Earnings Call: H1 2021

Jul 27, 2021

Good morning, everybody. A warm welcome together with Thomas Heinzel, our CFO, on behalf of von Toebel for the live stream and update on our half year results 2021. Thijns for your interest, welcome to those of you who joined on the live stream and a warm welcome also to those of you who joined through the telephone conference. As usually, I will kick off with a few highlights and an update on strategy. Then, Thomas, our CFO, will guide us through the numbers, and then I will be back with an outlook. After that, we are happy to take your questions and have a lively discussions. You can post and log questions either through the chat function or then also speak up on the telephone conference. So let's kick off. We present a strong set of results for the first half year of twenty twenty one. We are very happy that the numbers prove that we could further strengthen the trust clients put into Fonthobel. We have a solid robust net new money growth at the upper end of our own target range, coming in at around 6% annualized growth rate with €6,600,000,000 of net new money. We also continue to build market share and further trust with our clients who come in through digital channels. Our advised client assets reach a new record high of €274,500,000,000 We have used the 1st 6 months of this year also to achieve significant strategic Progress in a number of areas. We have continued to make progress in the ultrahigh net worth segment with a strictly investment led approach, different to the usual lending led approach that we see with many of our competitors in the industry, and we have proof points that the broader access to all the capabilities of our investment boutiques leads to success with ultrahighnetworthclients. We have continued to expand the range of our ESG offering, launching even an impact fund out of the liquid investment space. And we made the accelerated full acquisition of 30% of the 40% in 'twenty four. We deliver operating income that is up by 25 Sandd year over year coming from all areas, Asset Management contributing with 17% growth, Platforms and Services as the other institutional client group coming in at 32%. And even Wealth Management who obviously had to compare to the intense trading period a year ago comes in at +9%. Again, self guided investors through our digital the offering increased the most with 86% revenue growth. This leads to group net profit up by rounded 50% up to €191,800,000 The strong profitability in combination with an unchanged controlled risk appetite translates into very solid balance sheet number with a CET1 ratio of 14 0.5% and a total capital ratio of 25%. Page Thor gives you the overview of the key numbers. In addition, you also see the return on equity, which comes in as a very strong 18.7 percent, which is an increase of 5.3 percentage points and which compares nicely against the estimated costs of capital. We have executed these 1st 6 months on the back and supported by a very strong setting in terms of strategy and in terms of long term orientation. We are committed to our lighthouse goals. We believe and are confident that the four levers of our strategic journey, client centricity, being investment led, technology enabled and powered by people are the right levers for the environment and for the future success of Phonthoebel. And we have put our whole firm on one collaborative organizational model that starts to prove itself in a very Demanding Environment. We a few further updates on strategic progress on top of the things I already mentioned, and I will also get back in a bit more detail just after the next slides. So in terms of Fontable Experience in terms of brand recognition, we made it to the top 20 in the European Fund Business in terms of brand awareness, brand recognition brand trust, which is quite an achievement for us given the fact that more than 1400 companies compete in this market. The strong international footprint also translates in a strong reputation in our home market. Switzerland as our home market still accounts for 40% of our business and our clients' money. We have just been voted strongest Swiss Banking Brand and the only financial brand in the top 10 Swiss brands. While we do not consider ourselves primarily as a bank, as the saying goes, it's always okay to be number 1. A few updates, things to mention on our tipping points for future growth. We make progress in Asia also in combination with the platform strategies where we had increasing collaborations with local banks in Asia, also a strategic cooperation with Avalloc for dairy trade and our Cosmo Funding platform was breaking through the barriers of €10,000,000,000 traded volumes. In terms of using data and technology to make us a better partner for our clients. We made progress in one analytical platform rolled out globally. And we keep pushing with Vault into newer client segments where we offer convincing digital touch points to give the opportunity also to these client groups to harvest the potential of investing as the new form of saving. We're also very proud about the development of our partners here at Phontopl, of our teams. We have become more international, more diverse as we continue to make progress on this journey. We regularly ask for feedback because we think feedback is a key success factor in a collaborative company and the feedback we are getting makes us very proud. Over 95% of our people are fully committed to the strategy and are proud to working for Frontera. On the journey of this strategic progress, we also keep learning, we keep adopting and we keep improving to deliver the best we can in order to offer to our clients. And in this context, we also came to the conclusion that the synergies are the overlap in needs from ultrahighnetworthclients, multifamily offices and independent asset managers are so convincing that it makes sense to bring the client facing activities of these two channels closer together, which led us to the decision to move the successful platforms and service unit, which has grown by 32% and delivered an organic growth rate on an annualized basis of 10% into the broader wealth management setting. We will execute this as of August 1. Three points on 24. We became majority shareholder in 2015. The cooperation, the partnership has over delivered on all the targets we have announced in 2015, we have now found and agreed on a partnership approach going forward that aligns all the interest that lets the partners and the teams of 24 focus on what they do best, which is delivering added value to their clients and which will add 2 percentage points additional uptick to the return on equity for Frontoble shareholders. We see this full buyout as a Milestone on a journey that can lead much further as the demand for sophisticated fixed income solutions remains very big. 24 has outstanding investment capabilities. Fontoebel brings the global footprint to the table and we tap into very large and very fast growing asset pools. This leads us to the core capability of any investment firm, which is the ability to navigate the wealth of our clients in demanding and choppy markets. Here the usual update. Key message, 73% of the money in all our funds is ranked 4 or 5 stars. So we have a robust and solid footing in terms of performance quality. I gave you an update in February on the end year numbers in terms of fixed income where we stood at 54% 1st and second quartile as we still were digesting the massive downturn from last March. As you see now, as I indicated in February, the fixed income strategies have recovered fully. We are back to 90% 4 5 star ranking over 1, 3 5 years. We also have very strong multi asset class numbers over 3 5 years. Our mandates, has been doing even better than the funds that are listed here. When we look at our equity products, all our core Equity Products, our quality style bottom up highly concentrated portfolios. They are generally challenged as the whole investment Proteus in this market, which also has tendencies to leap into hypergrowth or leap into momentum phases in the markets. However, we will remain true to our investment beliefs. And I think the net new money we could gather in the 1st 6 months proves that we match our convictions with the long term lenses of the clients who put their trust in us. ESG is a topic we have been engaging on for years. We keep moving forward. We have integrated ESG respectively sustainability criteria now in the absolute majority of all of our investment strategies. We have launched a number of additional sustainableESG investment strategies with a sustainable emerging market debt fund or the already mentioned Global Impact Fund, which claims to prove an additional social impact out of liquid investing, which is a very promising approach from our point of view. We believe ESG will mainstream. That's the direction in which we are working and we will keep you updated on our progress in this journey. These were my key highlights on the achievements and the results for H1 'twenty one. With that, I gladly hand over to Thomas, our CFO, who will lead us through the numbers in more detail. Thank you very much. Warm welcome from me as well. Advice client assets have been on a record, euros 274.5 €1,000,000,000 of growth versus year end of 10.6%. Assets under management have also grown slightly more by 11.2% to almost a 0.25 SEK 44,200,000,000. If you look at where this is coming from, you see performance has contributed SEK 13,000,000,000 to the growth. Net new money 6.6 percent. And important compared to last year, FX effects have contributed 5.1 €1,000,000,000 of growth. As opposed to last year, where we had quite some headwind, we have tailwind from the FX markets in this half year. Net new money, euros 6,600,000,000 or 6% annualized growth, positive contributions from all the client units and all the asset classes. Wealth Management has grown SEK 2,200,000,000. That is 7% our annualized growth rate. We're very happy with this. This is driven by 2 important remarks on this. First of all, it is broad based. All the units of Asset Management have contributed. And secondly, 83% of these inflows were in products with recurring revenues. Platforms and Services, €800,000,000 That's a 9% growth, very strong half year. And in Asset Management, €2,900,000,000 a strong spirit in the Q2 of this year, up to 4.3%. Please don't forget that we had to book out a very low fee bearing advisory mandate of SEK1.5 billion, which has also affected the SEK2.9 billion growth significantly. If you look at the income and profit development, operating income up 25%, costs up 17%. That, combined with a tax rate of 17.8 percent, has led to a group net profit growth of 48% from 100 €29,200,000 to €191,800,000 in the first half of twenty twenty one. The cost development includes one off charges of SEK 9,100,000, which are IFRS personnel costs that has to do with the share based plan that we have introduced O24 Asset Management Acquisition, which is booked in the personnel costs with a minus of CHF 24,600,000 and adjustments in the pension plan, which was a write up of credit of CHF 15,500,000 in total, roughly CHF 9,000,000 cost development one offs. If you look at the cost at the revenue growth, that was €157,000,000 The costs grew €74,000,000 that is a marginal cost income ratio, if you may, of 47%, which is, of course, driven by the higher revenues, but also of our shows that our first efforts on cost containment are gaining traction. That leads to a costincome ratio of 69.6% Or if we adjust it for the one offs, the 68.4%. Operating income has grown significantly, if you look at the asset based businesses, Asset Management, which is the largest block year over year, has grown by 17%. Platform and Services. We mentioned already very strong half year, 32%. And Wealth Management has grown by 9%. I'll come to that in a second what the drivers are, but it's difficult to compare it to the first half of twenty twenty when we had when there was different corona situation and the trading revenues and net interest income was at a different place. Strong growth has been Fin in digital investing, sales directed to digital clients, 86% growth. That is obviously driven by a benign market environment, but there's also a couple of structural reasons behind it. First of all, what we have seen is retail clients coming back to the market. It's not only that we see this also our partner through all of the channels. See that, for example, many brokers have record high account openings in the first half of this year. Secondly, we've broadened our product range and we have gained market share. And in particular, we have gained significant market sharing, grown quite strongly in Asia. And lastly, the hedging costs have decreased versus the last year. The return on assets, not a lot to say about asset management. In Wealth Management, what you see year on year, it is minus 7 basis points, those are driven in essence by 4 factors. Number 1, we started growing. According to an analysis that we did, If we if money in Wealth Management is funded until everything is invested and we are at the full return on asset, that takes roughly 9 to 12 months. That is something that we see. Secondly, we have some traction on the ultrahigh business as a strategic Tif, Tena mentioned this earlier, that also contributed a decline of 1.5 basis points. And lastly, as I mentioned, Net interest income in Wealth Management was down by 25%. That is basically driven by the U. S. Dollar. And then trading, of course, was significantly below the trading fees in the first half of last year. So that explains the difference. The pretax profit growth was €93,000,000 or 58% if adjusted for one off items and FX movement. Well, you see here the FX movement is negative. That is still driven by the second half of last year when we had the dollar cratering versus the Swiss francs. This half year, We had a slight tailwind, as I mentioned earlier. U. S. Dollar was basically, on average, the same as in the second half of last year. Euro and pound, we gained. So for this half, the FX was slightly positive. But on a year on year, it is still a negative contribution of €11,000,000 that you can see here. That overall has led to a very solid and resilient balance sheet and capital ratios. The equity total equity has gone up by €68,000,000 to €1,960,000,000 in total. Debt despite €127,000,000 charge from the 24 acquisition. And that has led to the CET1 capital increase by 5.3%. Since we haven't increased our risks, the risk weighted assets are basically unchanged, That leads to a higher CET1 ratio, 14.5 percent and higher total capital ratio of 20.5%. Leverage ratio has come slightly down. What I want to mention here that gives us further capacity for any organic or inorganic growth initiatives on our balance sheet. Value Creation was very strong in the first half. We have an ROE of 18.7% versus a cost estimated cost of equity of roughly 9%. And return on tangible equity is at 25.9%. Anybody looking at the return on CET1 ratio, that would be North of 33%. What is important on this chart is to show that the trend of increasing value creation is continuing and the momentum is still there. With that, I already come to the summary of the business KPIs. Net new money growth, the SEK 6,600,000,000, the 6% is on the top range of our targets. All the other ratios are above target operating income growth 25%, which is over the 4% to 6% range, pretax profit growth, net profit growth, just shy of 50%, costincome ratio below 70%, so it's also below our target of 72%. CET1 ratio is 2.5% above our target total capital ratio, 4.5 percent and return on equity at 18.7 percent is also significantly above our objective. So all in all, if I can sum this up, we had a very strong first half of twenty twenty one. With that, I would hand back to Zeno for the outlook. Thank you very much, Thomas, for this overview on the numbers. Let me turn to the last piece of our presentations in this environment and obviously also after now many, many years of bull markets both on the equity as well as on the fixed income side, one of the questions that come up with in discussions with investors is obviously the question of timing. And I just wanted to share a little piece of research that we have done, which looked at what made sense over the last 20 years. And what made sense over the last 20 years was actually to be invested at all times. And I would claim that also going forward putting capital to work in a systematic fashion makes a lot of sense. So what you see here in black is how a fifty-fifty percent strategy has performed over 20 years, when you just let it run completely unchanged in markets, it would have delivered an annual excess over the riskless rate of 3.3%. And if you have had started to time in the wrong Wey and missed the top 10 days or the top 20 days or even the top 40 days, your annualized return would have been strongly reduced. If we add to that what we claim to do as an active manager, Churso. We added to that the tactical asset allocation signals that come out of our Westcorp quantitative modeling. And you see that actually then trying to navigate markets add value if it's done in a systematic and robust fashion. And also the added value is pretty robust through time. So we think it's another proof point for Truff, we already know very well, to have added value for investors, you need to be on a common journey in the long term, which means that clients and investment firms need to be partners, need to understand and trust each other, be transparent about expectations and investment outcomes and then the results can be very handsome for every Buddy involved. And this is what we are committed to. This is everything we do trying to help investors build Better Futures. Let's move to the outlook. We think that the environment remains helpful to what we do best. We see and witness a strong and own growing demand for professional investment advice. We see that the distinctive quality driven, content driven strategies rewarded by trust, by flows, but also by stable margins. We believe that adding technology, investing in technology, investing into people will continue to add value going forward. So we see momentum. We see also strong upside in terms of the possibilities we have from the investment side, from the opportunities on the distribution side, we will remain very prudent when it comes to sizing our risk appetite, we will continue to invest. How did we get off into H2? We had a good start into H2. We have we the robust revenues so far. But obviously, let me remind you again that there is some history has shown that there is some cyclicality in our business and July, August December happened in H2 on a very regular Besis. However, we came off the blocks nicely for H2. And obviously, the strength of our strategy and the strength of our capital position gives us ample optionality going forward. That was it from our side with the overview. We are happy to take your questions now. Again, a quick reminder, there are 2 channels for the questions, either the chat function on the live stream system or the queue on the telephone conference. I will try to combine the 2 channels in no particular order. Let's start with nice with an easy one to start off. We have a question from Peter Stenz over the chat function. Thomas, I would hand that to you, there is a question regarding a comment on Page 9, how is the increase in return of equity of 2 percentage points calculated? Thomas, can you take that? Happy to share the details on this one. In essence, it is equities going down from the charges. The return is going up because we have no more minority that we will have to pay out. So the return attributable to shareholders is going up. And we did the calculation based on the end of May numbers that explains how this is. And but we're happy to share this, how exactly the calculation has been done. Thank you, Thomas. Then we would move on to the phone channel. And the first question comes from Nikolas from CIC Group. Yes. There is some background noise. So but you're audible. Let's give it a try. And if we have problems, we will just ask some questions back. Congratulations on a very strong set of numbers today. So the first basically the questions are 1 on targets, 2 on asset management and finally on cash revenues. Targets. You are already well ahead of your targets in terms of, let's say, cost income. You've got a tailwind From the positive markets at the end of the first half as well. Is it fair to say that your targets, let's say, 72% lower costincome is now looking a little unambitious. That's question number 1. Question number 2 is on private markets. This is something we've discussed before. I know you said this is not an area of interest for you. And equally, I know that your share of public market securities is Kylie, and you just had a very strong set of net new money. But even so, given that private markets and alternatives have the best outlook for fees and growth. Is it now a discussion at board level? And just curious, how do you weigh up the potential for growing in a shrinking market like traditional asset management versus growing in a high growth market like private markets because clearly the market also signs a premium for those that operate in high growth markets. So just curious on your thoughts there. The second one on Asset Management is on ESG. We've seen a big increase in sustainable ESG funds. I think that number has been flattish for the last 18 months or so. So curious what's changed there? And if you could help us if you could disclose your ESG flows This half, that would be helpful. And finally, just on the transaction revenues, pretty stellar. You mentioned that there is some structural elements here. And I'm curious if you could just provide a bit more context or color How much of this you think is repeatable, not only in digital investing, but also platforms and services? I guess, is there any change in the approach of how this business is being run? For example, you referenced lower hedging costs compared to last year. That's it for me. Thank you very much. Thank you very much, Nicolas, for your questions. I'll kick off with 1 and 2, and then Thomas will comment on the transactional revenues and the more repeatable aspects of them. So targets, they may look easy to reach from the current position. But for the time being, we will stick to them. We have this planning our ambition, RISM that says us, okay, we want to move in this 10 year lighthouse direction. And then we have rolling targets for on a 2 year basis. So we will revisit the target spectrum by June next year. And that time period, we intend to stick with what we have currently out there as targets. As you have seen, we are Kaye, we're exceeding our own targets. And there are no incentive schemes linked internally for us to reach targets where the incentive schemes are only linked to absolute numbers. So there is no nothing in the system that would create incentives to move slower just because we have reached certain targets, but we intend to keep the strategic planning at the sensible rhythm of this 2 year RISM, 1st. And second, we are also I mean, we are in a quite benign environment right now. And Let's Look how the whole year then pulls out. And then we have a very solid basis to review this in H1 NextGear. Then in terms of private markets, I confirm almost everything what you have said. I mean, we are Committed to Liquid Markets. And in the liquid space, we are still a very, very, very tiny fish. And this pond is huge. Just look the multi strat fixed income world, for example, we compete there among other products predominantly with the Strategic Income Fund of 24. This strategy accounts for €12,000,000,000 If you look at the 5 biggest fund in the multi sector area, the 5 biggest funds account for €300,000,000,000 and more. And actually, if I look at our investment numbers, they Compare very nicely with these big five guys. So there is a lot of optionality in the current business. However, we understand as well that private markets are a mid- to long term topic. We don't only look at it from a fee or from a growth perspective. At the end, what focuses our mind is how do we deliver return to our clients. And if for reasons of regulation, Asian society, capital flows, whatever, a greater part of value creation is done under the umbrella of private markets. We have to be aware of that and talk about that. So yes, we talk about it. We look at options. And it may well be that we try to use capabilities that we have, for example, our asset backed security business as a stepping stone into certain areas of private markets. But we're in early talks, and we will very probably go on a step by step journey. Then if we go to Asset Management, this is the reporting ESG criteria, sustainability criteria in line with SFDR. Very soon. We will, like everybody else, then also have numbers according to Article 9, 8 and 6, which they will be probably more easily comparable going forward. When we look at sustainability flows in H1, Schwan, one of the key drivers was our cleantech product, a strategy that we run for many, many years that really, I think, is very proven, gives a strong feedback to investors on the CO2 impact on every Dollar Invested. And that is now just it has always been in the kind of the end client space. It now moved even into the institutional space with large institutions, clients developing demand for it. That's one of our main drivers for the flows in sustainability. And we will add this global impact fund to that range coming from the same team and from the same investment process. With that, I would give for the 3rd question to Thomas. On these funds, I on how much the question was how much of the transactional element we believe is sustainable. That's Difficult question, and I wouldn't dare to give you a concrete number. We're working with different scenarios. I mean, the future is always very difficult to predict in this case. Retail clients have come back. If we would see a very sharp correction somewhere in the next half year or year, of course, retail clients can be spooked again And pull back out. You've also asked for a change in the business. Yes, there is change in the business. We're getting broader. We're getting more digital, and we are integrating more along the value chain with our B2B clients. For example, we do calculations for them on their behalf, Greek simulations, all other things. We do things like if there's a structured product, we would calculate optimal switching times and all these kind of things. As an example, a structural product that gives between 0% 10% if in a 6 month expiration date, if you realize 9.3% in the 1st 3 days, of course, we would recommend to switch because then you can lock in the gains. That's the kind of thing. So what we're doing is standard work, working on data and integrating with our clients and increasing the service level that we provide to our clients. Perhaps it's worth shedding some light on the geographical progress also in Asia. Yes. On Asia, we had that's one of the critical things. On Asia, we have gained significant market share, Which we also believe is not something that will go away very quickly. We started a couple of years ago and have step by step Made our way up in terms of increasing the market share. So we're in a very good position there as well. And our position has increased. Our brand is strengthening. And also with the on the retail side with users of that, we're still very careful on the risk side, But this is how we'll grow the business. And we believe that could be a very interesting growth opportunity for the years to come. Nicolas. Does this answer your questions? Incredibly helpful. If I could just place the last question one other way. You made in digital investing, you made €160,000,000 of revenues in 2019, €180,000,000 odd in 2020. Given your Asia market share gains, given new product ranges such as crypto, Is it fair to say that a sustainable run rate should be above those levels? I guess that's another way of putting it. Yes, I would say, we believe it should be above those levels. Then we stay to the phone channel, and we have Neves from UBS. Hi, good morning and thank you for the presentation. Also congrats to a good set of numbers. I have three questions, please. Firstly, if I may, I would like to stay a bit with digital investing. The growth in Asia that you mentioned, can I ask which products were driving this? Are you now focusing more and more in investment products, for example? Or this is primarily high activity and strong demand for warrants and perhaps shorter term leverage products. So if you can talk a little about that. And still on digital investing, could you perhaps quantify the contribution from crypto trackers or Bitcoin trackers to revenues or at least give us a sense How significant that contribution was? And also whether these revenues were primarily skewed to the Q1 when we saw really high activity in cryptocurrencies. The second question is on wealth management gross margins. I acknowledge certainly your comment on the typical seasonality in the second half And the inherent unpredictability. But I'm just wondering what sort of strong seasonality should we expect here? It seems like the NII component of the margin have come down quite significantly already. Transaction activity have been holding up. And I'm just wondering, should we expect the same type of seasonality like in prior years? Or this could be a bit more perhaps softer. And the last question is on asset management. Can you perhaps talk a little bit about the flaws you saw primarily in the second quarter this year. Were these mainly to mandates, did the fact that a lot of the a much higher number of fixed income funds have 4 and 5 star ratings. Did that have an impact? And generally, where did you see these flows and to which strategies? And if you could give us an indication of where clients Are looking at going to the second half. Thank you. Yes. So let me start. Thomas, could you elaborate on margin developments and seasonality? Then so the first one, Asia are both things. So it's through Hong our Hong Kong presence, it's leveraged products listed on the stock exchange and the usual direct interaction with self guided investors. Then they have so far limited demand for investment products. However, where the investment products have grown are on the B2B channels with external asset managers, respectively, banks, where we have made quite some progress in linking up to digital platforms. So that leads to or refers to the point that Thomas has made that we have come better in linking us up on the value chain with our distribution partners. So we have made significant progress in Asia to be linked UP to more digital platforms and therefore also be electable to more distribution partners when it comes to investment products. The business that is linked to packaging cryptocurrencies and giving a convenient access to them, it's a lower double digit number in terms of revenues. And then perhaps we hand over I hand over to you, Thomas, on Wealth Management, and I'll be back with Asset Management flows. Crypto contribution is below 20%. And what is interesting though is the first and the second half of this half year. So quarter 1 and quarter 2 weren't significantly different. On Wealth Management gross margin, The seasonality is normally July August are rather slow. So second the second half of July and the first two weeks of August are normally a bit slow. And then in December, also in general, you see a slowdown of activities. Now that is on average over the last couple of years. But we have seen years where December was extremely strong, in particular, if there's strong movement in the market, of course, clients are repositioning themselves. So we would see that going up. What is important, the key driver of the margin decline has been net interest income. And net interest income mostly in the U. S. Dollar position, where we have a as you can see from the segment report, we were down 25% in Wealth Management and that we're not sure this is going to change very quickly. So that is something where we are locked in. But we also don't think that the interest rates can go in the U. S, in Dickler, will go much further down compared to where they have been on average over that half year. So So that's a bit the situation. So seasonality, yes, but that is mostly driven by the fact that people are on holiday and that in December, If markets are calm, people tend to you tend to have activity in the 1st 3 weeks. And then in the last week, people normally also our Offshore Holiday. Then let me get back to a spit color on the flows in Asset Management. So one large chunk of flows was within fixed income, but there especially in the multi strat sector. So this was a building block that was bought by very large global banks, by distribution partners. So far the appetite for clients into more credit linked strategies, corporate high yield or emerging market, hard currency, local currency or even corporate has not yet returned. So actually, this is one of the hopes, expectations, aspirations we have for H2 that given our track, given our credibility flows in more credit linked fixed income strategies should come back on top of what we see from the multi strat field. Obviously, the asset allocation decisions were a bit slow because up and until May, the benchmark returns of everything that was credit linked or and had a duration exposure actually was negative and asset allocators don't like to go into negative territory. So let's Tsee where how this develops into H2. But in H1, fixed income flows were important, but more or less limited to less duration sensitive, less credit linked multi strategies. The other source of net new money was multi asset class. Within multi asset class also quant strategies from Westcor that should probably see an unchanged pattern in H2. 2. We don't expect a lot of changes there. Then on the other chunk was very long term institutional asset allocators who kept investing in our bottom up equity strategies despite the general challenge they currently face in the market environment. Obviously, that will be an area to watch going forward, how will the appetite of very long term investors develop relative to a market that can remain momentum driven Farlonger. So that's surely something we watch very carefully. That's the overview on flows. Does this answer your questions? Certainly. That was very helpful. Thank you. Great. Then we have another question on the call from Michael Kunz from ZKB. Please go ahead. Yes. Good morning. My first question would circle back to the trading income. I mean, in the first half, you have already achieved 83% of what you had achieved last year as a whole. And could you please shed a little bit more light on the underlying developments? I mean, you mentioned the decline in hedging costs, but that cannot really be the only driver. So if you could help me a bit on that one, please. Then the second question refers to the asset management, the equity business. I mean, couple of years ago, we had been discussing even about keyman risk in this business. And now today, we basically talk almost fixed income only. How's the situation at Quality Growth Boutique in New York? Are you happy with the way they develop? Or are they moving a little bit more sideways These days, how's the situation there? And then third question, Given that you've beaten expectations by far on the half year result, your dividend policy, Is it kind of still in place? Is it too early to comment? Or is it fair to speculate that the strong development of the year Might also lead to increases there. Thanks. Thank you for the question, Michael. We are so surprised that we had to wait for question 3 to have the dividend topic on the table. I will perhaps kick off with Asset Management and then give both all the trading results and underlying repeatability of them. And the first cover on dividend, I hand over to Thomas. Is that fine? So asset management. So first of all, it was a deliberate target of us to become more diversified. So we when we scale back 6, 7 years, we had 60% of assets and obviously an even larger the part of revenues in equity and within equity a very concentrated offering. Today, we have 30% fixed income, 30% equity, 30% multi asset class and within equity 2 strong boutiques. So I think that is significant strategic progress and deliberately executed in a combination of organic investments and acquisitions. Why is this important for going forward and for the value of the company. It's not only because we are more diversified, it's actually also because some of the key buyers and the key sources of growth, predominantly global banks are busily reducing the number of relationships of partners they work with. And if you want to keep making the cut, you need to have abroad, you can't be a one trick pony. You need to be able to offer 2, 3, 4 convincing options. And we believe that building convincing products in the area of high conviction active asset management can only be done out of protected and independent structures that we call boutiques. So that's why we have done that diversification, built different centers of competence where outstanding return can come from. But putting that under one global sales organization that can invest then in this strong and deep partnership with our clients. So we think that was a deliberate choice, a deliberate journey and has heavily fortified our position in asset management and obviously then the value that we as a company can show. In terms of the way how we are organized or how we ask boutiques to develop, we have become very, very conscious, but that's now 10 years ago, 7, 8 years ago on the talent structure within the boutiques as you can check every 4 or 5 star product of our company and you will always see 2 named PMs. We believe that people are key in these investment processes. People make the difference. People are important, but they have to be part of a team and part of a process. So we invest a lot of scrutiny into that. And we think it pays off when you see how we can produce flows across the cycle and how we can navigate between the ups and downs of relative performance, which, by the way, is unavoidable in high conviction active asset management, and we still deliver repeatable growth across the cycle. So that's the overall picture and that then lends itself to one of our equity boutiques quality growth where we are happy. You see strong stability on the team. You see strong long term performance, especially on the developed markets. We acknowledge and are aware of that this style is generally challenged now, especially in some of the more high growth emerging market segments. But we're working on this. We're happy with where the team goes, and things are going just fine. If I take over on the trading income, the 83%, yes, this is, of course, correct. The hedging costs don't Spain, everything. But don't forget, last year in March, what happened, market was breaking down by 30%. So there were quite some costs in order. And we have reduced, as you can see also from the reporting of the full year annual report of last year, you can see we've reduced the risk quite significantly in the first half of last year. In this year, The market environment was more benign. But as I said earlier, yes, crypto played a role. So crypto wasn't the main driver, but it played a role. Last this year. In the first half, there were very little revenues coming from crypto that was different. And we said it was between 10% 20%. Asia, has been a strong contributor in this year. And then also on the investment products in Switzerland and Germany, our market share has increased significantly and the volume was just very high. Basically, it started at the end of January And it held on, of course, with ups and downs for the whole half year. We just saw very high trading volumes, and that is what drove the results on top of our additional market share. And on the dividend policy, it is too early to ask that will be decided before year end by the Board. Michael, does that answer your questions? Yes, that's perfect. Thanks. Thank you. Then we move on to Daniel Radley from Octavian. Daniel, please go ahead. Good morning, everybody. And also from my side, congratulations to the strong set of numbers, particularly, I think, net new money and Wealth Management was again very strong. And there also goes my first question. We heard other banks complain a bit about the lockdown situation in H1 and related headwinds for net new money generation. Now you had a very strong net new money growth. Did you not feel any headwinds from the lockdowns? Or did you also feel it and your net new money would even be have been better than the 7% we have now seen in Wealth Management. Then maybe just as a side question, I was missing a bit the relationship manager number. Did you stop releasing these? And then one question on costs. Can you maybe give us some color on how much of the cost We have seen year on year was driven by variable components like bonus accruals, etcetera, versus investments or, let's say, higher fixed cost. And how shall we think into future semesters about the costs? And then just One quick follow-up, but I think you already answered this, on the net interest margin in Wealth Management. So The exit margin on net interest income was more or less in line with what we have seen in H1. Can you confirm this? And I'm sorry, one last question. On capital, obviously, the dividend question was already asked by Michael. But more generally speaking, what are other uses of capital could you imagine Versus dividend payout? Thank you. Yes. Thank you very much. Lots of questions. I will Krebs, start with Wealth Management and New Money and the link or non link to COVID and shed some light on how we think about capital. And then I would ask Thomas to answer on the RM number the disclosure of this shed some light on cost developments and the net interest income question. So Wealth Management, obviously, everybody operates under the same circumstances. So we had the same travel restrictions and the same limitations to interact physically with clients as everybody else. I think what helped us or what supported us, I think we have invested a lot in thinking through and executing how to actually build also in the digital world a proper sales funnel starting from building, creating leads, nurturing these leads into a prospect and then handing over these prospects to RMs in order to convert the prospect into a client. We are still very, very early days there, but we see that this can work. And we strongly also believe that this works better if your offering is investment led, which means you have all these great content with which you actually can create leads and nurture leads into prospects. And that's something we strongly believe in. We also, we have to throw significant efforts at it. For example, with what we have mentioned under this data driven tipping point, where we built this analytic platform and really built the whole value chain, lead, prospect, client and the content machine. That's probably one point. The second point, I think we have been early adopters of digital onboarding, which works well and has become not a Common Practice, but which has become more and more normal, let's put it like this. And then also we have to be fair, von Toppel. Always, if I get the numbers, you know the numbers of the competition better than I do, but I think we have a very high proportion of Swiss clients in the Private Wealth Business. And that this has always been important to us. We always believed in the home market. We said we want to be strong. Here we can we have to prove that we can win in the home market. And obviously in Switzerland, we have remained very operational now also during COVID. That would probably a little bit highlight, but I would not obviously, I share your expectation with our Head of Wealth Management that that with less COVID restrictions, we could even do better. Then capital, those of you who follow us for a long time know that we are cautious users of our capital. One thing that we can exclude that will not happen is out of practice or one off payouts back to shareholders for very obvious reasons. We have one shareholder that has stayed with us for almost 100 years and intends to stay with us for the next 100 years and shareholders would pay taxes in between taking out capital and paying in capital. So that does not make a lot of sense. So we have a certain slack in the capital structure of our company for the reason of that shareholder structure. But I think that they add such a lot of value in terms of stability, long term thinking that I trust that we should all live with that certain slack. Then in terms of how to use that capital, I think we're happy to say that also what we invest organically compounds currently at 18%. The ZUKAY. So we are happy to underpin future organic growth. So we try really hard to keep this as capital light as possible. You've seen we've increased revenues by 25%, but kept risk weighted assets STABL. So you should not expect from us a change in our risk appetite. We will not unleash lending. We will not change the risk appetite that we have in our structured product business. But obviously, should revenues grow further, they will us for a little bit more risk weighted assets. And we keep an open eye on the M and A market. I mean, we have change criteria and unchanged preference. We would not go for many reasons, never go for big bet the bank merger the type of staff. But we're very happy to look into add on acquisitions both on the wealth management as well as on the asset managementinvestment side. And we see that many players, competitors are looking in how to right size or optimize and we have an open interest in these kind of dialogues. Then I'll hand over to Thomas for the other two questions. On relationship managers, We're a bit cautious sharing these numbers. And the reason is relatively simple, because from the net numbers that you see, it's very difficult to directly conclude what the net new money were. What because what you would have to look at the gross numbers. So the change in relationship managers. That's a key number to look at. And that's why we're also a little bit cautious to share those numbers and disclose those numbers. But it is in general, this is not super secret information, and we can look into that. The what is important though is we are measuring very cautiously the contribution from the relationship managers from the new relationship managers, which we count as up to 3 years. And we manage that we look at that very carefully month by month what the contribution to the overall net new money from new relationship managers is. On the cost side, yes, it's always possible to reduce costs. And of all of the exercises, all of the things that we do day to day, the simplest thing would be to just go in and slash costs. That normally comes at quite significant costs on the revenue side and also on the culture side, on the people side. Hence, we are very careful with this. So what we are currently focused on is since we still have attractive growth, we are currently focusing on growing and increasing the operating leverage of the company, I. E, put simply, costs need to grow less than the revenues. And this is where we are currently putting our effort in. There is a couple of things that are going on, looking into investments, how we deal with investments, how we look into return from investments, all of these things. And these are currently in development and being rolled out. And a couple of these initiatives we have already taken in the first half of the year. So that's how we deal with costs and that's how we think about costs. One has to be very, very careful to not go into this cost spiral, right, which will then, at the point in time, choke down the revenue growth. And on the exit margin, net interest income, yes, it's the same between the second half. What you have seen is the biggest drop we had in the U. S. Was in the first half. And basically, interest rates came down to Plusminus0. That is when a lot of the damage to our net interest income has happened, and you see it now in the year over year comparisons. What we do have is we don't think this will go much further down. We're also growing our credit book, as as you can see from the numbers, we have the loan growth has increased by 9%. That looks a lot in half a year, but that is still catch up because on average, our penetration of Lombard loans is still relatively low. And that is where we believe the net interest income margin there's a little bit of support on the net interest income margin. But for the time being, as Stenor said earlier, we don't see a massive increase in interest rates coming on quickly that would give us a lot of tailwind. So that's those are those would be my things on the question. Daniel, is that helpful to you? May I quickly follow-up on the cost question? And the question was also whether we have seen, let's say, a pickup in variable components of the costs in H1, which are directly linked to the top line like bonus accruals and whether you could give us some Color on this and then maybe a small follow-up on net new money and wealth management. Have you Can you maybe give us a bit of color on where exactly you have seen this money coming from? Where there in Have you benefited from, let's say, the struggles of some of your local competitors? Yes. I start with net new money and then can you talk on costs. So net new money, broadly diversified across all regions. So and by importance of our regions, just a quick reminder, Switzerland, then it's the German speaking part, then we do then have increased our Footprint in Italy, as you know, with a local presence. So that contributed to growth. And then from the markets far, it's predominantly the U. S, respectively, Eastern Europe and all regions were contributing to net new money. We don't base our strategy on the weaknesses of competitors that may change from time to time. We keep winning business from all sources of where clients have been or currently are, and we try to convince with our own strength. And on the costs, of course, Additional revenue growth never comes at 0 marginal cost. So there are some general cost items that occur. Exchange fees, Instructure products, all these kinds of things, they, of course, play a role. And then in terms of bonus accruals, we pay for performance. We do this. And but that has not changed. So the share of the variable costs has not increased over the last year. Okay. Very clear. Thanks a lot. Kurt. And for a change, we switch back to the chat channel where we have a question from Stefan Arnold. Where is Vontober seeing itself, sorry for that, in the area of sustainability in comparison to its competitors and what are the mid Term targets for asset management. For example, are you considering a potential expansion of this capability. So very interesting question and tough to answer. Let me try to kick off the answer with a provoking statement and say, no, in 5 or 10 years, you will not ask for a distinct disclosure of ESG assets anymore because it will have mainstream. That's actually a conviction we share a lot that ESG will just have to become part of each and every investment process because at least the risks coming from a different assessment on ESG criterias from capital markets, from society, from regulators, will force each and every capital allocator to consider these factors and these risks as part of its decision process. So that's the direction of travel we believe in. All the boutiques are integrating ESG GE into their investment processes to different degrees and to different in different dialects because we have different investment approaches in the boutiques, but that's a general direction of travel. What will kind of remain a specialty or a special focus this debt what is called impact. So where you where the investor deliberately asks for impact beyond pure financial returns. And this has been so far limited to private market investments. We think it will to a certain extent also Become Part of Liquid Market, Public Market Investing. And as I have mentioned, we're launching the first product that will also travel into this impact arena on top. Where do we see us? I mean, the competition is broad, is intense. I think what we can claim is a number of things. We have been early adopters. We have been early movers. We have a corporate setup that is credible. We are climate neutral for more than 10 years. We think long term, our shareholders have given away more than 10% of the company to a philanthropic trust. There's a lot of it in our DNA and in our long term orientation. We also think that true ESG investing almost by definition needs active approaches. Because if you limit yourself in the passive world to actually Just Check on documents and on disclosures and you give up the most important signal, which is capital allocation, selling or buying an issue of an issuer. I don't think that's the true interpretation of ESG investing. So we think we're privileged that we can actually put actions to the words that everybody is using. And therefore, we feel fine about the competitive position. But obviously, we are now in a phase where saying you do ESG is not bringing home any client. The answer has to be how you do it and how does this contribute to better investment results. And there the proof is Always in delivering the results going forward, but we are convinced that we're well positioned. Then we move back to the phone channel, and we have a question from Mediobanca. Please go ahead. Yes, morning. Thanks for the questions. I had one on costs and one more on crypto. On the expense, the 47% marginal costincome ratio or feels quite high when I'm talking about operating leverage. I was just wondering kind of the scope of planned investment over the next couple of years And whether this is front loading some of that or there is actually just so much you can potentially spend this cash on, but It's natural for you guys to be spending when you can when the revenues are good. And then secondly, on the crypto notes, Tracker Notes. There's been some regulatory guidance out there about risk weights on crypto holdings. They're going to be very, very high, it Seam. I don't know if this causes any issues to these kind of notes given that you've got a significant amount of cryptocurrency On balance sheet to back those trackers. I think these are both for you, Thomas. Yes. Look, on the 47,000,000, that's a marginal cost growth that I mentioned. Of course, we're going to continue to invest in the next 3 years. It's not necessarily that we have pulled a lot of investments forward. We're currently looking into this the FSR side. We do think, as you have heard Zeno say, there are great opportunities out there, both in the organic and in the inorganic space, and we're going to continue to drive this going forward, which is, by the way, one of the things that drives the cost income ratio, the marginal cost income ratio, which is where it's not that we are the cost side. We do have a lot of cost leakage, but we are very cautiously and very consider in a very considerate way investing and thinking about where to put our chips and where we should invest for the future, which will return revenues and growth in the longer Term Horizon. On crypto, we are aware of the consultation paper of the BIS consultation paper. We look into what this is going to happen to this. Crypto is an interesting business for us. We only do it for the time being in the area of structured products. So we provide access, And we shall see how this will all develop and how the regulatory space is going to develop on this. It's a consultation paper, so there's still quite some time left before they will translate into national regulation, and then we will see how we will deal with this. So that 47% isn't a bad number for you going forward? No, we don't think this is a bad number. We can do our investments. We can do what we have put out. And the Lighthouse does the lighthouse that we have formulated does include significant growth, top line growth. And top line growth these days, it's relatively you have to invest to get top line growth. Of course. Thank you. Thank you. Perfect. Thanks for the lots questions. Any other questions on any of the 2 channels? We have another one from Nicholas from Citi, please. Thank you. I can't resist on the fight of the apple since Mike, this is gone. Just two follow ups. Just two last questions on Asset Management, if I could, please. You referenced Healthy outlook for quant flows in multi asset. I mean, could you just talk a bit more generally on the outlook On the state of the asset management pipeline for new business. I guess also particularly in the context The equity performance has been pretty muted with, let's say, 36% of funds assets in the top 2 quartiles on a 3 year basis. And then the second one was Now we'll use State Street Alpha. Where are we on implementation integration there? What are you seeing in terms of functionality? Should we expect any additional efficiency gains or costs from this? So that will be the numbers. Thank you. Sorry, Nicholas, I we missed the second part. I got it up and until the pipeline of Asset Management and then you were quickly cut off. Sothe. Could you repeat the second part? Yes, of course. Can you hear me now? Yes, of course. Can you hear me now? Yes. Okay. Good. I'm back. So yes, at the beginning of the year, Von Total Asset Management announced it will use State Street Alpha as the new platform. Just where are we on implementation or integration of that? And what are you seeing in terms of the functionality? And should we expect any additional efficiency gains or costs from this? Or is that already in the numbers? Thank you. Good. So let me start on the flows. Then I comment where we are with State Street Alpha. And then I don't know if this is there already an if we can see this where in the cost, I would have to refer to our CFO, because I don't think that the investments are so big that you will see that the aggregated numbers, but I'll give for that over to our CFO. So asset management outlook on everything that is multi asset classes, I would say, stable to what we have seen in the first half year. So I don't see a lot of changes there to the pipeline. That's fine. Surprise to the upside could be that given the ever lower yields on standard multi asset class or standard fixed income mandates, dates, especially in the passive area, need more choose from overlay mandates that could be a booster in second half year, but we don't plan for that and we don't see it as of yet. Then fixed income, actually, we're still a bit low on the pipeline when it comes to credit linked strategies that have duration exposure. But we are very, very convinced that everything we do in on the distribution side and especially the quality of our products will lead to an increasing pipeline and to increasing flows going forward, where we see strong momentum and almost unmuted Fit Demand is everything that is multi strat flex, where we take away the duration interest rate allocation decision away from the client and do it within our building blocks X, there we see very strong momentum. On equity, that's the area to work. I have been very transparent on this. Again, we sell to very long term investors, very institutionally minded investors. We have especially on some of our emerging market then take sustainable products, huge pipelines that will convert going forward, but investors watch also try to time Styles. It's fine if multi asset class allocators try to time Styles. We as bottom up investors should never start to try to time styles and try to be everything to everybody. We'd rather live with a few months or a few quarters of muted flows. That may happen, but we will never jeopardize the credibility and the consistency of the investment process over the long term going forward. And if this leads to slower fund equity flows in H2, we will digest that. But can I just follow-up there with you, Zena, please? I understand the type of equity product is And as a fashion right now, given market momentum sorry, given where the markets are performing. But even so, the fact that So this equity fund, only 36% are in the top two quartiles versus same style funds, same Morningstar category. Is that not a concern? And I'm just therefore surprised to see you're getting very strong Floors from long term capital allocators or have I misunderstood that? Yes. We have this focus on bottom up quality tilted strategies. That's true. So in the current hypergrowth momentum market phase, this is not an easy situation. We have the challenge that these markets put on us, but we will not there is no intent to shift around in terms of styles or in terms of adding other Styles, we will stick to what we know best. And we see we also saw in the first half year very long term, the business mix has turned to become a little bit more institutional away from wholesale as many institutional allocators tend to have a more long term view than wholesale allocators. So we shifted a little bit the focus on the distribution side. But that's the only that's the thing we will do. What we are also looking into it, Geno, especially in emerging market, Asian markets, you will see a little bit of product innovation coming out of our boutique that allows us to invest earlier in promising companies, because that this something that clients ask for. So we will launch a separate dialect of 1 of the boutiques in order to be more open in these kind of market environments. That's how we tackle the situation. So we are aware of it. It's a challenge that everybody faces, who is in the quality bottom up corner. And we adopt to it to a degree that we refocus on more long term client segments. And we are in the process of launching a dialect in parallel that is more open to buy into younger and earlier moving companies. And for State Street Alpha, that is but one of our investment projects that we are driving. So we're not going to disclose any details on this one. The costs are not that outrageously high that it would Warranta disclosure. And the benefits will also be in line with the investments that we're taking. Progress so far is okay. There's always something that could go faster. Other things, we're ahead on track. It's a usual large project. The benefits will be around. There will be some cost benefits, but not something that you could look into in a valuation point of view, Butmore in that is one of our cost containments. It's part of digitalizing our infrastructure. And there will be also benefits, of course, by renovating the whole infrastructure, data and all the things that Zeno mentioned earlier. On the tech side, we have a completely different grip of the business with all the information that we get out of Alpha in a consistent and efficient way. Understood. Thank you very much. Thank you, Nicholas. Any other questions? So we have another question from Jorg Krone. Net new money was over target, but weaker than the 2 previous half years. Can you shed a light on the shift in Asset Management and Wealth Management over time? I'm happy to take this directly. We have an aggregated target of 4% to 6%. We think that's best practice in the industry. We have over delivered against this target for 1 or 2 years. We had always been very clear that this will not stay like this forever. We have now in a half year where the Q1 was very challenged, 1, due to corona second, due to the interest rate movements that kept off a lot of investment decisions. Nevertheless, we have delivered at the upper end of our net new money organic growth. So I think through the cycle, we are fine. And we're also aware that decisions and priorities of clients between asset management and wealth management channels do shift. That's one of the reason why we think that the combined model of looking after private clients and institution clients makes a lot of sense because it helps us to feed and nurture the different investment styles through their own life cycle and show to the capital market more stable flows than if we would go to 1 single client segment. Then we have another follow-up question from Daniel Rekki again from Octavian. Please, Daniel, go ahead. Hello. Thanks a lot and Really, and it's a great question. But may I ask you to quickly repeat your comment on the margin impact of the bundling of the Financial Advisory Services with ultrahigh net worth individual catering Was this one basis points on the nonrecurring income margin? Is this true? Thomas, I think that's a question in your camp. Sorry, can you then repeat? That was in which context? In the context of the Wealth Management gross margin, you commented about The impact of the bundling of the ultra high net worth and financial It wasn't the bundling. I'm sorry. There wasn't It wasn't the bundling. I said 1.5 basis points come from the fact that on ultrahigh, we're gaining tractions and the margins on ultrahigh our by default slightly lower. And the dilutive effect it had on the margin between the first half of last year And the first half of this year was 1.5 basis points. That was my comment. Okay. But this was on recurring or is this across Margin. Look, as we grow the ultrahigh business, we shall see how this goes. That is in any way stable and is recurring. So I don't see yet how we will get back on this one. But then I've already said earlier that what we see is when a client funds its account, it takes roughly 9 months until we see the ROA up to a certain level, 9 to 12 months on average. That is what we have seen in the last for the if you look at our clients over the last 3 years, those are the results until they're fully invested. So we would have to wait a little bit longer to see how this goes and what the ultimate impact of this then will be. Okay. Thanks a lot. Good. Thank you very much. I currently see no other questions, neither on the chat channel nor on the phone. Then I would thank you all for your strong interest in Vontobel. We enjoyed the conversation. Thank you for the interest in our company, and we wish you all a successful day. Thank you. Thank you.