Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the FinecoBank first quarter 2022 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, and thank you for joining our first quarter results conference call. Before having a closer look at our results, let me please underline that in the recent months, there has been a huge change in the structure of the market, which is further enlarging our growth opportunities. As you know, our new dimension of growth is underpinned by the recent acceleration of the structural trends reshaping the society. This has been further strengthened by the dramatic increase in the interest rates scenario since the beginning of the year.
Our business model as a one-stop shop quality platform is benefiting by the new market structure, as we expect, and strong increase in our net financial income, thanks to the strong gearing to the interest rates of our quality and capital light net interest income, which is driven by our clients' valuable transactional liquidity and not by lending as for other banks. On investing, we expect strong results despite the challenging environment with robust inflows driven by structural trends and by the growing contribution of Fineco Asset Management. On brokerage, we expect a structural higher floor compared to the pre-pandemic levels, thanks to our quality target market based on wealthy and financially aware clients and to our business model.
The main outcome is that Fineco is becoming more and more a fast-growing and capital-light business with a structurally higher profitability and a structurally higher room to dispose of it, as the leverage ratio is no more a point of attention. This will allow us to distribute a higher level of dividends and, at the same time, to be in the position to invest more on our growth. Let's now move on slide five. Going into the details of our quarterly results, adjusted net profits in the quarter was equal to EUR 124 million, up by 30.5% year-on-year, thanks to our diversified business model with all the three product areas that are firing at once.
Adjusted revenues at EUR 256 million, increasing by 23% year-on-year, and mainly supported by the investing, thanks to the growth of, in asset under management and the higher control of the value chain by Fineco Asset Management. Operating costs were well under control at EUR 69 million, increasing by 4.1% year-on-year and confirming operating leverage as a key strength of the bank. Adjusted cost-income ratio was equal to 27%. On cost, let me please remind you that, the strategic decision to manage almost 100% internally our IT is protecting us from the inflation on IT costs. Our capital position confirmed to be strong and safe, with a Common Equity Tier 1 ratio at 19.3%. Our commercial activity is accelerating as well.
In April, we recorded strong results with net sales at more than EUR 1 billion, and the mix confirmed to be strong, with around 0.6 billion in assets under custody and around 0.4 billion in assets under management, of which 77% represented by Fineco Asset Management retail net sales. Brokerage revenues are estimated for April at around EUR 14 million, around 20%, 24% higher compared to the average monthly revenues in the period 2017-2019. These results was achieved despite volumes being extraordinarily low in the month at levels last seen before 2018, when our monthly brokerage revenues were much lower. This confirming once again that the floor of the business is now definitely higher. Let's now move on, slide six.
As announced, we reached very strong results also in this quarter, with adjusted net profit at EUR 123.6 million, +30.5% year-on-year on a like-for-like basis, despite the very challenging macro scenario. Revenues at EUR 255.7 million, up 23.2% year-on-year, as we have been able to catch the strong acceleration of the structural trends in place, mainly thanks to the contribution of investing and to the robust net financial income. Operating cost well under control at EUR 69 million, increasing by 4.1% year-on-year, excluding costs strictly related to the growth of the business. Let's now move on slide seven and start to analyze more in detail the dynamics of our results. Net financial income in the quarter at EUR 107 million, increasing by more than 43% year-on-year.
Net interest income at EUR 59.3 million, and profit from treasury management at EUR 48.1 million. Let me highlight that given the new interest rates environment for this year and going forward, we expect a significant acceleration in the contribution of the net interest income to the net financial income, and we don't expect additional profits from treasury management. Let me remind our sensitivity to a change in interest rates, which is driven by our clients' valuable and sticky transactional liquidity. A parallel shift of plus 100 basis points would generate EUR 147 million of additional net interest income.
One of the main consequence of our focus on becoming more a platform than a bank is that we are continuing to accelerate the growth of our non-financial income, which in the quarter reached EUR 147.6 million, up 11.9% year-on-year, mainly thanks to the positive contribution of investing and banking. Overall, brokerage registered an excellent quarter at EUR 59.7 million, close to the record levels of the first quarter 2021, and strongly increasing compared to the last quarter of 2021, confirming a structurally higher floor compared to pre-pandemic levels. Now jumping on slide 21, we will deep dive on the performance of the brokerage business.
In the first quarter of the year, brokerage confirmed that the floor of the business is structurally higher compared to the past and regardless of the level of volatility. As you can see in the chart on the top of the slide, in the first quarter of the year, brokerage revenues reached EUR 59.7 million, resulting in a monthly average 77% higher compared to the monthly average revenues in the period 2017-2019. In April, estimated brokerage revenues at EUR 14 million, around 24% higher compared to the average monthly revenues in the period 2017-2019, despite volumes on the market have been extraordinarily low in the month at levels last seen before 2018, when our monthly brokerage revenues were much lower.
Let me remind you that the growth of the brokerage business is driven by the contribution of three structural components. First, the deep reshape of our brokerage business. In this regard, we are live with the crypto offer on Bitcoin and Ethereum through CFDs, options, and listed ETPs with our usual strict and rigorous target market. We are also live with our leveraged certificates platform, and in the third quarter of 2022, we will launch a brand new brokerage platform, which will combine our state-of-the-art standard with top quality, easy to use. Second, as you can see on slide 22, the client base using our platform is widening with active investors that have grown significantly in absolute numbers, standing around 35% above the average level in 2018-2019.
Let me remind you that our active investors have an average of four executed orders per month, are wealthy people in their forties and fifties with assets on average above 200,000 EUR, and the vast majority of them has a relationship with our financial advisors for long-term planning of their financial wealth. We are also live with the most competitive offer in Italy to catch the next generation of active investors. Third, we are continuously increasing our retail market share. Let's now move on slide eight for a focus on investing. As you know, we are in the sweet spot to capture the structural trends in place in Italy, and also thanks to our initiatives, we have experienced a strong acceleration towards assets under management.
On top of this, Fineco's management is now reaching a new dimension in the economies of scale, thus taking more control of the value chain. As a result, investment revenues were equal to EUR 73.4 million in the first quarter of 2022, increasing by 28.4% year-on-year, with management fees increasing by 28.5% year-on-year. The quarter in the comparison is characterized by the usual seasonality in the PFA's costs related to FIRR and Enasarco, that they are higher at the beginning of the year, and to EUR 4.2 million of other commissions in the fourth quarter of 2021 related to operating efficiency reached throughout the year in the value chain on institutional classes by Fineco Asset Management, which are booked each year in the fourth quarter.
Management fees margins after tax increased to 52 basis points in the quarter despite the negative market performance, thanks to Fineco Asset Management delivering on its strategic discontinuity and to the deaccumulation products, which are increasingly shifting towards equity. On top of this, we have also recorded a positive contribution by Fineco Asset Management activity on the substitution of funds underlying or wrappers with its own funds, which is in turn reinforcing the effect coming from retail classes. Let's now move on slide nine for a focus on our cost. The slide confirms once again efficiency to be part of our DNA and core in our bank, representing a clear and unique competitive advantage. Also, this quarter was characterized by cost directly related to the strong acceleration of our growth dynamics in the new normal world.
Operating costs in the quarter at EUR 69 million, growing by 4.1% year-on-year, excluding costs related to the growth of the business. Mainly additional EUR 1.7 million cost for Fineco Asset Management, that they are incurred with the acceleration to further expand its business and have a higher control of the value chain. Additional EUR 1.6 million in marketing cost. Staff expenses at EUR 28.3 million in the period, increasing by 4.8% on a yearly basis, net of costs related to the expansion of the business of Fineco Asset Management. Finally, non-HR costs at EUR 40.6 million, growing by 3.5% year-on-year, net of the above-mentioned costs related to the growth of the business. Let's now move on slide 11 for a focus on our capital ratios.
Fineco confirmed once again a rock-solid capital position on the wave of a safe balance sheet. Common Equity Tier 1 ratio at 19.31%. Leverage ratio at 3.99%, in line with the optionality allowed by ECB and Bank of Italy. Our leverage ratio, excluding the exposure towards central banks, is equal to 3.80%. Risk-weighted assets at EUR 4.78 million, and total capital ratio at 30% as of March 2022. Let's now move on slide 13. As you know, in the first quarter of 2022, our net sales continued to be very strong and sound, despite the very challenging macro context. This further confirming the structural changes of our dimension of growth.
Inflows in assets under management proved to be solid in the period, thanks to the ability of our network to support clients in the long-term financial planning. Let me now spend a few words on the recruiting, which is confirming the recent trend we discussed in the past quarters. Fineco is emerging more clearly as the perfect bank for professionals looking to grow their own business in a sustainable way. As you can see on slide 14, the strong increase in the interest of financial advisors to join our bank is continuing. In this regard, please note that we have no need to overpay financial advisors with huge upfront fees and the usage of aggressive approach historically taken by the industry.
As a result, in the first quarter of 2022, we have recorded a net increase of 64 personal financial advisors in our network, as we recruited 29 senior and 50 junior, with net sales generated organically by the bank at 88% in the period. Let's now skip to slide 18. As anticipated, at the beginning of the call, we are in the sweet spot to benefit from the new market structure. In this slide, we made some changes to our guidance that are overall positive compared to our last quarter presentation. With regard to our banking revenues, we expect our net financial income in 2022 to be in a range between EUR 300 million and EUR 310 million with the current forward rate curve.
Going forward, we expect our net interest income to significantly benefit from the new interest rates environment, both thanks to the sensitivity and to the volume increase. Overall, banking fees are expected above EUR 50 million in 2022. Going forward, they are expected to keep on growing thanks to the increase of the client base and to the previous repricing actions. On investing, already taking into account the negative market effect of April up to April, we expect for 2022 revenues to increase in the region of mid-teens% with higher management fee margins. At this regard, let me please underline that the last couple of quarters benefited from the acceleration linked to the substitution of Fineco Asset Management funds within the wrap. Therefore, in the next quarter, margins are still expected to grow, but at a slower pace.
We also expect net sales of around EUR 5 billion for both FinecoBank assets under management and for FinecoBank, and for FAM retail classes, and increase of around 100% of financial advisors in our network. Going forward, we confirm the guidance of around EUR 6 billion per year in assets under management net sales, and EUR 6 billion per year in retail net sales by Fineco Asset Management. We also confirm the increase of the bank's management fees margins after tax up to 55 basis points and pre-tax margins up to around 75 basis points by 2024. In this regard, let me please underline that based on the most recent numbers, we expect to reach that level before 2024.
Brokerage revenues are expected to remain strong with a floor in relative terms with respect to volatility and volumes that is definitely higher than in pre-COVID period. Let me remind that this trend has been further confirmed in the first quarter of 2022 with an excellent results very close to the record high registered in the same period of 2021, and much higher compared to the last quarter. Operating costs in 2022 are expected to grow around 5% year-on-year, not including around EUR 7 million of additional costs related to Fineco Asset Management strategic discontinuity to improve the efficiency of the investing value chain.
On costs, let me please underline that the strategic decision to manage almost 100% internally our IT is protecting us from the inflation on IT costs. Thanks to this, we will consider in the coming month the possibility to further accelerate the marketing expenses to take advantage of the strengthening of the structural trends. Let me also add that we expect Fineco Asset Management costs to stabilize going forward. Cost income, 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. This excluding potential higher marketing expenses. Systemic charges for 2022 are expected in a range between EUR 42 million and EUR 44 million, booked within provisions for risk and charges.
Tax rate for 2022, we expect a decrease in a range between -0.5 and -1.1 percentage points, considering the most recent interest rate scenario, and therefore according to the revenues mix. On our capital ratio, we expect the CET1 ratio to remain above the floor of 17% and leverage ratio comfortably in range between 3.5% and 4% currently, with the combination of both a strong acceleration in the growth of the bank and the distributions of generous dividends. As you can see in the slide 52 in the annex of our presentation, the point of attention related to the leverage ratio has been definitely fixed. On dividend per share going forward, we expect it constantly increasing also thanks to the progressive delivery on our strategic discontinuities.
Customer risk was equal to three basis points, thanks to the quality of our lending portfolio that is offered exclusively to our loyal customer base. In 2022, we expect it below 10 basis points. Finally, we expect robust and high quality net sales with a mix mainly skewed towards asset under management and, with a lower component of deposits, thanks to all the new initiatives we are undertaking. Let's now move to slide 19. As you know, in order to take full advantage of our new dimension of growth, we have undertaken a wide set of initiatives to keep the growth of our balance sheet under control.
All this set of new initiatives is already delivering, allowing us to move towards the concept of platform with a strong improvement in our assets under management net sales and with the growth of deposits definitely under control. As a result, we can already now, at the same time, sustain our strong long-term growth, distribute a higher level of dividend per share, and comfortably remaining well above our regulatory requirements. Let's now move to slide 20 to deep dive on Fineco Asset Management. As anticipated during the presentation, Fineco Asset Management is progressively delivering on its strategic discontinuity to take more control of the investing value chain, resulting in higher revenues and margins for the group. As you can see on the top of the slide, the dynamics of Fineco Asset Management net sales are further improving regardless of the macro scenario.
In the first quarter, our Irish company recorded EUR 0.8 billion of net sales in retail classes in a market environment much more complex compared to the same period of 2021. Despite this, its contribution to the group, to the group's net sales more than doubled year-on-year. Fineco Asset Management continued to deliver the, in the internalization of the value chain, with a strong increase in net sales of funds underlying wrappers. As a reminder, this process is linked to the substitution of Fineco Asset Management funds within the building block used for funds of funds or insurance wrappers. This leading to an additional margins contribution for the bank.
Finally, Fineco Asset Management has further enlarged its modern product offer with the recent launch of its investment solution based on passive funds, which will allow the group to have a distinctive positioning as an innovator and to be perfectly prepared to capture a new trend that is already taking place outside Europe. Let me highlight that in the short run, these new investment solutions are useful to target wealthy clients by reducing costs and improving performance. We expect that in the long run, this trend is going to take place in Italy too, progressively involving our whole customer base, as it's already happening, for example, in the U.S.
To conclude, let me highlight that thanks to the full control of the value chain, our Irish company can offer at the same time, both an efficient pricing for clients while retaining a higher margin, higher margins. I'll now leave the floor to Paolo Di Grazia, our Deputy General Manager, for an update on our UK business on slide 24.
Thank you, Alessandro, and good afternoon, everybody. Our offer in the UK is proceeding in the right direction. We are attracting experienced traders, loyal and looking for quality offer with a strong activation rate at 65% on our brokerage offer. Let me remind you that with our best in class price quality ratio offer, we are targeting a quality cluster of clients as we are not focused on hit and run, highly speculative and volatile customers. As you can see from the graph on the left-hand side of the slide, we now have more than 20,000 clients with almost 2,000 clients acquired in the first four months of the year. The trend of our revenues generation is extremely positive.
As you can see from the graph on the right-hand side of the slide, in Q1 2022, we recorded EUR 0.5 million of brokerage revenues, almost doubling year-on-year. On top of this, our cross-selling is working very well, and we are continuing to improve our revenue mix in favor of the over-the-counter and listed products, which are now the lion's share of the growth. As a result, our business is progressively gaining traction and is already profitable at the operating level. On a final note, we are in the process of preparing the setup to launch our offer in Germany by the end of 2022, as we think that our model adjusted based on the features of the German market can be very attractive for local clients also thanks to our unique price-quality ratio.
Thank you for your attention. I'll hand it back to Alessandro.
Thank you, Paolo. Now we are ready to open to your questions.
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 your touchtone 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 Giovanni Razzoli, Deutsche Bank. Please go ahead.
Good afternoon, to everybody. Couple of questions on my side. You have already disclosed your inflow target for the full year 2022. I was wondering how do you think that the significant increase in the market yields can impact your commercial policies? At the end of the day, the average investment margin, because probably there is more room to accelerate on multi-class products or also class one products. If you can elaborate a bit on how these shift in the interest rates environment may impact your commercial policy. The second question, if you can share with us what is your reserve on the EUR 21 billion of financial investments held to collect. The last point interesting, you said that you are recording higher brokerage revenues with lower volumes.
I deduce that you are basically, your clients are basically trading richer products. For you, can you provide us a little bit more visibility on this? Because it seems that you put a lot of emphasis into the sustainability of the brokerage revenues going forward. Thank you.
Thank you for your questions. Let me start by the first one. Historically, what we observed in the past, that the interest rates needed to start on having some meaningful impact on the commercial policy. You need to have three months Euribor close to the region of at least 2% level. That clearly it's still far from being there. In that case, clearly you can expect some the beginning of a possible more interest by clients for example, assets under custody solution, something like that. As we...
As we explained, if tomorrow morning we are going to be in that kind of scenario, this would be absolutely great for us because on one end we are going to make a real big fortune on the net interest income, considering the incredibly sticky and totally uncorrelated base of deposits. At the same time, the impact in any case on the commercial strategy is going to be still minimum. That kind of a situation is an absolutely great situation for us. I would like to remind that the main driver that is driving up the investment margins is related to the continuous acceleration of the control of the value chain.
This is going to be absolutely perfectly in place and completely, totally uncorrelated with the level of interest rates. On the second question, I leave the floor to our CFO for answering. Please, Lorena.
Thank you, Alessandro. Good afternoon to everybody. As you know, 99.9% of our bond portfolio is accounted in held to collect portfolio. In accordance with IFRS 9, held to collect business model is valued at amortized costs without impact on P&L and also on capital. This means that both P&L and reserves are not impacted by the fair value of our portfolio. The reserves are zero.
Regarding the third question, what we mean by higher brokerage revenues with lower volumes is that our clients are progressively emerging as trading more also in a low volatility environment. This is not necessarily driven by richer products, but also in part by this, but mostly by the fact that we have more clients that they are trading, and also particularly very important that the clients, considering the target market we have represented by wealthy and aware clients, are able to trade in every market conditions. Also the continuous improvement and broadening of the platform is offering trading opportunity to clients also when the wind is extremely light.
It's like to have a sailing boat that has become much more performing also in the light breeze.
Thank you.
The next question is from Domenico Santoro with HSBC. Please go ahead.
Hello there. Good afternoon. Thanks for the presentation. Some questions from my side. First of all, on the NII, the guidance that you gave for 2022 implies quite an acceleration of the core NII over the next quarters. I just want to understand what are the assumptions used in order to, you know, get the sense how much bulletproof is this guidance. First of all, have you used the forward curve that you show at page 44 to understand whether this is conditional, of course, to rates going up? And second, what kind of assumptions you have made in terms of bond portfolio rollover in terms of yield? I see that your sensitivity has increased. I just want to understand the assumptions on this side.
When you say we're not expecting any more profits from Treasury, is it for 2022 or is also going forward for the next years? Because so far, your trading line has been quite supportive. Of course, you need to protect now the NII. The second question is on AUM, on investing. I see that you revised your guidance on investing. I mean, the AUM says that you expect for this year, they are quite strong compared to the trend that we have seen so far. My question is, what makes you so confident to accelerate the run rate for the rest of the year? On margins, there was a slight decline in the quarter.
When I look at the gross margin, I wonder this is something that we should expect also for Q2 or FAM will compensate for that. Because when you were commenting the guidance instead, you specified that margin should be up over the next quarters. On brokerages that, first of all, April looks a little bit light, the EUR 14 million. Is there any accounting timing lag to some fees that might probably be booked for the next month? Why, or maybe there is not. When I look at the average fee in the first quarter, the orders were strong, but the average fees were sort of declining quarter-on-quarter.
I'm just wondering whether there is a little bit of competition effect in Italy, given new entrants in the market quite aggressively pushing for these kind of services. Just a clarification on tax rate. The fact that you reduced your guidance on decline of tax rate, is it just due to the fact that you expect now more Italian-based revenues, NII based, or there is anything else that we should take into account? Thank you.
Yes. Let me start from the first questions. This is particularly what we are using is the implied forward rate curve. We are not using any particular internal view, so we are just using the forward rate curve. It is extremely easy to see the progression that we can expect. This is going to be clearly quite massive going through 2023. Regarding the assumptions that we have behind the portfolio rollover is to maintain an average maturity of the portfolio that is in the region of five years. This means that if you have a bond expiring, for example, you have to invest.
There is a large portion which need to be invested on a ten-year basis in order to keep unchanged the average maturity of the portfolio. In terms of composition, we expect that the composition is going to remain diversified, and so we are going in the long run to stay in terms of exposure to the Italian market to stay in a region of 30%, more or less. The remaining is going to be extremely broadly distributed among the other European govvies. As we explained, the profit from treasury management and net interest margins are two kinds of communicating vessels.
As we anticipated that the more the market was moving toward a higher interest rate scenario, and the more you have to expect the profit from treasury management practically disappearing and everything substituted by the growth of net interest income. Clearly, the growth on the net interest income side, but I think that can be very easily calculated, is going to be so strong that clearly the last problem we have is to protect what is not going to be made through the profit from treasury management.
Just to give you an idea, but the financial income, just thanks to the net interest income, through 2023, is going according to the existing scenario, is going to grow at least by more than 40%. That is. Going through 2024, even more. We're talking about really huge numbers. Clearly the problem of the lack of profit from treasury management is completely non-existing. The decline in gross margins in the first quarter in 2022, please, Lorena, if you want to give, but I think that is just related to seasonality, something like that.
I don't know if you want to elaborate more on the point, Lorena.
Yes, it's correct. As you can see, we have a decline of around EUR 5 million in the item cost. This is related to the usual seasonality that is at the beginning of the year due to the higher cost linked to contribution paid for the activity of our financial advisors, FIRR and Enasarco, that are mostly concentrated in the first part of the year because there is a cap. This is the only reason.
On brokerage, as we explained, April has been characterized by an absolutely extraordinary low level of volumes. When we're talking about low level volumes, we're talking about low level volumes in the financial industry. It's not just us. In order to find a similar level of volumes in the market that we experienced in April, you have to go back before 2018. Nevertheless, if we compare the revenues generated, for example, in that period of time when with the similar level of volumes, our revenues has been now much higher. Despite that, April has not been a good month for brokerage. In relative terms, it's been an absolutely excellent month because we.
That this is confirming that the floor is much higher. Absolutely, there is no impact by the new competition we are facing, because it's a competition that is concentrated on really low-value clients, and completely too far away from the target market we have. It's exactly the contrary. The floor is keeping on rising, and April is a perfect confirmation of this. On tax rate, yes, we expect a progressive reduction of the speed of decrease of the tax rate just because we're expecting a massive increase of the revenues generated here in Italy, because as I was explaining, the financial income is better to grow in a big way.
Okay, thank you very much.
Decelerate the decrease of the tax rate.
The next question is from Enrico Bolzoni with JP Morgan. Please go ahead.
Hi, good afternoon. Thanks for the presentation. Just a few questions from my end. One on the fee margin that clearly increased quite a bit. You say that now you expect to achieve the 75 basis points ahead of time. Is it possible that you might actually go beyond the 75 basis points? For example, I think about mix shift, considering that I presume this quarter was pretty negative in terms of mix shift, and despite that, you had a positive increase there. That's the first question. The second question was on the trading profit. That was quite strong. I just wanted to ask you to comment maybe on the drivers. I know you clearly benefit from internalizing trades.
Has there been a substantial amount of trades that was internalized over the quarter, or is there any other driver that we should think of? Another question is on the flows you posted for April in assets under custody. They were actually pretty strong. Do you have any visibility in terms of what clients are doing? Is it because you think there are maybe early sign of repositioning in the market and in a way we could expect then you know, stronger trading numbers maybe in the coming months, considering the strong flows in that you see. Maybe one final question is on your international presence. One is in the UK. I mean, the growth slowed down there a bit.
Have you reconsidered maybe pushing a bit more with marketing or doing something to basically accelerate there? What should we think when we think about Germany? Shall we think something similar to the UK in terms of your ambitions, in terms of targets, customer growth, or you think that maybe because it's a more similar market, you can grow faster than what you've done in the UK so far? Thank you.
Yes. Thank you. Regarding the first question, the answer is yes. The fact that we expect a growing probability to achieve the 75 basis points ahead of time clearly this is paving the way for going beyond the 75 basis point margin. The answer is yes. Trading profit, you are referring to the trading profit related to the brokerage business, I assume.
That's right. Thanks.
Yes. This is clearly the trading profit is a by-product of the volumes on the market. The more, the higher the volumes we are trading, and the higher is the possibility to internalize, so the internalized client service. Because our trading profit is 100% commercially driven, we are matching the clients' orders, and so the higher are the volumes and the activity by clients, and then, the higher tends to be the trading profit. April flows in assets under custody has been extremely strong.
The reason is that the cluster of clients that is interested in assets under custody is represented by the cluster of clients that are mostly driven by what we call the tactical asset allocation of their portfolio. They tends to be extremely reactive to the market moves. These clients tends to be contrarians, so they tends to buy when the market is going down and selling when the market is going up. This exactly what's happening.
We have also a part of the clients that they are clients of financial planners, that they have that they are at the same time interested in strategic asset allocation and tactical asset allocation. The same story. Probably going forward means clearly the higher is the amount of assets under custody we have, and clearly the higher is the base for producing higher commissions on brokerage. This is a matter of fact. These are more or less what we are observing, but it's not different from what has happened also in the past. It's a typical approach by this cluster of clients.
They are trying to take advantage of the large swings that are on the market. Our UK growth, yeah, you're right, is a little bit down, but this is just because we are still in a process of understanding exactly the final setup following the interaction we are having with the local authorities, and we prefer to be a little bit cautious. Before starting to push again more on marketing there, we want to have the final picture completely finalized. The discussion is still underway, and our expectation is to come to the conclusion the next following month.
Germany is clearly an even more straightforward market for us 'cause we have no any roadblocks represented by the fact that the U.K. now is not anymore in the European Union, so everything is going to be very straightforward. Germany is an extremely interesting market because it's a complex and a competitive market, but at the same time, it's characterized by extremely reactive clients. We think that Fineco can be extremely competitive in comparison with what are the prevailing offer there. Definitely probably the opportunity in Germany is, in my opinion, likely to be even bigger than in U.K. I don't know, what do you think, Paolo, on the point?
Well, yes, I totally agree. Germany is a great market for us. Again, we have a great offer in terms of value for money, and I think we can be very successful there.
Thanks.
The next question is from Angeliki Bairaktari with Autonomous Research. Please go ahead.
Good afternoon. Thanks for taking my questions. First of all, I see your updated guidance for AUM net flows at EUR 5 billion this year. If we look at the year-to-date print, including April, and annualize that, this implies around EUR 4 billion in AUM net flows. I get from that you expect an acceleration in AUM net flows in the coming months. Do you think based on sort of the behavior of clients that you have observed in previous market corrections, do you think that clients could step in and invest a bit more in the market, assuming there is a stabilization? What is sort of the underlying scenario of market conditions that you have that underpins that EUR 5 billion AUM net flow target? Second question on banking fees, the guidance is for more than EUR 50 million for this year.
How sustainable is that going into 2023 and beyond? I am in particular thinking that, you know, obviously you repriced your offering traditionally has been one of free current accounts. You repriced the current accounts due to the persistently low negative interest rate environment, but now this is changing, obviously. Is there any chance that you could revert gradually back to offering free current accounts, or you don't foresee that at the moment? Last question on brokerage: If I remember correctly, in the last quarter, you were hoping that brokerage could be flat or even exceed the 2021 level of revenue, of brokerage revenues this year. Is it fair to assume that we should be a bit more cautious now and potentially expect brokerage to be below the 2021 level in 2022?
Thank you.
No, thank you for your question. Let me start with the guidance on assets under management EUR 5 billion. Yes, the assumption behind is based on our past experience. As soon as we have the market stabilizing. The market is stabilizing doesn't mean necessarily market that is starting to go up. Just means that we don't have any additional shock in the market, something that is unexpected. Because starting from the beginning of the year, we had three shocks. The first one is the announcement by the central banks of their change in terms of view on the inflation direction. The second one has been the beginning of the conflict in Ukraine.
The third one has been the renewal of concern on the possible much more aggressive hikes of interest rates that is just recent. Nevertheless, because what we were observing that every time that the market is able to digest the negative news and without there being an additional brand new negative news flows, then we start on picking up again. The assumption is that at the end of the story to have a kind. I'm not saying bright skies in front of us, but then a little bit more stable market in which everything that is negative has been let me say digested and so we can progressively return to the business as usual.
This has been always the history also in the past. This is the reason why we are still remaining with the expectation of EUR 5 billion. This is the rationale. On the banking fees, you are completely right. It is a very good question because now, considering that we are expecting a really massive increase of the financial income, that is going to be really huge. Theoretically, the banking fees, so the charging price on the clients, looks a little bit, is paling in front of the dimension of the financial income, so it's not necessarily any more needed.
At the same time, we think that to have the clients paying a fee with the bank giving back to them in the end when they are becoming good clients is an extremely healthy approach because it's preventing the bank from taking on board extremely low-value clients. We think that we can reroute to move in direction of making a special offer for certain cluster of clients, for example, for the young clients. This for sure. This is what we are doing right now. Going back again to the concept of zero commission on the bank account, we don't think that it's a good idea.
Exactly because the risk is to start again on onboarding a cluster of clients on which we have not a great interest. On the brokerage, yes, you are correct. We guided the market at the beginning of the year with revenues flat or even higher. Again, we think that. When we are giving the guidance, what we are assuming is a kind of a natural scenario. A scenario in which we don't expect anything spectacular, both on the positive, on the negative side. The guidance was being given expecting a normal volatility, not too high, not too low, and the same story for the volumes. We remain on the point.
It's clear that if we are entering a period in which every month is, in terms of volumes on the market, exactly the same we experienced in April, clearly it's difficult that we can achieve higher revenues. For example, it's just in the last few days, for example, brokerage is back again, is roaring back again, and with the volumes and so on. We think that brokerage, if we stay in, let me say, decent market conditions for brokerage, so with a decent level of volatility, decent level of volumes, yes, we think that we have the possibility to get flat or even higher revenues. Also because last year has been characterized by an extremely disappointing second part of the year.
The last year has been an year with in which the first quarter has been absolutely amazing, mostly driven by the all everything happening in U.S. with the GameStop and so on. Then the volatility has kept on collapsing, volumes going down, and so has been a not particularly exciting environment for brokerage last year. This is the reason why we think that in the case we have an decent conditions with a normal level of volatility, normal volumes, yes, we still we think that we are still on track for getting consistently so flat or even higher revenues.
The next question is from Filippo Prini with Kepler Cheuvreux. Please go ahead.
Hello. Hello. Good afternoon. Thank you. Two brief questions for you. The first one is on your guidance on cost, excluding the expansion abroad and some impact, your guidance of +3%. You mentioned that you are pretty immune from IT inflation. Just wondering if you could be immune also from some salary inflation, so for a part of labor cost in the next year. The second one is on lending. I see on the line of lending that basically you kept excluding mortgages, the expected yield unchanged. Just wondering if you do not expect into guidance of the higher interest rate any contribution going forward also from the lending portfolio. Thank you.
On guidance on cost, we don't expect a significant wage inflation. For two main reason.
One, because historically, the Italian labor market is much more rigid than in other regions in Europe. We think that in any case, the wage inflation in Italy is going to be less relevant than in other parts of Europe. Second, Fineco is a factory, so we are not an investment bank. We are not an asset manager. Clearly, by definition, the level of exposure to the wage inflation in a company that is a factory clearly is much lower. This is the reason why we are in our projections. We are embedding some salary drift, but it's not going to be anything spectacular.
Lending, we want to remind that lending for us is an ancillary business. We are mostly the only real kind of lending that for us is really important is the Lombard, because it's strictly related to the investing business. On mortgages, we have not such a great appetite because we are observing that the banking system is keeping on using mortgages as a marketing tool, and so providing solutions that they are not in line with the prevailing market conditions.
From a mathematical point of view, the reason why we expect yield unchanged. I'm leaving the floor to the CFO on that point, that she is much more familiar with these numbers than I am.
To be honest, we have increased the expected yield because in the previous presentation, we have 45-55 basis points, and now 60-70 basis points. We have increased the average yield.
Yes, thank you. It was excluding mortgages, just focusing on personal loans and Lombard.
Yes.
The Lombard is, we have to wait physically for the three-month Euribor being back positive. As soon as the three-month Euribor is not anymore negative and is positive, we are going to start on enjoying an increase also on the margins on the Lombard.
Okay.
On personal loans is a small, extremely profitable business. We don't see any reason for increasing the rates we are charging to clients.
Okay.
Because in the personal loans, there is the classic case of the adverse selection. The higher the rates we are charging to your clients and the worse is the quality of clients you are attracting usually.
As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. Mr. Foti, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.
Thank you for attending our conference. As usual, for everybody that is in the need of deep diving in our numbers and guidance, please, we are available for any kind of follow-up on the presentation. Thank you again for attending the conference.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.