Anima Holding SpA (ANIM) Earnings Call Transcript & Summary

Good afternoon. This is Chorus Call conference operator. Welcome, and thank you for joining the Anima Holding 9 Months 2020 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Alessandro Melzi D'Eril, CEO of Anima Holding. Please go ahead, sir.

Thank you very much, and hi to everybody. Thank you for attending our 9 months conference call result. As always, I would go through our presentation, starting from Page 4. Some highlight of our 9-month results. We reached end of September, EUR 188 billion of assets, with EUR 1.2 billion of net new money in the 9 months, excluding Class I mandates, plus 5% on total revenues if compared to 2019 and plus 7% in terms of EBITDA, reaching EUR 207 million. EUR 103 million of net income. I believe that these are solid results through a market -- strong market volatility we experienced this year. We demonstrated a strong resilience in our top line with an enhanced cost control already demonstrated for the years. The company is generating a large amount of cash -- continues to generate large amount of cash, enabling dividend payments and keeping -- leaving a strong strategic flexibility for the group. We have a strong position with our strategic partners, and we believe that we are well positioned in the changing banking industry. Page 5, AUM evolution. As I mentioned before, we -- within the first 9 months, we reached EUR 1.2 billion of net new money. This is made by EUR 2.5 billion of net-net inflows on the institutional landscape, while we experienced EUR 1.3 billion of outflows on the retail. We also communicated to the market this morning the results of October that are negative by EUR 700 million. These are made by EUR 0.5 billion of outflows on the institutional segment. To comment on that, the retail continues to be quite difficult in this period. We -- then we'll get back to it anyway on the retail side, the conservative approach of the client base, we are seeing the results of that. Institutional is a choppy business. I think that we have to look at the institutional business not by month by month. We continue to keep a very positive outlook in this segment, notwithstanding the exit of 2 clients that were booked in this market. Page 6, shows our business by segment. 28% of our assets under retail, 72% on the institutional. Out of our -- of the 28% of AUM on the retail side, 88% are focused on our strategic -- key strategic planners, BAMI, BMPS, Creval and Banca Popolare di Puglia e Basilicata. Page 7, our performance notwithstanding low or negative interest rates and the conservative approach of our client base. We manage -- we continue to manage and to deliver better-than-market performances even if negative, of course, considering the negative performance of the market this year. I will go directly through to numbers, Page 9. Some highlight of our consolidated P&L, as always. Plus 5% of revenues year-on-year, also thanks to the contribution of performance fees. Plus 7% on EBITDA, reaching EUR 207 million. This is due -- is made by the increase of revenues and decrease on costs strictly under control all through this period. Adjusted net income, plus 5% if compared to last year, where we had the -- some tax -- positive tax effect, one-off tax effect. Looking at the margins, the decrease in margins, as we already explained in the first 6 months of the year conference call. The decrease is mainly attributable to absence of placement fees or, let's say, the strong decrease in placement fees this year if compared to last year due to the zeroing of the activity of the banks for almost 3 months during the health emergency beginning of the year. Then we will see what -- how will the banks will react during this new lockdown that we are going to experience in the next few months. And then the market effect, of course, affected our assets given that the decrease in equity and flexible, so the assets where we have more profitability brought down our average profitability. In terms of cost income, cost income popular revenues is approximately 23% -- less than 23%. Ex performance fees almost 27%, continue to be best-in-class on this topic. Expense ratio at a minimum of 4.5 bps on AUM -- on average AUM. Page 10. Net fees. On the left side of the page, we showed, of course, a rebound in Q3 even if still below our run rate also because of the lower-than-average contribution of placement fees, considering also the fact that the Q3, of course, we had August that is typically a month where we have less gross activity. On the right side of the page, personnel expense season, well under control. We continue to invest moreover on the internal research team and the -- and our newly authorized AIF company, alternative company. But notwithstanding investments, we have been able to keep strictly under control this cost. Page 11, consolidated net financial position. The strong cash generation I was mentioning before enabled this year in Q1 to have more than EUR 30 million of buyback. EUR 73 million dividends in Q2; bond buyback, EUR 16 million; and EUR 35 million bank loan reduction repayment always in Q2. Page 13. I would like -- we put the page in the presentation to remind the key feature of our key strategic partnership because I believe that is very -- is something that the market is asking a lot in this period. So we have 5 main partnerships, on top of that, we have all our other -- the other relationships with other institutional and retail networks. But with these partnerships, the key feature, starting from the expiration date, we have Credito Valtellinese, Banca Popolare di Puglia e Basilicata, 2027; Monte dei Paschi, 2030; Banco BPM; and Poste Italiane, 2033. Poste Italiane is a little different because -- just to remind you that is a partnership on institutional business bonded retail. We have exclusive preferential access on all the banking networks. This means that we have access to the network. We can make training, joint steering committee. We have higher visibility than other partners on the network. And we are the only one that can have such an agreement with these banks. There are no -- for all these agreements, we have no change of control clauses and no breakup fees. We only have a change of control, but on ANIMA, with some of disagreement, these are public. But I mean, I don't think that are important to be outlined here. We have minimal level to be respected in many of these agreements, with CVAL, with Banca Popolare di Puglia e Basilicata, and moreover with BAMI and Poste Italiane. Exclusivity for products only with Banco BPM, so BAMI on the insurance businesses. So we have the exclusivity to manage all the insurance product distributed through the network. As an outcome for all this feature of disagreements is that with all these partners, we have a share in terms of mobile funds over the total in the region, over 60%, with many of them, Monte dei Paschi, 58%. Page 14, we put some legal framework already public of these agreements. I won't go through that, but it was just to remind to the market some feature that is already public, but sometimes we are asked to questions in this respect. And so we wanted to outline the key feature of these partnership agreements. Page 15, what we are seeing in this period. As we carry on all newspapers, consumption rate are decreased a lot this year. Saving rate increased rapidly and incredibly doubled. This is not only an Italian trend, but is -- we are experiencing the same in -- we are seeing the same in Europe and also U.S. Due to uncertainty, clients are saving, but they are moving such savings into deposits with their amount that is now exceeding 100% of the 2020 GDP. In Q4, we are seeing an acceleration in terms of increasing our liquidity on current accounts. And therefore, I mean, this is affecting our net inflows on the retail side on our retail business. We are focusing a lot on accumulation plan. We are proposing accumulation plan. We pushed a lot in the last 2 months, reaching 35,000 new accumulation plan open in 2 months. And we are also, of course, we are proposing our balanced fund solutions and thematic funds, and we hope that this liquidity that is accumulating will be, let's say, the potential for the recovery once the situation will be stabilized in terms of uncertainties in terms of the future. I already mentioned our October net outflows, so I wouldn't get back to it. On Page 16, I would like to outline the fact that the group has generated a massive amount of cash in the last years and continue to generate a massive amount of cash, demonstrating also the resiliency and the health of the group from a financial and economic standpoint. I mean we provided a strong amount of dividends in the last 2 years to our shareholders, EUR 134 million accumulated, plus EUR 91 million of shares buyback. And as I mentioned at the beginning, I strongly believe that this cash generation provides to ANIMA significant financial flexibility in order, I mean, to look at potential opportunities and to be ready to face the market situation going forward. I remain fully available for your questions.

[Operator Instructions] The first question is from Panos Ellinas of Berenberg.

One of the -- your largest bank partners in the retail business, Monte dei Paschi is facing ongoing challenges. And I estimate that more than 1/3 of the retail net outflows all in the year were from Monte alone. I mean given these challenges will continue to exist and maybe outflows from Monte could accelerate, how are you looking to reverse this trend in retail flows? I mean would flows from BAMI been offset the outflows from Monte? And how shall we think about the retail flows going forward?

Well, Monte dei Paschi, of course, is suffering this year, but it's not the only bank suffering. I mean we are seeing that on the retail side, all the retail is suffering. In fact, we are negative this year by end of 9 month EUR 1.3 billion, increasing in October. So this is, of course, not made by -- only by Monte dei Paschi. What could happen on the retail? The retail today -- I mean, this year, what we saw is that people were scared and were uncertain in the future. And so apart from the period of the lockdown, where they couldn't divest or invest, so they were staying on hold. Then there were more going towards liquidity. I think that once the situation will stabilize, there is a lot of room to recover for this business because, as I mentioned at the beginning, the liquidity, there's a massive amount of liquidity. The country has still a lot of space to increase the position in assets under management. And given also the level of interest rate, people need and will need help in managing money. Because keeping -- I mean, money on the current accounts in the short term could seem let's say, safe. But in the long run, you're paying taxes, cost, and there is also the inflation, of course, that is going to eat your money. So I strongly believe that we -- the recovery is possible and will come in a different environment, of course.

The next question is from Federico Braga of UBS.

I have 3 questions, if I may. The first one is on the market shares that you show on Slide 13, the average 60%, 70% market share that you show. How these numbers compare to the minimum levels that the banks need to respect within your challenge? Just trying to understand if there is some room between your current market share and the minimum levels or not? The second question is if you can please give some more details and updates on your growth initiatives that you also mentioned in the presentation, in particular, ESG, the alternative and the private assets -- I'm sorry, the research team initiatives and in particular, compared to your original expectations, how these are going, considering that this year we had COVID that maybe delayed some of them and trying to understand also the cost impact of these initiatives this year and maybe in 2021? If I'm not wrong at the beginning of the year, you mentioned EUR 3 million -- between EUR 3 million and EUR 3.5 million impact to the cost base because of these initiatives. Just wanted to understand if these are in line or not this year or some could come next year? And the last question, you highlighted the strong cash generation of your business model. So I was wondering if you are also -- you would be willing also to consider to resume your buyback program given also the low liquidity of the stock that could be held by a potential assumption of buybacks?

Well, market shares we are -- bank to banks, in case, we are, in general, above the level of market share, in some case, also significantly above. And this means that the market shares are something that helps, let's say, provide guarantee in some way, but it's not -- we are not working for the market shares. We are working to do far better. And to -- and we believe that -- and we saw in the past also that we have been able do far better with our networks. In terms of growth at -- the growth initiatives, let's say, the research -- internal research team, more than a growth initiative is an initiative to do better our business also in a context where MiFID II changed a lot the environment in terms of external research. And there, we are -- we hired 3 people this year. We want -- we were probably -- our expectations are to onboard 4 people, 4 or 5 people. So we are a little bit -- we had a little bit to slowdown the hirings because it's not so easy in this period to attract people and also to meet people, et cetera. On the alternative side, we approved -- we received the approval for the new company in July. We already have 4 people on board. So the team is already set. We are planning the first closing for our first fund in December. We have the -- we are in the process of regulatory approval of the -- of the new fund in CONSOB. Hopefully, this will arrive in order to allow us to do this first closing within year-end. So we are fully on track with -- we are on track with what we expected since the beginning with some slowdown in terms of cost deployment. Next year, yes, we will have some new costs -- some costs regarding these initiatives. But still, I don't have yet guidance to provide you. But -- I mean I don't think these are material if looking at the entire level of our cost that this year we have been able to decrease compared to last year. Strong cash generation and buyback. We always said that we -- I mean, we always -- in the last couple of years, we said that we confirm our guidance on the dividend, 50% of reported consolidated net income. And we also said that we would like to have a buyback as an increase to the yield for our shareholders if extraordinary transaction will not materialize. And we continue to think so. So of course, in this period, there are many things going on in Italy in terms of banking consolidation. So we are looking carefully at what is happening. And if we may be involved in some second wave extraordinary transaction that could need more financial flexibility. So to sum up, I would say that is not a no. We are looking carefully at what is happening.

The next question is from Domenico Santoro of HSBC.

I do have 3 questions. First of all, if you kind of help us to reconcile the numbers that your banking partners are giving us in terms of sales of wealth management products, and the outflows you keep having instead from them? Because if I look at the presentation of especially Banco, but also Monte dei Paschi, they are all claiming record sales, especially in the beginning of the year and in the months of September, October. Of course, the activity was on hold in the summer. So I mean, either they are basically convincing clients to switch into different products or there is some trend, which is a little bit more structured in terms of disaffection vis-à-vis the [ same promoter ] funds product. So I mean, just please let us understand what is happening there. Then if you can give us the number in terms of upfront fees for the third quarter that I don't see in the presentation and the margins attached to the EUR 500 million assets that you lost in October?

Well, I'll start from the last question, margins on the 2 mandates in line with institutional business. So let's say, low range of institutional business. So this is where, I mean, large clients, 2 large clients with large positions but low profitability. Upfront fees in the second quarter -- in the third quarter, EUR 1.3 million. So considering the, let's say, the low level of activity in the quarter given the summer is still low level of fees. So this is impacting, of course -- the placement fees are impacting the full year running level of management fees. Money BMPS, I mean this is a question that you can also ask them. But if you look at the -- I mean, their numbers, typically, the numbers are showing are gross numbers. So particularly BAMI as you were mentioning, I saw the presentation, and they are saying gross sales. The gross sales, we are talking about net flows. And then I also suspect -- I'm not sure what is included in these gross sales, potentially, I don't know maybe also certificate, I don't know. So I think that it's not easy to reconcile these numbers. I think that we are keeping our shares -- market shares with our partners more or less. Then you can have, of course, some swing quarter-to-quarter. But the net flows are not positive. I try to reconcile numbers, but if you look at the numbers, you have gross sales and level of AUM. So it's difficult to find a reconciliation of our numbers with their numbers.

The next question is from Luigi De Bellis of Equita SIM.

I have 2 questions. The first one is on the management fee margins. So how do you expect the mix effect by channel and product to weight on the margins in the next quarters? And in light of the increasingly low, and in many cases, negative interest rates, if you will push more towards equity products, your asset mix? And the second question, can you elaborate on your priority in terms of strategies in the next 12 months, both organically on the M&A front? And if you can remind us your potential firepower or maximum leverage?

Luigi, okay. I would -- starting from margins. We are pushing, of course, more and more on the equity, trying to find the right solutions for our client base, that is not the pure equity fund, as we always said, but it's balanced, flexible and solutions like simulation plan, both straight accumulation plan or accumulation plan embedded in targeted funds. So these are the solutions that we are trying to -- not we're trying, that we are structuring, and we are pushing more in this period because we believe that considering the level of interest rate, these are the most suitable products for our client base. The margins, looking in the margins, what affected more our profitability this year were the placement fees. And this is very much related to the gross activity that is very much related to the effectiveness of bank branches. So if the banks can work easily and safely, we can have gross activity. Instead if they are closed or semi-closed, like this is more difficult, of course. The other effect was related to the decrease in assets in more rich assets like equities, and this affected the average profitability. If we -- I mean, looking at the stability of the market, we don't expect a further decrease in profitability. We hope in a recovery of the market of replacement fees, and therefore, our profitability. In terms of strategic priority we have, organically, we have all our ordinary business, let's say. So pushing as much as possible on our networks, retail networks, trying to exploit as much as possible the opportunities that we may face in a more stable scenario, hopefully. We are, as in the past, working a lot on the institutional segment. And this is done through traditional products and through the new products that we are launching on the alternative landscape. This project, this was made and was created because of the demand we were seeing on the market of this type of products. And so we are very much focused in trying to develop this business initially for the institutional and potentially in the second step also for a net of individuals. So organically, these are the top priority we have in mind today. From a more, let's say, external standpoint, we are working carefully at what is happening in Italy. I think that today, the priority should be to try to exploit as much as possible opportunities that may arise from the consolidation of the banking sector -- the ongoing consolidation of the banking sector. This may happen or not, apparently, and in my opinion, this will happen sooner than later and probably is not something in the next 2 or 3 months, but in the next 9 to 1 year, I think that something will happen. And so we have to be ready for that. As I said -- as always said, as a second wave because we rely on banks and banking networks. And I believe that what we happen among banks will impact with opportunities, I believe, our business. In terms of firepower we have, we -- as of today, looking at the -- our numbers at the end of this year, we could re-lever quite easily by EUR 300 million, EUR 400 million. Why I'm saying that -- I'm dropping this number because when we did the transaction -- the last transactions 2 years ago, we reached EUR 700 million approximately of debt. End of this year after the dividend, looking at the cash that we can use to repay debt, we will be at a net financial position of a little bit more than EUR 300 million. So just looking in the past, we could easily get back to the EUR 700 million, therefore EUR 300 million or EUR 400 million.

The next question is from Angeliki Bairaktari of Autonomous Research.

Just 2 on my side. First of all, this year, the fact that you have this business model in retail distribution, which relies banking networks has sort of shown that you are a bit more vulnerable than some of your other -- of your peers to sort of closures and lockdowns and sort of the sensitivities around the pandemic. So I was wondering, are there any thoughts to shift part of your retail distribution towards maybe more direct channels or digital channels? Or is there anything that you can do, for example, work together with your bank distributors to sort of allow your retail customers to be able to buy and sell funds without having to physically visit branches. I appreciate that's probably a bit more of a medium-term question, but it would be interesting to hear your thoughts on that, especially as we see that bank branches are going to be slowly phased out. That looks to be the direction of travel. And then the second question, I mean, obviously, you see M&A in the banking networks in Italy as an opportunity. And there's a positive catalyst for ANIMA. But what we have observed in the past is that in the run-up to M&A, very often, banks are being distracted. So I just wanted to get a sense with regards to retail flows. Do you feel that perhaps the Banco BPM and Monte dei Paschi networks have been a little bit distracted this year in terms of sort of trying to push asset management products? And do you expect any improvement on that front from the next year onwards? Or as long as there is this lingering question over their sort of strategy and M&A, there is -- it's quite difficult to see a turnaround on that front?

Well, I'll start from the first question. Well, first of all, yes, we are negative with our banking partners. You mentioned our peers that -- I mean our peers so people relying on banking distribution and looking at the sector and the results are not -- are not so easy to be read, but it doesn't seem to me that they are bringing results. Also largest peers, I mean, people that have the similar business model -- I mean people the comparables, so the people relying on financial adviser networks have all different dynamics is true. They have -- we saw that they are reporting in very important results with growth, then I wouldn't comment on the results. But what I'm reading, of course, is important results in terms of growth also this year. The shift to direct. We have a different business model because we rely on third-party distribution. So becoming a competitor of these guys is difficult, for obvious reasons. I don't think that in the short-term period, this will be feasible. We have some direct client, but these are absolutely negligible if compared to the size of our business and build a sizable direct distribution, I strongly believe this would affect significantly our current relationship with importantly synergies as of today. And banks, yes, I mean, banks, they are also moving towards a more let's say, not physical distribution of products with clients, but always keeping strong relationship with their clients. I believe that in the medium term, banks continue to be -- and to have a large and important market share with the client base in Italy for this product. Clients are not ready to -- do not have physical touch in order to invest in asset management product. There are no relevant experience worldwide in this respect. So for the medium term, I think that this business model will continue to generate a significant amount of value and then we will see. Of course, we'll follow the evolution of the market. But for the -- as of today, I don't see dramatic changes in this respect. The banking networks. Our banks' partners, what can change the dynamic? This was a particular year. It was particularly difficult for these banks, apart from -- the specific situation of the banks was particularly difficult to raise money in this product because the market situation and the uncertainty was very high. I think that in a more stable situation, banks will get back to the potential to distribute this product and to exploit the potential that they have. We started this year with great targets with both Banco, with Monte, et cetera. After February, to be honest, the situation has changed entirely. So I wouldn't take 2020 as a year, let's say -- an example of the year for the future.

If I may just follow-up on my first question, I guess, have you ever considered partnering with the financial adviser network in Italy? And if you have and you have ruled it out. I mean clearly, all the discussions that you have -- all the discussions point to further sort of consolidation with bank distributors or with arms of bank distributors. Have you thought about partnering with a financial adviser network? And if not, why not? Why would it not work for you?

We -- I mean, we -- yes, we thought to everything, but -- in this sector, probably. But we believe that -- and I believe this is not feasible because you have -- I mean, you have many, many risks because I was mentioning, given that the financial advisers network are stealing clients or trying to steal clients and private bankers to the banks every day. I mean if you are the partner of the banks, you may have a problem if you are also stealing the client base. So you have to decide where you want to stay. And partnering with financial advisers networks I don't believe could be viable as of today for us. The dyssynergies, so the cost that we may face are probably higher than the synergies we may have. This is my opinion.

The next question is from Filippo Prini of Kepler.

One question from my side. Your positive outlook on institutional mandate relies on the fact that maybe you can be close to signing new mandate shortly with a new institutional investor?

Yes. In the sense that we -- the institutional businesses -- business were, I said more than once, we want to push a lot, and we have many relationships. We have things going on. And so sometimes, it happens that you lose something and others you win something else. And of course, we are trying to win more than to lose.

[Operator Instructions] Mr. Melzi D'Eril, there are no more questions registered at this time.

I thank you for patience and time. And I wish you a good weekend, and thank you very much. Bye-bye.