Earnings Call: H2 2020

Feb 11, 2021

Welcome everybody to the presentation of Frontobel's 2020 Full Year Numbers. A warm welcome from Thomas Heinzel, our CFO and myself. As usually, I will kick off With a few highlights, but also with an update on strategy, then Thomas will lead us in detail through the numbers, And I will be back with a short outlook. After that, we will obviously look forward to the Q and A session there are 2 channels in this very special environment that we all face. You can either send us questions through the chat functions over the stream or also through voice over the usual call infrastructure. Let me Turn to Page 3 of our investor presentation. The number of 2020 reflect Our business model, they reflect our strategy and they reflect the environment that we needed to navigate in the interest of our clients and of our firm. We're very happy to report that the trust of clients in Fontabble has increased further, reflecting our strong investment pedigree, reflecting the strong client experience and our strong focus on doing everything always with one goal in mind adding value to the investments of our clients. We have record net inflow of new money, Very strong across all segments and across all asset classes. We have Strong pretax profit of 5% growth. If we would do this on a constant currency basis, it would be up 14%. Very stable high quality operating income. The share of recurring income in our commission income amounts to 86%, A solid and resilient balance sheet, which is also testimony to the successful navigation of the biggest V shape In history, in H1, despite the restrictions of COVID, we made significant strategic progress and progressed towards the goals of our lighthouse. And on the back of that, the Board will propose to the General Assembly, a dividend of €2.25 marking the 10th consecutive year of stable or rising Dividends. A few more facts and figures. Advised client assets up 10% amounting to €248,200,000,000 Assets under management, the key driver going forward for fee income, up 10% as well and at a new record level of CHF220 1,000,000,000. Net new money annualized growth rate 7.4 percent above our own target of 4% to 6% and comparing we think favorably in relation to the industry. Operating income flattish, Pre tax profit up 5%, also after one offs up 5%, On constant currency basis up 14%, a very strong and clear proof point for the operational success of our focused investment firm strategy. Group net profit after tax slightly down by 2%, flattish at €259,000,000 The dividend against a strong backdrop in capital ratios 13.8% and Tier 1 of 19.8 percent, a growing capital base and reflecting also sensible return on equity. What did we do and move forward in terms of strategy. I reflect the lighthouse strategy that we also have shared in the Investor Day late in the last year. We look are convinced that the environment remains supportive for demand in our capabilities and reflects the increasing need for professional advice and professional solutions based on active asset management. We continue to focus on the long term. So also in a year Of transition and in a year of COVID, we have continued to invest and we have continued to remain very focused on the long term. We are convinced that the 4 key levers for success for our clients and for our firm are the two sides of the same coin, client Centricity and being investment led at the same time, use technology to bring our services to each and every touch point that the clients wish and building on the one of the strongest talent bases in the industry. We have moved into our new setup with putting client centricity and investment led at the core of the firm, moved to that collaborative working mode and we are happy with the related progress. We are on the first iteration With 2 year targets for our lighthouse journey, we have clearly identified priorities and we have made progress against them. We used the backdrop of COVID as everybody as the whole industry to move towards even better digital experience. We could profit from the strong technical backbone we already had and are now able to onboard clients digitally across markets and across segments. We have received and we are very happy and proud about that strong testimony and endorsements for the quality of our service and the quality of our Products being named one of the leading wealth managers in our key market Germany being named the best So it's an asset management company for sustainable investing, having a strong endorsement in the U. US institutional asset manager market as the best global equity manager and in the very competitive U. K. Pension award ceremony, we were endorsed both for Multi Asset as well as for Equity Manager of the Year. We kept our view on the long term and invested into the tipping points for future growth. We have significantly increased the investment teams focused on return sources of the future predominantly with a nation or thematic backdrop. We have added boots on the ground that focus on our key growth areas, be it global banks, Asia and the U. S. We have continued to use and leverage technology. Our cloud based big data analytics platform is not only up and running. We have successfully brought Clear and concrete use cases into operation that significantly enhance the client experience and our ability to deliver the edge to our clients. Very important to us as well, the endorsements from our own people, we regularly pulse their feedback. And as one of the very few financial services company, we have made it to the high performing norm category of the global renowned service of Towers, Willis, Watson. We're very happy with that because also in a technology driven world, Men will continue to make the difference. At the core of our firm are our product and investment capabilities. Our advised client assets grew by 10% to €248,000,000,000 They are very well diversified across asset classes, across our boutiques and across our capabilities. Our assets under management, the core driver of future revenues, up by 10% as well, Record new level €220,000,000,000 with an increasing focus on sustainability with more than 50% with integrated ESG or outright sustainability approaches. How did we do in terms of organic growth? What you see to the left to give a little bit more color than just a highlight of 7% annualized growth, what you see to the left is us doing against the competition in European cross border fund flows in active management. And what you see is that Come sun or come rain in very different environments, we deliver organic growth against the peers and against the market. And that is the proof point that to the stability and the long term orientation of our strategy, only because we are diversified across boutiques, only because we have a strong range of very competitive products in different asset classes And only because we tip in different segments and in different markets can we deliver diversified resilient repeatable growth. So we're very happy with that. The strategy in terms of mapping client centricity and investment led and Translating this into added value for our clients and into organic growth for our firm is clearly working. Obviously, 2020 with on the one side the biggest V shape in history and on the other side Slightly evaluated valuation for certain types of momentum stocks has not been an easy backdrop for a fundamental high conviction active asset manager. Our long term track records are fine, stable, resilient and a strong basis for existing and future business. However, it is worth to deep dive a little bit into the different asset classes. So within equity, the current momentum trend is a challenge to fundamental Bottom up managers just to give you a kind of a number in January alone when you look at 3rd Nation Markets' momentum style has outperformed ValueStine by a couple of 100 basis points. These are massive shifts, one could even call them melt ups in valuation categories. However, we are confident that on the one side, Clients understand the long term orientation of our investment approaches. And on the other side, we have a range of products either from ESG or to thematic that are very well geared towards the future most promising sources of returns be they thematic impact or Asian. And as you see, our some of our key products do extremely well. Multi asset, a challenging year in 2020, but we have delivered especially also our 3 alpha approach that is at the core of our wealth management advice and wealth management offering has performed well and has delivered also well against the competition. We also think that this record low yield environment requires very active approaches in multi asset going forward, and we think we are well equipped and well positioned. Fixed income had a Very strong start into 2020 and then the biggest V shape in history came along. That was obviously a setback for everybody in the fixed income industry and that has also muted the fixed income flows in H2. And you can clearly see that in our numbers and that is perfectly understandable that allocators and clients paused in allocating towards credit driven fixed income strategies. However, I'm very happy to report that all Our strategies have recovered. Not only have they all delivered positive absolute returns, but as we speak, we are ahead of benchmark again in all strategies. And we think the lineup in our fixed income boutiques is very strong and promising going forward. We also think that this is one of the key challenges for our investors going forward. And I would say it starts to amount to a problem for society in general. Just two facts I want to share with you. Out of the global fixed income universe, 30% yields at the negative rate. Out of the expected return, 20 years ago, 70% could be harvested by almost everybody by buying blindly risk free treasury yields. Today, This is only 20% of the expected return. The bulk of the expected return is complex and obviously more riskier credit spread linked expected return. Every fixed income investor needs a partner with a professional global active approach. We have the people, we have the lineup, we have the products, we have the track record. We also continued to use technology in order to reach directly the self guided end investor who is on the rise in line with many trends we have known now for years, ever more tailoring, ever more individualization, ever more instantaneous interaction between clients and supplier. We can deploy a very strong dedicated and sophisticated technology platform and that has translated into And that has translated into growing market shares in each and every market, partly also again a testimony to our loyalty to clients in H1 providing consistent liquidity and marketing. We think that this is a very strong starting point to further build a digital business for self guided investors. This was my update on strategy. I gladly hand over to Thomas Heinzl, our CFO for more details on the numbers. Thank you very much, and welcome, everyone. I'll quickly run you through the numbers. The we start with the record advice client assets, as you can see. And as Zeno has mentioned already, the growth rates were around 10%, Both for advice client assets and a little bit more for assets under management, which gives us a track record over the last 5 years of 12% per annum growth. If you decompose where the growth has been coming from, what you will find is the largest chunk is net new money with €14,800,000,000 Then we had some FX headwinds of €7,000,000,000 and performance contributed another €11,000,000,000 The other things were smaller Bookings and technical adjustments, so that led us to the €248,000,000,000 the record advised client asset numbers. If we lift the bonnet a little bit and look below, what you can see here is there is a positive contribution both on assets under management and net new money From all of the client units and all of the asset classes. Assets under management have increased by per client unit and also by asset class, every asset class has increased by minimum 7%. On the net new money, I would like to mention the noteworthy improvement of wealth management that had last year roughly €100,000,000 and has improved to €3,800,000,000 Also, platforms and services has doubled They are net new money. On the asset class, what you can see is equity swung back to positive inflows. And the fixed on the fixed income side, Zeno has already explained, fixed income has slowed down in the second half of the year, But what we now see is demand step by step returning for the next year. If we turn to the P and L, headline numbers across the P and L have been overall stable, with the operating income flat, Profit before tax up 5%, group net profit down 2% and the costincome ratio has improved from 75.6% to 74%. However, what we have to keep in mind is there are 3 important effects that I will talk About in the coming slides, which is number 1, we had quite some headwind from foreign exchange effects over the course of the year. Secondly, The tax rate has increased. And thirdly, the sale of the brokerage business, which we haven't backward adjusted and costed €16,000,000 on the operating income line over this year. Let me make some remarks on the tax side. Taxes rose to 19.2%, while last year, they were at 13.6%. That is almost entirely driven by the fact that we had one off effects In 2019 tax line. So if we calculate back with the 2020 number, the 2019 tax rates, we would end up at 18.8%. So the tax rate increase Like for like would have been around 0.4%. That cost €20,000,000 on the tax on the group net profit. If you look into the revenues a little bit more and look into the effects here, what happened, Why revenues are stable? We what you will see is we have as I mentioned earlier, we have a €40,000,000 impact from discontinued business, which is the brokerage business. And then we had quite significant headwinds from currencies. As you may know, 32% of our revenues are in U. S. Dollar. And the U. S. Dollar year on year has moved from 0.97 to 0.88 Versus the Swiss francs, that's a 20% decline. Even on average, it's a 5% decline. And if we adjust for that and adjust for the other currencies, we would have a revenue increase that is more in the range of +5%. Let me explain a bit how that worked using the commission income on the left hand side as an example. What happened throughout of the year is in the 1st part of the year, we had this massive spike down Where revenues got where revenues obviously got affected, assets under management got affected. And then in the second half of the year, when it was a little bit flat and then coming up Towards the year end, we had the U. S. Dollar going down significantly. So if you look into that, we had For the for our revenues, we had a U shaped pattern over the course of the year. You could also call it a bathtub. The assets under management year end 2019 were €199,000,000,000 The assets under management year end 2020 We're €220,000,000,000 Yet, if you look at the average assets under management on a monthly basis, we would be at €198,000,000,000 So that is what happened. We had this dive. And then towards year end, it came up again up to €22,000,000,000 in assets under management. The good news about this is, €22,000,000,000 in assets under management. The good news about this is this gives us a very good starting position for the New Year. The whole picture that you see here, it's worth mentioning a couple of topics around the revenue dynamics that you see here. First of all, 86% of our commission income is recurring income. So it's mostly driven by assets under management. The trading income, as you can see, is also up 11% due to increased client trading, but also because we have been Very cautious on risk and did a lot of hedging, in particular, in the first half of the year. And the result of this revenue is a consequence Of deliberate decisions to be on the client side and to be cautious on risks. What's important to note is clients for us are partners, they are not Counterparties on the other side of the table, which this revenue dynamic reflects. On the margin side, we're satisfied with the margin development in an overall high margin pressure environment. Let me quickly comment on Asset Management first. On Asset Management, roughly half of the margin development of this minus 3 basis points has been driven by mix effects, where over the course of the year, fixed income had a higher share in the total revenue pool. The performance fees, as you can see, contributed another basis points. And the last thing that I wanted to mention is that we have as asset management is Increasingly successful. We get larger and larger tickets from clients, which basically means, of course, The pricing is adjusted, but we are still staying within the pricing framework. So we're very disciplined on pricing. And hence, we want to continue with our objective that we have stated before that the ROA on asset management is intended to be above 40 basis points. On platforms and services, what's important and wealth management, what's important to note here and what you see here very clearly is the interest income, which is declining since many years and is continuing to decline given the interest rate environment and the lower I mean, the lower for longer Framework that we have discussed earlier. Let me move to the bottom line and the FX impact. What you will see here is €307,000,000 was the pretax profit in 2019 and €321,000,000 is the tax profit in 2020, that's a 5% increase. Now if we correct for one offs and for FX, we get the following results. 1 offs Basically, our wash on both sides in 2019 and in 2020. However, what we have done is we have taken the 2019 FX rates and have calculated the full P and L full 2020 P and L with these FX rates. What you will find then is a €29,000,000 difference coming from currency effects. Now let me remind you a bit How we are how our revenue and cost setup works. We have roughly 41% Of our revenues are in Swiss francs versus 77% of our costs. That basically means a strong Swiss francs like other general export exporting companies in Switzerland generally hurt us. So the U. S. Dollar is 32% of revenues and it is 88% of the costs. Same with Euro. Euro is 14% of the revenues and 8% of the costs. So from this €29,000,000 FX impact that you can see here, the U. S. Dollar alone Explains €20,000,000 decline. Euro is €4,000,000 British pound would be €3,000,000 and the rest are smaller things. So if you correct for the currencies and if you look at the underlying operating pretax profit growth that the company has developed, has created, we would see we would look at the 14% increase in the just in the pretax profit. The costincome ratio as well. The costincome ratio, as we said earlier, 74.1 percent. If we calculate At constant currency, it would be more around 40 72.3%. Now this is still above the target, and we are looking into the costs. But as we have said in other times and earlier, we're very careful to not sacrifice growth opportunities for the sake of cost management. The balance sheet, we have a strong and resilient balance sheet and capital ratios. On average, Every year, we generate roughly €125,000,000 of equity after dividend. This year, it was €78,000,000 And the key driver is the revaluation 24 Asset Management minority stake, which we where we have adjusted the valuation of 100 From €114,000,000 to €163,000,000 That basically clearly underlines the success of this acquisition. The CET1 ratio increased the CET1 capital increased by 8% to a little bit more than €1,000,000,000 And the risk weighted assets increased by 6%. That has been driven by credit risk charges, which in turn include the risk weighted assets for our crypto products. What I want to mention here as well is over this year, we have seen during the Whole market stress, we have seen no credit losses on the Lombard book. We have also not seen credit losses in other areas, which is a further testimony to a very cautious risk stance and to our resilience in the balance sheet. The capital ratios of 13.8% and 19.8% for CET1 and total capital are handsomely above the targets of the regulatory targets of 7.8% 12 And our internal targets of 12% 16%. The leverage ratio stands at 4.6 Percent. We also wanted to highlight the value creation. The return on equity, the 13.3% It's below the target that we have, 14%, but it still is significantly above our cost of equity, which will be this year around 8% to 9%. You look at the history over the last couple of years, it has always been between 8% 9%. I think 2019 was a bit low in that respect. We're focusing on capital quite strictly. We have established an improved capital management framework over the course of the year. And we will roll that out in 2021 and use that for things like product profitability, product design, pricing and so on and so on. The dividend remains at CHF2.25 per share. And with that, as Zeno mentioned earlier as well, we have 10 years Rising of stable dividends. That supports our long term view in value management and in dividend policy to Ensure an attractive shareholder value generation over a period of time and not just quarter by quarter. So if I may summary the KPIs, the business KPIs again. I would like to keep in mind the three effects that I have mentioned: the brokerage business That is not part of the revenues anymore, the FX headwinds that we had and the tax normalization that we also had to take in 2020. Net new money growth 7.4 percent handsomely above the target. Top line growth is 0.3% below. If we would adjust, It would be quite in the middle of the range. Pretax profit 4.7 percent also again quite significantly impacted by the FX headwinds that we had and the net profit growth where we have a couple of all of the three effects that we have mentioned earlier. The costincome ratio at 74.1 is a step in the right direction, but it's still not in at 72. So there's quite some ways to go. On the return on equity, as I mentioned earlier, above 40%. It is return on equity is above the capital costs, but we would like to be higher and we would bring that back to 14. Capital ratios, payout ratios and dividends we have discussed. I think the balance sheet is solid and CET1 ratio and total capital ratio are Above all external and internal targets. With that, I hand over back to you, Timo. Thank you, Thomas. So I'd conclude with the outlook and a few thoughts on the the industry and where this industry may be going. So we expect 'twenty one to continue. Again, as we have discussed many times, COVID is not A game changer, our U-turn COVID is simply an accelerator of trends that have already been here. So we expect to have a more regional, More heterogeneous world, we expect to see continuous emerging of new client groups. We will see digitization really becoming Structural and impactful, just a quick data point in the U. S. Now more people have a digital e wallet on their phone than they have a classic bank account. And going forward, the importance of Asian markets for the harvesting of alpha will become ever more important as their relative weight in global market capitalization will increase. What do we see in the industry as responses to that? Many people struggle to build multichannel distribution models as obviously this intermediation And the different dynamics in the group highlight that this is a very sensible thing to do, and you see this both on the M and A side as well as on the organic buildout side. And what we see as well is that driven by the ever lower yield environment from central banks, Global banks are losing deposits month over month, and they answer to that to build a very strong affluent and retail wealth management offering and global banks have actually become one of the biggest clients for professional asset management services. How do we see Fontabble to be positioned against that? Very well. 1st of all, we had already trust always trusted in this multi segment distribution efforts. So we were always pure in the capabilities and in the commitment to clients' interest, But we were always believers that we needed to combine different client segments and different client needs, anchoring into the same capabilities. So that focus on to creating clients wealth and on the lined and recurring fee models will pay off. We also believe that this combination of Client experience and investment led will prove successful in this environment, and we feel very well positioned from a technology perspective. What have we Accelerated or improved during 2020, we are building and expanding investment capabilities that are with boots on the ground In Asia, in order to underpin the sourcing of Alpha from this region, we have additional local presences. We opened up in Japan. We added presence in Milan, so we use also these challenging environments to show strength and to continue to build. And we have a dedicated partnering strategies with these aforementioned global banks. How did we kick off 'twenty one? We kicked it off very well. Had a strong start into the year. We see a growing demand for professional investment solutions and for professional advice. No surprise in this challenging investment environment. We are convinced that distinctive high quality offerings will make the difference. We continue to see a lot of potential for the further deployment of technology. And while we may see or we expect to see in Q1, a certain slowdown of the exit strategy of developed markets out of the corona crisis. We think it's only A shift in timing, but it will not change the fact that science will help developed economies to exit the restricted corona environments in Q2 and Q3. So we remain committed to use our strengths and to continue to build our strengths to deliver added value to our clients and to deliver sound and robust organic growth based on client orientation, based on strong performance. We have the investment products and the structured solutions products lined up. We have the next generation of products with Return sources from thematic, from ESG, from Asia are well ahead and will be available to our clients through the course of 'twenty one. We have dedicated and focused growth opportunities on the distribution side, and we will continue to deploy our strengths In technology, we will remain a long term step by step risk aware actor, but we are committed to deliver organic growth going forward. With that, we have finished Our points that we wanted to highlight about 2020 numbers and 2020 results, And we are most happy to have your questions now. Ladies and gentlemen, again, 2 channels. I hope We will be able to handle the related technology either the channel on the stream for text or You can ask for the voice directly on the call. The floor is yours. The I have two questions, Valerie, please. The first one is on investments. So you clearly have helped So the strategic plan or will you increase investments? If you would increase them, can you give us a framework and how to think about how much of the incremental revenues could be allocated Two additional investments. That's the first question. The second question is on wealth management margin, now less than 70 Those are my questions. Thank you. Yes. Thank you very much, Nicolas. As always, very diligent and detailed. We will work hard to get through all the Five questions. Thomas, may I ask you then to go after the Wealth Management margin? And I will try to tackle a few of the others. So In terms of marginal investments, if markets remain resilient, we have actually not hold up any significant investments In 2020, so we took the long term view and say despite COVID, we continue at the speed we wanted to continue. And The limitation is more the we feel more constrained by the execution capability of the organization, which cannot handle everything in parallel. So we have not the list of backlogged investments that we would trigger if revenues stay where they are. The only marginal impact that you should see is obviously on personal costs and what you perhaps would see is a Bit of an uptick in marketing fees, but that would be probably not meaningful. So there is not a backlog. So we should actually then profit from marginal revenues going forward. However, I would like to this was not your question, but nevertheless I quickly repeat, We would also be shy on cutting back investments if markets would not stay fully resilient as we are convinced of the soundness of our mid- to long term strategy. Then on the asset management margin side, hard to quantify, perhaps a basis point, something in that area that could be triggered by this ever larger demand pattern. Then on performance fee, perhaps first point, we are not the big performance fee house. So even in the I think our record performance fee number was €11,000,000 against €500,000,000 revenues in Asset Management. So this is a very smallish Part of our revenues in all years, actually the key points or the key sources are fixed income products And they had not yet reached the high watermarks after the V shape in March. So that was actually the key driver despite the strong recovery and the strong rebound of markets and also sensible catch up of performance. It will take 'twenty one to get back into the high watermarks. We came very close to them in 2020, but we didn't fully make them. So that's the main reason. On digital investing, no, that's purely client driven. We try to keep the again, we only allocate as much capital to the trading back end behind that Business that we need in order to provide quoting and liquidity, the expected return target to traders from the open position is 0, all of that is service oriented to clients. What was obviously the case that hedging costs in H1 were higher than in H2, But we've seen as we can document with the market shares, we have seen a strong uptick of winning business in the second half year. And on the Wealth Management margin, this is John from you. Wealth Management margin, the margin was indeed In the second half, that is driven in essence by 3 things. First of all, net interest income further went down as you can see from the numbers from the spreadsheet that we have published. Secondly, also the trading fees receded a bit. While we don't have a big chunk of trading fees, Of course, March April had higher trading fees and they have receded a bit towards the end of the year. And the last thing is, If net new money comes in, which came in at the end of the quarter 3 and over quarter 4, that normally goes On the balance sheet and then stays on the balance sheet and then people start to invest step by step. That explains why you see a little bit Of a dilution because the revenues are not immediately coming once we see the inflows. They're not there at day 1. We normally work hard in that direction, But it takes a little bit of time, money arrives. And then we figure it out with our clients what we are going to do and how we're going to invest the money. Those are the three reasons. Perfect. Then we have another question from the call from Daniel from Octavian. Please go ahead. Good morning. Thanks a lot for the question. And just for A question regarding your decision to close down the brokerage business and the numbers you provided. Obviously, When I got you right, you lost €16,000,000 on the top line €14,000,000 on the pretax profit. So you were only able To take up €2,000,000 of the costs related to the brokerage business whereas you lost basically all of the revenues, Is there any plan to reduce this, let's say, cost block to the coverage business further? Or what is The plan going forward with this business Sorry, I think that was a miss Maybe I can correct. What we said is the €16,000,000 is top line. We did not calculate any bottom line or pretax profit impact of the brokerage business. We did not do this. We just said on the top line, it was €16,000,000 that we have less from discontinuing the business versus the last year. But what we can confirm sorry, Daniel, to interrupt you. Sorry for that. We have provided guidance to the impact of The alignment of our business and our IR department will be happy to resend that guidance from 1.5 years ago, And we are pretty much in line to what we have announced then. So no significant bottom line impact, and we were able to replace the top line loss. Okay. And maybe a general question on the cost outlook. What should we expect In terms of, let's say, cost inflation for 2021, given you obviously are investing into our different areas. I think the key investments in terms of General expenses, I think you should not much of a change going forward. In terms of FTEs, you've seen the numbers. And obviously, we keep investing in high talent, but that's about it. Thomas, have you more Better guidance on this? We continue to work towards the 72% cost income stated target over the course of the year, Right. What we're not doing and what we don't have on the plan is an aggressive cost program. But what we do is we will very cautiously looking to the costs as the revenue situation develops over the course of the year. Good. We have the first question from the Channel and perhaps I read it out loud to everybody. Does that make sense? So that also the people on the call have the same Information, so we have one question from Christian Harding. Dear both, what role do you see for your house in the ongoing and rapidly Accelerating consolidation in the Swiss Wealth Management, particularly the digitization push after COVID-nineteen that many participants will not be able to afford. Well, we see us clearly as one of the winner of this And we see our house well positioned in terms of capabilities, brand, reputation, trust, attractiveness to host the talent that is needed to look after wealth mentioned clients and also in terms of the digital capabilities we need to deliver. However, I don't know if the whole consolidation process goes truly through M and A. I think we will see a lot of silent consolidation, people simply going out of business, platform losing allure, Teams, clients moving in terms of M and A, we would have the ability to execute, but I'm very clear, our selectivity has only increased after we have done a very Sensible transaction with which gave us a national footprint, which gave us additional scale. We are happy with what we have that we've built the bridge into Italy with Fintur. We added a few books on the U. S. Side. So We are actually fine. We are happy to execute on M and A, but the pure cost synergy case, We would be very critical in our analysis how to look at it. However, what we increasingly see in is simply that Market shares are redistributed and client move around because they don't get the service that they need to tackle the future, be it digital touch points, be it professional investment advice at every place, and we are confident to be well positioned. Okay. We have another question from the call From Neves from UBS, please go ahead. Hi, good morning and thank you for your presentation. I have three questions, please. Firstly, on your clients revenue. A strong start into 2021. I just wondering if you could clarify what exactly you meant by that, maybe touching on The main business lines. And I was wondering if you could share your views on the current environment and how 2021 is shaping up Specifically in structured products. Secondly, wealth management. Wealth management hiring. You obviously showed net new hiring again in the second half of last year. I think you added about 8 RMs in the second half. If you could give us a sense what pace of hiring should we expect for 2021, maybe 2022 And whether this could be another major contributor to inflows going forward. And thirdly, just making sure I understood correctly. I think Thomas mentioned that you have slightly enhanced or changed the capital management framework last year. Just wanted to see if that is correct. And if so, if you could elaborate a little bit more how exactly this has changed? Thank you. Yes. Thank you very much. So I will try to kick off with the first one and then obviously, capital management. Thomas will deep dive. And if you have more numbers on VM hiring going forward, I'll gladly leave you this one So starting to 2021 was obviously yes, it was a strong start. Obviously, as we can all do the numbers, we have Strong resilient margins, and we have €220,000,000,000 in assets under management, and then we can all do the math. So that was a very Strong start. We saw also pretty strong activities from clients to take allocation decisions, especially on the private client business, on the self guided investor side who made their decisions in order to allocate their wealth towards the topics of 'twenty one. We see Also some on the self guided investor side, many kind of topics that dominated The minds of investors, which were interesting to interact with clients. What we also see is Pretty strong interaction with institutional clients on how to change their asset allocation and is it time to return to credit, Is it time to adjust on the fixed income side? What will happen? Big themes on impact, semantic, ESG. So there we see a lot of client interaction, not yet so much decisions, but actually our the diaries of our People are full and client interaction is at a very high level. So we have seen actually broad Engagement levels across all segments in the 1st weeks. Now let's see how this continues now into February March, but so far we are fine. Does this help for the Some more color on the kick off into 2021? It does, absolutely. Then let me take on Wealth Management. The Of 8 people, what you have to understand, of course, is that it is net numbers and not gross numbers. So there's always a bit of a churn. All in all, we want to accelerate hiring again, and we're striving to get to anywhere between 2% and 4% of net new money growth out of hiring new relationship managers, integrating them into the firm and bringing new money in. So that's how we look at. We look into what's the net new money contribution and that's how we back calculate how many new relationship managers We are looking for and we want to onboard. So I can't give you the exact number yet. That depends on many factors how successful they are in bringing the money in, But that's how we do it. We hire the people and we track very, very closely how the inflows are working. And on the last question, the enhanced capital management What we are going to do so what we have started to do is besides the amount of equity that any of our product Eats up. We also look into other things driven by net stable funding ratio requirements, liquidity requirements and so on. We have developed A capital allocation framework where we're focusing on allocating capital to products and to clients a very granular level, so that we can understand profitability very accurately and we can use that then to steer the bank Throughout all of the major decisions that we make. Give you an example. We design a new product. We want to be in a position where we can immediately say, So how much equity, how much liquidity does this product eat up? And can we structure it a bit differently to achieve the same outcome, But be even more efficient on the balance sheet. That's the kind of decisions that we take. We will also rework our pricing frameworks for our products to take this into account. So in essence, what we want to have is an after capital profitability for all key products on a granular level And then also, of course, aggregate it up to clients and aggregate that up to relationship managers And to functions through legal entities and so on and so on. That's what we want to do this year. Thank you very much. That was super helpful. Cool. Any other questions on the chat or on the call? And I see also no questions on the channel. Let's check with the last update that we don't miss anybody. We do not. Then I would like to thank everybody for the interest In von Tobel and for your time, thank you for the engaging discussion and we wish you all a successful day. Thank you. Thank you very much.