Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the Banca Generali first half 2026 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. Gian Maria Mossa, CEO and General Manager of Banca Generali. Please go ahead, sir.
Good afternoon, Welcome to our first half results conference call. First half results are the best ever, with net profit at the highest level, EUR 279 million. Total assets at highest level, EUR 121 billion, and net inflows for the first half at the highest level ever, EUR 4.4 billion. Focusing on the net inflows, the quality has been improving over the time, and we are very confident to keep growing with this quality, thanks to the strengthening of our asset management hub and the new release of products. Let's start, as usual, from numbers. Page four, net profit accelerated in Q2, as I said. In the first half, the overall result EUR 279 million. In the first half, EUR 152. This number comes from an acceleration of both the components, recurring net profits at EUR 180 million, and the variable net profit at EUR 43.6.
If you see the variable net profit, you can see that there is a one-off of EUR 20 million tax charge. This is due to the application of the standard corporate taxation in Luxembourg for our asset management company, following the current unavailability of a tax benefit for the asset management company. We will see it later. Page five. We will go through the revenues components, starting from net financial income. Overall net financial income closed at EUR 97 million, or EUR 189 in the first half. Again, also in this case, the good results come from positive contribution by both components. Net interest income is slightly higher, EUR 84.8, and a higher contribution of trading gains and others, thanks to the significant contribution from Intermonte. Overall, the total net interest margin closed at 1.96%. That is in line with our guidance.
Page six, the other component of revenues, total gross fees. Second quarter, EUR 393 million. Overall first half, EUR 741. While the variable fees, you see the acceleration in the second quarter thanks to the positive market trends and the great quality of the investment strategies. Overall margins for gross recurring fees is in line with the previous quarter at 107%. Focusing on the recurring components, you know you have two different parts. The first one is about investment fees. Here you see a double-digit growth. In particular, the second quarter was very strong at EUR 258. Here, the result is the sum of an acceleration in advisory fees and an acceleration of management fees, both at double-digit growth. In terms of margins, here you see a pickup of the margins at 1.44%.
This is basically driven by the positive trend of the markets, but we stick to our guidance of margins at 1.4% and 1.42% for the mid year. Page eight. The second component of the recurring fees, that is about other fees. Other fees were very strong in the second quarter, EUR 46 million, and as overall result for the first half, above EUR 90 million. Again, here we had very strong entry fees, thanks to the excellent work in the private placement structured products. Strong results also in brokerage commission, thanks to solid activity of both retail and corporate clients. The last but not least, you can start seeing a pickup also on the banking fees. Overall margins on other fees, pretty stable over time at 0.16%. All the revenues components grew at double-digit growth, while the cost is greatly in line with our guidance.
Let's start at page nine with the payout ratio. Overall payout ratio slightly lower than the targets announced. Payout to a phase ordinary payout at 35.5. I remember that the guidance here is 36%. Cost of growth below 12% at 10.5%, excluding a +1 off, and the overall payout to third parties close to 6.2%. In this case, excluding a -1 off, the 6.2% is broadly stable in line with the second quarter of the previous year for some seasonality. Again, very solid steering of the cost of the network, and we continue to share the revenues with the target we announced. Page 10, you see the operating cost. Here, we are slightly higher compared to the guidance of 68%, and this is basically driven by the acceleration on all major projects.
We have, as you know, the Insurbanking, I will give some numbers on Insurbanking later. Intermonte is going very well, as well as all the project linked to artificial intelligence. In the non-recurring components, you see a spike at EUR 5 million, this is basically all investments for future growth, are about advisory to scout the markets, to think of the strategy for the next years. It's a typical one-off when you are close to the launch of a strategic plan. Page 11, operating leverage. In terms of operating costs on total assets, we achieved the best result. It is 0.27, also all cost-income ratio measures are in line or better than expected. Closing this first part of the presentation, Page 12, very solid results in the core components, very solid operating lines and results.
Below operating lines, you see an improvement for the normalization of some one-off. About the tax charges, the EUR 20 million, thanks to the positive discussion with the Luxembourg authorities and the initiatives in our asset management hub that we will explain in the business update part. We are confident to reabsorb this spike, we have a medium-term guidance by the end of 2028, around 27% to 28%. Last bullet, you see the contribution of Intermonte. Strong acceleration of the overall results, EUR 6.2 million of net profit. Impressive, the revenue synergies already are close to EUR 8 million on a target for the first half in the range EUR 10 million-EUR 15 million. This is great part, thanks to the structured products, some sub-advisory mandates, and asset management. We will see further improvement both in this part of the business as well as in the M&A activities.
Now moving on to next section. Balance sheet, page 13. Starting from the total liabilities, everything is pretty stable due to the strong activity in asset management in the second quarter. You see the client deposits slightly higher from EUR 13.9 billion- EUR 14 billion in the second half. Cost of funding slightly higher, 0.77%, in line with the trend of the interest rates. Page 15, on total asset side, also here, pretty stable numbers. Overall interest-bearing assets at EUR 17.1 billion, with the yield on these assets slightly higher at 2.73%. Last page of this chapter, page 16. We have capital and liquidity ratios. Also here, very stable numbers. Total capital ratio at 19%, leverage ratio at 5.7%, and liquidity coverage ratio, net stable funding ratio well above the requirements. Now let's move on the assets recruiting and net inflows part. Page 18.
In the usual representation we introduced in the first conference call of this year about total assets, in which we give also the trend of Insurbanking business. You see the histogram. First of all, the EUR 121 billion, as I mentioned, the highest level ever of total assets, BG total assets, while the EUR 7.9 billion is about Insurbanking. The assets that we advise or manage directly in the insurance products for Generali clients. Referring to Alleanza, I mentioned before, we are very confident with numbers and with this project. We have just completed the rollout of the banking offer to the private advisory network, and we completed it in June of this year. If you look at the numbers of current accounts, we exceeded 5,000 current accounts in the first half. We confirm the target of at least 15,000 current accounts.
For the Insurbanking business, we closed the first half with more or less EUR 200 million of net inflows on the insurance wrappers for a total of EUR 260 million since the beginning of the partnership. Also in this case, we confirm to exceed half billion EUR for the end of this year. Our feeling for this project is very positive. Also, on the territory, we see great collaboration between the Alleanza network and the managerial structure of Banca Generali network. We're just at the beginning of the journey with exciting feedback from Alleanza network.
Page 19, we focus on the total assets of BG clients. First time, as I mentioned, we exceeded EUR 120 billion. If we focus on the left, you see that the overall advanced advisory fees business exceeded EUR 13 billion, and you see a constant increase of the weight of advanced advisory fees on total assets. Now they account for 11%. At the right of the page, you see the representation of total assets by fee categories. More than EUR 80 billion generate recurring fees, and the major increase is about the managed solutions, so EUR 56.9 billion.
Let's focus on this EUR 56.9 billion, page 20. Here you see the impressive acceleration of in-house products. In-house products account for more than EUR 30 billion or 53.2% of the total managed solution, and you see an increase of 2.5 percentage in only one year. This is thanks to the excellent work of the portfolio managers for the financial wrappers and the introduction of protection in the fund offer. Moving on from total assets to total net inflows. As I mentioned at the beginning, record level of net inflows, EUR 4.4 billion, and at page 21.
You can see that assets under investment account for EUR 2.1 billion, and the greatest part comes from the managed solution, EUR 1.9 billion. Again, the major contributor of this EUR 1.9 billion is about in-house products with more than EUR 1 billion in in-house funds and EUR 400 million in financial products. It is not just about the quality of these inflows, but also the contribution of the different distribution channels. In particular, page 22, the existing ones, so our existing colleagues, exceeded the result of last year by almost 50% or EUR 1 billion, moving from EUR 2.2 billion- EUR 3.2 billion. You see also the recovery of recruitment with a total contribution of EUR 1.2 billion or 50% higher compared to the last year and also higher compared to two years ago. I am sure that more will come in the second half. Why?
We are accelerating the recruiting activity, we already onboarded 106 new colleagues. What interests me more is the part coming from private banks. You see the number, 33. That is the highest one, and this is also thanks to the proposition with Intermonte. So now we are able to attract also tele bankers with specific competencies in the corporate advisory business. The business activity is very sound, well distributed on the field, and as I mentioned, the quality is pretty impressive, and I am pretty confident to see this quality also for the second half of the year, as we are investing a lot on our asset management hub and on product innovation. Moving on to page 24, you see the structure of our Banca Generali asset management hub. We have three major components, Luxembourg platform.
In the Luxembourg platform, you know here basically we provide funds, third markets, and multi-asset solutions, but it is all about current funds. In the middle of the page, of the representation, you see our Italian capabilities, so our investment hub. Here we are probably among the best player in managing personalized financial wrappers, and now we can leverage also the Intermonte capabilities. Then Investlinx. Investlinx is an Irish platform. You know we closed this deal to enter the active ETF industry, but Investlinx has also a license for fund business. So we have greater flexibility in deciding where to launch new initiatives also for the single fund and fund of funds business. Page 25, you see the major achievements for these three blocks of the first half of this year. Starting from the left, so our Luxembourg platform.
These numbers are as of the July 25th, so there is some numbers also realized of July. You see that the overall net inflows for funds industry in Luxembourg retail business is around EUR 1.4 billion, of which EUR 1 billion is in the new family of protected funds. These initiatives were launched with top investment banker players, U.S. investment players as JPMorgan, Morgan Stanley or Bank of America. So, the proposition invest in equity or protecting the downside is working very well as offering a predefined coupon. Regarding the Italian offer, the financial wrappers, here you have two different businesses, the personalized financial wrappers, so for top clients and where we are performing very well. Then also in this space, we launched protected solutions in partnership with Intermonte for the aging strategy. Here, we exceeded EUR 200 million.
Part of the synergies with Intermonte comes from this business. Last but not least, we have just signed a contract with Investlinx, and we already launched the first active ETF. It is an ETF focused on small medium enterprise in Italy. We are very quick and flexible in launching niche initiatives, niche ETFs. This shows how flexible and dynamic, and fast is this kind of platform to be in the market with new initiatives. Thanks to these three different blocks, we are confident to maintain great flexibility for the second half. We have pipeline of very strong product offering, and you will see during our strategic plan how we are sure to leverage all those three platforms to excel in the asset management industry. Last but not least, page 25. Some guidance for this year.
On the net inflows in particular, we increased the target of total net inflows from a target of higher than EUR 6.5 billion to an average of EUR 7.5 billion. We confirm positive trend also for July, where we are confident to exceed EUR half billion. In terms of target of product mix, we confirm to exceed EUR 4.0 billion of asset under investment. Second block, you see targets in terms of margins, cost, and tax rate. First column, you see how we closed the first half, then you see the guidance for the medium-long term. We are confident to stay in the range of 1.4%-1.42% for the management margin. As I explained, we have some positive effect from the positive market.
Core operating cost, we confirm long-term guidance to stay in the range of 6%-8% with this spike in first half of this year and probably also the second one as we want to accelerate all the projects for future growth. The tax rate, as I mentioned, you see the spike at 30.5% for this first half, we are confident to absorb a great part of this spike, and we give a new guidance in the range of 27%-28% for the midterm. The presentation is concluded, and I will hand over for the Q&A session. Thank you.
This is the Chorus Call Conference Operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question comes from Marco Nicolai with Jefferies. Please go ahead.
Hello. I've got a few questions on my end. You guide for margins at 1.4%- 1.42% over the medium term. Can you just remind us what gives you confidence that this will remain solid in the future and that you won't face further pressure on these margins? Perhaps driven by competition or so on and so forth. On the NII, first question, can you remind us the average balance in the current accounts opened under the Alleanza partnership? Another question on NII is around the deposit costs. I saw a pickup in the second quarter.
Is the repricing now done, and what do you expect from here on this front? The last question on the guidance. You didn't upgrade asset under AUI inflows. Obviously you have an open-ended type of guidance here, but it seems that even annualizing the first half, which is anyway weaker seasonally, you're already at EUR 4.2 billion. Do you think EUR 4.5 billion is too far as a target? Thank you.
Thank you, Marco. Let's say that if you think of margins in asset management, we have different levers to compensate any downward pressure. For example, we have the highest exposure in traditional life insurance products, where margins are definitely lower. We are among the most exposed to third-party funds, and also in this case, there is room to internalize part of margins. Then there is the partnership with investment banking and Intermonte, where we can increase margins over the underlying. For all these reasons, we are confident to confirm the target 1.4%- 1.42%, considering also that now the level is a little bit higher.
Consider that in this 1.4%- 1.42%, there is also the Insurbanking business activity. Second, net interest income. At the moment, the contribution of Insurbanking on the deposits is pretty low, is in the range of EUR 20 million-EUR 30 million. We've just started with opening the current account, we are just at the beginning. At the moment, it's all about Banca Generali clients. For the pickup in cost, I will hand over to Tommaso.
Let's say that pickup in operating costs are more linked to the investments that we are going to make in the ETF platform, especially investing in AI. We have also some specific investments for the Alleanza project that have been, in any case, accounted in the first half. We expect also that in the second half we are going to have, let's say, continuing on investing. That's why we see that for this year, we will have a spike in operating costs with the guidance, which is a little bit updated. We will be between 8%-9%. We expect to have the second half in line with the first one. At the same time, we expect that going forward, we can meet the 6%, 8% guidance, which is the medium term that we have always stated to the market. This is where we are. I think that's all.
Lastly, just to answer your question about net inflows, why we have risen the target for net inflows, not for the product mix. I said that here there is a conservative view on the trends of the markets for the second half. We are not confident to see the same markets as the first half. To be more conservative, we prefer to confirm the guidance in terms of mix. That depends also in part from the market's dynamics. While on the net inflows, we see a very strong trend both for the existing sales force as well as for recruitment. Even in, let's say, more volatile markets, we are confident to over-deliver compared to the targets at the beginning of the year. Thank you.
Thank you. Just if you can follow up on the deposit cost, because in terms of costs, I meant what happened in the deposit cost Qo Q, and what do you expect from here? Thanks for all the answers.
Deposit cost, let's say that evolution is linked to the data of our deposit. Let's say that we have the 35% of our deposit which are linked to the Euribor evolution, the Euribor marks evolution. That's the part which is going to follow the evolution of the market. We expect in the next quarter to have a small increase in terms of interest rates. We expect that the Euribor six months will increase around 30 basis points in the last quarter. Especially we expect in the last quarter, in the fourth quarter of this year, the spike in interest rates.
This is going to give, let's say, an increase in terms of cost of funding of some basis points that we expect to have in the second quarter, but something which is a lready, of course, replied in our guidance, which we have confirmed between EUR 335 million and EUR 345 million. Let's say that we are more sensitive in term of net interest margin evolution, more to volumes than to interest rate change, because we have, let's say, also for our purposes now, a sensitivity to interest rate lower. We are more sensitive to what is the balance sheet dimension.
You can see that in the last month, we had lower growth in the liabilities, in the deposit, because we had increased the net inflows in managed assets. We have to also understand what will be the path of the investing of our client in the next months to understand what will be the full impact in net interest margin. We have, as based our guidance of stable volume or slightly increasing.
To cut the long story short, we haven't changed our way to pay back to the clients. We have the asset that has a leg to update the value in line with the new scenario of the interest yield. We have a duration of below two years, so it takes a little bit more to adjust the assets than the liabilities. Nothing has changed.
Thank you very much.
The next question comes from Davide Giuliano with Equita. Please go ahead.
Hi. Good afternoon, and thank you for taking my question. I have three. The first one is on net inflows, if you can anticipate some details on net inflows for July. The second one, on the tax impact. You mentioned that you expect a return to the 27%-28% range by 2028. Could you provide us some more precise guidance on tax rate for second half in 2027? The last one on performance fee. Could you give us an indication of how many AUMs are close to their high water mark? Assuming stable markets between now and the end of the year, how much in performance fees can we expect? Thank you.
Okay. As it was mentioned, in terms of net inflows for July, we are confident to exceed EUR half billion. The quality in terms of asset and investment is higher than in the past. Also July is pretty strong month, especially in advanced advisory services. We say that in more general terms, the asset and investment component is doing well. Second, in terms of tax impact, as it was mentioned, we are in discussion with Luxembourg authorities. My feeling is that Luxembourg will change the framework to incentivize asset management in Luxembourg. Whatever the decision of the Luxembourg authorities, as I show in the business update session, now we have great flexibility in organize our asset management strategies. We are confident for these two main reasons: positive discussion with Luxembourg and more flexibility in our asset management platform. Tommaso will give you some projections.
In terms of performance fees, we say that we still have important part of the assets that are close to the high water mark. As we say that we are around EUR 5 billion, very close to the high net worth, h igh water mark, sorry. Tommaso, for the tax impact, please.
For the tax impact, we expect to have a gradual reduction in Luxembourg. We will think that starting from 2027 to the next year, we will have a positive impact. In Luxembourg, there are two components in terms of taxation. One is the corporate tax, the other one is the municipal tax, which is the one that we expect to go down accordingly with the discussion that we had with the minister. We will have basically, we expect to have full taxation in this year.
We don't know if we will have a positive impact, or we cannot confirm we can have any positive impact in the next quarter. Starting from the next year, we will have a progressive reduction. We have, on the other side, the possibility also to manage and to strengthen our presence in Ireland. To have, basically, also from this contribution, a positive impact on the total tax rate of the group.
Thank you.
The next question comes from Gian Luca Ferrari with Mediobanca. Please go ahead.
Yes. Hi, good afternoon. Two from me, please. The first one is on the net provision for risk and charges. It was a very low number. I was wondering if it was the reversal of the prudence you showed in Q4, or it is a new run rate. If you can give us a guidance of where we should put provision for risk and charges for full year 2026. The second is on custody, and in particular on certificates. Just a curiosity for me, I was wondering if in Q2 you issued plain vanilla certificates, or you are now pretty active on the AMC, on the actively managed certificates. If so, if Intermonte is a strong contributor to this business line. Thank you.
Thank you. For the provision, I will hand over to Tommaso. Referring a certificate, at the moment, numbers don't include AMC. We are working with Intermonte on some solution with the protection for the client. In the second half, we will extend the contribution of Intermonte also on the other kind of certificates. For provision, we expect, of course, let's say in the second half, we'll be more or less in line with what we have done in the first one. For the full year, we expect to stay around EUR 50 million, including also write-off and the contribution to the funds, excluding, of course, exceptional items that at the moment we don't have in mind. Of course, there is a benefit if you compare of what was the run rate in the previous year. This is our expectation for the current year, around EUR 50 million overall.
Thank you. Thank you very much.
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. Mossa, there are no more questions registered at this time.
Okay. Thank you for participating in our conference call, and let me finish by wishing you all a great summer.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.