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

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca Generali 9 Months 2025 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 thank you for attending our third quarter results conference call. Let's start by saying that despite the challenges of the last quarter linked to the tender offer of Mediobanca, we achieved very strong financial results with a strong support from recurring commission. Also, the commercial activity was very solid, thanks to the ongoing contribution of the existing sales force. Today, we're going to focus on 2 major projects, Alleanza and Intermonte. I will spend a few minutes also on the main projects on the core business. But let's start, as usual, from numbers. So moving on to Page 4, net profit. We closed the third quarter with net profit at almost EUR 115 million, great part of which driven by recurring net profit. And also the variable component is catching up and more good news for the fourth quarter on it. Net profit, well supported by all the components. Page 5, we can start with the net financial income. As you can see, the overall net interest income closed almost flat quarter-on-quarter. This is the result of expanding assets and just a slight reduction of the net interest margin. In particular, the net interest margin closed at 202 basis points and the overall contribution for the quarter of the net interest income was EUR 81 million. On the net interest income, now we are confident to close at around or above EUR 320 million, and we are confident to confirm the same level also for the next year. Moving on to Page 6, total gross fees. As previously mentioned, very strong result from the recurring component of the P&L. As you can see, the overall contribution for the third quarter was above EUR 280 million, while variable fees closed higher quarter-on-quarter, close to EUR 30 million, and we already had EUR 20 million in the fourth quarter of performance fee. And almost 50% of our assets in Luxembourg are close or at the high watermark. Deep diving the gross fees, the recurring component, Page 7. Let's start from the investment fees. Here, you have the same trend as the net interest income, asset expansion and stable margin. We are confident to confirm margins in the range of 1.42% for the end of this year, but also for next year. And again, we are confident to see an expansion of the overall asset under investment. Moving on Page 8, the other leg of gross recurring fees. So other fees. Here, you have positive news. First of all, of course, the numbers are stronger, thanks to the inclusion of Intermonte. But also once we compare numbers like-for-like, you see solid brokerage commission, a recovery of entry fees, and we will deep dive on the reason behind the acceleration in September of certificates, in particular, while banking fees closed a little bit lower due to a review of the prices of the current account. But let's say that we are confident to see very robust entry fees for the fourth quarter and a steady growth in the brokerage commission. So the overall revenue are very strong, confirming a positive trend, confident to maintain and stabilize the net interest income, confident to expand the recurring fees, both thanks to expansion of assets under investment and solid numbers for the other fees. Moving on to the cost side, Page 9. Here it's business as usual. Payout ratio is in line with guidelines or a little bit lower due to some positive seasonal effects. So overall payout to the network below 46%. overall payout to third parties around 6%. So here, no news, good news, very confident to confirm the current targets. Page 10, operating costs. Also, in this case, no surprises. We have some noncore items linked to the setup cost of new business line, the Insurbanking and also for the tender offer received from Mediobanca. Excluding these components, let's say, that overall total operating costs are well under control. Focusing on core operating costs, again, no surprises. Here it is important to highlight the fact that we set up the AI business, and we set up the Insurbanking business. So part of the costs are for investment in new business line, and we will see later some numbers on our projection of this new business line. Page 11, the ratios. Operating cost on total assets achieved the lowest level, like-for-like, so 0.27% and cost-to-income at or close to the lowest level, always like-for-like. Page 12, we have the usual sum up. So we are pretty proud of the results of the third quarter, considering also the uncertainty of the time, Solid operating profit, also excluding performance fees. We recorded also better nonoperating charges, basically driven to a lower regulatory contribution to banking and insurance funds. And the overall tax rate closed a little bit lower at 24.2%. So this allowed us to achieve the best results ever in terms of recurring net profit at EUR 273.8 million. Next chapter, balance sheet. As I said, it is a game of asset expansion with slightly lower margins. In particular, Page 14, you can see that the cost of funding is slightly down in line with the trend of the interest rate of the market. And you can see that the overall deposits are higher, EUR 2 billion year-on-year comparison. Page 15, same trend. So the overall interest-bearing assets up by EUR 2.1 billion and the yield on interest-bearing assets slightly down. Page 16, we have the capital liquidity ratios, also here in line with the trend already communicated during the year. So total capital ratio close to 20%. Also once considered the impact of the CRR3 and the first-time consolidation of Intermonte. This, let's say, contribution was partly offset by higher net profit. And as usual, the dividend provision is in line with our current policy, so at 83% of the net profit. Leverage and liquidity coverage ratio and net stable funding ratio well above the SREP requirement. Let's go in the third part, so net inflows, assets and recruiting. I'd say that commenting -- quickly commenting total assets, we closed above EUR 110 billion, more than EUR 73 billion invested in assets under investments. Page 19, you can see the breakdown of assets under management. First of all, confirmation of very strong presence of wrappers above 50% of the managed solutions, acceleration in in-house financial wrappers, acceleration in in-house funds. This is driven basically by the net inflows. Page 20 and 21, you have the usual representation of the inflows. Starting from Page 20, you can see that the assets under investment accounted for almost 50%. The greatest part coming from assets under management. And if you focus on assets under management, Page 21, you see the most comes from financial wrappers and in-house funds. So you can see the ongoing rebalancing from third-party funds to in-house funds. Now let's say that in-house funds account for 50% of the overall retail funds and more will come. Page 22, you have the net inflows by acquisition channel. Very solid numbers from the existing network despite 3, 4 months of challenging markets, driven by the tender offer. So very positive. And also recruitment went pretty well. Of course, the mix is more in favor of young talent, more difficult to recruit during this uncertainty. But now I can say that in October, we start again recruiting also very senior partner. And again, also in this case, I'm pretty confident to see strong results in the next months. Page 23, we closed with the October numbers. October numbers were very strong, EUR 1.2 billion, also thanks to a recruitment in Switzerland. We recruited 3 senior bankers, almost EUR 800 million, 3 top senior bankers. Very confident that they will contribute to the success of our Swiss initiative. Also, the Italian contribution is pretty solid. And as I say, we are gaining momentum in recruitment. So confident to close the year very well. But now let's enter the last part of the presentation, where I will focus a little bit more and will dedicate more time as it's really important to start giving some numbers on Intermonte and Alleanza. Page 25, you see a box on Banca Generali and Banca Generali core business. Just to say that today, we will focus on Intermonte and Alleanza as we are continuing investing also in our core business. First of all, if you consider our major assets, so the financial advisers. I'm very confident to enhance our financial advisory network, thanks to some specific projects, very important. The first one is the project related to the young talent. As you saw in the recruitment -- in the numbers of recruitment, we are more and more focusing increasing, accelerating numbers of young financial advisers. The second main project in the distribution channel is about teams. So the possibility to work together, both senior bankers or senior bankers with young talent. And we are working to increase the personalization of this contract among bankers. And this is -- this contract will be useful also for our Insurbanking project. And third, probably even more important, you know that we have some specialization in the network. For example, we have the sustainable adviser. Number are almost double in just a little bit more than 1 year. We are focusing some bankers on the investment and corporate banking, let's say, capabilities. So it's a way to fedalize more and more our financial adviser, giving them the possibility to focus on the topics they prefer. But -- and this is about how to enhance the financial advisers. On the product side, very focused on our asset management capabilities. Very confident to expand numbers for our Luxembourg platform just because we launched a new family of products. One example, in the last 3 weeks, we launched our first initiatives of protected fund and some other initiatives on entering the equity market gradually. We collected more than EUR 200 million in 3 weeks, and I'm sure that more will come in the next weeks. So it's all about internalizing margins and developing our Luxembourg platform. And we have been working for the last 6 months in launching also dedicated initiatives in Ireland for active ETF, and I will dedicate more time on these initiatives in the next conference call. But now let's focus on Intermonte and Alleanza. So starting from Page 26, 2 strategic pillars of the acquisition. You remember, I said that for us, this acquisition was a game changer. It's a game changer from a revenue perspective and margins as we expanded our capabilities in global markets, and we start seeing the first results. I was mentioning certificate. October has been the strongest month in certificate, both in terms of volumes and also in terms of margins as part of the derivative structure was closed by Intermonte. And thanks to the expertise in these assets, I'm sure that the numbers will expand in the next months. So expertise -- more expertise in global markets as well as the possibility to expand the business of our financial advisers in the corporate investment banking. And in this case, again, some numbers, the business is already there. We organized more than 130 meetings with top entrepreneurs already clients of the bank, and we are close to deliver some mandates with these entrepreneurs. So the potential is very huge. Why we are so confident on this deal? In Page 27, you see some numbers. You know that the total equity not listed, so small, medium enterprise basically amount to EUR 1.5 trillion. And if you look at our client base, we have more than 3,900 clients, entrepreneurs with more than EUR 160 billion of estimated value. So in our portfolio, in our clients, we have more than 10% of the overall equity not listed, small and medium enterprises. And we are the best positioned in terms of distribution. We have more than 600 financial advisers with more than EUR 50 million, average EUR 100 million. So we have the clients in our portfolio, and we have the competencies and the professional to provide investment services, and we have Intermonte, of course. And remember that one major priority for the private banking will be the generational wealth transfer and some projection estimates at more than EUR 300 billion of transfer within 2033. So Page 28, you see the projection of revenues of Intermonte in the next 5 years. We are confident to more than double the overall contribution of net banking income of Intermonte. So from EUR 42 million at the end of 2024 when we closed the deal to a range of at least EUR 89 million. Three major components, asset under custody and trading. So what we're talking about or what I was dealing with previously, so structured products, certificate derivatives, managed products, the example of protected fund launched in October and investment banking. And as you can see bottom of the page, cost income. End of 2024, 80%; end of 2030, less than 60%. So it means that the extra net banking income has a cost/income that is almost in line with the existing banking -- cost/income of the bank. So it's a very good operating leverage in this case. So Intermonte, as I mentioned, will be something very important for the bank, disruptive because we have the clients, we have the competencies in the network. And now we have also the capabilities -- the internal capabilities to work on the entrepreneurs. The second project, Page 29 is about Alleanza. And let me give you some numbers of Alleanza. Alleanza -- the portfolio of the clients of Alleanza amount to almost 2 million clients, of which more than 55% affluent clients. They serve this client through paid agent insurance channel with almost 10,000 distributors. Of these 10,000 distributors, 2,700 are registered to the, let's say, to the financial advisory book. So they could work as financial advisers, but actually, they don't have a mandate. So actually, they can just offer insurance products. And the quality of this distribution network is very high, and you can see how they improved their results over time. Now they are the third player in terms of volumes every year. So I said that it is a very performing distribution network. Bottom left, you see probably the most important part of this slide. The overall life reserves account for more or less EUR 40 billion. Internal projection estimation of the potential of the clients gave a number of around EUR 170 billion. So it means that the existing portfolio, the existing clients manage more than EUR 120 billion with other intermediaries, basically banks and, per se, with banking products and asset management products or assets under custody. So here, the opportunity is pretty clear. Alleanza can work on a wider range of products in terms of bank, their clients in terms to -- let's say, to reach the clients with more sophisticated solutions. So also, let's say, balancing the bank insurance project. All the banks are trying to penetrate the insurance business. So this can be seen also as a defensive move. We will start banking their clients, so expanding revenues and defending their existing portfolio. On our side, we will enter the affluent business without distracting our private bankers from our core activities that are private clients. And the combination will allow us to catch up with the penetration in the affluent segment. How we're going to offer? At Page 36, we have the details to Page -- sorry, we will offer both banking products as well as we will extend the distribution of our insurance wrapper to their clients. So you know one of our capability has been to set up and to develop a dedicated insurance wrapper in which you can combine the best solutions of external asset managers. So we will provide support to the Alleanza network and advise them with portfolios to distribute these kind of solutions also for their clients. And the numbers we expected to achieve are significant. I mentioned in previous meetings that we do expect a sort of penetration of 1% of the potential of the client per year. And so here, you see the projection in the case of Alleanza for the next 5 years. We are confident to achieve at least EUR 7 billion of assets, of which EUR 3 billion, EUR 3.5 billion invested in banking and asset under custody products and EUR 4 billion, EUR 5 billion invested in these insurance wrappers, of which almost EUR 3 billion invested in, let's say, BG fund management products. So here is -- of course, the business come from the advisory fees, the advisory services we provide in this solution and the underlying of the insurance business. The overall impact in terms of net banking income is in the range of EUR 40 million, EUR 50 million. And the cost/income conservative prudently, we consider, let's say, the cost/income of the bank, but I'm also confident that the cost/income will be lower. So as you can see, also Alleanza is transformative because it will allow us to expand also in the affluent business, focusing on third-party distribution, but very close to the bank. We share the lion. And Intermonte is an accelerator, is a new engine to accelerate our existing business for private clients. So the combination will accelerate the trajectory of our growth path. Page 32 is just a slide on our target for this year, commercial targets. Just to say that the tender offer of Mediobanca had some uncertainty during the summer. And despite this, let's say, challenging time, we announced some targets at the beginning of the year. And now I can say that I'm confident to overachieve in terms of total net inflows, so to close definitely higher the EUR 6 billion announced at the beginning of the year and also to confirm the target in terms of product mix with assets under investment above the EUR 3.5 billion. And as I mentioned, I start seeing also very good sign in recruitment activity and while the existing sales force has continued to work very well during all the months of this year. And now I will hand over for the Q&A session. Thank you.

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

I have 2 clarifications and one question. The question is about the trend of inflows and recruits. I wonder whether during the offer of Mediobanca during this uncertain period, you suffered exit from bankers. And if so, whether the effects of these exits have already been fully factored in your monthly flows so that from now on, from October onwards, the commercial date of Banca Generali will reflect only the ongoing business and the new recruits with no more impact from previous events, so to say? So that's my first question. And then I have 2 clarifications. The first one is on the Insurbanking project. Is it fair to say that the network of the agents of Alleanza represents around 1/3 of the total of Assicurazioni Generali. Is my understanding correct? And the last clarification is on the guidance from net interest income. I apologize, but the line was bad, Gian Maria, when you mentioned this. You said that for 2025, you expect an NII above EUR 320 million, right?

Thank you, Giovanni. First of all, inflows and recruitment, you are right. Of course, during the summer, we had some exit. From June to September, the overall contribution of net recruitment, so in less out was almost 0. I'm pretty confident that we have almost factored all the exit and they start seeing the new colleagues. So from November, I can say that we are again business as usual with some positive queues in terms of recruitment. So -- and from that point of view might say on optimism. So I don't see more extra impact. For the Insurbanking project, I can give you a rough estimate. We said that overall Generali distribution channel accounts for 50% of the whole industry. It should be around EUR 100 billion. So being Alleanza 40%, I would say that is more or less 40%. But this is, let's say, I should ask Generali the right number. If I have to guess, I'd say 40%, so slightly above 1/3. For the guidance in terms of net interest income, you are right. We confirm for this year net interest income equal or above EUR 320 million and the same level confirmed for next year.

Next question is from Gian Luca Ferrari, Mediobanca.

Two for me, please. The first one is on the EUR 40 million, EUR 50 million revenues on the Insurbanking project in 2030. I was wondering if you can give us some shorter, let's say, targets for 2026 and 2027. How much will be the contribution in '26 and '27? The second one is on the contribution again on the Insurbanking. You are targeting EUR 3 billion, EUR 3.5 billion of deposits, right? So with 200 basis points of NIM you are having today, I'm not getting to the EUR 40 million, EUR 50 million overall contribution. So is there a split with Alleanza on this NII? Or I'm missing something here?

Thank you, Gian Luca. Let's say that we do expect to reach a sort of steady growth in the Alleanza business in the second part of next year. So you will see a phase-in. So it's reasonable to think that for each year, we will gain 1 percentage point of the potentiality of the market. For the next year, I said that there is the phase in. So it will be a little bit less, but we already started, and we start seeing some positive numbers already now. We are piloting it. So it will take no more than 6 months to achieve the speed, the normal speed. So you can more or less spread these numbers in the next 5 years with a phase-in in the first half of next year. In terms of margins, you say that when we mentioned banking products, you have to consider that part of these assets are current accounts and part are assets under custody. So as a conservative assumption, we estimate margins of around 80 basis points for that part of the business.

Next question is from Luigi De Bellis, Equita SIM.

Three questions for me. The first one on Intermonte. So could you elaborate a little bit more on the main synergies expected from the integration, in particular regarding asset under custody and credit products? And are there already some synergies realized in 2025? And regarding the SMEs, are there specific new services or products that you plan to launch for this client segment? The second question on the Insurbanking with Alleanza. So EUR 7 billion, EUR 8.5 billion in volumes by 2030, very interesting opportunities. But what are the main challenges you foresee in reaching these targets? And even in this case, are there early signs of cross-selling success between banking and insurance products? The last question on the market environment, the recent M&A activity in the sector. How do you see Banca Generali's positioning evolving in the Italian private banking landscape over the next few years?

Thank you. So Intermonte synergies, let's say that all the business of structured products will be impacted positively. We estimate a run rate of structured products of around EUR 1.5 billion per year. Primary market, 80%; secondary market, 20%. And we can internalize a good part of the structured products for the derivative components, thanks to Intermonte. So this is the major synergies that I can see. And then some efficiency also in the negotiation of ETF and the equity. Yes, we start seeing some synergies already now. We started with the first EUR 50 million of structured products in these weeks, and the initiatives are very successful. So we will start seeing some revenue synergies on, let's say, the capital market part as soon as the fourth quarter. You have a phase-in, we will reach the run rate probably in Q2 of next year. We have some implementation -- some technological implementation to reach the run rate. In terms of Alleanza, I consider that we launched the pilot a couple of weeks ago. So it's probably too early to see the results. I can see that the communication was great. We organized convention. And my perception that was a great enthusiasm just because, I mean, it's pretty normal to think of cross-selling and synergies between Banca Generali and Alleanza. Some good practice, consider, for example, the successful case of the financial planning of agency. So we have this dedicated network in the agency of Generali. We almost doubled the numbers in the last 3 years. So this is an example of collaboration that is working pretty well, and I'm pretty sure that we're going to accelerate in the future. So this is a positive momentum for Insurbanking also as a defensive move. Let's -- if you consider the announcement of the major banks are all about bancassurance. So you have to protect your existing business, and the first step to protect is to manage the current account. So I'm confident that there is -- it will be a priority also for the distribution channel for each professional. And so there is the same interest in understanding and speeding up this kind of project. And it will be positive for Alleanza, diversification of revenues, a higher penetration in the share of wallet of great clients and for Banca Generali, leveraging third-party distribution to enter the affluent market. So I don't see, honestly, challenges. I'm very confident.