000,000 with expected yield in a range between 55 and 70 basis points. Our expected credit loss on this product is very low at around 19 basis points, thanks to the strength of the big data, analytics and to the quality of our lending book. To this regard, let me please highlight that after 45 months From the launch of our mortgage coupon, only 3 clients are accounted in the NPLs. On personal loans, we confirm our guidance on new production in a range between €150,000,000 €200,000,000 per year, We have a net growth in a range between minus $20,000,000 and minus $60,000,000 with average yield confirmed Between 380,410 basis points. The expected credit loss is very low or some personal loans at around 55 basis points. On Credit Lombard, we confirm our annual growth in a range between €300,000,000 3.50 million. We've expected a yield between 75 basis points and 85 basis points. With regard to 2021, we are not going to change our cautious and conservative approach for lending, But low interest rates environment should increase the appetite for lending solution by our good clients. Therefore, we expect a rebound in lending activities with production being higher than in the past. Let's now move on Slide 18 for a focus on our capital ratios. Finnacle Confirmed once again a rock solid capital position on the wave of a safe balance sheet. Let me remind you that following the extension of the recommendation by ECB and Banco of Italy on July 28, we will refrain from paying dividends until January 1, 2021. In any case, our intention is to give back our excess capital to our shareholders at the first window of opportunity. Common Equity Tier 1 ratio stood at 23.28 percent as for September 2020. Please note that the indicator has been negatively impacted by a one off effect. In fact, in the quarter, we had an impact of 18 basis points, minus 18 basis points coming from the deferred tax assets on the contribution to the deposit guarantee scheme That will be recovered in the Q4. In addition, in order to have a more stable level of capital ratio during the year And to give a more conservative representation, we have started to deduct the AT1 coupon from the for your time. Capital on an accrual basis and not on a cash basis, with an impact in the quarter of minus 19 basis points. On top of this, the main reasons behind the quarterly decrease in the common equity Tier 1 ratio has has been the process of building up the dynamic management of our treasury. Total capital ratio stood at 37 point 41% as of September 2020. Now, I would skip directly to slide 26. In this slide, we summarized our guidance for 2020. Please note It does not include the revenues and costs related to the UK business development. Net interest income It is expected to remain resilient, only slightly decreasing by just few 1,000,000 on the back of volume effect And the benefits coming from ECB tiering. Let me remind you that this assumption incorporates no change in our investment policy, no increase in our risk profile and the more dynamic management of our treasury. Please note that in 2020, We had no contribution from TLTRO. Investing fees are expected to increase mid single digit year on year with a stabilization of margins. Brokerage and revenues are expected to remain strong With a floor that is definitely higher than in the past for three main reasons. First of all, the deep and continuous reshape of our product offer. 2nd, the strong growth of new customers, driven both by the enlargement of the market and by the increase of our market share. 3rd, the levels of volatility, which will probably be higher than the extremely low levels registered in the past years. For your time. Banking commissions related to smart repricing are expected to be around $11,000,000 this year. And we are confirming our guidance on operating costs to a yearly growth of around 4% to our strong operating leverage. Let me please highlight that this guidance does not include marketing expenses related to U. K, which are expected up to 7,500,000 and we are increasing them, thanks to the good feedback reached so far. We expect the core Tier one ratio to stay comfortably above 70%, a level that we deem appropriate and massively above the industry average. Leverage ratio stood at 4.35% since September 2020 and this is expected to remain above 3.5%. Thanks to all the initiatives that the bank is undertaking. Let's now move on Slide 27 for a focus on 2021 guidance. Net interest income is expected to remain solid and resilient following the worsening interest rates environment. We are now estimating A decline in the region of 13,000,000, 15,000,000 in comparison to 2020. So this is just a fractional for your time. We are saying respect to the most recent indication we gave to the market that was in the region of more or less €12,000,000 of euros. Let me please underline that we are containing the effects of decreasing interest rates, thanks to the smooth run off of our bond portfolio, for your questions. The positive effect from volumes and lending, the benefits from ECB tiering and TLTRO, a more dynamic treasury management through the Hill Investment strategies and the enlargement of the scope of our investments to non European govies. On top of this, we expect a contribution of structural revenues for your question. From the regular activity on maintenance of our investment portfolio in the present context of decreasing interest rates, Let me please underline that, although this contribution is accounted in the trading profit line, this activity is not driven by market timing, but only by the continuous process on maintenance to have an efficient portfolio. For your question. For investing revenues, we expect a double digit increase with respect 2020 with resilient margins. Brokerage and average is expected to remain pretty strong with a floor that is definitely much higher than in the past. Banking commissions related to the smart repricing are expected in the region of €20,000,000 to €23,000,000. Costs are expected to grow In the region of 4.5%, mainly due to the increase in the workforce. Going forward, we confirm our guidance of a continuous decline in cost income for your time. In the long run, thanks to the scalability of our platform and to the strong operating gearing we have. We expect our core Tier one ratio to remain above our floor of 17%. Leverage ratio is expected to remain above 3.5%. Cost of risk is confirmed in a range between 10 basis points 15 basis points, even in this environment, thanks to our high quality lending book. Finally, we expect a robust and high quality net sales, reflecting the acceleration of the structural trends in place. Let's now move to Slide 29. Our key priority going forward remains to structure and improve the quality of our for your time. On improving the asset mix is clearly delivering and this year we are recording a strong acceleration in our net sales dynamics. For your time. That is the results of our industrial measures. And we have not undertaken any aggressive and short term commercial offer for your time. As you can see from the graph in the slide, The 1st 9 months of 2020 assets under management fees have increased more than 35% year on year And the same has happened to the productivity of our network, with net sales per financial advisor increasing by around 45 for your participation. Let's now move to slide 30 to analyze more in-depth Finic Asset Management. Finica Asset Management is confirmed to be the key to be key in our move to accelerate the conversion for your participation of deposits into assets under management and to sustain margins, thanks to its strong operating leverage. Our latest net sales results confirm once again that Fineco Asset Management is gaining commercial momentum, for your time. Giving a strong contribution to Finneco inflows, also in complex environment like the present one. This is possible, Thanks to its ability to create modern and innovative multi manager solutions, reinforcing our guided open architecture The penetration of Finnacle Asset Management retail class total assets reached 23% of the Finnacle Bank's Total assets under management and we expect it to grow even further. The penetration of assets under management, excluding insurance, reached 33% in September 2020, increasing by 6 percentage points for taking the questions. Finally, let me please underline that Finica Asset Management is going through a further evolution of its business model And this catching a trend coming from the U. S. Where asset managers are starting to give advisory in portfolio management. Starting from 2021, our asset management company will head to the present flexibility in making the value chain even more efficient. Let's now move to Slide 31 for an update on the development of our U. K. Business. Client acquisition. As you can see from the graph on the top of the slide, since we have started our marketing campaign, the number of active client accounts has strongly increased, Up by more than 60% year on year, in particularly active current accounts on trading have increased by more for your time. Please note that the strong feedback we are receiving from our first marketing campaign is driving us to increase our marketing expenses for 2020 up to $7,500,000 As you can see from graph on the bottom of the slide, the cross for your time since our very first marketing campaign at the end of the Q1 of 2020. OTC and listed products confirmed to be for taking the lion's share of revenues in the Q3 2020 despite seasonality and lower volatility. For your time. Coupled with our huge operating leverage, this is allowing us to be at operating breakeven, excluding marketing expenses, for your time. As for our next steps, we are progressively enlarging our Van't Hoffer and Daisys for your time. You can find the detailed timetable on Slide 32. Thank you for your time. And now we can open the call to questions. Please speak at the receiver when asking questions. The first question is from Domenico Santoro with HSBC. Please go ahead, sir. Hello. Hi. Good afternoon. Thanks for the presentation and all the details. A very well done presentation. Thank you. I do have a couple of questions. First of all, on the dividend, Assuming that the regulator removes the dividend ban At the beginning of the next year, now this seems also more likely given what is happening today, the vaccine and let's see what happens. But I mean my question is, how should we look at your dividend policy for next year? It's true that You are sitting on a huge pile of capital, but it's also true that You might want to have more appetite for lending next year given the way rates are behaving and also for your leverage in my benefit. So my understanding here is that there is a trade off, of course, between capital and dividend. Shall we think that as other operators in the market are going to pay also the 2019 dividend. Shall we assume Like how they are doing, you will increase the payout for next year. So any thoughts on this will be Welcome at this point. The second question is on investing your guidance for next year for this year 2020. If my calculation is correct, your Q4 in investing in terms of revenues would be a bit lighter than the Q3. So I'm just wondering whether there is any increase in the payout ratio to financial advisers, had it happened last year or there is Something more to say in terms of margin or whatever you might want to comment. The other question is on investing for next for the guidance for 2021. My understanding was that the migration to pharma What's going to be margin enhancing, why your guidance points out a stabilization of margin? So I mean double digit in mind A lot of things. So can you give us more indication about margins, sales, so we can extrapolate a bit more precise for guidance in your generic double digit. And then I understand that the comment that you made on the 81 coupon, the DTAs, but there is also quite an increase of risk weighted assets in the quarter. Can you comment if for your question. I hope there is any change in mix that is more penalizing for risk weighted assets or any other reason why risk weighted are Thank you for your questions. Let me start by from the dividend. So, first of all, on dividend, we prefer to remain to maintain cautious wording because what we can By the regulators, it's still unclear. So it's not clear if banks are going to be allowed to pay the dividends. And if this is the case, in which dimension and who is going to which kind of rationales They're going to use for making eventually a distinction among the different banks. So we think that It's much more serious to remain extremely prudent and so on. We are confirming that we are going to give back to the market the excess capital we are building up. The business model of the bank remains extremely capital light, so we can put together for the our strong growth with a very generous dividend policy. And So this more or less is what we can the kind of comment that we can make on dividends. So we before for being more precise exactly what we need to have is an exact is a much clear picture by the regulators because for the time being we have just rumors and but there is nobody There is nothing that has come from the regulators on the official side. So our position is that clearly, We are not interested in retaining excess capital, so we are going to give back to our shareholders. The business model of the bank is extremely Very well balanced, very extremely capital light. And so we are going to perfectly in the position to keep on paying very generous dividends and sustaining our growth. Regarding for the 2020 investing and the guidance of 2020 investing and also in 2021. For taking the question. In the last quarter, there is clearly the risk that the final for your financial planners. And so clearly, there is clearly some kind of It depends on the dimension of the net sales that they are going to achieve for taking the last part of the year. Last year, we as probably we remind, We had an incredibly robust final of the year, much above our expectations, And this has driven a higher cost for financial planners. So in the case We are on investing, the net sales are going to be pretty much in line with our expectations. We don't expect any Significant change in what we are paying to the financial planners. Clearly, if there is for your time. And higher than expected acceleration that in any case is extremely very well welcome because it's going to create an even better base for 2021. In this case, there is the possibility to have a small increase in what we have to pay to them. Regarding the guidance on 20 Clearly, it's impossible to give more precise guidance because clearly there are components Of what we can expect to happen next year that are not perfectly under our control. So I want to just Presento, there is the market effect. We don't know. The timeline Of the net sales, because clearly, the fastest are the net sales made on asset under management Therese. And this is exactly the contrary in the case your net sales on asset under management is coming later on. But clearly, As you can imagine, this is not completely in our hands because, for example, the example has been 2020 in which There has been a totally unexpected impact caused by the month of March, and this clearly As generated and clearly has been a drag for the revenues generation of investing. So we are extremely confident on Asset management is clearly continuously contributing in increasing margins. Why we are giving a picture of stable margins? Because we know that clearly we have some for sure, Finacoste Management is going to keep on contributing for taking the questions. In making our whole firm more efficient in sustaining the margins. On the other hand, there is clearly is We expect the continuation of the headwinds represented by clients remaining, in any case, Cautious and conservative. So if you put everything on the table, we think that And a serious and conservative guidance is to expect margins remaining relatively stable going through for your time. Clearly, if we are more successful in driving the client's appetite, clearly there is room for And hi, Girma. But at the moment, we prefer to be cautious and giving as a guidance something that we think that is extremely for your time. Robust and solid. On the risk weighted Obviously, the assets, if you don't mind, I leave the floor to the CFO that can give you for taking a more detailed description of what's going on with the assets. Please, Lorena, if you want to? Thank you. Thank you, Alessandro. Good afternoon to everybody. Regarding to risk weighted assets, in the 3rd quarter, We can see an increase of about €150,000,000 driven for €40,000,000 of Eurus by extraordinary impact. As already said by Alessandro, €27,000,000 new one off expect related to the DTA on the contribution to the deposit guarantee scheme. Consider that this impact that will be recovered in the Q4 once the contribution to the deposit guarantee scheme will be paid. And then we had also another one off effect for €13,000,000 on other assets. It's a technical misalignment that has created an exposure immediately recovered the day after the end of September. The recurring but not the recurring. So what happened regarding commercial loans and treasury investment is has a value of €114,000,000 of risk weighted asset increase, Of which EUR 19,000,000 related to treasury activity, unsecured lending for credit assets equal to risk weighted assets absorption of 20%. And then we had the usual increase in our commercial loans and FiniQ Asset Management exposure. So this is the impact on the Q3. In any case, This is not clearly the impact caused by The building up of the yield enhancement strategies clearly is bigger at the beginning of the process Then when we are going to reach the target level, this is going to clearly is going to decelerate Quite considerably. So you are not to keep this run rate in the increase in risk weighted assets This is a run rate for the future. So clearly, this is this has been higher because the process of building up is the moment in which clearly the impact on The next question is from Azura Guelphi with Citi. Please go ahead, madam. Hi, good afternoon. A couple of questions for me. One is on the NII outlook. I see that you've given a resilient outlook. I I don't know if you can quantify it a little bit. And also if you can give us some color on the TRO strategy and what is your to the tiering potential changes. The other one is on the net sales. Octobers were very strong, but driven by deposit. Do you expect if market normalized that the switch from deposit into AUM to accelerate very soon? Ori will still take a bit of time. And the last one, Isami, is on your digital angle. Clearly, you are very different from most of your Pearson, your IT platform. It's a key differentiating factor. We always talk about it in terms of efficiency and scalability of your business. But what do you think are the other main advantage? Is it revenue generation and risk management? If you can give us some color on that. Thank you. So on the net interest outlook, so for 2020, clearly, we don't expect any significant change in the process. So because clearly there is for taking my questions. Such a short period of time still, so there is no impact. So it's much more interesting to make comments on 2021. [SPEAKER MARTIN PEREZ DE SOLAY:] So the we what we are going to do what we are trying to do on giving an indication to the market is to try to give to the market and a precise number. So during the last few months, for the clearly in which there has been a continuous deterioration of the interest rates environment. We moved in direction of expecting For next year, a decline of net interest income in the region of €12,000,000 Now considering that the interest rates kept on going down, for your time. Our outlook has become slightly worse. And so now we are giving as indication range between a decline between €13,000,000 €15,000,000 So not a big change, but clearly What we preferred considering that the net interest income dynamics is extremely complex, we try we are trying to give to the markets for taking the highest possible visibility in what's going on the Mac. Regarding TLTRO sensitivity and regarding the tiering potential changes, I don't know, Lorraine, if you want to make some comments on this point. Yes. So regarding TLTRO, for the first time on December, our intention is to join Thierry, and ask to borrow the maximum available amount that is in the region of €1,000,000,000 So we expect a positive contribution to net interest income. And if we relate to Tier 2 tiering, We can say that on an annual basis, each €100,000,000 of TLTRO, we can have €1,000,000 of positive effect on net interest income. If we Ken. We can count on tiering. So if we can invest for this money on tiering. And Alvaro We have the tiering is possible for us for 6 times the reserve, the regulatory reserve. And This is the situation. Sorry, Alessandro, I interrupt you. No, I'm not sure that we if we got correctly the question of the question raised by Adzuran. So if we answered correctly to your questions on TLTRO and tiering potential. On Tier 1, yes, on Tier 1, I wanted to know like if, for example, the multiple player gets increased, what's the sensitivity of the NII, if you can? So to your point, if there is an increase in the Multiplier from 6 to Yes. In the multiple so At the moment, which is the total amount? The multiple for your 6 times our mandatory deposit. At the moment, the mandatory deposit is equal to? It's €262,000,000 at the end of Timbal. Okay. And clearly, At 0.8. Yes. So EUR 206,000,000 of euros, the variation on net interest income on an Now a comment on the net sales. So the month of October has been incredibly robust because we are continuously for your time. Building up and so now the net sales has been 91% higher than the past year. And again, without any kind of commercial initiatives, so the bank has kept on doing for your questions. Business as usual, nevertheless, and so this confirming that there is a massive contribution by the for reinforcing structural changes. The reason why there has been such a large component represented by deposits that because the month of October has been a combination of several for some negative elements regarding asset under management fees. The first one is the delay for your participation in the pipeline of the approval process by the Irish Central Bank of the new products and this has been driven by the combination of the traffic jam caused by Brexit And also the fact that Ireland has been the 1st country entering in a very strict lockdown, But we expect it to recover in the next few weeks because the new pipeline of projects now It's underway and so this is going for sure is going to bring a positive contribution in this direction. And second, Clearly, the reason the increase of the assets we gathered has been definitely for your time. And so it's clear that we have such a sharp acceleration respect The trend is normal that at the beginning you have an accumulation of liquidity on the asset, but this is boding extremely well for the future because it's the base on which we can start to work. And for sure also the expectations by the incoming U. S. Elections and so on has made Financial Plan is a client a little bit in a wait and see mood, but this is as confirmed also by the what's going on, on the market and so on. So It's we are extremely confident that you resume very shortly an excellent pace for your time. On the asset under management dynamics and in any case, we are extremely pleased by the huge increase that we are experiencing in net sales on the because it's confirming that the bank is definitely in a great position for capturing the structural trends. So the internal IT, which are the advantages? So the advantages of an internal IT are So numerous that it would require probably a dedicated presentation for this, but I'm just for taking the questions. So, the first one, obvious that clearly we are doing things Much better and spending much less for a very simple reason because when you are leveraging on externalized services or external System integrators, by definition, you rely on someone that is has to make a margin on what is provided to you. And so clearly, if you are directly managing everything by yourself, it's much less expensive. But more importantly, is making you much more reactive, agile and faster because you can every time you need, you can change for the course of what you're doing. 3rd is making your internal Culture, much better because you tend to retain internally the skills, the knowledge, the experience In what does it mean to run an IT infrastructure, if you are leveraging on externalized Solutions, the knowledge, the skills are in the hands of someone else. And so clearly, You are not the owner of your future because this is put in the hands of someone else. And also you can be in a very comfortable position to be in what is the best position for a bank for taking the questions. To be a smart and fast follower, so we can observe everything what's going on in the market, Then deciding when something makes sense to be used and when this makes sense to jump into And a certain technology avoiding to make extremely expensive and costly mistakes. But there are many other elements. So probably, We are considering probably to arrange a dedicated presentation to the market on what Our IT infrastructures and what does it mean for us and which kind of The next question is from Angeliki Bayraktari with Autonomous Research. Please go ahead, madam. Good afternoon. Thanks for taking my question. Just one on my side. You mentioned in your presentation that Fineco Asset Management We'll add to sub advisory mandates a new product range based on an advisory service. And so I was just I'm not sure I fully understand exactly what this means. So will you be using for 3rd party products, strong 3rd party asset managers as part of your offering to your clients or is it the opposite? So you will be for using Fineco Asset Management products as part of an offering of 3rd party players. If you could just give us a little bit more detail on that and sort of What could be the potential contribution in terms of revenues from these initiatives? Thank you. So regarding this point, and so just to be more precise on the point. At the moment, Finica Asset Management is remaining consistent with an approach that is leveraging on 3rd party's contribution. And this is made throughout a scheme in which there is a Finico fund And then the reason we are giving to a third party and sub advisory mandate for running the fund, And we are paying a fee for this. The new generation of products, Particularly on extremely the products that are related to extremely efficient markets, So simple markets and so on. The scheme is going to be instead of giving to the 3rd parties and sub advisory mandate, We are going to get by them an advisory service, so which is the difference in terms of structured portfolio It's not such as great because clearly we are going to put in place practically what they suggested to be done by the 3rd party. But clearly, there is much less expensive for us because in sub advisory mandate, it can cost to you up to 50, 40, 50 basis points and advisory service is usually in the region between 5, 6, 7 basis points. So it's a massive reduction of what you are paying to the 3rd parties for running the business. Clearly, this is not going to make any Substantial difference because it's going to remain a fund in which the decision what you are where you want to invest, what you want to do is to remain in the hands. It's going to be driven by a third party, but it's a scheme that It's much more efficient and this is making for us possible to extract a much higher amount of value. So in few words becoming more efficient on the value chain. Thank you. And so the basis point difference that you mentioned is obviously quite big. But I presume you mentioned over a few years. So I guess it's going to take At the moment, this will only be applicable to a small part of your Finneco Asset Management product offering. Is that correct? Meaning, we will not see a big spike in margins in 2021 or 2022 from this initiative. Is that correct? No, it's going to be a progressive building up. So clearly, we are going to start and progressively this is going To build up, it's going to become a quite relevant way we are working. So you have to look to this It's something that is going to keep on building up over the months and the years. But clearly, in the probably during the next year, Can be probably with throughout 2021, probably to think to have And a few billions of assets that are going to be managed in this way can make sense so clearly. It's not going to be to make a dramatic difference just immediately, but it's going to make a quite large A quite important difference going forward, yes. Thank you. The next question is from Federico Braga with UBS. Please go ahead, sir. Yes. Good afternoon, everyone, and thanks for taking my question. Sorry, just One clarification first. So the €13,000,000 to €15,000,000 decline to NII includes also the benefits from TLTRO and ECB tiering, The second question is still on NII. Actually on TLTRO, I mean, in Q2, you said that you had no interest in participating to TLTRO. So just trying to understand what has Change if it's just because of the yield environment or there is also something else. And also if you can please tell us What could you be to expect the what can we be to expect the net impact to your leverage ratio of TLTRO, please? And the last question is on the tax rate. The 20% tax rate that you reported in Q3, there was some So then on the net interest income, the guidance on net interest income 2021 Are clearly including the benefits from TLTRO and Tiering. Why we changed our mind on TLTRO? Because clearly, the situation has changed. So the interest rates environment has become much It's more challenging when respect the past. And so clearly, we think that considering that there is a gift for your time. And why we have not to take this gift. So, this is the very transparently, this is the reason why we changed for your time. And net impact on the leverage ratio of on the TLTRO, Lorena, if You can give more details on this point? Yes. The impact is estimated in about 14, 14 basis points. And on the and if you want to elaborate also on the tax rate, please? [SPEAKER MARIA ALBERTO LOPEZ ALBERTO:] Yes. Regarding tax rate, so in the Q3, what happened was that Fimiko Bank Standalone profit before taxes decreased compared to the second one, mainly due to 2 effects. 1 is a contribution to the systemic charges for €28,000,000 And we have also lower brokerage revenues for around €14,000,000 of euros quarter on quarter. In the same period, so in the Q3, Finsch Asset Management profit before taxes remained quite stable, for the question. Slightly increased quarter on quarter and this increasing its contribution to the consolidated From 30% to 28% because in the quarter, the weight of the Finic Asset Management profits that are subject to the Irish tax rate of 12.5% increased, whilst the weight of Ineco Bank stand alone profits subject to the Italian nominal tax rate of 33% decreased. And for 2020, we expect a tax rate flattish. And we don't expect also going forward significant reductions In our consolidated tax rate, as the majority of the consolidated income will continue to be represented by revenues generated by Fineco, Thank you very much. The next question is from Filippo Prini with Kepler. Please go ahead, sir. Yes. Good afternoon. Two brief questions, if I may. The first one is on Ukraine. Last If you can give an update on this metric. The last one is on your natural financial bias. You increased a lot for your question. The numbers basically is unchanged in the last, let me say, 3rd. So You made a lot of comment on the possibility of financial guidance to increase the profitability, but at some point, your assets will grow I hate that you should need to increase the number of financial advisers. Thank you. So Let me start from the financial plan as inflows and then I will lead to Paolo di Grazia the answers Regarding the financial planning, Rafinico is in terms of productivity by Chorus Linez is by far the most productive organizations in the industry Because if you make the right calculations, so not considering the impact caused by recruiting, Clearly, Fineco is by far the most productive organization. So your point is, Are you close to the level at which the productivity is cannot be increased Even furthermore or not? Or in order to keep on sustaining what you're doing, you need to have more financial plans. So first of all, The fact that we are much more productive than the industry, this doesn't mean that the industry is really productive, Because the level of productivity of the industry in the financial planners industry is extremely low In comparison what is the opportunity on the market. And so we are Absolutely fine in saying that the room for increasing even more the productivity of our franchise business It's still huge because just to give you an extremely easy, simple number. At the moment, Tefineco has 1,300,000 of clients, of which 500,000,000 1,300,000 of cash, of which 500,000 are clients most interested in transactional banking. So we are of interest for financial planners. The remaining 800,000 clients, the number of them that they are Actively managed by the financial planners at the moment, they are probably between 200,000 250,000. And so the remaining parties still waiting for being directly managed. And clearly, if the point is, If you think to do this with the normal approach, clearly, I'm talking with you that the productivity, There is no room for being increased. But if you are using technology, clearly, the possibility to increase the productivity of potential fairness It's still really huge. So this is the first point. So we expect that the productivity of our financial planners for keeping on growing according with everything we are doing on the technological side. 2nd, We are observing and growing natural interest by the markets in direction of what we are providing. And so we expect that the number of financial planners is going to increase net of net by the year end for a very simple reason because now financial planners that they are interested in changing the organization in which they are working. They are starting realizing that there is not just the upfront premium you're receiving as the main driver, But it's becoming quite important that the business model, the service model, the technological platform Because this is what is going to make you so the combination of these two components is leaving us extremely relaxed for taking the question. On the capability of the bank on keeping on increasing the business with a very small impact on the operational side, Because the positive financial plan is still a lot of room for growing. And in any case, we are observing that our capability to take on both new financial plans It's definitely growing and we are not clearly changing our approach. So we are not interested on overpaying them for recruiting the new financial planners. Paolo, if you want to give an update on U. K, please? Yes. Good afternoon. Yes, about the ARPU you asked about, it's the ARPU decreased Still strong, the decrease at around €500,000,000 And the reason why decrease is because of the seasonality And the lower volatility we had in the Q3. And please note that the previous quarter was very strong related to the for the strong volatility and it was a perfect quarter for the brokerage. And so if you compare the 3rd quarter with the Q1, there is a big jump. There is an increase. And this is The reason why is because we started investing in investing with the right target, basically acquiring the right clients. And we're still working on the cross selling activities, which is giving us some for your results right now and we will start we will continue to invest and try to acquire the best clients we can in the U. K. In the next month. Many thanks. The next question is from Maruti Debelis with Equita SIM. Please go ahead, sir. Yes, good afternoon. Just one question on the certificates. Could you elaborate on these new opportunities and quantify the potential for your questions. Yes. This It is a very large and huge opportunity for Fineco because clearly and this is another just for giving another Evidence of how it's important to be perfectly integrated from an IT and operational point of view. The certificates market, it's a huge market here in Italy that is a listed market. And as what we are saying is a market that is represents for more or less €100,000,000 of revenues. Fineco has a market share on retail brokerage That is above 50%. And at the moment, we are capturing on this market probably for just a few 1,000,000 of euros. So clearly, we are incredibly far away from our natural market share. And the reason of this because until now, we were concentrated in doing something else. But clearly now it's a market that is emerging as very interesting, particularly also looking forward for the our also theory potential expansion in other countries in Europe in which certificates are for your time. Driving the lion's share of the business like Germany and France clearly has become heavy then that was important for us to start to look to this market. And so partly what we're going to do, we are going to start on integrating the chain, So becoming issuer, market maker and distributor, so we are going to bring to the clients So progressively, instead of having our clients buying and selling products provided by someone else, Progressively, we are going to bring to them our products. And clearly, this It is a very relevant innovation that we are going to introduce and we are extremely confident This can represent an absolutely very interesting additional upgrade in the revenues generated by brokerage. Thank you very much. For everyone on your telephone. Mr. Foti, there are no more questions registered at this time. Thank you very much. As usual, if there is there are any other questions And so please feel free to contact us anytime for having a follow-up. Thank you. Ladies and gentlemen. Thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.