Earnings Call: Q3 2022

Nov 8, 2022

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the FinecoBank for third 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 third quarter results conference call. Before going into the details of our presentation, let me please remind you that the big change in the structure of the market over the recent month is further enlarging our growth opportunities as a platform. As you know, our new dimension of growth is underpinned by the recent acceleration of the structural trends that are reshaping the society. This has been further strengthened by the increase in the interest rate scenario since the beginning of the year. The main outcome is that Fineco is becoming more and more a fast-growing and capital-light business model with a structurally higher profitability and a structurally higher room to dispose of it. This will allow us to distribute a higher level of dividends and, at the same time, to meet the position to invest more for our growth. Let's now move to slide five. Going into the details of our results, adjusted net profit in the first nine months of the year was equal to EUR 303 million, up by 17.7% year-on-year, thanks to our diversified business model, able to deliver strong results in every market condition. Adjusted revenues at EUR 684 million, increasing by 14.6% year-on-year, and mainly supported by investing, thanks to the volume effect and the higher control of the value chain by Fineco Asset Management, and by the net financial income, which is underpinned by our clients' very sticky and valuable transactional liquidity. Operating costs were well under control at EUR 204 million, increasing by 4.1% year-on-year by excluding costs related to the growth of the business and confirming operating leverage as a key strength of the bank. Adjusted cost income ratio was equal to 29.8%. On cost, let me please remind you that, the strategic decision to manage 100% internally our IT is protecting us from, the inflation on IT cost. Our capital position confirmed to be strong and safe with a Common Equity Tier 1 ratio at 20.39%. Our commercial activity continues to be extremely solid, also in October, with the net sales at around EUR 700 million and a strong mix with around EUR 100 million in assets under management and around EUR 300 million in assets under custody. Estimated brokerage revenues in October at around EUR 14 million, around 20% higher compared to the average October revenues in the period 2016-2019. These results was achieved despite market volumes extremely low in the month and close to the historical lows. This confirming once again that the floor of the business is now definitely higher. Let's now move to slide 6. As announced, we reached very strong results also in the first nine months of the year with adjusted net profit at EUR 303 million, +17.7% year-on-year on a like-for-like basis, despite the very challenging macro scenario. The quarterly decrease is entirely explained by the systemic charges booked in the third quarter of the year. Revenues at EUR 684 million, up by 14.6% 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 robustness of our net financial income. Operating costs at EUR 204 million, well under control and increasing by 4.1% year-on-year, excluding costs strictly related to the growth of the business. Let's now move to slide seven and start to analyze more in details the dynamics of our results. Net financial income in the first nine months of the year at EUR 261 million, increasing by 20% year-on-year, with net interest income at EUR 211 million and profit from treasury management at EUR 49 million. Let me highlight that, net interest income is progressively increasing, thanks to the strong gearing to interest rates we have, driven by our clients' valuable and sticky transactional liquidity. We are continuing to accelerate the growth of our non-financial income. Mr. Foti, your line is. Sorry for the interruption. We are continuing to accelerate the growth of our non-financial income, which in the first nine months reached EUR 423 million, up by 11% year-on-year, mainly thanks to the positive contribution of investing and banking. Now jumping to slide 23, we will deep dive on the performance of the brokerage business. Overall, brokerage registered an excellent first nine months at EUR 149 million, despite the persistent and negative market context in terms of volumes and bear market, confirming a structurally higher floor compared to pre-pandemic levels regardless of market conditions. As you can see in the chart on top of the slide, in the third quarter of the year, brokerage revenues reached EUR 42 million, resulting in a monthly average 24% higher compared to the monthly average revenues in the period 2017-2019. Let me remind you that the growth of the brokerage business is driven by the contribution of three structural components. First, the continuous process of deep reshape of our brokerage business. Second, the widening of our client base using the platform, with active investors growing significantly in absolute terms and standing around 35% above the average level of 2018/2019. This trend has been confirmed also in the most recent quarters, despite the low volumes on the market, and our target market is focused on wealthy and financially aware clients able to trade in every environment. Third, we are continuously increasing our retail market share. Let's now move on slide nine for a focus on investing. Fineco is positioned 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 Asset Management is delivering on its discontinuity and taking more control of the value chain. As a result, investing revenues were equal to EUR 228 million in the first nine months of 2022, increasing by almost 18% year-on-year, with management fees increasing by 18.5% year-on-year. Let me highlight that the strong contribution by Fineco Asset Management has been able to sustain margins and revenues. Management fees margins after tax reached 53.3 basis points in the quarter, and pre-tax reached 71.6 basis points, increasing despite the strong negative market performance in September, which is expected to have an impact on the fourth quarter. In the first nine months, management fees margins after tax increased by 52.7 basis points. Let's now move on to slide 10 for a focus on our cost. This slide confirms once again efficiency to be part of our DNA and core in our bank, representing a clear and unique competitive advantage. This quarter was characterized as well by cost directly related to the strong acceleration of our growth dynamics in the new normal year. Operating costs in the first nine months of the year at EUR 204 million, growing by 4% year-on-year, excluding costs related to the growth of the business. Mainly, additionally, EUR 5 million cost for Fineco Asset Management that are incurred with acceleration to further expand its business and have a higher control of the value chain. Additional EUR 3.2 million in marketing costs. Staff expenses at EUR 86.5 million in the period, increasing by 4.8% on a yearly basis, net of the cost related to the expansion of the business of Fineco Asset Management. Finally, non-HR costs at EUR 117 million, growing by 3.6% year-on-year, net of the above-mentioned costs related to the growth of the business. Let's now move on slide twelve for a focus on our capital ratio. FinecoBank confirms once again a rock-solid capital position on the back of a safe balance sheet. Common Equity Tier 1 ratio at 20.39%. Leverage ratio at 3.88%. Risk-weighted assets at EUR 4,764 million. Total capital ratio at 31.11% as of September 2022. Let's now move on to slide 19, on guidance. As anticipated at the beginning of the call, we are in the sweet spot to benefit from the new market structure. Let me add that despite the current volatile environment, the growth of the revenues expected for 2022 has strongly improved compared to the last quarter presentation with a different mix, thanks to the quality of our well-diversified business model. With regards to our banking revenues, we expect net financial income in 2022 to be around EUR 380 million with the current forward rate curve. In 2023, we expect the net financial income to increase by at least 70% compared to the upward revised 2022 expectations and already considering an early repayment of TLTRO in November 2022. Going forward, we expect the net interest income to keep on benefiting from the new interest rates environment, both thanks to the sensitivity and to the volume increase. Finally, thanks to this new environment, we will take the opportunity to continue the diversification of our bond portfolio by reinvesting in European govs. Overall, banking fees are expected above EUR 50 million in 2022. In 2023, they are expected to keep on growing, thanks to the increase of the client base. On investing, taking into consideration the negative market effect up to October, we confirm 2022 revenues to increase by around 10% year-on-year, with higher management fee margins. Overall, bank's assets under management net sales are expected at around EUR 3 billion, while for Fineco Asset Management, we expect retail net sales around EUR 2.5 billion. Our financial planner network is expected to increase by around 130 financial advisors. Going forward, we expect around EUR 5 billion net sales per year in the overall bank's assets under management. For our Irish company, we expect retail net sales at around EUR 4.5 billion per year. Finally, despite the challenging context this year, we confirm the increase of our management fees margins after tax up to around 55 basis points by 2024, thanks to the Fineco Asset Management operational efficiency. That is more than offsetting the negative market performance. Pre-tax margins are expected to increase slightly less versus the previous expectations at around 73 basis points by 2024 due to the negative market effect. Brokerage revenues are expected to remain strong with the floor in relative terms, with respect to the market context that is definitely higher than in the pre-COVID period. Let me remind that this trend has been further confirmed thus far in 2022, despite the worse market conditions in terms of volumes. Operating costs in 2022 are expected to grow at around 5% year-on-year, not including around EUR 7 million of additional costs related to Fineco strategic discontinuity and additional marketing costs. On this, in the coming month, we will invest a few million to take advantage of the strengthening of the structural trends. Finally, let me please underline that the strategic decision to manage our IT 100% internally is protecting us from the inflation on IT cost. That going forward, we expect Fineco Asset Management cost to stabilize. Cost income, we confirm our guidance of a continuously declining cost income in the long run, thanks to the scalability of our platform and to the strong operating gearing we have. Systemic charges for 2022 are expected in a range of EUR 45-47 million. On 2022 tax rate, we expect a slight decrease by minus 4.5 percentage points, considering the most recent interest rate scenario and therefore according to the revenues mix. On capital ratio, we expect the CT1 ratio to remain confidently above the floor of 17% and leverage ratio very well under control in a range between 3.75% and 4%. Currently, with a combination of both a strong acceleration in the growth of the bank and the distribution of generous dividends. On dividend per share going forward, we expect it constantly increasing also thanks to the progressive delivery on our strategic initiatives. Cost of risk was equal to 2 basis points, thanks to the quality of our lending portfolio that is offered exclusively to our loyal customer base. In 2022, we expect a hit in a range between 3-8 basis points. Finally, we expect a robust and high-quality net sales with a mix mainly skewed towards assets under management and with a lower component of deposits, thanks to a host of new initiatives we are undertaking. To sum up, the outlook for the bank has strongly improved compared to the previous guidance we gave in the first half of 2022. Hence, the higher expectation of net financial income driven by the current forward rate curve is far more than offsetting the slight decrease in the expectation related to the growth of the investing. More in detail, the uplift on net financial income is expected at around EUR 50 million in 2022 and by at least EUR 200 million in 2023. On the other end, on investing revenues, we confirm our previous guidance for 2022, and we slightly decrease our expectation for 2023 growth by only EUR 10 million-EUR 15 million. Let's now move to slide 20. As you know, Fineco Asset Management is progressively taking more control of the investing value chain, resulting in higher revenues and margins for the group. The contribution of Fineco Asset Management to the group assets under management net sales is further improving regardless of the macro scenarios, moving from 55% in the first nine months of 2021 to 75% in the same period of 2022. In the first nine months of the year, our Irish company recorded EUR 1.9 billion net sales in retail classes in a market environment much more complex compared to the same period of 2021. Fineco Asset Management continued to deliver in the internalization of the value chain by collecting net sales of funds and the running of wrappers. As a reminder, this process is linked to the substitution of Fineco Asset Management funds within the building blocks used for fund of funds or insurance wrappers, this leading to an additional margin contribution for the bank. 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 efficient pricing for clients while retaining higher margins. I now leave the floor to Paolo Di Grazia, our Deputy General Manager, for an update on our international business on slide 24. Thank you, Alessandro. On slide 24, we are presenting the strategy for the development of our business abroad, where we leverage on simplified and digital-only offer. As you know, we are getting ready to the deployment of our brand-new platform for investments that we have developed internally, which will be highly scalable and multi-language. This will allow us for a smoother and more straightforward startup process for entering new countries, as it will only imply business and marketing effort to identify the right set of products and services. Moving onto the update on our UK business, let me first remind you that we are in talks with the local authorities on the post-Brexit setup. For this reason, we have reduced our marketing activity over the last few months. Despite this, our business is gaining traction thanks to the word of mouth, and we're improving our revenues generation also. As we have already anticipated, the next country we are planning to approach is Germany in 2023, leveraging on our new platform for investments. Our plan are to develop the offering two steps. First, brokerage and multicurrency. Second, investing with no network of financial advisors. The offer will tailor German market customers' behaviors, leveraging on CFDs, certificates, and ETFs, while the brand positioning will look to acquire sticky, high value, and financially aware clients looking for a fairly priced quality service, as in our DNA. Finally, in the next few years, we plan to approach different countries across Europe, depending on the opportunities that may arise. Thank you for the attention. Please, Alessandro. Thank you for your time, and now we can open the call to questions. Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone with a question may press star and one at this time. The first question is from Giovanni Razzoli of Deutsche Bank. Please go ahead. Good afternoon to everybody. A couple of qualifications on my side. If I go back to the slide of the outlook, if you can please clarify, because the line was not very good, what you expect in terms of investing revenues for 2023. You have mentioned EUR 10 billion-EUR 15 billion of lower investing revenues for 2023. Is my understanding correct? I also missed what instead you expect in terms of improvement in NII. If you can please confirm that. Related to that, I've seen that you have marginally revised downward the target for the pre-tax fee margin in 2024 from 75 to 73 basis points in 2024. I would like why you have kept the net margin stable. I was wondering whether this is due to the different mix in terms of contribution from the different factories. Probably there is something relating to higher contribution that you expect now from Ireland. If you can please clarify this. Another quantification on 2023 for net financial income. Is that correct to assume that you don't expect any major contribution from trading from treasury management for 2023? The last question, again, on net financial income, can you share with us what would be the target in 2022 and 2023, assuming the spot curve rather than the forward curve. Thank you very much. Let me start. First of all, we are not saying that we expect any decrease on investing revenues by EUR 10-15 million, going through 2023, but because we expect the investing revenues keeping on growing. What we say that, with respect to what we were expecting in terms of growth, there has been, with respect to the previous guidance, a reduction between EUR 10-15 million. So it's EUR 10-15 million of less growth, but not a decline, comparing in comparison to 2022. I've been clear enough on this point or not, because probably our communication is not clear. No. Sorry. You were clear in the conference call, but I am representing my question, so I got it correctly. It's EUR 10-15 million of lower growth compared with your previous estimate. You are clear. Yes. Yes. Yes. about the NII then, if you can please repeat what you said. If you can, too. On NII, what we said was we expect and respect the guidance we gave in the first half. We expect an increase of additional EUR 200 million considering the expected increase of rates. This is what we are expecting by 2023. Regarding the marginal reduction on the downwards of the pre-tax margins level, this is mostly related to the market effect, the negative market effect. At the same time, we are reconfirming the 55 basis points rise after tax because the positive impact by Fineco Asset Management is completely offsetting the negative impact generated by the market effect. It's clear that without that negative market effect, probably you could expect to have an after-tax margin even higher than the 55 basis points. This is the reason why we have an after-tax margin that is a pre-tax margin that is modestly lower than the previous guidance and an after-tax margin that is remaining pretty stable. Yes, we confirm that we don't expect any significant profits from treasury management in 2023. Practically almost the entire dimension of the net financial income is going to be represented by net interest income. To give you another net financial income for 2022 and 2023, assuming the spot curve, we have to return to you with the numbers because we are not in front of us. We think that using the current spot curve, considering that this curve is, in any case, just for the moment, is behind what is expected to be done, for example, by central banks and so on. It doesn't make a lot of sense to make that kind of calculation. In any case, my colleagues are going to return to you with a precise calculation of that number. Thank you. The next question is from Enrico Bolzoni of J.P. Morgan. Please go ahead. Hi, good morning. Thank you for taking my questions. Just a clarification on the margin on the investment business, net versus gross of taxes. The fact that the net of taxes remained flat despite the gross came down a bit is just to the fact that FAM is becoming increasingly a larger proportion of the AUM, and as such, you benefit from the lower tax rate. Just clarifying that. Related to that, another question. I mean, clearly you have been impacted, just like other asset managers by the negative markets year to date. I was just wondering, if it wasn't for the negative market impact year to date, is it fair to assume that your margin could have actually go above 75 basis point? Because it seems to me that you managed to keep it pretty high despite the negative mark to market, and only now you brought them down a bit. I'm just curious to understand, you know, over the medium to long term, what should we expect in terms of ongoing margins for the business? I have another question on advisor productivity. You gave some color clearly that you're recruiting is on track. You also have a slide where you say you have a number of new initiatives that in theory will improve, you know, the advisor, the customer experience, but also the way advisor can run their business. I was just wondering, do you have any idea in terms of what do you expect in terms of advisor productivity? Can we put a number to that? By how much you think the productivity of your advisor could improve, as a result of these new initiatives? The final question on the brokerage-only account, can you just remind us, in terms of timing, so when should we expect it to be live? Is it gonna be this year? Is it gonna be next year? Have you done any study on what is the addressable market, so how many customer you think there are, for example, in Italy that potentially can join your platform once it's launched? Thank you. Let me start by the first question. Yes, the answer is yes. The reason of the resilience of the net versus gross is thanks to the positive impact of our asset management. Going directly to the, also answering to the second questions, the answer is yes. If it was not for negative margins, the net margins could go above 75 basis points as well. Financial planners productivity new initiatives to improve the customer experience. Just to give you an idea of the journey of increasing the financial planners productivity is just at the beginning. The bank has a little bit more than 1.4 million clients, of which we can say that probably more than 800,000 that can be related to financial planners. The number of clients we can say that they are really actively managed by financial planners are probably in the region of 350,000-400,000 clients, and this because financial planners clearly tends to be concentrated on the clients that for them are more interesting in terms of dimension of clients and also easiness to deal with them. The way forward for filling the gap is to put in place initiatives, technology and so on, in order to help financial planners in managing proactively a larger number of clients. As you can see by the numbers, the room for increasing the productivity of financial planners is still enormous, and we remain absolutely very positive in this direction. Brokerage-only account, I'm leaving the floor to Paolo. If you want to give a little bit more color on when we think to launch the brokerage-only account, and what we expect in terms of addressable market and so on. Please, Paolo. Yes. Yes. Basically, we are testing the new brokerage account. We plan to deliver the new setting by the first quarter of next year. The addressable market in Italy, we think is for this kind of business 100,000-150,000 clients possible target to acquire. Of course, we are aiming for a portion of this amount. The target is quite different from the full-fledged account. We are targeting more smaller clients, basically younger clients. Still, yes, we think this is the addressable market. Thank you. Actually, sorry, a follow-up question I forgot to ask. Can you just remind us, this is on the, on the beta on deposits, so do you still plan not to pay, remunerate anything on deposit given the current rate evolution? At what level of rates would you consider introducing a client remuneration? No, we have not changed anything in the plan. The largest part of our liquidity is transactional liquidity, and so we are not planning to give any kind of remuneration there. We, on the other side, we have our platform that is offering other banks term deposits on which clients they can switch in real time from their current account there. This is going to be used in order to fulfill the expectations by clients that they are looking for in a higher remuneration. Again, the reason behind the very low beta of our deposits to rates is related to the business model of the bank. That is, again, many years that the bank is concentrated in taking on board clients just thanks to the quality of services and not using rates or discounts and so on for taking them on board. This strategy clearly is paying off right now that we have rates returning to the normal year. Yes, we are not planning to introduce any remuneration on the current account of clients. Thank you. The next question is from Domenico Santoro of HSBC. Please go ahead. Hi, good afternoon. Thanks for the presentation. I think we need to come back a little bit on your guidance on the investing fees to clarify the point. I understand that we will land at the same point in terms of margin in 2024, because the tax rate basically will be lower. In this sense, it will be useful to have also a guidance on tax rate for the next year, for 2023. What is not clear to me is the direction of margins in the short term. Because if I calculate the Q4 level of investing fees implied in your guidance that is more or less flattish vis-à-vis Q3 when you usually have some positive seasonality. I would like to understand a little bit the direction on margins also in the short term. It would be also very useful to have a precise guidance on investing fees for 2023, because you said EUR 200 million more of NII, but we had the previous number on the NII. Now you say EUR 1,050 million less in terms of investing fees, but we don't have basically the guidance on investing fees for next year. It would be very useful in order to understand and clarify the point. The second question is why you'd upgrade the medium long term target in terms of net inflows by EUR 1 billion. Presumably this is due to rates or for different reasons. The third question is, Ted, on dividend. First of all, what you have accrued so far in the nine months for 2022. A more general comment for 2023, because your profitability will increase significantly next year just because you're gonna grab, you know, the extra margin in terms of interest rates. Given that your leverage ratio you say is fine and it doesn't need to improve, I know that you always say that Fineco is not a dividend story. I just wonder whether next year, given the more that is coming from NII, you can be a little bit more generous in terms of payout. Thank you very much. Let me start on the guidance on investing fees. You're right that usually there is a positive seasonality going through the fourth quarter, but this is right when you are in a bull market and clearly we are not there. As we explained, the negative impact caused by the correction of September is going to be charged particularly on the fourth quarter. This is the reason why you are correct that we expect a relatively flat line on the fourth quarter. On the precise guidance on investing, because we probably have been a little bit confusing in the way we presented the guidance. When we are saying that we expect a 10-15 million EUR less in respect to the last guidance we gave in the first half. Lorena, in the first half, the guidance on investment growth exactly. If you can help me. Lorena, are you there? Ms. Pelliciari, your line is open. No, probably Lorena is not there, so, sorry. In the first half, we gave a guidance on investments growing that was expected to grow, probably between 10%-15%, something like that. Gianluca and Franco, can you give me assistance in reminding the guidance of the first half? The first half of 2022, yes, it was 10%. Practically, when we are saying 10-15 million EUR less with respect to the previous guidance that was expecting to have EUR 4 billion by the year-end in terms of assets under management, and EUR 6 billion recurring. Now we change the indication, we expect EUR 3 billion by the year-end and EUR 5 billion. This means that the expected growth is going to be there in any case, so we are expecting and definitely a growing investing business. But with a reduction with respect to the. Practically the message we can send, and probably we have been a little bit confusing. The message is the combination of EUR 3 billion instead of EUR 4 billion by the year-end, and EUR 5 billion recurring instead of EUR 6 billion. If we put everything together, the results is 10. This is worth 10, between EUR 10 million and EUR 15 million less. If you consider the dynamics on the financial income, the increase is with respect to the guidance on the first half is to at least EUR 200 million more. The message that we want to give is that, considering that we read some comments saying that the positive uplift of financial income is going to be offset by the negative, by the reduction of guidance on investing. There is an absolute disproportion, because the expected growth on financial income is in the region of EUR hundreds of millions. The lower growth on investing is in the region between EUR 10 million and EUR 15 million. It is a completely different magnitude. I don't know, Domenico, if I've been able to clarify a little bit this concept. Okay. I will follow up with Franca later. I want to understand a little bit the direction of margins in the short term, in Q3 and maybe in 2023. Is the direction still positive, or you expect basically a sort of a deceleration at this point? We expect a deceleration in terms of growth. Clearly the path is in the direction of a continuous increase, but is consistent with the guidance we are giving. Because it's clear that there is a component that we cannot manage, that is the market effect. Because the main reason behind the slowdown in the path of growth of the margins on investing is mostly related to the market effects. Because for the remaining part in terms of mix, the effectiveness of Fineco Asset Management, nothing has changed. The trend is still in the upward direction, but clearly the progression is slowing down, but this is mostly related to the market effect. Yep. Alessandro, I don't know if you hear me now. Yes. Okay. No, but nobody, well, I asked for it to Domenico, so thank you, Lorena. Okay. Thank you, thank you. The second question is why the downgrade of the medium long-term target. We prefer to keep a cautious approach because clearly there is underway a structural change in the market with higher rates and so on. We remain absolutely very positive, so we are fully convinced that as soon as we have a little bit more visibility on the market, the path is going to be resumed in the right direction. We are preparing a brand new generation of solutions that has to be coherent with the new context we are going through. Clearly considering the absolutely horrible year that we are experiencing, we prefer to be more cautious in the guidance. There aren't any specific reasons for doing that. The only reason is because we are going through an extremely complex scenario, and so we prefer to keep a more prudent guidance there, but not because we have any specific concern on the direction of the assets under management business. On dividends, what we had accrued is mostly clearly for regulatory reason. It is perfectly current with the latest payout we had. It's more or less in the region of 70%. We are remaining on the idea that Fineco is not the kind of company that has to give a specific timing on payout because this Fineco is a growing company. It's clear that the dividend per share is expected to grow quite considerably going through 2023 because the profitability of the bank is going to jump in a big way and as well. There is no reason to introduce any significant change in what we are doing in terms of dividend payments. Okay. Thank you for the answer and the patience. Thank you very much. The next question is from Filippo Prini of Kepler. Please go ahead. Good afternoon. Thank you for your time. Some clarification, if you may. The first one, if you can add some comment on the decline of risk-weighted assets that you've seen at the end of September compared to end of June. Second clarification is on your latest listing of ETFs, if the offering of ETFs, if you envisage any impact, if any, on your margins on investment products. The third one is on your loans at floating rate. Do you see with high rates any concern on the ability of your clients to meet this payment? If you can remember which is the collateral guarantee of these loans. Last one is if you can share with us a ballpark figure on the volumes that you've been able to generate in selling third-party time deposit. Thank you. On the decline of risk-weighted assets, I leave the floor to Lorena, please, if you are there, can you- Yeah, I am here. No, the, I had a technical problem before. Yeah. The, the Decrease of risk-weighted asset is mainly driven by the decrease of unsecured lending, because we closed 2 position with U.K. counterparties. As you know, U.K. counterparties after Brexit are weighted at 100%. Our job was in these last months to close as soon as possible the position that we had with U.K. counterparties, and this is one of these activity. Okay. Thank you. That reduce risk-weighted assets. Yes. On ETF offer, at the moment Fineco is, as you are familiar, a platform that is offering right now quite a wide range of ETFs on the platforms. This is a growing activity by our clients. The launch of ETFs is giving to us the opportunity to take part to this growing trend. We think that this is an opportunity in terms of additional revenues. It's not a threat. Because in any case, our clients have thousands of ETFs available on the platform they can buy and sell, but this is the real strength of Fineco that is absolutely one-stop solution for clients. introducing our own ETFs, clearly we had the possibility to take a piece of this fast-growing trend. We had the opportunity to have building blocks that we can use in our advisory solutions. Definitely ETFs, the launch of our ETFs is going to be revenue accretive for us, and it is not a problem. The collateral guarantee of the Lombard loans, now, first of all, the clients that they are using the Lombards are the most valuable clients. The approach we are using clearly is we are measuring and evaluating the credit value of our clients. We are not just giving the Lombard related to what they are giving to us in terms of guarantee. We are evaluating the overall position of client. There are clients that are absolutely in an excellent position, so we don't. Also, the risk management process we have in place is extremely strict. We don't have any issue related to the rising of rates and declining market. Volumes on selling of third-party term deposits, this is not big, absolutely, despite the fact that with one single click a client can transfer their liquidity there. At the moment, I don't know, Paolo, if you have the most updated numbers on the platform. EUR 150 million. Yes. This is 150. Very, very small. This, again, we are not surprised considering that, the most part of our liquidity is transactional liquidity. It's not liquidity that is chasing rates. Thank you for the answer. The next question is from Elena Perini of Intesa Sanpaolo. Please go ahead. Yes. Good afternoon. I would like to have some clarifications on your net financial income guidance. Because you mentioned EUR 380 million for the current year. So assuming no more treasury profits, then can we assume a net interest income around EUR 120 million in the fourth quarter? This is what I can argue, so I was wondering if you can confirm that. Then for the following year, so for 2023, you were mentioning EUR 200 million more in terms of net financial income. also with reference to it, if we do not assume any profits on treasury management for next year, then we would have approximately EUR 580 million in terms of net interest income. I'm a bit confused about distinction between net interest income and net financial income, especially for the following year. If you can Yeah. Give me some clarifications, thank you very much. No, thank you, Elena. I apologize again for having given such a misleading indication, because I understand that we try to give to be more precise, the most precise possible, and we made confusion. Practically, we expect EUR 380 million of financial income by the year end. Lorena, what does it mean in terms of fourth quarter? Just in order to- One hun- Sorry. EUR 120 million is fine. Yes. You are, on this, you are perfectly aligned. The guidance we are giving is that we expect a rise in the financial income in 2023 by at least 70%. If you take EUR 380 million and you increase EUR 380 million by 70%. Again, sorry Lorena, if I'm a little bit continuously. We are EUR 646 million. Yes. 646. If our guidance is right, we expect 600 and, excuse me, Lorena. 46, EUR 50 million, EUR 650 million. Yes. EUR 646 million of net interest income without any significant contribution by the treasury management. I don't know, Elena, this is clear. We are being a little bit more little bit less confusing now. No, no. Well, it's very clear. Thank you very much. 2022, EUR 380 million. 2023, if the market is right, is more than EUR 640 million of financial income. Okay. Thank you. The next question is from Andrea Vercellone of Exane BNP Paribas. Please go ahead. Good afternoon. 4 questions. The first one is on your bond portfolio. You mentioned earlier on in the call that you were thinking of further diversifying it. At the moment, including the UniCredit's bond, 41% of it is in Italy. Can you just elaborate a little bit as to what you have in mind for future years in terms of what does diversify mean? Second question is on your mortgage portfolio. Can you tell us what percentage is floating? Third is on your Lombard loans. Is there any pressure on spreads there, as rates move higher or you will continue to price, as you said, on the basis of, well, the riskiness of the customer, the credit risk of the customer, and therefore they would just have to pay a higher rate, if they want that loan? Finally, on financial advisors remuneration, you changed it, I don't remember when, I think last year, to only remunerate them on the basis of assets under management, essentially. I'm sure it's much more complicated than that but essentially ignoring deposits and assets under custody. Given that the rates environment has changed and deposits are actually quite profitable for you, is there any thought on changing this and remunerate back also for deposit gathering or not thought at all? Thank you. Thank you for the question. On the bond portfolio, practically, we are going to stop any buying of Italian and Spanish bonds, but not because we have any specific concerns on Italy and Spain, but just because we want to. The higher level of yields is giving an absolutely great opportunity for accelerating furthermore the diversification of our balance sheet. We think that again is not driven by any concern because there is no reason for having that. It is because we think that the more the balance sheet is diversified and the better it is in terms, for our shareholders. We are going to keep moving there, keeping on buying sovereigns, national agencies and other core European bonds. In the guidance we are giving to the markets on the financial income, we are considering exactly these kind of actions, not buying Italian and Spanish bonds and keeping on buying core European governments. On the mortgage portfolio, and again, I'm asking my colleagues to give me assistance, which is the percentage that is floating versus fixed. We have a percentage that is floating, that is in the region of 15%, but the remaining part that is at fixed rate is hedged. It's transformed through interest rate swap into variable. Yes. Lorena, but the question was in order to understand the possible risk of clients, because if a client has a fixed-rate mortgage, clearly is not exposed to rising rates. I think that Andrea, this is the rationale behind the question, so I'm assuming. The floating is 15. It's both sides to understand the risk. Yeah. also to understand how much more money you will make, as Euribor moves higher. You're saying that- Yes, but. For you, Fineco, including swaps, the entire portfolio or almost the entire portfolio is variable? Yeah. More or less is variable. Yes. hedge around 100% of fixed rate. Okay. Yes. On the client side, the largest part is fixed, and just 15% is floating. On the bank side, the largest part is floating. Yes. On Lombard loans, any pressure on spread? No, also because our spreads are very low. We are characterized by charging very low spreads. We don't see any kind of pressure there. We don't plan to change the advisors remuneration for a very simple reason, because strategically wise, our priority is to move as much as we can, clients in direction of assets under management solutions. We have not changed our mind. Also considering the much higher level of rates. We don't need to do that because in any case, liquidity is keeping on flowing, because thanks to the usage by clients of the platform. The financial planners, we want to have financial planners remaining concentrated in doing one single absolutely very important job, that is to move as much as they can, clients in direction of assets under management. Thank you. The next question is from Luigi De Bellis of Equita. Please go ahead. Yes, good afternoon. Three quick questions from me. The first one on the net financial income guidance for 2023. Can you elaborate on the volume growth on bond portfolio, if there is some changes on the mix between fixed and variable going forward, and the lending growth implied in your 2023 guidance compared to the nine months 2022 level. The second question on the net interest guidance. Implicitly, you expect a significant acceleration in 2023 from the trend of the last two months of 2022. You mentioned it, if I'm right, a new generation of solution to be launched. Can you elaborate on this, how product mix of assets under management products is evolving? The last question on the brokerage. Can you elaborate on the competition on brokerage, if the situation is stable or not compared to the second quarter? Thank you. Yes. On net financial income, I'm not sure that I got correctly your question. When you're referring volume growth of bond portfolio. We expected to have an increase of our base of deposits, going forward on a run rate in the region of a couple of billions EUR per year. Does that good? This is mostly, again, driven by the transactional liquidity. For this reason, considering that we don't expect any significant change in terms of evolution of our lending business. Lorena, what we can think to have in terms of increase of the balance, so the growth of the bond portfolio. Uh, um- Reinvestment and so on. Net of lending starting from EUR 2 billion of deposit. Considering the increase of lending, we could estimate EUR 1.5 million or EUR 1.6 million. Yes. In terms of mix. Of additional loans. Fixed and variable- Variable, we are around 50%. Yeah, we don't expect any significant change by- Yeah. by that. The 2023 guidance increased, but you are referring to the assets under management? Because the guidance has been- No, I mentioned it, the net interest guidance. Implicitly, the 2023 implying an acceleration compared to the last two months of 2022. Yes. I am wondering the reason, and you mentioned a new generation of solutions to be launched. No, the rationale behind, because as we explained several times to the market, we considering that we are continuously monitoring the clients' behaviors and so on. The only what is keeping clients cautious and in a wait and see mood is the lack of visibility. As soon as we have this continuous, relentless, and negative news flows that is stopping, we expect progressively the returning to a more normal pattern. At the same time also, we are preparing a new generation of products that they are more skewed in direction of rates and fixed income because as a matter of fact that there is a growing appetite by clients for rates and fixed income. We are preparing. Probably we are going to be ready with the first wave of new generation of products by probably the second half of November. Fineco Asset Management is going to launch the beginning of this new generation of products. In terms of product mix, we expect then is still a growing component represented by investing solutions, so in which we are providing to the clients a strategy. This is good news because this is 100% represented by Fineco Asset Management solutions. On the brokerage competition, the main change we observed that clearly with a much more complex market now the competition represented by the so-called new brokers is practically we cannot say disappeared, but is completely much lower. Because clearly, these are really difficult times. If you don't have the right target market, the right clients and so on, it's extremely complex. I don't know, Paolo, if you want to make a small comment on this point. Yes. Basically, competition in Italy has been 100% on very small clients. Let's say they have between 5,000, 10,000 EUR to invest. Competition is basically 100% on pricing on these clients with very poor service levels. Basically on our target, you know, clients, they have more than 200,000 EUR to invest. Top-end client, we have basically no competition. Also with the new brokerage account we're going to release in the next few weeks, we will also decided to also target these small clients. We will also definitely close the gap also in this kind of business which is very less interesting than the other one. Still, it's interesting because, you know, they are younger clients and, sooner or later, some of them, they will become very interesting clients. Thank you. The next question is from Adele Palama of UBS. Please go ahead. Yes, hi, good morning. Two questions from me. One on tax rate for 2023. I don't know if you have already given the guidance, but can you repeat the guidance for 2023? On MREL, do you have any pending issues for 2023 specifically? Thank you. On tax rate, we have to remind that tax rate is extremely influenced by the mix. The more we have revenues produced here in Italy, clearly, and the more your tax rate going up. The more revenues you are generated, for example, in Ireland, and the tax rate is going down. It's clear that in 2023, considering the massive rise of the financial income, that is 100% generated in Italy, we expect a rise in tax rate. Lorena, correct me if I'm wrong. It's correct. This is not driven by that, a lower activity by Fineco Asset Management, but just because there is such a big rise in the financial income that clearly this is completely generated in Italy, and this by definition is driving up the tax rate. On the MREL, we clearly think that probably we are considering that we want to be very well in advance in fulfilling also the future evolution of that parameter. It's probably during 2023, we are going to go through an issuance for the MREL requirements. In terms of impact on the PNL of the bank is going to be absolutely negligible. It's not anything material in the overall profitability of the bank. The issuance that you are expecting for 2023 are included in the NII guidance? Yes. Sure. Okay, thank you. The next question is a follow-up from Elena Perini of Intesa Sanpaolo. Please go ahead. Yes. Well, I was just looking at your tax credits acquired. You reached EUR 900 million at the end of September. I was wondering if you are going on in acquiring them and what they are, if you can remind me about the details on this. Thank you very much. No. We are just finishing off discharging the backlog that we had in place. But we are not taking on board new request by clients. Practically, the tax credit business has been closed. We are just finishing off closing the previous request received in the past month by our clients. The yield on this, can you remind me about it? Thank you. Lorena, we can. Yeah. The last if we consider the yield on the last price that we have applied to our customer is in the region of 2.5% per year. Okay. Thank you very much. You're welcome. Mr. Foti, there are no more questions registered at this time. Thank you very much for the very interesting Q&A session. As usual, if you have more to ask, please contact us anytime. Thank you again.