Banca Mediolanum S.p.A. (BMED) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Banca Mediolanum 9 months 2020 Results call. [Operator Instructions] I must advise that the call is being recorded today on Tuesday, the 10th of November 2020. I should now hand over to your speaker for today, Alessandra Lanzone, Head of Investor Relations. Please go ahead.

A very good afternoon, ladies and gentlemen, and welcome to the presentation of our results for the first 9 months 2020. As usual, our CEO, Massimo Doris, will lead the presentation, and our CFO, Angelo Lietti, will join the Q&A session. Please make sure to ask your questions according to the language line you're connected to. All answers will be in Italian with an English translation. Massimo, you now have the virtual floor. Thank you.

Thank you, Alessandra. A very good afternoon to everyone. Before we launch into the numbers, I would really like to express just how proud I am of our 9 months results, which continue to be outstanding in all respects. We've all been hit by this tragic pandemic, like a ton of bricks, but far from being shut down and discouraged by the endless and negative fallout, we were all faced with, we rolled up our sleeves and dealt with challenges that were so unprecedented at the time and that have now become daily challenges. We didn't miss a step in our responsiveness with all of our customers, thanks to our across the board digital readiness, which allowed us to face everyone's initial disorientation, and our well-known advisory approach built on a personal relationship and unrivaled investment strategy rounded out our work. So let's look at the numbers. As you can see Slide #5, our net income reached EUR 249.8 million for the first 9 months of 2020, 3% higher than consensus despite the extraordinary contribution to banking industry for Banca [indiscernible] body and lower versus last year, essentially due to performance fee and the equity contribution from Mediobanca. And yet, we were able to sustain a very strong operating margin, reaching nearly EUR 316 million, which is already an accomplishment given the times. And yet, as we see slide #6, if we were to once again make a comparative analysis of the operating margin versus last year on a like-for-like basis and also assuming a constant level of inflows, we would have had an operating margin 10% higher than in 2019. In fact, in the first 9 months last year, we had EUR 21.5 million of equity contribution coming from our shareholding in Mediobanca, which is now classified as HTCS, and of course, there were no costs related to flowing, which altogether accounted for EUR 11 million at the 9-month point this year. On top of this, we had a hike in inflows far more than doubled compared to the same period last year. And this has an immediate impact on acquisition costs before we see any benefit in commission income. In fact, we provisioned nearly EUR 12 million more in incentives and bonuses on individual net inflows, as is usual. Needless to say, I can't bring myself to feel negative at all about this kind of cost. Since this doesn't imply any changes to the payout criteria and is a useful KPI for future recurring revenues. Speaking about our recurring business, let's take a look at what's happened. Gross commission income was up 4% at EUR 1.1 billion with entry fees and insurance revenues surging sizably, thanks to the substantial gross inflows into mutual funds on one hand, EUR 2.4 billion more than last year and on the other, to the rising level of premiums into protection policies. Our greatest contributor to the top line management fees were up 3%, totaling almost EUR 780 million despite the enormous hit in the assets in Q1. Mutual funds assets recuperated over the course of the following quarters. However, average assets will take some time to catch up. But indeed, the high equity component of our assets and inflows this year have compensated for a potential dent in management fees. As you can see in Slide #8, the sum of management and investor management fees, namely commission income for recurring fees reached EUR 896 million for the first 9 months, corresponding to 207 basis points on average assets. You might remember that this number was at 206 basis points in H1 when our assets felt the impact of the Q1 market drop the most. However, in Slide #9, you can see that assets have recuperated since then, month after month. And as I already pointed out, the strong equity content overflow this year started to have a positive impact on average assets in Q3. So let's continue down on the income statement and analyze acquisition costs, which were up 8%. As you can see in more detail, Slide #22, regular commissions paid to the network mirrored the 4% increase in gross commission income while a much greater level of incentives and bonuses reflected the extraordinary net inflows generated in the first 9 months, namely the far higher number of Family Bankers who hit the EUR 1 million inflows much earlier than usual. They were more than double the ones that reached EUR 1 million of net inflows. And now let's go back to Slide #5 and look at net interest income, which totaled EUR 178 million, a notch up over the same period last year, even though the retail cost of funding increased significantly in the first 9 months as a result of our extraordinarily successful 2% promo on time deposits, we were able to compensate this with higher interest income on our strong lending activities. Therefore, we are very confident that we can close 2020 net interest income in line with last year, based on the positive trend in the growth of the credit book. Net income on other investments registered a negative EUR 18 million, an improvement over last year. The most significant component of this line item, namely impairments on loans were largely in line at EUR 14 million despite an increase of 17% year-on-year in our credit book. And don't forget this already takes into account 2 different recalibrations of the loan loss provisions model, not only for the country outlook alone, but for one, including COVID-19 scenario. This clearly shows the value of our credit granting model and the creditworthiness of our customers. Our NPL ratio came in even lower at 0.62% net. And we expect the cost of risk to remain very low as well in the ballpark of 20 bps. As far as the rest of the line item is concerned, I'd like to point out that last year, we had a significant write-down of over EUR 15 million on advocated peso rental property. Now moving down the P&L. G&A expenses totaled EUR 403 million for the first 9 months, up 1.6% versus last year. This accounts for nearly EUR 10 million of G&A costs related to our new Flowe app we launched in June, which we'll talk about a bit later. But in the meantime, I'd just like to let you know that we've reached almost 90,000 customers for Flowe, so far, in a mere 5 months, which is exceptional when you look at any of the more successful global competitors. On the other hand, as you can imagine, the restrictions due to the COVID-19 situation didn't allow us to fully carry out our events marketing plan as far as our family bankers in personal events are concerned. Thus the lower-than-expected increase of 1.6%. However, keep in mind that most of the spend was shifted to the fourth quarter. First and foremost, Flowe, the Giro d'Italia sponsorship and related activities and our new format advertising campaign. Nonetheless, we are adjusting our guidance for G&A expenses in 2020 downward to an increase of 3% to 4%. As far as the regular contribution to banking industry are concerned, be aware that the deposit guarantee scheme acknowledges the higher share of our deposits in the banking industry. While the single resolution fund accounts for a higher country risk compared to last year. Before leaving the income statement, a quick look at the market effect is in order. Performance fees have to deal with a completely different set of market behavior than in 2019. And those fees crystallized by the 9-month point came in EUR 20 million lower than last year. Extraordinary items include EUR 5.2 million in banking contributions for Banca Popolare di Bari, which will be stuck with until 2023. While looking at the P&L as a whole, I would like you to value the fitness of our business fundamentals, particularly given the heightened restrictions we are all facing and which continue to be a reality. And yet, our business fundamentals appear to be underappreciated by the market. Okay. Leaving the P&L. Slide #11, we see that assets under administration and management, which had been hit significantly by the strong market drop in March and more than made up the difference by the end of September, ending up 3% higher than at the beginning of the year, EUR 86.7 billion. That's quite a feat, considering that at the end of March, we were down more than EUR 8 billion in managed assets. While we recognize the market recuperation since then, our performance in net inflows was key. And as we see Slide #13, the EUR 5.8 billion inflows we achieved in the first 9 months. Better yet, the latest figures from October of EUR 6.2 billion were nothing short of exceptional. And not just because of the EUR 2.8 billion into administered assets, mainly attributable to the 2% promo rate on time deposits. But mostly because of the EUR 3 billion inflows into managed assets with an [ admittedly ] high level into equity mutual funds or EUR 2.4 billion. Almost the entire mutual funds net inflows. And you know this is what we do. Our model, our investment strategy, our family bankers, our digital readiness, are all working in concert to keep the advisory machine moving ahead to generate positive flows into equity mutual funds, even during harsh markets, lockdowns or what have you. The automatic mechanism, we advise our customers to use when making equity investments, helping them to disconnect the investment process from their emotions largely account for the level of quality flows we produce. The Double Chance service, for example, you can see Slide 42 was highly utilized this year to harness the opportunities presented by the deep market crisis we went through. Paying 2% on the sums temporary part in a dedicated deposit account and gradually shifting the entire amount into equity funds over a time frame of 12 months. And this service now continues to be customer-preferred route for investing liquidity recently freed up by the expiration of the time deposits since the market's ongoing volatility continues to present an evident opportunity. In fact, October was sizably -- saw sizable flows into Double Chance, which, remember, initially show up in administered assets but end up in equity funds. We now offer an interest rate of 1.5% on the temporary part sums and accumulation phase up to 24 months. As of today, there is a little more than EUR 1 billion in the deposit accounts, waiting to be shifted to equity over the several months. Our other highly appreciated automatic service is Intelligent Investment Strategy. We are showing on Slide #43. They gradually shifts investments from money market to equity funds. Automotive will double in the installment or even multiplying it up to 5x when markets drop. As of today, there is more than EUR 2 billion in money market funds waiting to be invested into equity. If you look at Slide #44, the light blue bar shows just how much our customers installments have automatically increased during those months of market declines, really taking advantage of dollar cost averaging. And by doing so, maximizing our customers' long-term returns. However, you know very well that advising our customers is a nonencompassing effort for us. And we address all areas of our customers' financial needs, including credit, among others. And I'm proud to report that at the end of September, we surpassed EUR 11.5 billion in our credit book, a jump of 11% since the start of the year as you can appreciate in Slide 14. As a matter of fact, as demonstrated in Slide #16, we managed to grant a record EUR 2.1 billion in mortgages and loans in the 9 months, an increase of 13% and versus last year, even though the extended lockdown pulled the range of mortgages in particular. As regards to general insurance premiums, Slide 17, we saw a jump of 31% versus the same period last year, totaling over EUR 94 million, while new business of stand-alone policies exceeded EUR 16 million, a surge of 90%. The commitment we have to this business is solid and has been even intensified during these uncertain times. We created an arrival model where our family banker can address the entire range of customer needs. And this is not easily reproduced at all. In fact, you can visually see just how different we are from our peers. Right here, Slide #41, which incorporates Assoreti data of Italian Networks business figures. January to September. In terms of total net inflows, we hold a solid 18% market share. While focusing on mutual funds, we are in a great position with 21% share, however, just look at mortgages and loans, it doesn't look like our peers are interested in doing much here. Not to mention, general insurance, where we represent practically the entire sales network market. Changing topics, let's look at our capital ratios in Slide #18. The common equity Tier 1 ratio at the end of September was up 21.8%. Of course, this accounts for the 2019 dividend balance, we are not allowed to distribute in October and that has been entered in the capital reserve. Our capital position continues to be extremely strong. Please note that if we hadn't been restricted to capitalize the dividend balance, our CET1 ratio would have been 19.2%. And this, without the benefit of this year's net income that has not been capitalized yet. Now let's look at the network in Italy, and move on to Slide #33. I'd like to highlight that average assets in our Family Bankers' portfolio made gains, reaching EUR 19.2 million. Our Private Bankers and our wealth advisers' portfolios also developed very nicely, reaching 38.5% and nearly EUR 102 million, respectively, as shown in Slide #34. Moving over to Spain. You can see Slide #36, that our business kept up a strong pace in the first 9 months. Net income came in at EUR 17.9 million, an increase of 2% with a very solid operating margin growing by EUR 1.9 million up 10%. All of the business indicators were on the increase despite the fact that Spain got hit particularly hard by the pandemic. Total assets increased 9% since the beginning of the year, totaling close to EUR 6.5 billion, with managed assets at EUR 4.7 billion. Net inflows had a record period exactly as in Italy, registering EUR 704 million, EUR 500 million of which in managed assets, up 72%. The lending was also very strong, bringing the credit book to EUR 680 million, an increase of 21% since the start of the year. Just like in Italy, the credit quality is very high, with a net NPL ratio of 0.74%. The sales network saw an impressive 18% increase since the beginning of the year, reaching 1,219 Family Bankers. So now let me just give you a few updates regarding the progress of our Flowe app that we have referred to as our venture into the future, as explained in Slide #49. Just as a reminder, for those of you new to us, the objective of our new strategic project is to accommodate a rapidly changing world. Flowe is a [ new money ] institution, targeting the needs of the younger population who are receptive to an innovative and completely digital banking service as well as to the demand of sustainability, individual well-being and social evolution. Flowe represents a journey towards the future that Banca Mediolanum intends to pursue by means of innovability. Now as I already said, in just 5 months, we are getting close to 90,000 users. In sum, 6,100 different cities with an incredible acceleration in the past couple of weeks. Our users include teenagers ranging from -- ranging in age from 12 to 17, right in line with our objective to give an early start in their exposure to financial education. We issued over 9,500 physical mastercards, which incidentally are impact free and made in recycled wood and approximately 1,500 payments per day are registered. And to just give you some context, the payments made by Flowe users have so far been able to compensate for some 550 tons of CO2 and over 17,700 trees have been planted in the forest we're supporting Guatemala. The cost related to the project will be gradual. In line with the number of Flowe users, which grows week after week at a meaningful pace. In fact, we plan to reach 120,000 users by the end of the year, and we are adding new services to the marketplace we call the Bazar as well as new education and entertainment content at the time. That's why we envision the G&A costs of Flowe in Q4 to be around the same as the total of the previous 9 months. So far, some 50% of our users got on board via the member get member marketing feature, while the rest are typically acquired by social media advertising and influencers. We had the ambitious target to -- of reaching 1 million users in 3 years. And before closing, I'd like to update you about our most recent advertising campaign, that surely, the Italians in the audience have already seen. It truly represents a departure from the classic advertising we are all used to. We indeed felt that the times required something really attention grabbing. And we wanted to set a new standard in the world of communication in the banking sector with a new advert that went on-air October 16. The campaign harnesses the art of cinema, using a somewhat subliminal message to sensitize viewers on the importance of financial planning in order to reach life projects and goals. The overriding concept is that making the right choices is important to living in the future the life you dream of. Each of us, sooner or later, are faced with the reality of whether the choices we have made in the past have proven to be correct and consistent. The short film features a very famous Italian actress and is titled, Tell Me About Me, a film based on a true story that of each of us. I don't want to give you spoiler alert, but if you would like to go check it out at [indiscernible]. I really encourage you to do so. Although it's in Italian, I think you get the main message of the story, nonetheless. A story about time, opportunities and good advice, which encapsulate our investment strategy and philosophy. Thank you for your attention today. I just want to close reiterating one fundamental concept. Regardless of the whatever crisis we get faced with, including the resurgence of COVID-19 emergency, we will continue to make the difference as a market leader and with our customers. This is not our first rodeo, far from it. Thank you very much. And I'm available for the questions for the Q&A section.

Thank you. Massimo, we can start the Q&A session. Thank you.

[Operator Instructions] First question, Domenico Santoro, HSBC.

[Interpreted] Thank you for the presentation and for the large amount of information you provided. So extraordinary performance. It was really a good performance. I'd like to understand better the sustainability degree of certain items. As far as NII is concerned, I understand you had a better cost of funding, loans increased but you provided us with a flattish NII guidance this year. Does that mean that Q4 is going to be or is expected to be less strong than Q3. So is this NII sustainable and also Q3, TLTRO, did you take up any of it? Any impact from it? Also, I notice that there is an acquisition cost that percentage-wise is lower. Could you tell us why? Any visibility on Q4? Could it become more stable? Banking fees and insurance fees, could you provide us with some color as far as the fourth quarter is concerned and may be casting our plans further ahead into 2021, what kind of outlook can you share with us? What's your guidance as far as fees are concerned, banking fees and insurance fees specifically? I do understand that this scenario is quite uncertain and everything is still kind of up in the air, but I'd like some comments. Dividends. I know that you're still in talks with the regulator, but what kind of expectations shall we have? Do we have to expect an ordinary dividend? And do you have a payout floor and also what should we expect for the rest of the year? And what will happen to 2019 dividend?

[Interpreted] So let me take your first question about NII first. Cost of funding actually increased in the first half of the year because of our promo 2% interest paid on deposit accounts. During the third quarter, cost of funding went down. If you look at Slide 10, on the right-hand side, you can appreciate that from EUR 56 million, EUR 57 million interest margin, we went to EUR 65 million. And that is due to the fact that our promo on 2% deposit accounts expired, so the cost of fundings declined. And also, we took advantage or were benefited by EUR 1 billion due to tiering, which gave us a EUR 0.5 billion advantage out of the EUR 1 billion amount. So the trend is positive here. And we expect it to continue to be positive until the end of the year. Let me also say that at the beginning of December, a large number of securities will come due. So we will receive interests from these securities. And we expect a stable flat level compared to last year. So NII is expected to remain stable compared to last year. Acquisition costs. The payout hasn't changed at all. So when you see a change in this value, it changes as a function of funding, and that is due just to the mix in the funding. Otherwise, I mean, aside from that, there were no changes whatsoever. Let me remind you that family bankers receive a bonus or a fee on net inflows. And they have to achieve at least EUR 1 million net funding threshold to gain access to the bonus. But then the bonus will be computed only on the net inflows generated into managed assets. So should they actually gather EUR 1 million new inflows, that up into administered assets only, the Family Bankers would receive 0 bonuses. So the amount varies from Family Banker to Family Banker. But as you can see, in the first 9 months of the year, we have registered a doubling of total net inflows. So very many bankers did gain access to the bonus. Last year, they did have good inflows into managed assets. Maybe last year, they just generated EUR 800,000 rather than EUR 1 million. So they did not gain access to the bonus. They were not entitled to these bonuses. This year, very many bankers twice as many as last year as at the end of September exceeded the EUR 1 million threshold, and they've got to stick to it until the end of the year. Because the bonus will be paid as at December 31 and be paid on managed assets as at December 31. So if some bankers would -- will report -- actually, if some bankers report outflows, they will not receive a bonus at the end of the year. So there is no change whatsoever in the payout calculation. As far as banking and insurance fees go, banking fees fell due to 2 significant factors. On the one hand, we reported EUR 4.8 million more in trading fees -- securities trading fees. But on the other side, we reported EUR 4.3 million less worth of commissions generated in Germany on ATMs, ATM machines operations. So -- and also, there was an improvement in the sales of certificates. And that happened because certificates are products that are created ad hoc every time tranches are created. And certificates become really appealing depending on market conditions. So if market timing is not right, if the interest -- if the rate is not interesting, if the rates of volatility isn't there, they would not sell. So that is the reason why service fees are low. Insurance fees excluding those commissions that you see out there, that effect is due to the -- to the premiums in P&C insurance. As far as visibility on 2021 or 2021 outlook, we expect our inflows to continue to be quite robust. Please remember that most likely, we will close the year with our all-time record in terms of total net inflows because at the end of October, we have already reached EUR 6.2 billion. Our previous record was EUR 5.860 billion that we reported in September. And hopefully, we'll will beat that record next year as well, even though it will be challenging, but I really see no problems whatsoever preventing us from continuing reporting robust inflows, robust lending and robust sales of insurance products. Dividends. Well, I haven't been talking to the Bank of Italy about dividends, also because the Bank of Italy is really dependent on what the ECB is going to decide. We know that they are expected to lift the ban on dividend distribution in 2021. So what we want to do is pay the EUR 0.34 dividend balance that we had not distributed in 2019. And in addition, we would like to pay out the entire 2020 dividend. So that is our intention. We would like to pay both dividends. So final dividend for 2019 and the entire dividend for 2020, since we could not distribute the interim dividend in November.

[Interpreted] How about the accrual percentage in terms of capital?

[Interpreted] Well, we have not capitalized. We have capitalized the EUR 0.34 dividend for 2019. We had to shift them to the capital reserve. But as far as 2020 income, we have not capitalized anything. Otherwise, we would have definitely exceeded 22% CET 1, Tier 1.

[Interpreted] You mentioned 0.5% on EUR 1 billion, you are referring to TLTRO 3?

[Interpreted] No, I was referring to tiering.

Next question from Gian Luca Ferrari, Mediobanca.

[Interpreted] Massimo, I've got a few questions for you as well. The first has to do with the EUR 2.4 billion in terms of term deposits. At the beginning of the year, we talked about the possibility that 1/3 would outflow from these deposits when the promo was over. But apparently, this hasn't happened because there is -- there were no EUR 800 million outflows from these deposits from people that would close their account when the promo has ended. But I see just net numbers and cannot see the gross one. So can you give us just a bit color as to how customers are reacting and whether the 1/3 outflows has actually been much lower in reality? My second question has to do with Spain, EUR 8 million worth of net income in third quarter compared to EUR 5 million that was in first and second quarter. Now assuming that there are no performance fees, I was wondering whether this quarter 3 balance was due to some nonrecurring items that might reflect this. Then you talked about 75 people that were added to the network, how many from your network? How many from outside third parties? And then I would like to know something about ongoing discussions.

[Interpreted] I'll ask Domenico Farina to help me answering these questions. Because with respect to exits -- I'm sorry, of outflows from the 2% -- the promo 2% deposits, we certainly did not reach the EUR 800 million, but maybe Domenico can tell us exactly how much this was in reality. Just bear with me.

[Interpreted] Yes, Massimo, maybe I can answer directly. The outflows to external banks is approximately 20% -- 23% to be precise, i.e., EUR 600 million. The rest of the amount is either a part on the deposit account, and some of it has been already moved over to managed assets. So we're talking about some 15% managed assets.

[Interpreted] In the meantime, of course, we had additional inflows that sort of counterbalanced the outflows. And let me remind you that a few years ago, we had already experienced something similar because we had seen a 30% -- an outflow of 1/3, more or less, once the rate promo had ended. But in the following months, this 30% outflow was more than off-balance by compensated. And by those who had remained and new customers who had opened their accounts. And not only did they decide to maintain what they were banking with Banca Mediolanum, but they increased their presence or their money with us. And we hope that the same thing will happen this year. As to Spain, net income increased somewhat more. Because they increased their leverage at treasury level, and they increase the interest -- their net interest income, and they were able to have some more interest margin. They're also performing very well. They are really breaking all the records across all the line items total inflows, managed assets, credit. And it's also a little bit of protection. This is very negligible. This is why they're breaking all the records there. But in any case, they are performing very well. As far as Family Bankers are concerned, again, I ask Domenico to help me here, should be 60% people coming from other sectors and 40% coming from banks. [Technical Difficulty]

[Interpreted] We have momentarily lost the connection. So again, please bear with us, and we'll be back as soon as Mr. Doris is back.

[Interpreted] While we're waiting for Massimo, let me answer what you were asking about Family Bankers. We have some 70% coming from other sectors and 30% from the banking industry. So this with respect to what you were asking about Family Bankers and the breakdown.

Next question from Elena Perini, Intesa Sanpaolo.

[Interpreted] Massimo, I have 3 questions. First one, the transformation of deposits into managed assets. Do you really think that this transformation may accelerate now that we are approaching the end of the year. In October, you did very well in terms of managed assets, but you have also accrued a significant inflows into administered assets. Performance fees year-to-date, please? This is my second question. Could you update us on performance fees year-to-date? And finally, I would like to ask a question about interest, net interest income specifically, what's the guidance, the NII guidance you're willing to share with us for next year?

[Interpreted] I do apologize, says Mr. Massimo Doris. I'm really sorry, I lost the Internet connection from home, and I had to connect via my cell phone.

[Interpreted] So Massimo, let me summarize the questions for you, if you haven't listened to them. So the first question is how much of the term deposits were converted into -- you said that much of it was converted into managed assets. Do you expect an acceleration of this conversion until the end of the year?

[Interpreted] Well, I'm sure that the shifting of deposits into managed assets will actually accelerate. It always happens. Plus, if markets do actually enjoy some kind of momentum, which they are displaying right now, thanks to the Pfizer's announcement of the like -- of a new vaccine, I really think there will be an acceleration.

[Interpreted] Second question was about net interest income for 2021.

[Interpreted] We expect it to be in line with 2020. Despite low interest rates, despite the securities that we have in our portfolio, they will come due and new securities will most likely be bought at a lower interest. But at the same time, we have increasing volumes in retail loans. These volumes are steadily surging, and this will compensate for the drop in the interest rate on securities.

[Interpreted] Finally, the tax rate for 2021. If you want, I can take this question and answer it that we do not expect major changes compared to the current situation. So we don't expect major changes. Tax rate will remain more or less the same. Fourth question, could you please tell us about performance fees as at today? I'm not talking about those that have been really reported and accounted for but just accrued. Well, you have seen that in the last few days, and Mr. Lietti is taking the question, the market has been very volatile. And so far, we have reported some EUR 85 million growth performance fees. But this is really a very volatile piece of information that is definitely influenced by the latest news. So Elena, these were the 4 questions you asked. Is that correct?

[Interpreted] Yes, it is.

Next question from Federico Braga, UBS.

[Interpreted] I have 3 questions. The first, with respect to asset -- managed assets inflows in October. Can you explain how much came from the Double Chance or similar automatic conversion schemes? And respect to other sources. And then as far as Flowe is concerned, can you just give us a little bit more of color, the weekly rate compared to what you -- in November compared to what you saw in October? Just tell us how this is faring? And then third question, what about competitive dynamics? With respect to CQS loans in the coming months, considering that most likely, it is foreseen that this type of lending is going to decline. So can you give us a guidance as to how things are going to develop in the coming months?

[Interpreted] As far as your first question is concerned, we have some EUR 100 million per month that would come from the automatic investment of parked money. As far as Flowe is concerned, we expect to reach 120,000 users by the end of the year. The growth rate is rather volatile because it really depends on what kind of initiatives are put in place in terms of marketing initiatives by Flowe. So we might have instances where when we might acquire 300 users a day. And other days, we might acquire 1,000 new users. But our year-end estimate is 120,000 S2 CQS loans. That is a salary or pension-backed loan. We expect to see competition rising considering that the cost of money is going to go down. We are among the leaders in this industry. So should competition increase, we are used to tackling challenges and facing up to them. And in any case, in order to work in this specific kind of business, you really have -- need to have a specific know-how. This is just not the regular, everyday kind of lending, it's a specific type of loan. Of course, it's not that difficult to develop this kind of skills, but it's a sort of barrier to entry. And maybe smaller entities will just turn to the incumbents that may act as intermediaries. So something may happen.

[Interpreted] Massimo, if I may, I would like to add that since June, banks have already reported a decline in the cost of capital and the cost of money. And so it's already here. We as well, of course, of course, yes.

Next question. Equita has the first -- the next question.

[Interpreted] I have 4 questions. Management fees, what kind of evolution do you expect in the next quarters? And also the SIA equity investment, do you think that this investment may have an impact on 2020, 2021? And what kind of impact on equity? And the third question is the banking insurance business, what kind of fees and costs do you expect in 2021? What kind of changes? And finally, market consolidation. I mean the sector is really consolidating, what kind of impact may Mediolanum feel should some significant players that were -- that made headlines during the week join efforts and merge?

[Interpreted] Well, as far as management fees are concerned, as I said earlier, that we expect a declining trend, namely a couple of basis points a year. And that is due to the fact that the trend is on the downswing. It's a declining trend. And also, we made some decisions, like you know, cutting management fees on PIRs. We decided also to stop selling a share class of Irish funds that is the asset class -- sorry, the share class that has the highest management fee. And then we have the very great success of the Intelligent Investment Strategy. So when they have that has a 50 basis points management fees. So this is all dragging the fees downwards. But also market volatility may inflate or disinflate management fees just like recurring revenues. For instance, at the start of the year, we were at 210, then we went down to 204 or 205 when markets crashed in March because, of course, it was precisely the equity market that was the hardest. And we have lots of assets invested in equities. And so the average fee was actually impacted, but then markets recuperated. And so we went up -- back-up from 210. We had gone down to 203, and then we went up to 208 in September. You can see this seesawing trend. And then I said 207, I mentioned 207 because that's the average -- the year average from January to September. So it's the year-to-date average. But then I think that these basis points will go down again. In theory, they could go up again, but that would mean that we would have 60% to 70% equity mix, which is better said equity in our assets mix, and that is really unlikely. Should the asset mix actually favor the -- or be dominated that much by equity. In that case, we would see this kind of performance in management fees. Well, as far as the merger between Nexi and SIA, S-I-A, is based on a share exchange ratio of 1 Nexi shares for every 1 SIA share. So with this merger, we have like 7.7 million Nexi shares in our portfolio. The merger agreement should be signed in agreement -- sorry, in December and then be actually implemented in July 2021. So if we consider that Nexi share is EUR 15. The growth capital gain before taxes should be EUR 60 million. How are we going to account for that capital gain? First of all, we have to see whether in December, they actually signed the merger agreement as expected. And again, in December, they will actually define the share exchange ratio the Nexi share value will be established, but that will be discounted because as at December 31, at value will not be liquid. So there will be some kind of haircut due to the illiquidity of the stock. And then in July, when the conversion to SIA stocks will be completed, we will have an additional capital gain, but that depends really on how SIA is faring. So should the merger happen today, should the share exchange ratio be the one I have mentioned, we would have about EUR 60 million capital gain. I hope I answered your question. I hope my question -- my answer was exhaustive.

[Interpreted] Yes, of course, it was.

[Interpreted] So Massimo, if you want to take over from here for the other 2 questions.

[Interpreted] Yes. So we were talking about managed inflows into managed assets generated by automatic systems. If we add Double Chance, we go up to EUR 200 million a month that are automatically shifted into managed assets. That was to round out an earlier question. Then as far as the growth at this pace of banking fees and insurance fees. We want to grow a lot, protecting our customers. That is why this year, we will have about EUR 25 million in new business stand-alone policies. Plus we will have fees coming from loans from the lending or banking business itself. As far as protection is concerned, we have EUR 39.5 million. We stand at EUR 94 million, plus 30%. I think we'll end up with a plus 30% next year as well as far as this line item is concerned. Banking service fees could instead be perfectly in line with this year. That really depends on how certificates fair, meaning it takes a certain type of market condition to create these products. But e-certificates are not issued because market conditions do not allow us to create to really make tradable sellable products. Then the Family Banker would sell a unit, would sell a fund. I mean money will not be left to gather dust in banking deposits simply because certificates cannot be sold. Family Bankers will push other products. So this line item gathers also the commissions generated by Germany's ATM machines. And depending -- and I'll get to the question -- to when we expect to sell the company. So depending on when we actually sell it, we will have -- that will impact this line item of the -- German ATMs commissions. As far as personnel is concerned, we have achieved an agreement with 30 Family Bankers for them to be transferred to other banks. We have indeed found 3 banks that are willing to take on board our Family Bankers. Some of them have accepted. And so they are transferring Family Bankers along with their assets and clients to these 3 other banks. And we are still in talks with 3 other Family Bankers. Then like I said, we have the German ATMs business there, we have 2 companies, 2 are German and 1 is American, who manifested interest in buying this business. So most likely, we really hope we can sell this business and close it down. So next year, we expect -- we hope we can actually close our business in Germany. Thank you, Luigi.

Next question, Domenico Santoro.

[Interpreted] I already asked all the questions I wish to ask. So I apologize. It wasn't me.

So next question from Alberto Villa, Intermonte.

[Interpreted] I've got a couple of questions. Can you give us -- you gave us a guidance as to operating costs, 3% or 4%. Can you give us some color with respect to operating costs in 2021? And the fact of you had no marketing events in 2020, you had no convention. What was the effect on operating cost? And also what were the costs of having to get organized and having your people working remotely? And then another question has to do with an update as to [ Antifa ], traditional and alternative investments. And then can you tell us something about the industry consolidation? We've seen articles and on newspapers, what is your take? And what about also asset managers in Italy? Can you just share your opinion and give us your take on this matter?

[Interpreted] Talking about operating expenses. What we could save as a result of the lockdown was mostly offset by the higher costs we had to deal with all that was necessary to work remotely because of the lockdown. All the PCs we had to purchase and the mobile phones for our people so that they could work from home or remotely in any case. So with respect to all the marketing events and the conventions we did not organize due to the lockdown, we saved us slightly more than EUR 10 million in the first 9 months. But with respect to next year, we expect to see an increase by 3% to 4%. Again, with respect to our operating expenses, and this is our guidance. As to PIRs, we are shortly going to launch an alternative PIR. We are working on that. We don't expect to have a lot of inflows on these type of products because alternative PIRs are illiquid. And every time you have an illiquid product considering our clients, the type of clients we work with, we don't think we're going to have massive inflows. As to traditional PIRs, I believe that when things come down once the pandemic is over, traditional peers should -- PIRs should rebound. Because -- of course, people keep on hearing that there is a crisis, people are going bankrupt, big people are in distress and all this news has to do with Italy because people live here, and they hear about what is going on in Italy. So telling them invest in Italian companies is rather difficult, it's rather challenging. So again, with respect to 2021, talking about PIRs, I think the market will be a bit muted. I hope I'm wrong, but I'm afraid it's going to be a bit muted. [Technical Difficulty]

[Interpreted] Again, I'm afraid, Mr. Doris has disconnected or there are problems with the connection? No he's back.

[Interpreted] As to the sectors, the industry consolidation. I believe that with respect to the traditional banking industry, there is an ongoing consolidation wave. The Intesa Sanpaolo-UBI consolidation has sort of made this consolidation wave even livelier. Internet-based banking has sort of shaken the traditional banking organization and systems. And therefore, for traditional banking -- for the traditional banking sector, the economies of scale have become more and more important. Considering also the various problems Italian banks had with nonperforming loans, which might get worse in the coming months due to the pandemic. So we've seen an acceleration with respect to consolidations. At least on paper, we will see this acceleration as far as our own industry is concerned. And therefore, I'm talking about network-based banks. I don't think there's any need for consolidations because all these type of banks are growing rather well. Of course, I'm talking about the leading banks. I mean there might be consolidations, but due to other reasons and not to stay alive, so to speak, as it is the case with traditional banks -- for some traditional banks. As far as we are concerned, our growth is solid and alive. So we are not envisaging any merger or acquisition. Again, with respect to operating costs, the 3% to 4% for 2021 include the Flowe costs. Yes, it's all included. And compared to this year. This year, we're going to close with a plus 3% to 4%. And next year, we believe that we are going to remain within that range. Around 4%.

Next question Alberto Villa, Intermonte. I think we have already taken this -- the question from Mr. Villa. Then we have no further questions coming from the English (sic) [ Italian ] line. So we hand it over to the English line. [Operator Instructions] Our first question is from Hubert Lam from Bank of America.

Most of my questions have been asked already. Just 2 left for me. Firstly, of your flows going into managed assets this year, how much have gone into equity funds? That's the first question. The second question is, can you give us a sense in terms of how clients are reacting differently during this recent resurgence of the virus compared to the first time around, would you say clients are more calm this time?

[Interpreted] As far as inflows into managed assets, maybe we can show the October slide. Here, we see that out of EUR 2.769 billion net inflows into funds and unit linked products. If I'm not wrong, about 80% ended up into equity funds. Yes, specifically, EUR 2.4 billion ended up in equity funds. And the difference between EUR 2.769 billion and EUR 3.146 billion is net inflows into certificates. So funds and units, EUR 2.4 billion out of EUR 2.7 billion. There was equity funds inflows. As far as the behavior of customers or markets during this virus resurgence, it's more or less the same. We see that today are the network, the Family Bankers network is really leveraging Double Chance right now. So we still report very good inflows. Specifically, total inflow is very good. But when we have a double -- an inflow into Double Chance. We don't have an immediate impact into managed assets, not right away because the money is parked temporarily on a dedicated account, and then it is gradually shifted to managed assets. Markets displayed fantastic rebound right now. And if markets continue to be performing that way. I am sure that inflows into managed assets will continue to be robust, not only ours, but everybody.

[Interpreted] Any other question from the English line?

We have 1 more question from the line of Angeliki Bairaktari from Autonomous Research.

Just 2 left on my side. First of all, with regards to your Family Bankers in Italy, the number continues to decline with 70 people left this quarter. I was wondering if you could give us some color on what is driving the Family Banker resignation year-to-date? And where should we expect the number of Family Bankers to stand next year? Is it going to be higher or still continue to decline? And second question, you spoke about consolidation in the banking sector. And you still have a stake in Mediobanca. If you could just give us an update with regards to sort of your stance and how -- whether it be your stance, whether your investment could change if Mediobanca were to be involved in state banking sector consolidation in Italy?

[Interpreted] As far as family bankers are concerned, exits are quite normal because if you take a look at the turnover rate, this is 3.8%, which is really very, very normal. The problem is not so much the 65 family bankers who left or the 19 who retired. If people retire, there's nothing you can do about it. But the problem is the 75 new bank, family bankers, who we were able to win over and who joined us, which are few. This is why we set up plan for next year, we are going to implement it starting next year with respect to our sales and distribution network. Because we want to increase the number of family bankers and especially increasing the productivity of the more skilled and senior family bankers. Under the plan, we expect to have a junior family banker. These are the young, newly graduated family bankers that are going to work alongside senior family bankers. Since generally, senior family bankers have a large client portfolio. They might allow junior family -- they can ask junior family bankers to help them with the smaller clients. So that in the meantime, they acquire the necessary experience for the generational transition. And at the same time, they will be able to acquire all the necessary experience from the senior bankers, and this is going to be welcome by the junior family bankers. Then there was another question on Mediobanca, Massimo?

Right. As far as Mediobanca is concerned, for the time being, we do not intend to change our position, our stance. Even though they might want to start operating in the same industry. Actually, they're already here. They have set up CheBanca!. My father was a member of the Board of Directors of Mediobanca. And when they voted on setting up this CheBanca! venture. He was positive and gave a positive vote. And then there is Banca Esperia. We have a 50% -- we sold 50% of our stake in Esperia to Mediobanca. So you see that Mediobanca is already active in this sector. They might want to increase their footprint, if that's fine. They're free to do whatever they wish. We've transferred the stake in Mediobanca to the HTCS, and this allows us to be even more flexible in deciding whether to sell the stake or not. For the time being, we're just on a wait and see stance.

[Interpreted] Thank you, Angeliki. Are there any other questions?

There are no further questions. I will now hand back to the Italian call for any further questions. [Interpreted] We don't have further questions from the Italian line. So I hand the conference over to Ms. Lanzone.

[Interpreted] Thank you. Massimo, do you want to make a few closing remarks?

[Interpreted] Sure. I'd like to close by saying that I'm really very satisfied with how things are faring. Commercially, we have a total net inflows that, in October, reported plus 110%. Managed assets inflows, plus 32%. New loans, plus 14%. And P&C policies, plus 30%. So commercially, we are really doing very well. Operating margin, on a like-for-like basis, displays a plus 10% in a year like this one. Plus, we have a Flowe that is really going strong. So I believe that these 3 pillars -- 3 factors are really pivotal in showing that Banca Mediolanum is really on top of things, even though the situation is very difficult. Well, thank you. Thank you, everybody. Have a nice evening, everybody. We'll meet again for the 2020 full year results on February 11. Thank you again, and goodbye from all of the participants.

[Interpreted] Thank you, everybody, for connecting to today's conference call. You may disconnect now. Thank you, and goodbye. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]