Earnings Call: Q2 2019

Aug 5, 2019

Afternoon, this is the Chorus Call conference operator. Welcome and thank you for joining the Fineco Bank First Half twenty nineteen Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Alessandro Forti, CEO of Fineco. Please go ahead, sir. Good morning, everyone, and thanks for joining our Q2 2019 results conference call. As you know, starting from May 10, Finnacle is an independent public company. Let me remind that the exit from Unitiated Group has no implication on Finnacle strategy and business model and will actually allow us to be even more flexible and improve our time to market. Fineco enjoyed limited synergies with UniCredit, and we continue to focus on maximizing Let's underline that Fineco fully independence has No implication for its customers and no material impacts on its capital and liquidity strength. Known in its profitability, thanks to the transitional arrangement agreed with UniCredit. The 2nd quarter reflects The main effects coming from the consolidation, in particular, the release of EUR 10,000,000 sub provisions After the full collateralization of UniCredit exposure, different calculation methodology leading to an increase in the operational risk And to a decrease in core Tier 1 ratio to 17.8%, still at very solid levels. Let me underline that the decrease will be partially absorbed as soon as the bank will adopt the standardized model in the coming months. Leverage ratio performed at 4% after the issuance of the EUR 300,000,000 831. Let's now move to Slide 7 and start commenting our first half results. Adjusted net profit in the first half twenty nineteen climbed to €137,300,000 Plus 9.7 percent 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 some of the actions we have recently taken on have already producing results. We generated EUR 323,500,000 of adjusted revenues In the semester, up 3.8% year on year, supported by investing and banking area, while comparison on brokerage is affected by new regulations and low market volatility. Later on, we will deep dive on the actions we have undertaken on the latter. Operating costs stood at EUR 127,500,000 plus 2.3% year on year, And cost income decreased at 39% despite the continuous expansion in assets and clients, thanks to a strong operating leverage and to the scalability of our platform. Please go through the following slides to analyze more in details for the dynamics of our results. Let's start with net interest income dynamics on Slide 8. Net interest income increased by 3% year on year, supported by strong volume growth, both high quality lending and sticky site deposits, even more valuable given the current remuneration on liquidity offered by the system. 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 1.32% in the first half of twenty eighteen to 1.26 in the first half of twenty nineteen. Cost of funding remains very low at 4 basis points due to deposits in foreign currencies. Please let me remind that our cost of funding related to deposits in euro, which represents 97% of our total deposit is 0. Let me please Underlying that we confirm our approach towards the buildup of diversified and low risk investment portfolio also in the present rates environment. As a reminder, while the collateralization of the unit rate Exposure gives us room to increase our Italian Globus Holdings. As an independent company, we will be able to be even more efficient in our treasury management. In 2019, we confirm our guidance of a low Single digit increase in 'nineteen interest income, while for 2020, we see hit flat due to the latest evolution in the rates environment. In the following slide, you can find the focus on our bond portfolio. As you can see, our strategy to run off the Unicated Investment portfolio to a blend of European government bonds is progressing very well. Our bonds portfolio now includes also France, Spain, Ireland, U. S, Poland, Austria, Germany, Belgium, Sovereign National Agency and covered bonds in addition to Italy. Let me also remind our sensitivity to a potential increase in interest rates. A parallel shift of 100 basis points would generate EUR 119,000,000 of additional net interest income, While a parallel shift of minus 100 basis points, we generated minus EUR 108,000,000 of net interest income. Fees and commissions grew by 8.7% year on year with management fees up 12.2%, thanks to a larger contribution of guided products and services, which moved up from 64% in the first half of twenty eighteen to 69% in the first half of twenty nineteen and to the new asset management company. Let me highlight once again that our investing fees are strongly sustainable As for the most represented by recurring fees, entry fees only weigh around 2% of investing revenues, And our business model does not rely on them, and they are not aligned and they are aligned with the interest of clients. But they are just in anticipation of future profitability for the bank. The profitability on assets under management, calculated as management fees, net of taxes on assets under management is equal to 47 basis points in the first half twenty nineteen with customer looking for more conservative solutions. We remind that we are further developing our investing profile through the launch of new Fineco Asset Management Solutions and the enlargement of insurance products. As for 2019, we confirm our guidance of After tax margins, flat, but revenues growing low double digit on the back of volume effects on Fineco Asset Management Contribution. Trading income, net of nonrecurring items, is down by 18.3% year on year due to the lower market volatility and to the new ESMA regulation in place since the second half twenty eighteen. As you can see in the chart on the right bottom, the first half of twenty nineteen has confirmed its Patents of Low Market Volatility. Nevertheless, the new option platform we have announced during the our Q1 results is now fully up and running there, And they are already producing tangible results on the brokerage side that should be further strengthened over the next quarters. With this regards, for brokerage, we expect a low double digit Growth in the second half of twenty nineteen versus both the first half of twenty nineteen and the second half of twenty eighteen. For 2020, we see this growing trend to continue. Moving to Slide 11. We have a detailed review on cost evolution. As you can see, the first half of twenty nineteen, once again, confirms our efficiency, is part of our DNA and core in our bank, representing a clear and unique competitive advantage. Staff expenses were at EUR 44,100,000 in the first half, plus 6.3% on a yearly basis, mainly due to the increase in the workforce related to the business development and costs related to the Fineco Asset Management. Not fully in place in the first half of twenty nineteen and the internalization of some services after the exit from the Unigladed Group like, for example, the audit department. Non HR cost at 8.3 EUR 400,000, flat 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. We expect cost up Low single digit both in 2019 2020. Let's now move on to Slide 12. Commercial loans grew 28.2% year on year with the usual strict control on credit quality. Let's remind 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, up 14 basis points as of June 2019 due to the improvement in the quality of the credit of the Credit. For 2019, we expect a stabilization of our cost of risk at around between 19, 21 basis points, much lower compared to the system. Let's move now in analyzing our lending offer More in-depth at Slide 13. Mortgages grew by more than 35 percent year on year reaching €979,000,000 at the end of the first half. Average loan to value on total outstanding at 53% and average maturity at 19 years. Personal loans grew 12% year on year with very attractive margins. Long back loans exceeded EUR 1,100,000,000 in June 2019, increasing by more than 35% in 1 year, driven by credit loan volume. We are adjusting our 2019 guidance on volumes, And we don't want to undermine the quality of our lending book on mortgages. A new production in a range of €300,000,000 to €350,000,000 as we prefer not to compete against the system in right zones characterized by aggressive prices, High loan to value and longer maturities. On personal loans, new production in the range of EUR 220,000,000 EUR 250,000,000 per year. On credit loan bank, we expect around EUR 500,000,000 annual growth. As for the expected yields, please Remind that in the case the market environment changes, we would have to move accordingly. Moving to Slide 14. Sineco confirmed a rock solid capital position on the wave of a safe balance sheet. Let me remind you once again that the full collateralization of the exposure with Uniqeditor Fully neutralized any potential credit risk weighted assets and concentration limit deriving from the exit from Uniquedit Group. The only negative impact on our common equity TR1 ratio is related to the increase in the operational and risk weighted assets from EUR 682,000,000 to €1,200,000,000 That is exclusively due to the change of model for calculating operational risk, which is no longer the U. K. E. Created the group advanced model. Again, let me stress that this impact is only driven by Applied Methodologies, while the risk profile of Fineco has not changed at all. As a result of this, our common equity Tier one ratio At 17%, 84%. In this respect, we are working on the migration to the standardized approach in the coming months, which is expected to absorb lower capital versus basic approach in the region of 100, 150 basis points as of December 2019. Therefore, the current operational risk weighted asset figure should be taken as a worst case scenario. Leverage ratio Equaled to 4.03 percent pro form a, including EUR 300,000,000 additional Tier 1 issued in July 2019, which enabled Fineco to proactively maintain the leverage ratio comfortably above 3% when I had the of 2021, when this pressure will come into force And to better exploit our growth potential, while at the same time working on our initiative to improve the asset mix of our clients. Finally, Total capital ratio pro form a, including EUR 300,000,000 additional TRY 1 stood at 33.94 percent as of June 2019. On Slide 15, You can find more details on the EUR 300,000,000 additional Tier 1 placed on July 2019. Let me remind you that this Issuerance allows us to proactively maintain our leverage ratio, comfortably above 3% while ahead of the 2021 Regulatory entry into force of the 3% requirement. On July In Livent, 2019, the bank successfully completed the placement of its first Market issued of additional Tier 1 instruments for a total amount of EUR 300,000,000 with a fixed coupon of 5.875 percent for the 1st 5 years compared to initial price guidance of 6.5%. This tightening compared to the initial price guidance is one of the most significant seen for this type of instruments as a result of an overall demand equal to 9x the offer. The issues recorded an order volume of EUR 2,700,000,000 of euros demonstrating recognition Our bank also in the fixed income segment and allowing to us to take advantage of the favorable On Slide 16, we show an overview on the total financial assets growing trend supported by The healthy expansion in new inflows, we gathered EUR 30,000,000,000 net sales since 2013, leading total financial assets almost EUR 76,000,000,000 in the first half of twenty nineteen. Guided Products increased their penetration rate to 69% on total assets under management from 67% on December 2018. Let's now move on the on Slide 19. Jumping into the Slide 19. Out of EUR 3,300,000,000 of net sales in the first half of twenty nineteen, 90% was organically generated through the existing financial planners or directed by the bank And 10% came from recruitments made over the last 24 months. For 2019, we expect robust net inflows, driven by structural trends and by the high quality of our proposition. The recent launch of some brand new products and services such as Plus and CoreTarget is helping us in offsetting the higher propensity of clients to remain in a wait and see mood In this very complex market environment. Now I would skip directly to Slide 22. Sustainability is at the heart of our business model and translates in transparency and fairness towards Customers as the cornerstone of our commercial strategy. As you know, we believe that making our clients satisfied is the only way to generate a long lasting relationship and produce sustainable results in the long run. As a consequence, Finnacle ranks number 1 among banks in terms of reputation, a key indicator as it allows to affirm us as a premium brand and generate a positive dividend on business results. This explains why we have decided to share with customers the benefits of the operational efficiency we are generating through Finnacle Asset Management By progressively lowering their total expense ratio in an environment characterized by pressure on margins and while we have Developed a sustainable fee structure based on the total absence of performance fees and upfront fees almost at 0. Let me remind that we engage customers leveraging on the quality of our services, not relying on short term aggressive commercial offer, Thus explaining our cost of funding close to 0. In the same way, organic growth is the main engine of our net sales as we focus on putting our advisers in the best position to answer to the financial needs of the Italian families. Let's now move to the Slide 23. Delivering the highest possible shareholder value via an healthy, Sustainable and organic growth is the main goal of our business model. Thanks to this approach, we Over time, we have continuously delivered high quality recurrent and predictable profitability over the cycle, producing a diversified and sustainable revenue growth in all market conditions. Our commitment is key To be a long term winner and to refrain from taking shortcuts in order to produce short term results, especially in a challenging macro environment characterized by partial margins, lower expected returns and demanding regulation. We have already underlined our focus towards a quality offer and the attention we pay on building It's fair and long lasting ratio with customers. So let me please highlight the other main aspects of this strategy, namely It's safe and diversified low risk asset coupling with valuable and sticky deposits solid capital position A deep internal IT culture allowing us to leverage on cutting edge technology, difficult to replicate and leaving our operating leverage unmatched in the banking arena. This allows us to have a highly scalable, low risk business And to exploit the growth opportunity with a best in class sign to market. Let's now move on Slide 25. Let me please spend a few words on the main changes in our total assets following the consolidation from the Unitiated Group. As you may see from the graph, our balance sheet enjoys a massive enjoyed Massive derisking after the full collateralization of our Unicated bond exposure, while total assets decreased after we extinguished Term deposits with Unicredits and transferred EUR 1,200,000,000 liquidity at Bank of Italy. In the pie on the right hand side of the slide, you had a breakdown of our non unit credit bonds. As you can see, the diversification of our investment portfolio is continuing with an increased exposure towards a blind of European government bonds and covered both. Moving to Slide 31. Finneco's management is key to further improve operational efficiency in several aspects and to improve our ability to create a modern and innovative Multi manager solution to satisfy the needs of our customers, financing our time to market, Developing our hoofers to meet evolving customer needs and deal with market challenges, Anticipating the trends of the industry. Just few words on the latest investment solution recently launched by Tneka Asset Management, New decumulation products allowing for a gradual investment in financial markets, a key solution in an environment Seeing customer with a low risk propensity multi thematic fund specialized in capturing the most relevant secular trends We're shaping the world. New building blocks, both vertical and based on risk of prior, have been launched And more sub advised funds are in the pipeline. On a final note on our Irish subsidiary, Let me please underline that among the several benefits Fineco estimates is delivering, A key factor to focus on is the higher proficiency in risk management, Thanks to the look through on daily basis on the sub advisory funds underlying us. Let's now move on Slide 34. On this slide, a quick update on Fineco UK and Patent Box. In UK, we acquired 4,500 clients with the share of non Italian continuously increasing and now up to 64%, of which 48 percent net British. Considering the steady level of revenues constantly generated, We now started the 2nd phase of this initiative with a more boost on marketing and commercial activities. I'll remind you that UK We offer leverage as 100% on the Italian platform, meaning that we have no additional fixed cost. Let me please give you an update on the offer side. On the on one hand, Aiza and multi brand funds are under implementation and expected in the coming month. On the other, we continued to expand our multicurrency service and the banking offer, for example, with the launch in the coming month of the Easter payments. 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 apply both for intellectual properties as our platforms are internally developed and also for the trademark. The fiscal benefits we will cover 5 years from 2015 To 2019, intellectual properties are renewable according to the international guidelines. We are confident to close the agreement by the With the Italian fiscal authority by year end as the deadline for the 5 years Validity of the norm expires in 2019. Alternatively, we cannot exclude to consider the option To self determine the Patent Box benefit as set by the decree, the credit of credit, definitely approved in the law number 58 of 28th June 2019. As you know, in the second half of the year, we will start on preparing the launch of 2 brand new platforms that will be available starting from 2020 and that will further strengthen the productivity of the bank. This will be the 3rd evolutionary step in the history of our bank and will allow us to combine our cyber adviser approach with big data analytics. This will help us to better deal with pressure on margins by further improving the productivity of our network and the asset mix of our customers. Slide 18. On Before we open the call to questions, going back to Slide 18, let me please give you some color about the July results. Net sales, we are solid at EUR 420,000,000 and with the mix influenced by 2 temporary effects. The first one coming from clients selling their assets under custody component, minus EUR 350,000,000 for profit taking mainly on Italian govies following the reduction in interest rates. July has been a very profitable month for brokerage, the best of the year so far, confirming once again Fineco as a leader in Europe for a number of executed orders. The second temporary effect come from the self direct clients selling to our funds. As a reminder, Fineco is one of the most important open architecture platforms in Europe and also used by clients to buy funds on their own initiative. These two components led to a strong inflows in deposits, which in the coming months are expected to be transformed again into assets under custody and assets under management, also thanks to the new initiative the bank is undertaking. Net of this temporary effect, net sales in deposits are in line with our expectations. Finally, net sales in guided products and services stood at €191,000,000 with the penetration on asset under management at 69%, confirming the attractiveness of our advanced advisory solutions for our customers. Thank you for your time. And now we can open the call to questions. Excuse me. This is the Chorus Call conference operator. The first question is from Gianluca Ferrari with Mediobanca. Please go ahead. Yes. Good afternoon, everyone. Three questions from my side. The first one is on NII. You made a very clear guidance for this year and next year. I was more curious around the fact that you lowered a bit the yearly new production for mortgages and personal loans. I understood you said that we don't want to compete with banks and so on and so forth. But in reality, you are basically offering those kind of products To your existing customers and by the way the cost of risk at the moment has been a great achievement. So why not sustaining a bit the NII With at least the same production you were guiding for in Q1 or even accelerating it. The second question is On leverage, if I got it right, I think $1,000,000,000 of new deposits is consuming more or less 15 basis points of leverage. Maybe Lorena can help with this math. So in a couple of years' time, if you keep growing the bank like you are At the moment, you are doing at the moment, we could see the 4 time leverage going back again in the 3 time region. So I was wondering if given the growth you are having and the great results you are achieving with this respect, if it is Not the case to revisit a bit the 70% dividend payout and to retain a bit more earnings To absorb the tremendous growth you are achieving. And the last question is on the voluntary scheme in the second quarter, the $4,300,000 If you can help us in trying to model that for full year 2019. Thank you. Okay. So let me start from the net interest income. So the net interest income, we clearly, the guidance we are giving on mortgages And personal loss is not necessarily a reduction in the guidance. We just gave a range Because clearly, it's extremely difficult to give exactly and very precise numbers because it can be affected by many reasons. So we are giving Guidance in terms of range, clearly, this doesn't mean necessarily that we are going to go for the lower end of the range. At the same time, clearly, we don't think that the right answer for sustaining the net interest income is to take on board more risk. And so we are going to because it's a this clearly is a shortcut Because and so we are going to continue on moving that direction because we think that keeping And quite very well under control, cost of risk remains absolutely key Thanks, Coriant with the philosophy of the bank. Coming to the So coming today your point on the leverage ratio. First of all, let me remind that our strategy focuses on transforming as much as we can possible deposits into asset under management, and we are setting up several initiatives such as the launch of the new platform in order to further boost Then, still, in order To be more precise regarding the numbers, in order to maintain to keep an leverage ratio of 3.5%. That is the guidance we have given to the market throughout 2021. We and we can have a growth In terms of deposits, in the range between EUR 2,500,000,000 to EUR 2,700,000,000 a year. That is absolutely perfectly correct with our business strategy. And this without cutting dividends and something else. So I want to remind that Fineco is characterized by an extremely capital light business model And so clearly, also maintaining a very generous dividend policy, we can generate organic capital. And so again, based on these numbers, we expect that a range between EUR 2,500,000,000, EUR 2,700,000,000 of deposits on the year It's going to keep the bank posted in line with the 3.5% target level we have on the leverage ratio. On the voluntary scheme, based on the latest On the most recent informations, we don't expect any other request by the voluntary scheme, by the voluntary scheme and so we saw this there. Thank you. Thank you very much. The next question is from Alberto Villavil, Intermonte. Please go ahead. Hi, good afternoon and thanks for taking my questions. The first one is back on the NII. Just to make clear for the guidance for 2020 and If we assume an increase in deposits in the region of €2,500,000,000 to €2,700,000,000 what's your assumption in terms of reinvestment The yield and if we can expect a significant change in the investment mix compared to the Slide 5 pie chart you show us of the non UCG bonds. Because I'm still struggling in finding I mean, given the current Market yields, it seems a bit challenging to achieve these targets. The second question is on the CET1 ratio. Can we Expect by the end of the year, the possibility you get a boost from a partial internal model, if you can update us on that. And the third one is on the Patent Box. You said that you may go for the calculation methodology if there is no agreement with the agency. I was wondering if you can give us an indication of what is the calculation in terms of size of benefit for the company? Thank you. So just for coming back to the point on the net interest income. So we again, We are confirming this guidance of for 2020 for a flat net interest income. Yet to consider that clear digit, This probably is the 1st dividend we are able to get, thanks to the exit from the group because clearly not because we Clearly, we are not going to change the structure of our investment. So I want to be very clear on the point. We our idea is not to increase The risk we are taking on board because again, we don't think that this is the right answer on the question on margins, on net interest income. So In terms of investment strategies, the approach is going to remain pretty much the same. The dividend from being From exiting from the group is just the results that I tried to give you the physical flavor of what I mean. So when being part of the group, for example, was nearly impossible to enter in any kind of repos agreement on our Fineco now has a very large treasury department because we have sit on more than EUR 23,000,000,000 of Investments and something like that. And so clearly, there are a lot of actions that you can take for Making efficiency without taking a lot more risk. But for example, if we want to enter in a repo agreement for Extracting additional revenues from the portfolio. In the past, the process was incredibly cumbersome because we had to go through and Investment Committee at the group level and assessing if the counterparties, so for example, you have Entering a REAP agreement with Global SIFI. In any case, it was requested to submit this to the Investment Committee of the group and in the case the group was has reached the maximum level of exposure I respect this global SIFI was not possible for us to go throughout this transaction. So practically, Fineco in the being part of the group has not exploited fully all the potential that there is in Efficient management of the Treasury Department. Same story, when you have to invest, for example, if I have an investment plan We checked to invest a certain part of my liquidity in Portuguese bonds or something like that. Same story. We had to go through these incredibly cumbersome processes for getting authorization at the group level. The risk at the end of the process to discover that the overall maximum amount at the group level has been exceeded and some not being able to And so the delaying investments by, I don't know, 6 months really is going to create. So putting everything together, So clearly, we are working clearly quite intensively in order to transform the Fineco Treasury Department in a real Efficient department and the results that clearly is that without changing the risk profile of what we are doing, our investment strategies, We are going to be able to offset the headwind represented by the most recent decline in interest rates. On CHET1, yes, we are quite confident that by year end, We are going to be able to move in direction of the standardized model with respect to the basic model. And so as we explained during the presentation, we expect possible Increase on respect to the 17.82 percent cost to own ratio to put to head in a range of additional 100, 150 basis points of COTR1 ratio. On the Patent Box, clearly, we cannot give you any precise numbers. What we can And in case we can confirm that it's going to be in a sizable amount in the region of several tens of 1,000,000 of euros, And that's all. But clearly, it's an evolving story because the fact that we in the case we go for This doesn't mean that we are not going to be extremely cautious and conservative in what we are doing. In any case, we confirm that the Patent Box, when this is going to be finalized, is going to be The sizable effect, I want to remind you also that looking forward, Fineco is continuously developing Brand new platforms all these brand new platforms are clearly becoming eligible for getting an additional tax break Because the trademark is a one off. For example, everything is related to the intellectual properties is recurrent, and Finnacle is in a great position considering the peculiar business model we have. So this does not differ differently from the most part of the other banks. We are directly developing our platforms. So this is making this quite attractive on considering the future evolution of Patent Box. Thank you. Very helpful. The next question is from Elena Perini with Banca EI. Please go ahead. Yes. Good afternoon. I've got essentially two questions on your AUM net inflows and your net commissions. How do you see the net inflow Going forward during this year, do you see any improvement in AUM net net Even the current environment, do you still see a cautious attitude from the Investors, and linked to this, you gave us a guidance on Net interest income for 2020, as regards net fees, after The low double digit growth you expect for the current year, what is your perception for 2020? Thank you. So regarding the asset management at the National Net Influencer, We don't expect any significant change in terms of approach and EBIT by clients. But at the same time, due to the improvement of our product offer is making us confident that we are going to be able to get absolutely decent returns also assuming that clients are remaining cautious Because as we underlined, Fineco Asset Management is working quite actively In developing new solutions, they are exactly in that kind of direction. So we were mentioning the new generation of the accumulation products And also a new generation of insurance products. So we and so I'm jumping directly to your questions on what we can expect In terms of net commissions development, so for the year, we gave guidance of Everything that's related to investing growing in the region of low double digit, And we confirm the same guidance also for 2020. Let me spend also a few words because when we are talking about Fees and commissions, there is also brokerage. And maybe brokerage has suffered Quite a lot in the particularly in the Q1 because we had the combination of Very low volatility, at the same time, still the impact of the new ESMA regulation. And as we explained, The bank has put in place quite a huge amount of effort in direction of developing a new generation of Products and services, mainly in direction of the option business that as We are not discovering the hot water, but this is the most profitable activity, for example, For the U. S. Brokers, now the most part of the profitability is coming from the auction business. And the results are starting to building up. And for this reason, we think, 1st of all, we can confirm that the results generated by brokerage in the Q1 can be kind of presented at the bottom Our results and also assuming the volatility remaining pretty low, we expect that, that brokerage It's going to keep on growing in the region of high single digit going forward exactly for these reasons because What has been put in place is paying off. It's not clearly, it's not a coincidence that July has been The 1st month, the best month of the year for brokerage. July has been characterized by a little bit, a touch higher volatility, but The most part is explained by the by clearly by the completely changed structure of products and offer. And again, we have not discovered anything. We are not going to get the Nobel Prize for innovation, just we implemented what Has been proven to be very successful in U. S. For dealing with retail clients. Okay. Thank you very much. The next question is from Anna Damore with Autonomous Research. Please go ahead. Good afternoon. I have two questions on capital, please. Firstly, Slide 14 of the presentation shows that credit risk RWAs have gone up by 10% versus Q1. What is driving this significant RWA inflation in Quarter, is there any one off, no recurring items? The second question, I understand that Fineco Pillar 2 requirement is 0 at the moment. Do you expect an increase in the Pillar 2R following the exit from the UniCredit Group? And if so, what's the timing on this? Thank you. Regarding the increase of the risk weighted assets is just related. The largest part by far is Explained by the change in the way we are calculating the operational risk. That is not an increased Risk profile of the bank. So I want to be extremely clear on this point. But there is an increase in credit risk, RWAs. Okay. So the increase in credit and the counterparty risk quarter on quarter is Due to increasing lending, that is absolutely in line with the previous quarter. But we had We have made some new investment in covered bond, which has a slight capital consumption. And there are some nonrecurring items that are related to the purchase of securities not settled by the end of June, which generates a commitment for unsettled financial assets. This effect will be completely recovered at the beginning of July. It's just a temporary effect because we Yes, the situation in which exactly at the end of the month, we had some the settlement of some activities that not completely finalized at the Cross of the tumor, and this has generated this temporary effect. And On the Pillar 2, we are still waiting for because first of all, to know exactly And to be our regulatory body because the Fineco is still Under the control of the ECB, but considering that we are below the EUR 30,000,000,000 threshold of balance sheet, where we probably we are expected to return under the control of Bank of Italy in terms of Certainly. And clearly, after that, we are going to receive the final request on the Pillar 2. We cannot rule out to get some more requests, but clearly this is absolutely is totally It's going to have a negligible effect in what we are doing because Finnacle is in such a strong position that also assuming that we receive an additional request Again, it's actually it's not an issue. Okay. Thank you. Gentlemen, there are no more questions registered at this time. Thank you very much. As usual, if You had some more request of data to mention this series. We are, as usually, always available for answering to your any additional questions in the coming days. Thank you very much. Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.