Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the FinecoBank third quarter 2019 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Alessandro Foti, CEO of FinecoBank. Please go ahead, sir.
Good afternoon, everyone. Thanks for joining our third quarter 2019 results conference call. Before we start going through the details of the presentation, let me please underline the key messages of the quarter. First of all, our nine-month results recorded our best net profit ever, confirming once again the sustainability of our sound business model, able to deliver solid results in every market conditions. Second, the growth of our very well-diversified stream of revenues has been supported by four business areas. Please note that our brokerage business has strongly performed in the third quarter, the best one since the introduction of ESMA regulation, showing that the in-depth review of our product offer is already producing tangible results. Third, operating cost as usual well under control, with cost-income ratio declining by 1.4 percentage point to 37.9%, and confirming operating leverage as a key strength of the bank.
Fourth, net sales confirmed a solid and robust commercial activity, with gathered products reaching 70% of our stock of asset under management. Let me please underline that Fineco Asset Management is increasingly becoming the cornerstone of our inflows in asset under management, as confirmed both in September and October. We will later deep dive into some industrial measures we are undertaking, namely a stronger push in moving customers' liquidity in asset under management, a closer look to a possible smart repricing of our banking services, preserving our price quality premium, and a redesigned brokerage offer. Let's now move to slide seven and start commenting our nine-month results. Adjusted net profit as of September 2019 reached EUR 198.1 million, plus 10.8% year-on-year, reaching record results despite a more complex environment compared to last year.
Once again, this set of results confirms the soundness of our business model, able to deliver sustainable and industrial growth in every market conditions, and shows how the actions we have recently undertaken are already delivering. Let me please underline that the quarter is impacted by the annual contribution in the third quarter of the Deposit Guarantee Scheme, estimated in EUR 17.5 million. Therefore, quarterly comparison is not relevant. As of September 2019, we generated EUR 489 million of adjusted revenues, up 5.2% year-on-year, mainly supported by investing and banking area. Brokerage has recorded plus 10.5% quarter-on-quarter, thanks to an in-depth renewal of our product offer. Operating costs stood at EUR 185.2 million, plus 1.3% year-on-year on adjusted basis, and cost income decreased to 37.9%, despite the continuous expansion in assets and clients, thanks to our strong operating leverage and to the scalability of our platform.
Please go through the following slides to analyze more in details all the dynamics of our results. On slide eight, net interest income. Net interest income increased by 1.9% year-on-year, supported by strong volume growth, high quality lending, and sticky side deposits, even more valuable given the current interest rates environment. Volume dynamics more than offset the reduction in gross margins. As you can see at the bottom right of the slide, average gross margins on interest-earning assets lowered from 1.31% in the first nine month of 2018 to 1.23% as of September 2019. Cost of funding remains very low at four basis points due to deposits in foreign currencies. Please let me remind that our cost of funding related to deposits in euro, which represents 90% of our total deposits, is zero. Net interest income in the third quarter of 2019 is flat year-on-year and down 2.2% quarter-on-quarter.
The latter, mainly due to the strong decrease of interest rates registered in the third quarter. As an example, one-month EURIBOR moved from minus 37 basis points to minus 42 basis points in the quarter. The strongest quarterly decrease registered in the last three years. As for the fourth quarter, we expect net interest income increasing again on the back of the volume effect and benefits coming from ECB tiering. For 2019 as a whole, we confirm our guidance of a low single digit year increase in net interest income. We will deep dive on this later on during the presentation. Moving to slide nine. In slide nine, you can find a focus on our bond portfolio.
We are progressing very well in our strategy to run off the UniCredit bond portfolio and move into a more diversified and low risk investment portfolio through a blend of European govies and covered bonds. Our bonds portfolio now includes also France, Spain, Ireland, U.S., Poland, Austria, Germany, Belgium, Portugal, supranational agency, and covered bonds, in addition to Italy. Let me also remind our sensitivity to a change in interest rates. A parallel shift of plus 100 basis points would generate EUR 125 million of additional net interest income, while a parallel shift of minus 100 basis points would generate a -EUR 114 million of net interest income. Let's now move to slide 10. Fee and commissions.
Fee and commissions grew by 11.1% year-on-year, with management fees up 12.1%, thanks to a larger contribution of gathered products and services on asset under management, which increased by four percentage points year-on-year to 70%, and to the contribution coming from Fineco Asset Management. Let me highlight once again that our investing fees are strongly sustainable, as 98% of investing revenues are recurring fees, and we have no performance fees. The profitability calculated as management fees net of taxes on asset under management is flat quarter-on-quarter at 47 basis points, with customers looking for more conservative solution. Let me please highlight that our priority is to move as much as possible our customer liquidity into asset under management. For this reason, we are launching a new set of products aimed at speeding up the conversion rate of customers' deposits.
We will come back to this point later in the presentation. As for 2019, we confirm our guidance of flat margins after tax, but revenues growing low double-digit, thanks to volume effect and to the contribution of Fineco Asset Management. For 2020, we expect a low double-digit revenues growth, boosted by higher volumes. Trading income net of non-recurring items is down 11.9% year-on-year due to lower market volatility and to the new ESMA regulation in place since the second half 2018. Let me please underline the good performance of brokerage in the third quarter 2019, which recorded a growth of 16.3% quarter-on-quarter and of 40.6% year-on-year, following the deep offer reshape that we announced earlier this year. Let's jump to slide 39 for a focus on brokerage.
Overall, third quarter 2019 brokerage revenues recorded the best quarter since the introduction of ESMA, and the first 9 months of the year almost recovered compared to the previous year. This was possible thanks to the initiatives undertaken by the bank to improve the business, such as further enlargement of our offer. For this reason, we updated our guidance on brokerage, which is expected to be slightly increasing year-on-year and around +15% in 2020. Let's now move back to slide 11 for a detailed overview on cost evolution. As you can see from the slide, once again, our results confirm efficiency as a part of our DNA and core in our bank, representing a clear and unique competitive advantage.
Staff expenses stood at EUR 66.6 million as of September 2019, plus 5.6% on a yearly basis, mainly due to the increase in workforce related to the business development, in particular to costs related to Fineco Asset Management not fully in place in the first nine months of 2018, and to the internalization of some services after the exit from UniCredit Group, like for example, the audit. Non-HR cost at EUR 118.6 million, down 100% year-on-year, despite the enlargement of assets and clients. In terms of future evolution, we confirm our guidance on a continuously declining cost income in the long run, thanks to the scalability of our platform and to the strong operating gearing we have. The third quarter of 2019 has been characterized by low seasonality and a different distribution of marketing expenses among the quarters, compared to the previous year.
For the last quarter of the year, we expect costs to increase again due to seasonality and staff expenses. For 2019, we expect the overall cost to increase low single digits, and this trend is expected also for 2020. Let's now move on slide 12. As you can see on the left-hand side of the slide, commercial loans grew by 24.7% year-on-year, with the usual strict control on credit quality. Let me remind you that our lending is offered exclusively to our loyal customer base of clients and our deep internal IT culture allows us to fully leverage on big data analytics. This translates into commercial cost of risk very well under control at 15 basis points as of September 2019, due to the improvement in the quality of credit. For 2019, we expect our cost of risk further decreasing at a much lower level compared to the system.
Let's now move in analyzing our lending offer more in depth at slide 13. Mortgages grew by more than 29.6% year-on-year, more than EUR 1 billion at the end of the first nine months. Average loan-to-value on total standing is equal to 53%, and average maturity to 19 years. Personal loans grew 9.7% year-on-year, with very attractive margins. Lombard loans totaled EUR 1.2 billion as of September 2019, increasing by 30% in one year, driven by Lombard credit. As for our 2019 guidance on volumes on mortgages, we confirm a new production of around EUR 300 million-350 million, as we prefer not to compete against the system in red zones characterized by aggressive prices, high loan-to-value, and longer maturities. On personal loans, new production of around EUR 200 million-250 million per year.
On Lombard credit, we are adjusting our guidance to around EUR 300 million-EUR 350 million annual growth, as during the third quarter, some customers closed their credit line to take profits on the underlying collateral, mainly Italian governments. Thus, confirming once again how FinecoBank best-in-class brokerage platform is massively used by our clients. With regards to 2020, we expect a new production on mortgages of EUR 200 million-EUR 250 million, on personal loans of EUR 250 million, and for Lombard credit, an annual growth of EUR 500 million. Let me remind you that the latter can be impacted by our brokerage platform as it was the case in the third quarter. As for the expected yields, please keep in mind that in the case the market environment changes, we would have to move accordingly. Slide 14, capital ratios. FinecoBank confirmed once again a rock-solid capital position on the wave of a safe balance sheet.
The slight increase of risk-weighted assets in September is related to credit and operational risk, the latter due to a more prudential interpretation compared to June 2019. In fact, as you know, following the exit from UniCredit Group, we are applying now a basic approach. Let me please stress that this impact is only driven by the process of changing applied methodologies, while the risk profile of the bank has not changed at all. In any case, we are working on the process to adapt the standardized model, and this is expected to absorb lower capital. Common equity Tier 1 ratio stood at 17.37%, down by 47 basis points, mainly due to operational risk. At this regards, we confirm that going forward, we expect common equity Tier 1 ratio above 70%, a level that we deem appropriate and massively above industry average.
Leverage ratio at 3.85%. We confirm our guidance to maintain it at 3.5% by mid-2021, when the regulatory 3% threshold will come into force. Please note that we are stepping up our initiatives in order to improve the asset mix of our clients, which we will describe later. Finally, total capital ratio stood at 32.58% as of September 2019. Slide 15. On this slide, we show an overview of the total financial assets growing trend, supported by the healthy expansion in new inflows. We gathered EUR 31.1 billion net sales since 2013, leading total financial assets at EUR 78.6 billion as of September 2019. Gathered products increased their penetration rate to 70% on total assets under management from 67% on December 2018.
Jumping to slide 18, out of EUR 4.3 billion of net sales as of September 2019, 89% was organically generated through the existing financial planners or directly by the bank, and 11% came from recruits made in the last 24 months. Let me please spend a few words on recruiting, as we are observing once again an aggressive approach in the industry. In our opinion, overpaying recruiting is not sustainable for the business. For these reasons, we are not interested in following this approach. Estimated net sales in October were solid and great quality, above EUR 380 million, driven by inflows in assets under management, which are expected to be above EUR 510 million. In this regard, it's worth mentioning that Fineco Asset Management contributed for more than EUR 350 million, recording a new high on retail net sales for the second consecutive month.
We will come back later during the presentation on the growth potential of Fineco Asset Management. As for the remaining component, estimated direct deposits stood at -EUR 150 million, due both to the conversion into asset under management and tax payments by clients. Assets under custody, -EUR 20 million. Finally, we move to the next slide. Before we move to the next slide, let me please give you more color on 2019 net inflows. We expect a robust net inflows driven by structural strengths and by the high quality of our proposition. The recent launch of some brand new products and services by Fineco Asset Management, together with the upcoming insurance capital guarantee product offer, are helping us in offsetting the higher propensity of clients to remain in a wait-and-see mode in this complex market environment and improving our asset mix. Now, I would skip directly to slide 22.
In this slide, we summarized our expectations in terms of net interest income and industrial measures we are undertaking going forward. For 2019, we expect the net interest income growing by low single digits. For 2020, we expect a resilient net interest income with the following assumptions. First, our bond portfolio has been built in a very conservative way, meaning that its runoff is very gentle with no major cliffs. Second, we expect the continuation of the positive effect coming from the building up of volumes of the lending book, which we will continue to be offered only to our well-known base of clients. Third, we will benefit from the effect of ECB decisions, namely the tiering and the gentle steepening of the yield curve.
Fourth, no change in our investment policy as we will continue to invest in a blend of diversified European govies and covered bonds with no increase in the bank's risk profile. In particular, the exposure towards Italian govies will be in the region of EUR 5 billion. Last, our sensitivity. A parallel shift of +100 basis points would generate EUR 125 million of additional net interest income, while a parallel shift of -100 basis points would generate EUR 114 million of less net interest income. All these assumptions are key in making our net interest income very resilient and low risk. Please let me also remind you that it leverages on very valuable and sticky deposits, thanks to our sustainable and long-term commercial strategy. Let me also remind you that it could decrease by a few millions according to the current forward interest rates curve.
This is absolutely manageable by the bank, also thanks to the industrial measures we are undertaking, from which we expect our revenue mix to change, leading to higher contribution from investing and banking fees, at the same time, further lightening of our balance sheet. In the next slide, we will deep dive on the measures we are setting up to accelerate the conversion of customer deposits towards assets under management and the room we have for a possible smart repricing of our banking services that will preserve our positioning as best price quality offer in the market. Let's now move on to slide 23. On this slide, we summarize the main actions we are undertaking through our assisted selling platform to accelerate as much as possible the improvement of our customer asset mix.
Let me underline that the conversion of deposits into asset under management is our key priority, and our actions are already delivering. In fact, October asset under management net sales is expected to be the best one since the beginning of 2018. First of all, we are launching the new generation of products with a very conservative risk profile, ideal for customer with a cautious stance. Among the new offer, it's worth mentioning Fineco Asset Management Target, the accumulation product recently launched by Fineco Asset Management, allowing to progressively invest in the financial markets. The upcoming insurance capital guarantee product, and a remunerated solution with a flexible exit window ideal for customers with a short-term horizon. Fineco Asset Management Megatrends, that allows customers to invest in secular trends. Finally, pension funds that will be offered directly to customers.
We are delivering new software developments in order to fully exploit our main competitive advantage coming from big data analytics. We will be able to automatically analyze the behavioral patterns of our customers, and to better target our low-touch clients. This will allow Fineco to take more directly the driving seat in helping financial advisors developing their customer more efficiently, with a strong improvement of the effectiveness of our commercial strategy. Let me please highlight that our very first initiatives are already delivering as Fineco Asset Management Target and Fineco Asset Management Megatrends have represented the lion's share of our strong asset under management net sales, both in September and October. We have already started the first test of our brand-new platform offering Fineco Asset Management Megatrends directly through our assisted selling, and the upcoming insurance capital guarantee product will come next.
Let's now move to slide 24. Fineco Asset Management is key in our move to accelerate the conversion of deposits into assets under management. Our latest net sales results confirm that Fineco Asset Management is gaining commercial momentum, and in the last couple of months, it has further accelerated its contribution to Fineco's inflows. This thanks to its ability to create modern and innovative multi-manager solutions, reinforcing our guided open architecture platforms and enhancing our time to market in developing our offer to meet evolving customers' needs. At this regard, let me please underline that September was the best month ever for Fineco Asset Management in terms of retail net sales, and our estimates for October are even better, as retail net sales were above EUR 350 million, reaching around 50% of Fineco's net sales.
Fineco Asset Management Target and Fineco Asset Management Megatrends were the best-seller products, confirming that net sales are structurally skewed towards retail classes. Please let me also underline that following the success of Fineco Asset Management Target, we just launched a second edition of the product. I would like to highlight that the penetration of Fineco Asset Management retail class total assets reached 90% on Fineco's Assets under Management , and we expect it to grow even further. Let's now move on to slide 25 to deep dive on other potential industry initiatives that the bank could undertake. As you know, our goal is to offer our customers the best price quality convenience through a fair and transparent approach. This allows us to make our customers even more satisfied and to generate long-lasting relationship, which translates in sustainable results in the long run for the bank.
As a result, Fineco already enjoys a customer satisfaction rate equal to 97% and is the number one bank in terms of reputation. A key indicator that allows us to affirm ourselves as a premium brand and generate a positive dividend on business results. On top of this, we are continuously upgrading our banking services with a number of initiatives in order to improve our already best-in-class customer experience. Our positioning and long-term approach with our customers give us room to eventually think about the possible smart repricing to further support and diversify our revenues generation. Let me please spend a few words on the two main pillars of our smart repricing. On one end, it will not be linear on all our customers, as we will leverage on our deep internal IT culture to clusterizing customers according to their relationship with our bank.
At this regard, our full control of data management is critical. Second, on the other end, we will preserve our best price quality ratio. At the bottom right of the slide, we represented average cost for online operations of the main Italian banks. As you can see, we are the most convenient in relative terms, and we have plenty of room for maneuvering. Also considering that all the other banks are moving in the direction of charging higher costs to clients. Let me please underline that this is not a brand-new story for us, as in the past, we managed some smart repricing, as it was the case when the cap on interchange fee on credit cards was introduced a few years ago. Let's now move into the next slide.
In slide 26, we have summarized the results we have achieved after the in-depth reshape of our brokerage offer over the last few months. Brokerage business suffered a change in the market structure due to persistently low market volatility and to the introduction of ESMA regulation. As you can see from the slide, we have been, as usual, quite proactive in completely redesigning our product offer with the launch of new option products, the enlargement of our multi-currency basket, and the optimization of our systematic internaliser. More recently, we also repriced our forex, lowering the spread to have a better commercial grip, and introduced the 24-hour brokerage platform, which is key for the upcoming launch of our offer on Asian markets. Important to note, our actions have already delivered, and the third quarter 2019 was the best one in the last year.
This once again confirms our strong track record in dealing in a timely and efficient way with structural changes in the market where we operate. Let's now move on to slide 27, developing opportunities. On this slide, a quick update on Fineco U.K. and Patent Box. In U.K., we are growing nicely with about 6,000 clients, and 87% of the new customers acquired are non-Italian, of which 76% are native British. With regards to the offer side, we just launched our first funds, and we will progressively complete our open architecture investing platform over the coming months. The platform is very convenient also in terms of cost, with a competitive pricing of 25 basis points per year. In order to further improve the offer, we are evaluating the possibility to open a permanent presence in U.K.
In any case, we will take the final decision only after Brexit outcome becomes clearer. I remind you that U.K. offer leverage 100% on the Italian platform, meaning that we have no additional fixed cost. A quick update on Patent Box. The closing of the process is still in the hands of the revenue agency. Let me remind you that we applied both for the intellectual properties, as our platforms are internally developed, and also for the trademark. The fiscal benefit will cover five years, from 2015 to 2019. Intellectual properties are renewable accordingly to international guidelines. We are still working very closely with the Italian fiscal authority to sign the agreement for the five years by the end of 2019.
Alternatively, we cannot exclude the option to self-determine the Patent Box benefit in 2019 tax declaration, as set by the decree, the Tax Credit , definitely approved in the Law no. 58 of 28th of June 2019. Thank you for your time. Now we can open the call for questions.
Excuse me, this is the Chorus Call Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Gianluca Ferrari with Mediobanca. Please go ahead, sir.
Yes. Good afternoon, everyone. The first question is probably the second time I am asking this in a call. Your leverage ratio went down 18 basis points in Q3. With an additional four quarters, we might be very close to the 3% Basel III threshold. I understood the project of converting deposits into asset management, but even assuming you manage to convert a couple of billion, you are only earning one quarter of additional flexibility. What are your expectations regarding this switch into asset management? What are the sensitivities you made in order to avoid getting to the dangerous threshold of 3%? The second is on non-HR costs, that are pretty low. If you look at page 11, EUR 35 million in Q3, but also EUR 39.8 million in Q2, are well below the results reported last year.
It is all due, in my opinion, to development cost. I was wondering if we have to set a new base here, a much lower base compared to last year, or there is the postponement of some cost in Q4. What is the current run rate we should think about going forward with reference to non-HR cost? The last question is on the smart repricing. I think you put a chart where your current account is among the cheapest, I would say, EUR 25 per year. The repricing, I guess, applied across the board to all the 1.3 million customers, with some exceptions, I guess. Can you elaborate a bit more about this derogation you applied to your clients? Thank you.
Let me start on the leverage ratio. First of all, we had considered that we had, in the past few months, some extraordinary effect impact on the liquidity, generated by massive disinvestment of clients of their asset under custody positions, that has been generated by clients taking profits on their, mainly, the tightening of the spreads on the Italian govies. This has generated in, starting from the month of June and going through in July and August, a massive impact on this. Clearly, this is a temporary effect, and we expect that this is going to be progressively reabsorbed going forward. Second, I would like to underline is the strategy we are putting in place for absorbing liquidity are starting and producing quite relevant results, because both the month of September usually is not a great month for asset under manage.
Nevertheless, has produced an absolutely amazing result. Even better has been the results we achieved in the month of October, because more than EUR 500 million of asset under management has been exactly generated by the beginning of these new initiatives gaining momentum. I am referring to the new generation of products, and also the fact that the bank is becoming more and more efficient in interacting more directly with clients. What we expect, we confirm our guidance of remaining in the region of 3.5 leverage ratio mark going through 2021. Clearly this is current with a growth in our base of deposits in the range between EUR 2.5 billion and EUR 2.7 billion per year.
That is pretty much a run rate that is perfectly in line with the recent history of the bank, if we exclude the temporary effect caused by this massive reduction in asset under custody by the clients. This is not fully considering any additional possible positive impact produced by the new initiatives. Moving to the non-HR cost. Clearly, the non-HR costs are affected by seasonality. If you remind, in the first six months, we were commenting that the cost had been a little bit above the expectations because we had the marketing cost anticipated at the beginning of the year. This lower level of cost has not been generated by a postponement of cost, but we anticipated the cost in the first half. The third quarter is seasonally low in terms of this kind of cost.
We confirm that our overall costs are going to grow in the region of low single digits by year-end. The same path for next year. Clearly, we expect, but as we explained during the call, we expect for the fourth quarter, higher cost compared to the previous quarter, but this clearly is mainly related to the staff expenses. Coming to repricing. Repricing is, as we presented, we label this repricing as smart repricing, because it's not going to be linear. It's going to be an repricing in which the most valuable clients are going to remain excluded by this repricing. For example, clients with the investment products or lending products, or they are good clients for brokerage and so on, clearly they're not going to be part of this repricing.
In any case, it's going to be a flexible repricing because all the clients that in the meanwhile are going to join the cluster of the good clients are going to be clearly, they're not going to be charged with these repricing. Clearly, this is an approach that can be managed just by an extremely efficient bank, because from an IT operational point of view, it's very complex, because it means that you have to go through an quite in-depth clustering of your clients. Second, it's extremely complex from the billing point of view, because every month practically you have to change the way you are billing your clients, considering that the clients, they are continuously changing their behaviors and approach.
Thank you.
The next question is from Elena Perini with Intesa Sanpaolo. Please go ahead, madam.
Yes, good afternoon. I've got actually three questions. The first is about your CET1 ratio, which was down quarter-on-quarter. The second question is about your outlook for brokerage. If I understood correctly, you mentioned a 15% year-on-year growth you expect in 2020. Actually, big American players have reduced their fees on brokerage. What would you expect could happen here in Europe or in Italy? Finally, you mentioned some figures about your net inflows for October. Can you give us an overall rounding figure? Thank you.
Let me start from the CET1. The CET1 ratio went down just for a technical reason, because clearly this is still the follow-through of the change of the methodology, because after the exit from the group, we moved from the advanced model to the basic model. The final calculation has produced an additional reduction in the CET1. I want to repeat that this has not been driven by an increase of operational risk for the bank, but just by a technical reason. By year-end, we are clearly, as we explained to the market, we are working for moving from the basic approach to the standardized approach. That is an approach that is going to, when the process is finalized, is going to make for us able to recover a CET1 ratio in a region between 100 and 150 basis points.
This is going to happen by the year-end. Brokerage. Brokerage, we confirm that we expect for 2020, a growth in above 15% year-on-year, this is mainly driven by the reshape of the product offer. Regarding your point on what's going on in U.S., I would like to remind that the structure of the U.S. market is totally different from Europe, because U.S. is an quote-driven market, Europe is an order-driven market. What does it mean? In Europe, the book of the order is made by the orders of the clients, this is what is generating the price. For this reason, Europe remains mainly a commission-driven market. U.S. is a quote-driven market in which the book is produced directly by the market maker, that they are collecting the orders and then they read.
The most part of the revenues are generated by the market-making activity. The recent move that has been initiated by Interactive Brokers, because Interactive Brokers is one of the most active market maker on the U.S. market. The decision has been to take advantage by this and lowering the commissions in order to get more on the market-making side and taking volumes. This has been also generating the immediate answer by the other place. In Europe, it's a different story because, as I was explaining, it's an order-driven market.
From a purely theoretical point of view, the only one player that theoretically is in the position to make such a kind of a move for increase even more the volumes we have is Fineco, because Fineco is the only one that, thanks to the volumes and the quality of the volumes, we are able to internalize the orders. That is a causing of a market-making activity, which we are taking advantage from the spread. Clearly, we don't need to take such a kind of a move, but theoretically, for us, this is more an opportunity than a threat. From a technical point of view, Fineco is the only one player that can take such a kind of bold step because it's the only one player in Europe that is directly internalizing orders.
We don't expect in the coming future any kind of significant change in the commercial structure in Italy. Regarding the number of October, the number of October has been absolutely very, very strong because so net sales more or less EUR 380 million. This number is particularly robust because we had also this month, and higher than expected amount of tax paid by our clients in the region between EUR 16 million and EUR 17 million. That is huge. Also we had some impact that has been produced by the most recent launched bank in limiting that is, getting liquidity considering the very high interest rates they are offering in the region of EUR 40 million.
Clearly, this is absolutely not a matter of concern because it's touching the clients that they are historically, we call them the free riders, that they are continuously chasing for the opportunities, the most convenient opportunities on the market. The net sales have been very robust. The most amazing part of the story has been for sure the asset under management, because more than EUR half a billion that is of asset under management is the tangible evidence that what we are putting in place is starting and working pretty well. The bank is starting the process of absorbing the excess liquidity, so generating higher revenues on asset under management and making the balance sheet lighter.
Third, another very important point that Fineco Asset Management is accelerating more than we were expecting because is now with EUR 350 million of net sales means that the largest part of the front book, the net new inflows in asset under management has been captured by them. This clearly it's a great news also considering that the penetration of Fineco Asset Management of the overall asset under management of our clients is still pretty low, so just 19%. We have a very large room for growing.
Okay. Thank you. Sorry, may I add another question? I'm not sure to have understood correctly about your net interest income. For next year, you would expect it to remain basically flattish? Thank you.
Just to give you a more precise number. Assuming that the situation of interest rates, and the slope of interest curve is pretty much what we are experiencing right now. We can expect worst case, a reduction just in the region of few millions of EUR. That is not far away from practically from being nearly flat. Yes.
Okay. Thank you very much. The next question is from Domenico Santoro with HSBC. Please go ahead, sir.
Hello. Hi, good afternoon. Thanks for the presentation. I do have a number of questions, so I might go one by one, if you don't mind. First of all, on your revenue guidance for next year, did I get correctly that you expect a low double-digit growth in terms of revenues, also given your guidance on brokerage revenues, please?
We expect low double-digit growth in the investing revenues and a growth in revenues on brokerage that is going to be above 15%. On the net interest income, as just we discussed with your colleague, we expect that something that is going to be net interest income being between flat and just modestly negative by few millions of EUR.
All right. That's very clear. On your capital instead, given this is a topic for questions. Is this 17.4% a bottom at this point, given that you just mentioned that you expect some 100, 150 basis points from moving to standardized your model. If I remember correctly, there is going to be another -80 instead from the purchase of UniCredit brand.
Yes. That's correct. No, this is correct. Just in order to give you a little bit longer term picture, because clearly the Q1 ratio is affected by clearly there is on one side, the operational risk continues growing because they are calculated as a % of the revenues generated by the bank. There is some lending, but on the other end, there is the organic capital generated by the bank. Considering putting everything together, we expect that our core tier one ratio looking forward on a little bit longer term, can be expected to be stabilizing in the region of 17%.
All right. It's clear as well. Beyond 2020, I got all your comments about what you expect in the future. Also that you might probably want to sacrifice a bit NII in favor of generating more fees going forward. How shall we consider this? Do you expect just a recomposition of your P&L, or actually sacrificing also your NII in absolute terms in order to have a lighter balance sheet? Also some comments on the dimension on your balance sheet on the bond portfolio would be very useful. On this topic, I saw the slide of FAM and the migration of assets to FAM. How do you expect margin also going forward to benefit from this migration, given that only 19%, if my understanding is correct, are now generated from FAM?
On this topic as well, is there any thought of deposits that you might switch into asset under management volumes in the short term? Just to understand a bit how your P&L might change going forward. Thank you.
Let me start from the revenue mix on 2020. I would suggest to split the point into components. The first one, it's clear that there is what is related to the possible introduction of the smart repricing. In this case, what is going to be generated by this smart repricing is going to increase the overall expected revenues of the bank, because it's not expected to cannibalize in a significant way the net interest income. This is the first point. The second one is related to the absorption of liquidity through the asset under management products. In this case, every EUR 1 of liquidity that is absorbed by asset under management products is expected to generate, all in all, an increase in revenues.
Clearly, what we are going to get in terms of additional revenues on asset under management products is expected to more than offset regarding the decrease in the net interest income. The more effective we are in direction of moving clients in direction of asset under management products, and what you can expect is both a balance sheet becoming lighter, and second, an increase in terms of overall revenues generated. I don't know if I've been clear enough on these two points. Regarding the dimension of the balance sheet, clearly the dimension of the balance sheet is strictly related to our capability to move as much as we can in direction of asset under management products.
It's clear that, for example, if we are assuming that we are able, but clearly this is not a guidance, but clearly if we are able to replicate the month of October continuously, clearly this would generate a massive change in the balance sheet of the bank, and also a massive change in the revenues generated by the bank. Please, this is not a guidance, but just to give you an idea of how does it work, the relationship among the different components of our revenues. Again, the repricing is going to generate a nearly 100% additional revenues for the bank, because it's not going to generate any kind of cannibalization of net interest income.
Asset under management, the more we sell of asset under management products from clients, what you can expect a combination of lightening balance sheet, at the same time growing revenues, because the additional revenues generated by asset under management products are expected to more than offset the cannibalization generated on net interest income. On Fineco Asset Management, we expect the margins are expected to remain relatively flat, Fineco Asset Management clearly is characterized by being more efficient and producing higher margins. On the other hand, there is, in any case, the continuation of the structural for the industry pressure on margins. Second, clearly, clients are characterized by a low appetite in terms of risk. Clearly with clients more interested in more conservative solutions.
Putting everything together, we expect the revenues that are generated on the overall asset under management products growing in the region of low double digit, but with margins remaining practically flat after tax. This clearly can be changed by the product mix. For example, if we have clients becoming a little bit less conservative, in this case, you can expect a slight increase also of the margins. Clearly, we are not able to predict now. Now we are assuming cautiously clients remaining, maintaining the same kind of approach that have characterized them until now.
All right. That's clear. Thank you.
The next question is from Alberto Villa with Intermonte. Please go ahead, sir.
A few from my side left. One is on, is it totally off the table the possibility of introducing negative rates? You're moving on smart repricing, I guess, to counter the current situation in interest rates. When will you take the decision to implement or not the smart repricing? What is the, let's say, scenario in which you will move or not to introduce this measure? The second question is on, I was quite impressed about the switch of assets and the growth of Fineco Asset Management. It's clearly a success story. I wanted to ask you, how are you incentivizing, if any, the network to sell this kind of products? If you can give us an idea of the profitability of the different products you are launching. The accumulation, the Megatrends, the target, and so on.
Just to have an idea of, and if there are significant different profitability margins between these products. Thank you.
We are not considering to introduce any kind of negative interest rates, because introduction of negative interest rates, it's impossible to make a smart repricing tailored for the clients. For example, if you want to be effective in introducing a negative interest rate, you have to hit the most valuable clients. That is exactly the opposite we want to do. Clearly, we have not on the table any plan of introducing negative interest rates. Regarding the smart repricing, it is better probably to be in place, probably to be announced to the clients by the year-end and becoming fully operative probably during the first quarter of next year.
Regarding the growth of Fineco Asset Management and the speed at which is growing the asset under management products, clearly we are not surprised by the direction because this is perfectly current with the anticipation we give to the market because to the market we anticipated the implementation of the new platforms, of the new products. What is going on is exactly the result of this kind of activity. Clearly, we have been taken a little bit by surprise by the dimension, by the impact in terms of volumes, and so we are very pleased. In terms of the success of Fineco Asset Management is driven by a very simple concept that, for example, the Fineco Asset Management products they are characterized by being more convenient for clients because they are less expensive.
Thanks to the recovery of operational efficiency, we are able to give to our clients better products, but with a lower level of commissions. This is perfect for going through the challenges of the market. Second, Fineco Asset Management is extremely efficient because the main dividend of Fineco Asset Management that is an extremely fast, quick, and agile company. We are able to continuously generate new solutions for our clients. For example, the fact that we have been so fast in introducing this very efficient accumulation product, this has been thanks exactly to the efficiency of the company. The Megatrends is the same concept. There is no specific different incentive for the network on the Fineco Asset Management products. The incentive scheme is exactly the same on all the products we have on the platform.
The reason of the success is driven by the fact that Fineco Asset Management is able to give more efficient products, so that they are less expensive and more performant for the clients. Second, that we are very fast in tapping what are the continuously emerging new demands by clients because the market is a fast-changing market. You have to be very fast and flexible to give to your clients, to your financial planner, exactly what they need.
In terms of margins for you of the different products, are there differences?
Clearly on the margins, the same answer I gave before to Domenico. That is, clearly the Fineco Asset Management products, thanks to the higher level of efficiency, are more profitable. On the other end, clearly we have a couple of headwinds represented by the fact that clients are more skewed in the direction of conservative solutions. Second, that clearly there is a structural pressure on margin. Putting everything together cautiously, we expect the margins remaining almost flat going forward. Because we are not taking as approach, we are not using the shortcut to move the clients in direction of taking more risk. If the clients are fully convinced, and that they are interested in taking more risk, it's a story. Another story is to move clients in a not transparent way in direction of risky products. This is not clearly what we are doing.
Okay, thanks. I was wondering if between Megatrends and Target, for example, there is a huge.
There is a quite significant difference from Megatrends, but very reasonable because in Megatrends, the clients are investing immediately 100% on the market. On the Fund Target, the clients are investing progressively over the time on the market. By definition, Megatrends is more profitable than Fund Target.
Thank you.
The next question is from Luigi De Bellis with Equita SIM. Please go ahead.
Yes, good morning. Two quick questions for me. The first one on the repricing strategy, do you expect or not some small churn rate from this potential move, also looking at what happened in the past? Could you quantify the potential impact of this strategy or the perimeter in terms of customers? Second question on the Patent Box, could you quantify the impact expected on capital ratio, or in another way, if the positive impact is included in the 17% CET1 indication? Thank you.
Regarding the repricing, clearly, by definition, we expect some churn rate. Because as we said, it's not a brand-new story for Fineco, because Fineco, probably someone that is more familiar with our history, they know that for a very long period of time, we had the pricing on our banking services. We expect a churn rate in the region of few tens of thousands of clients, but concentrated in the low-end clients, though they are totally irrelevant in terms of profit generation for the bank. It's a move probably that, as we had the opportunity to discuss with some investors in the past month, it's a move to take in any case, also without considering the situation of interest rate, because it's a move in direction of improving furthermore the quality of our base of clients.
The churn rate is expecting just a few tens of thousands of clients, but mainly represented by absolutely marginal clients in terms of what is their contribution to the profitability of the bank. Regarding the Patent Box, the CET1 ratio in 2019, we expect to be around slightly above 17%, considering also the benefits from the Patent Box.
Okay. Thank you. If I may, on the repricing, could you quantify the potential impact from the strategy?
Finishing on the CET1 ratio. Clearly, this is not considering the possible positive impact produced by the standardized approach model As I was explaining, the condition ASA model, we can expect an additional improvement of the CET1 ratio between 100 and 150 basis points of the 17% that clearly is considering also the Patent Box. On repricing. Excuse me.
Yes, if you could quantify the potential impact expected from the repricing strategy or the perimeter in terms of customer.
Generate a few tens of millions of euros.
Thank you.
Mr. Foti, there are no more questions registered at this time.
Thank you very much for joining our call, and as usual, if you want then having any follow-up and deep dive in numbers and figures, please, the team is available. Thank you again.