Banca Generali S.p.A. (BGN) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca Generali First Quarter 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Gian Maria Mossa, CEO and General Manager of Banca Generali. Please go ahead, sir.

Good afternoon, and welcome to our first quarter results conference call. As usual, let's start with a quick introduction. The year started very well with both strong financial and commercial results. In particular, net profit was well supported by both recurring and variable components. The commercial results were very, very strong, thanks to an extraordinary job of the existing sales force. Probably more -- even more important, the two major initiatives of the bank, Insurbanking and Intermonte are going in line or above the expectation. In particular, Intermonte closed the first quarter of the year with an increase of 40% of the result and EUR 3 million of revenues driven by synergies. Today, we'll take the opportunity also to give you an update on ETF and present Investlinx as we are at the final phase in the acquisition of this small but strategic asset management in Ireland. But as usual, let's start by numbers at Page 4 with net profit, overall net profit close to EUR 126 million. As I said, thanks to a strong contribution of recurring, a record high, EUR 93.5 million or 80% higher year-on-year. And also, variable net profit contributed positively, thanks to variable fees linked to the market, with a contribution of EUR 33 million to the total result. The net profit result is driven by all the revenues streams, in particular, net financial income, Page 5. You can see the overall net financial income at almost EUR 92 million, stable quarter-on-quarter and 4% higher year-on-year. This increase year-on-year is driven by solid net interest income, EUR 82.7 million or an increase of 4% year-on-year and solid trading gains, EUR 9.2 million or plus 6% year-on-year. You can see also the total net interest margin, slightly higher at 2.02%, and we will comment the reason in the section linked to the balance sheet. But now let's go through the total gross fees, so Page 6. The overall gross recurring fees closed above EUR 300 million, first time ever, with an increase of 8% year-on-year, and the variable fees contributed positively for EUR 46.6 million. Even more important, we have more than EUR 13 billion of our Luxembourg assets close or in line with the high watermark level. So we do expect other positive contribution from performance fee in these weeks. Moving on to the different components of gross recurring fees, Page 7. We start, as usual, with the representation of the investment fees, higher management fees, EUR 242 million; higher advisory fees, EUR 256 million with stable margins. You can see margin on management fees at 1.43%. Here, you have a positive seasonal effect due to less accounting base. As I said, the overall margins are stable. So it's all about a business of asset expansion. Page 8, here, we can see also the positive contribution of other fees, almost EUR 45 million or 17% higher year-on-year, with a stable contribution of banking fees, strong results in trading, brokerage commission, almost EUR 22 million and strong results from entry fees, in particular, structured products at EUR 16.2 million. So positive news from the recurring component and positive news from cost components. If you go to Page 9, we can start from payout ratio. Everything is in line with our projection. So you see a slight decline in the fee expense on net interest income, just slightly above EUR 2 million in the quarter; ordinary payout, close to 36%; cost of growth, below 11%; and payout to third parties, just slightly below 6%. So here, the confirmation of how important it is to manage and to steer the network and to control the payout ratio. Page 10, you have a new representation of operating costs. We simplified the representation, and we restated the historical series to include Intermonte. You see that the first quarter of this year closed slightly above the guidance 6% to 8%, so EUR 82.5 million, or 8.3%, which is basically driven by an acceleration of all major strategic projects. So investment linked to future growth. And bottom, you see non-recurring items is a stabilization, as I communicated in the previous conference call, at EUR 2.2 million. The sales personnel cost slightly increased to the -- linked to the hiring of the bankers from [ BGFM ]. As a result, Page 11, we see the level of operating cost on total assets at the lower level at 0.28% and we see a reduction also in the cost-to-income ratio adjusted by the volatile components and adjusted by Intermonte. So now, we are below 36%, and we do expect to see further reduction. So just to close this first part of the presentation, very strong operating profit, also excluding the performance fee, and this is driven by strong net recurring fees, double-digit growth. And I'm very positive also for this trend in the second quarter. If we focus on total non-operating charges, you see a decrease to EUR 18 million, mainly thanks to a lower provision. And as I said, very strong recurring net profit at EUR 94 million despite also, let's say, including the negative effect of the temporary tax measures introduced by the budget law. A quick comment on tax rate. In line with our range, within 0.6%, 0.7%. So now let's move on to the balance sheet part of the presentation. So Page 14. You see a slight increase in total deposit, from 15.8% to 16.2%, a slight decline -- reduction in the cost of funding, from 0.72% to 0.68%. This is linked to the fact that in the first quarter, we haven't launched any specific commercial initiatives. If we see Page 15, you see the slight increase in interest-bearing assets, 16.7% to 17.2%. And here, you see a slight increase of the yield on interest-bearing assets, from 2.68% to 2.7%. So a slight increase in the yield on the bearing assets and a slight decrease on the cost of funding imply the net interest margin at 2.02%. Page 16, capital liquidity ratio. You see total capital ratio and leverage ratio well above the regulatory level, and also including a payout in line with the past year, so at 85%. And liquidity and coverage ratio, net stable funding ratio, pretty stable, the first one, above 300% and the second, above 200%. Now let's move on and let's focus on the first part of this presentation. Here, we changed the presentation just to give you more disclosure on the Insurbanking business and a different view on the managed solution assets. So let's start from Page 18. This is a new representation, as I mentioned, where, first of all, we represent, on one hand, the total assets of BG clients and on the other, the total assets in Insurbanking of Generali clients. Second, we present both the numbers at the end of the first quarter as well as an update at the end of April. So looking at numbers, you see a significant recovery of both assets, BG assets and Generali Insurbanking assets. In particular, BG total assets increased to EUR 116.7 billion, highest level ever. And the overall total assets in Insurbanking with Generali is at EUR 7.5 billion. If you focus on the right part of the presentation, the different comments, bottom, you see an update also of the business with Alleanza Insurbanking is in line or slightly above expectation. You know we have two different components of this partnership. The first one is about an insurance wrapper distributed directly by Alleanza and managed by Banca Generali. Here, since inception, the overall gross premium are at EUR 107 million, of which -- EUR 170 million, of which 40% already invested in unit-linked and another 40% will be invested gradually in the next 3, 4 years. So overall, asset allocation will be 20% traditional life insurance and 80% unit-linked managed by Banca Generali. This is distributed by 2,700 private advisers by Alleanza, while, as you know, the second part of the project, the banking the client, started with a pilot last part of the year. We consolidate all the digital procedures and processes, great feedback from the pilot from the pilot phase and starting the rollout. The rollout started in February. Now we have already opened more than 1,700 current accounts. The feedback are very positive. So here, I do see the feedback very, very coherent with the strategy from both the managers on the network as well as the private advisers. As I mentioned in different moments, it's not if, but it's when and it's about training courses and communication, but the feedback, again, are very, very positive and strong. There is a strong commitment by everybody. So very positive news from the Insurbanking, but now let's focus on our core business with Banca Generali clients. So let's move on to Page 19. And also in this case, you see a new representation. On the left side, you see the overall assets, EUR 116.7 billion and the overall contribution of assets under advanced advisory. And here, you include both assets under custody and asset management products. And you see that we are at 10.8% of total assets. On the right, you see the breakdown of the BG total assets by fee categories. So the assets under investment include, of course, the assets under custody and banking under advisory, the traditional life insurance and the managed solution. Now managed solutions account for almost EUR 54 billion. We see stable traditional life insurance. Traditional life insurance accounts for more or less 20% of assets under investment. And then you see the component of the advanced advisory services invested in assets under custody at EUR 7.7 billion. That is a new record high. Next page, there is a deep dive of managed solutions. So the deep dive of the EUR 53.9 billion at the end of April. And here, you see a focus on the so-called in-house products. In-house products is about the in-house fund, so Luxembourg funds distributed at the retail level, EUR 13.6 billion and then the financial wrappers at EUR 14.8 billion. If you compare the level at the end of April, EUR 28.4 billion, to the first quarter of last year, EUR 24.2 billion, you see a significant acceleration in the allocation of in-house products. Then you have a focus, the gray part, the lighter one, third-party funds, EUR 12.9 billion. And finally, but not less important, the insurance wrappers. I'm very confident to see an acceleration of in-house products just because we are very close to the launch of a very innovative solutions, and the same can be said for the insurance wrappers. So in the next weeks, I do expect significant contribution from managed solutions compared to historical level. Page 21, let's go through the net inflows. In this case, there is first representation of the first quarter and then a focus on the April numbers. Let's start by Page 21. Page 21, we see the traditional representation of total net inflows in terms of categories. We see EUR 700 million in assets under investment and an overall contribution of net inflows at EUR 1.9 billion. That is the highest level ever achieved by the bank. And you see a stable contribution of in-house products on the right. Next page, so Page 22, there is the representation of first quarter results by acquisition channel. Here, you see the amazing job of the existing network, EUR 1.4 billion, and a constant contribution of net recruitment. In terms of numbers, 60 new financial advisers, with an acceleration of young talent FA to support the creation of new teams and the succession planning of the financial advisers. Then Page 23, there is a focus on the April numbers. And again, here, the acceleration is very, very strong, almost EUR 900 million, even once included a one-off inheritance claim of a non-Generali insurance policy for a total amount of EUR 150 million. So including also this EUR 150 million of a very poor insurance policy, we achieved the best April ever. And you see that the assets under investment account for EUR 0.4 billion. If we look at the net inflows by acquisition channel, here, you see an acceleration of both existing sales force, EUR 0.7 billion, and recruitment. And I have to say that I never experienced in my life such enthusiasm for recruitment. We had several meetings, and I think that we will give you a very, very positive news in the coming months. So now, let's enter the last part of the presentation, so the business update and closing remarks. As I mentioned before, this is an opportunity to present Investlinx. Investlinx is a very young asset management company. It was founded in 2021, is an independent asset manager and is based in Ireland and at the moment, is focused mainly on active managed ETF as regulated by, of course, the Central Bank of Ireland and more important, has been authorized to manage, on one hand, active ETFs, on the other, also UCITS fund and discretionary mandates. The positive news in this case is that despite short operating history, we already completed the start-up phase, and we already achieved the breakeven phase. If you look at the current area of activity, two active ETFs. The first one is mainly equity, bottom-up approach, and the second one is a balanced solutions. Why it's so important for us, Investlinx, for the sustainability of the bank, for the acceleration of results. First of all, just because we have acquired a turnkey platform with a very limited execution risk. And now, we have two platforms of asset management, the first one in Luxembourg and the second in Ireland. And this gives us a great flexibility. So we have an established Irish manufacturing hub ready to distribute both active ETF and funds, complementary to our Luxembourg offer. Last but not least, we work actively with ETF. If you go to Page 27, you see stocks and volumes. As of today, we have more than EUR 8.2 billion of ETFs as an underlying of financial insurance wrappers, as an underlying of funds, as well as an underlying of advanced advisory services. So ETF, considering just assets under custody, accounts for more or less 9%. And then if you look at the bottom of the page, you see that the traded volumes average over the last 2 years, including Banca Generali as well as Intermonte, we are above EUR 40 billion. So of course, part of the story is to internalize the part of the value chain in active ETF. Roadmap, we are at the signing moment in these days. We do expect the closing at the end of June and the beginning of July, and we are almost ready to launch the first initiatives. And the distribution channels will be mainly two, direct distribution channels to our clients and to institutional clients through Intermonte and direct distribution as an underlying of our financial and insurance wrappers. So let's say that Investlinx has two major goals. The first one, to give more flexibility to our international asset management platform. And on the other hand, to integrate, internalize part of the value chain referred to the ETF business. Page 29 and 30, we show the targets we already shared with you in the previous conference call. We have just given an update to the net interest income at Page 30 in the range EUR 335-345 million. So we increased the range by EUR 5 million due to the slight increase in the yield curve. And now, we are ready to hand over and to answer to all the questions. Thank you.

[Operator Instructions] First question is from Giovanni Razzoli, Deutsche Bank.

I have three actually. The first one is on the acquisition of the Investlinx. The rationale in my view is very clear and it's a very interesting deal. I think it will complement your product suite for your very sophisticated client base. So that is very clear. I would expect that some pushback on the market could be okay, but this -- the higher penetration of active ETFs may cannibalize the margin on your existing product mix, which I don't think is the case, but I would like to know what's your response to this potential pushback on the market. Second question, you had EUR 170 million of product placement out of the insurance agreement with Generali Alleanza, which in my view is a very, very strong number. Is it fair to compare this amount with the EUR 0.7 billion of asset under management, asset under investment inflows in the Q1 and more specifically, to compare it with the EUR 0.1 billion of insurance wrappers inflows that you had in the Q1? Because if that is the case, this amount of inflows from the Insurbanking agreement is extremely good in my view. And the last question is, another positive element in my view, is that you seem to have resumed to a very healthy trajectory in terms of recruits. We know that for Banca Generali, recruits of bankers is a key component of the growth strategy. I've seen that in the Q1, by the way, the recruits were concentrated on junior resources when compared with the past. So I would ask you to clarify if this is a change of strategy, if it's a temporary trend? And what is the pipeline for future recruits over the next couple of months? And what is the profile?

Thank you, Giovanni. First of all, the answer on the risk of cannibalization of ETF. I said that we are working very well with ETF, always -- which are more often used as the underlying of financial insurance wrappers to minimize the total expense ratio to the client. And in some cases, used also by our top bankers as underlying of advanced advisory services. So if you combine the fees of the advanced advisory services, part of the internalization of the margin of ETF and the brokerage fees, you would have an excellent margin. So I do not see risk of cannibalization, especially because we will focus on niche strategies and replacement of stocks in more common ETF. Second, the inflows, you are right. EUR 170 million of gross inflows provided by Alleanza is a big number, especially if you consider the volatility of the market and the geopolitical chaos in this moment. So the enthusiasm of the network is very high, very strong, and there is a strong commitment. So I do believe that we will see positive surprise in the medium, long term just because the private advisers of Alleanza see the opportunity to increase, elevate their degree of professional and to cover also other parts of the portfolio of the clients. So this is very positive. If you compare the numbers of Alleanza with internal numbers, so the number of Banca Generali -- and the numbers of Banca Generali in terms of insurance wrappers were pretty low just because we are expecting the launch of the new platform, and the launch should be next week. So I think that we start -- we're going to see positive numbers as soon as May. Third, on recruitment, I'm very positive. I'm very positive as I met several very senior bankers. So thanks to the acquisition of Intermonte, now we are able to attract very senior bankers with important entrepreneurs as clients. And I do see some of these conversations very close to have at the end and to join the bank. You say that the monthly data are normally, let's say, volatile, but the overall numbers of meetings and of interest from these meetings is at the highest level ever. So I think that you will see both, an increase in numbers as well as an increase of assets. The focus on the young talent is as important as the focus on the most senior one for the sustainability of the network. So it's very important to see the blue part of the bar increasing over time. Thank you.

Sorry, one clarification. You mentioned that in May, you're launching a new platform. I missed this comment here. What are the details of it?

We are launching an insurance -- a new version of our insurance wrappers for our clients. So the focus will be, again, also in BG, not only in managed solution -- in-house managed solutions, but also on the insurance wrapper. Just to say that in the bank, let's say that the inflows of the insurance are driven by new release of products and the new release of platforms. While for Alleanza, it is a blue ocean as it is the first time ever that they can present financial wrappers with an insurance wrapper. So first time ever, plenty of clients, great enthusiasm. This is a no-brainer for Alleanza, for Banca Generali, it's driven by innovation products.

Next question is from Gianluca Ferrari, Mediobanca.

A follow-up, Gian Maria, on Investlinx on the questions asked by Giovanni. You said Investlinx will be mainly used for niche strategies. But looking at the simple P&L you provided, I think there are very little number of employees, fund managers or analysts. So I was wondering who is providing the brain behind these new strategies you want to put out? And how scalable is Investlinx given the current structure? Linked to the margins question from Giovanni, those active ETFs are probably priced in the 0.8, 0.9 percentage points ballpark in terms of management fee. And this is the underlying and advisory fee contract that, if I'm not mistaken, should be priced 0.5. So is it fair to say that it is still in the 1.3%, 1.4% ballpark, the overall gross margin of these products, and under wrappers, it's even more than that? The last one is a kind of curiosity on the one-off claim, the EUR 150 million, what does it mean non-Generali insurance policy? I suppose that all the Ramo Primo were G&A savings of Generali. So I don't understand what does it mean.

Thank you, Gianluca. Starting from the end, it's an old international insurance policy. So a few years ago, we worked -- we used to work with Utmost, then Generali decided to sell it. And so we have still a runoff portfolio, and this was the major position.

What is the impact in terms of revenues? You said very little. I presume it's kind of 10 basis points.

2 basis points. 2 basis points. The second -- and I say that I'm confident to retain part of these outflows. So we're going to see it here in the next months. Second, margins, let's say that the profitability, the margins of ETF will be in the range of 0.5%, 0.9%, depending on the kind, you can have active index to replace passive funds and you can have niche initiatives. So you can think in the range of 0.5%, 0.9%, depending on the underlying. But you are right, that it will be combined with advanced advisory fees, brokerage fees, and wrappers fees. The brain is partly in Italy, Intermonte, Banca Generali is partly in Luxembourg, for example, on our BG Fund Management. If you think of our major competitors, for example, the biggest one provides solution from Ireland and great capabilities are in Luxembourg. So you can also leverage on existing brain. And the platform is fully digital, of course, has no legacy, and it is fully scalable. So no reason to have any limits in terms of assets. And we will give some disclosure on numbers during our -- during the presentation of the next 3-year strategic plan at the end of the second half of the year.