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

Ladies and gentlemen, thank you for standing by, and welcome to the Banca Mediolanum Full Year 2020 Results Conference Call. [Operator Instructions] I must also advise you that this conference is being recorded today. I would now like to hand the conference over to your speaker today, Alessandra Lanzone, Head of Investor Relations. Please go ahead.

Good afternoon, ladies and gentlemen, and welcome to the presentation of our full year results for 2020. The presentation will be led by our CEO, Massimo Doris; and our CFO, Angelo Lietti, will join in the Q&A session. It's very important that you ask the question in the language according to the language line you're connected to. All of the answers will be in Italian with the English translation. And now I'll hand this over to Massimo. Massimo, the floor is yours. Thank you.

Thank you very much, Alessandra, and very good afternoon to everyone. It feels really incredible to be able to say that the year 2020 was one of the best years ever in the history of Banca Mediolanum with total flows exceeding EUR 7.7 billion, a striking performance considering the volatility in a year characterized by the fallout of a black swan event and with an equally remarkable performance in the other businesses, such as general insurance and loans and mortgages. Not only did we not miss a step in our responsiveness to our customers, thanks to our digital readiness and advisory strategy, we continued and we'll continue to take our groundbreaking approach to the next level, setting up for explosive growth. We are not putting limits on how we go about creating solutions and inventing our future. But first, let's look at how we handled the past year 2020. As you can see in Slide 5, our net income reached EUR 434.5 million for the year, somewhat beating consensus and lower versus last year, essentially due to the exceptional level of performance fees we had in 2019. On the other hand, we didn't have the same level of one-offs relating to the write-downs on our shareholding in Mediobanca and on the business in Germany. However, if we sum up the results of 2019 and 2020, we just about hit EUR 1 billion in net income. What an achievement considering the 2 years we've all just experienced. I'd like you to put your attention on the top line. Gross commission income was up 3% to EUR 1.5 billion. Entry fees surged 35% on the back of the massive level of gross inflows into mutual funds. We were able to generate EUR 3 billion more than the previous year. Our greatest contributor to the top line, management fees, were up 3%, getting close to EUR 1.1 billion, not bad given the disastrous markets and the consequent impact on our assets in Q1. But the phenomenal equity inflows this year contributed to counteracting any lasting reduction in management fees. And indeed, the higher quality content of our assets also enable us to benefit from the market recovery. As you can see in Slide #8, commission income from recurring fees, which sum up management and investment management fees, reached EUR 1.22 billion in 2020, corresponding to 207 basis points on average assets, maintaining the same level as at the 9-month point. In fact, in Slide #9, you can see that assets recuperated month after month since the big drawdown in March. And as I already pointed out, the stellar equity percentage of over 90% of our mutual funds flows this year started to have a positive impact on average assets in the second half, showing commendably stable margins each month. So let's continue analyzing gross commission income looking at net insurance revenues. The sizable jump of 33% is almost entirely due to general insurance protection policies and has grown in tandem with the 29% increase in premiums. Banking service fees, on the other hand, were down 13% since we had an exceptional generation of EUR 20 million more in fees coming from certificates in Q4 2019 versus Q4 2020. Moving down the income statement, let's address acquisition costs, which were up 8%, reflecting the higher entry and management fees income as well as insurance revenues, but also encompassing the much higher level of incentives our family bankers received this year for their individual net inflows. As you can see in more detail in Slide #23, regular commissions paid to the network mirrored the 3% increase in gross commission income. While given the extraordinary net inflows generated in 2020, you can imagine the impact on incentive on net inflows. They jumped 27%. In fact, there were far more family bankers who hit the EUR 1 million mark in personal net inflows, which is the minimum required to receive this incentive. Returning to Slide #5. Net interest income totaled almost EUR 248 million, up 4% over 2019, beating just about everyone's estimate for this line item. Despite the unfavorable interest rate environment and even though our retail cost of funding increased significantly in the first 9 months as a result of our successful 2% promo on time deposits, we were able to mitigate this with the higher interest income coming from our strong and ever-increasing lending activities. Please note that our business in Spain had a very healthy contribution as well. Net income on other investments were a lot less negative than in 2019, when we had taken a write-down on a vacated piece of rental property. But what counts more is that the most significant component of this line item, namely impairment on loans, were particularly unchanged versus the previous year at EUR 19.7 million despite an increase of 17% in our credit book and with no negative effects from the health crisis on our P&L. And that says a lot about the value of our credit granting model and the creditworthiness of our customers. Our NPL ratio at the group level came in even lower at 0.57% net or 1.13% gross, with the cost of risk dropping to 16 basis points against expectations. And since we are on the subject, please note that the amount of loans currently under moratorium is very limited in the ballpark of EUR 330 million. Now I need to spend a few words on a line item that used to be called other revenues and is now expanded to other revenues and expenses in order to be more and more consistent with the standard bank P&L for comparative purposes with our banking peers. Here, we haven't just included the various and sundry revenues, such as recovery of legal costs or of mortgage appraisal fees, but also expenses linked to rewards intended to enhance customer loyalty, particularly high with Flowe this year, which we use to account for in G&A expenses. Of course, we reclassified the relevant line items for 2019. Now moving down the P&L. G&A expenses totaled nearly EUR 558 million, up 4% versus last year. Why the G&A costs related to our core business are not even flat year-on-year, a lot of this due to the COVID-19 restrictions. The entire increase of this line item is attributable to Flowe. The silver lining here was the explosion in customer acquisition in November and December that was totally unexpected, but of course, very welcome and exciting. In fact, at the time of our launch in June, we had targeted 200,000 customers for year-end. Yet, we found ourselves with over 660,000 customers. Although customer acquisition costs per capita are not that high and have to do mainly with social media marketing campaigns, we were definitely not expecting 550,000 new users in 2 months. The totality of factors thus far brings us to an operating margin of nearly EUR 390 million, which, although very strong in itself, comes out lower than the previous year. And yet, as we see in Slide #6, if we make a comparative analysis of the operating margin versus 2019 on a like-for-like basis and also assuming a constant level of inflows, our operating margin comes out to be 8% higher. In fact, in 2019, we had EUR 21.5 million of equity contribution coming from our shareholding in Mediobanca, which is now classified as HTCS. But as you know, our dividend distribution was not permitted in 2020. And of course, there were no costs related to Flowe, which altogether accounted for nearly EUR 41 million in 2020. On top of this, we had a 90% hike in inflows, and this has an immediate impact on acquisition costs before we see any benefit in commission income. In fact, we had over EUR 15 million more in incentives on individual net inflows. Here as well, this is a welcome cost since it is associated with recurring revenues. And at any rate, it doesn't indicate any change whatsoever in the payout criteria. Going back to the P&L in Slide #5. As far as the regular contributions to banking industry are concerned, the EUR 4 million increase is due to our higher share of deposits in the banking industry and to a higher country risk encompassed in the Single Resolution Fund. Okay. Let's spend a few moments talking about performance fees, which ended up being EUR 154 million of the Q4 market rebound, beating the highest expectations. Of course, this gets nowhere near the EUR 425 million registered in 2019. But still, I guess, you can call it a happy accident, we won't tore our nose off it. However, we can't deny that this means the high-water mark for 2021 will be even more challenging to surpass, but we definitely count on an increase in AUM. And while we are on the subject, I would like to remind you that our Ireland-based funds are totally compliant with the ESMA guidelines for performance fees. And therefore, there are absolutely no adjustments for us to make. In fact, on our Irish funds, including the back book, have annual crystallization, absolute high-water mark hurdle rates and a 1% cap on top. As far as Italy-based funds are concerned, should the Bank of Italy issue any adjustment following the ESMA guidelines, we could readily adapt. But please consider that the weight of Italian performance fees on those of the group is very limited. In fact, Italian funds assets represent about EUR 9 billion versus the EUR 37 billion of our Irish funds subject to performance fees. The total of assets under management of Mediolanum Gestione Fondi, so Italian-based fund, is EUR 9.4 billion, EUR 9 billion of which with performance fees. And Mediolanum International Funds are EUR 43 billion total, of which EUR 37 billion with performance fees. This year, for example, only EUR 3 million out of the EUR 154 million of the group performance fees were attributable to the Italian funds. Extraordinary items for 2020 include just the extraordinary component of the contribution to the banking system at a negative EUR 8 million, mainly related to Banca Popolare di Bari, while 2019 suffered a significant hit from the write-downs of our shareholding in Mediobanca and of the German business. Leaving the P&L, in Slide #11, we see that assets under administration/management, which had been hit profoundly by the market drawdown in March, bounced back strongly, ending up 10% higher than in the beginning of the year at EUR 93.3 billion. That's quite an amazing turnaround 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, as we see in Slide #13. The all-time high EUR 7.7 billion inflows we achieved in 2020 were nothing short of exceptional. And not just because of the EUR 3.6 billion into administered assets, mainly attributable to the 2% promo rate on time deposits, but mostly because of the EUR 4.1 billion inflows into managed assets with an unbeatably high level into equity mutual funds which represented over 90% of the mutual funds net inflows. And you know this is how we operate. As you've seen, even during the toughest markets, even during the lockdowns, all the ingredients, our model, the family bankers, our investment strategy, our digital excellence all worked together to produce record flows into equity funds. And as you've seen, the start of 2021 followed in the wake of the previous months with strong numbers and high quality in our January flows. Over the course of 2020, you've all come to appreciate just how effective the automatic mechanisms are that we advise our customer to use when making equity investments. They clearly have to disconnect our emotions from the decision-making dilemma of the investment process and are largely responsible for quality flows. As far as Double Chance is concerned, consider that currently there is slightly more than EUR 1.25 billion in the deposit accounts ready to be shifted to equity over the next several months. And as for the Intelligent Investment Strategy Service, there are over EUR 2.42 billion in money market funds waiting to be invested into equity. Looking from another angle, in terms of our lending business, we are well on the track. At the end of 2020, we successfully passed EUR 12 billion in our credit book, a leap of 17% 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 3.1 billion in mortgages and loans, an increase of 15% versus the previous year despite the disruption of the extended lockdown in spring. Completing the overview of the results of our advising activities in 2020, general insurance premiums in Slide 17 jumped 29%, totaling nearly EUR 137 million, while new business of stand-alone policies reached almost EUR 24 million, a surge of 59%. Although 2020 lockdowns pulled the reins a bit on this activity, we are still committed to our ambitious plan. And apparently, we have no competition in general insurance as it doesn't seem to interest our peers. Now changing gears completely and of great interest to everyone here, let's address the subject of dividends on Slide #18. This is the situation. This morning, the Board members decided it will propose at the Annual Shareholder Meeting in April a dividend distribution of EUR 0.78 per share. Taking into consideration the Bank of Italy dividend ban, we are only permitted to pay EUR 0.0267 in May, which we will do in order to recognize our commitment to the shareholders, and at the same time, respect the recommendations. Specifically, Bank of Italy allows the distribution of the lower between 15% of the sum of 2019 and 2020 net income and 20 bps on risk-weighted assets. Of course, we consider this highly questionable. However, we will be able to pay the remaining EUR 0.7533 in October after the dividend ban is lifted. The EUR 0.78 proposed consist on a base dividend of EUR 0.44 for 2020, which correspond to the objective of a 5% year-on-year increase, plus the 2019 dividend balance of EUR 0.34, which we were not permitted to pay last year. As shown in Slide #18, this brings the total payout to EUR 573 million, which, at the closing price yesterday, corresponds to a dividend yield of 10.2%. Let's move now to our capital ratios in Slide #19. The common equity Tier 1 ratio at the end of 2020 was up to 20.4%. And this accounts for the entire amount of dividends proposed. So it's very clear that our capital position continues to be extremely strong. Moving over to Spain. You can see in Slide 37 that our business took off in 2020. Net income was very resilient, coming in at EUR 31.5 million. All of the business indicators made significant strides, even though Spain got hit particularly hard by the pandemic. Total assets reached EUR 7.2 billion, a solid gain of 21%. We managed assets at EUR 5.1 billion. Net inflows had a record year, exactly as in Italy, surpassing EUR 1.1 billion, EUR 688 million of which in managed assets, up 65%. The lending business was also extremely strong, bringing the credit book to EUR 745 million, an increase of 33%. Just like in Italy, the credit quality is very high with a gross NPL ratio of 0.9%. The sales network saw an impressive 28% leap in headcount since the beginning of the year, reaching 1,318 family bankers, becoming the largest network of FAs in Spain, even beating BBVA with their 1,227 financial advisers. The pace of recruitment increased incredibly during the pandemic, also thanks to our growing reputation. In fact, a customer satisfaction benchmarking study carried out by the independent consulting firm Stiga, found that Banco Mediolanum, just as Banca Mediolanum in Italy, is the bank with the most satisfied customers in the Spanish banking market. So now let me just give you a few updates regarding the progress of Flowe. By now I'm sure all of you are pretty familiar with Flowe. But for those who are just joining us, Flowe is the youngest venture of our group, as explained in Slide 48, an e-money institution targeting the mindset and needs of the young generation, acting as an incubator for the development of our customers of tomorrow, who could eventually join Banca Mediolanum when their financial needs evolve. Now as I already said, in just 7 months, we reached 662,000 customers all over Italy, with an incredible acceleration in the last 2 months of the year, as you can appreciate in Slide #49. Flowe users, whose average age is 30, with a strong concentration around 20 years old, include a good many teenagers, ranging in age from 12 to 17, right in line with our objective to give an early start in their exposure to financial education as well as empower them to live meaningfully sustainable and happy lives. And so naturally, average deposits are quite small and reflect Flowe target and business model. This is a volume business, both in terms of customers and transactions. And our focus in the next couple of years will be on increasing usage and on the upselling of services. In fact, we have new products in the pipeline, such as instant credit for up to a maximum of EUR 3,000, but also smart insurance policies that have to do with cell phone insurance, basic travel coverage, et cetera. On top of this, we are adding all the time new services to make the marketplace, we call the Bazar, as well as new educational and entertainment content that will nudge customers to upgrade to the paying status called Friends. In 2020, when we concentrated our efforts in acquiring massive numbers of new users, the percentage of paying customers was only 1%. But we believe this percentage could easily surpass 50% by 2023 when we expect to reach a total of some 1.7 million customers. And this is precisely when we plan to reach breakeven, assuming higher number of paying customers, higher usage, upselling of services and a gradual reduction of customer acquisition costs. So Flowe is our offer targeting the younger generation. But we haven't stopped there, we have further developed our offer targeting a crowd just a few years older, the digital young adults. As you can see in Slide 50, I'm referring to our latest piece of the mosaic of our digital strategy, our new endeavor called Selfy, which we launched about a week ago with all the support of TV, radio and social media advertising campaign. Selfy is a totally digital bank account, addressing the needs of these digital young adults who require a more full-service checking account than the typical Flowe customer, but who are not looking for advice at the moment like the typical Banca Mediolanum customer. By opening the Selfy account, the customer activates a comprehensive offer of banking services able to manage on a do-it-yourself basis, letting then cobble together the bank they need a la carte. This is not just a simple bank account on the menu. Digital customers can also choose from a credit and debit card, online trading, mutual funds investments, instant credit, smart insurance as well as widely available retail products completely on their own. And all this is guaranteed by the solidity of Banca Mediolanum, one of the most reliable banks on the market, which is not always the case in the digital financial world. Many of you will probably ask why are we creating yet another digital account when the regular Banca Mediolanum account can already be opened and used digitally without the involvement of a family banker. As a matter of fact, this is one more step forward in the Banca Mediolanum customer journey and experience. Let's say, it was the missing link in our strategy of being fully digital, which completes the range of diversified and ad hoc approaches in order to capture all types of customers. We don't have a crazy target in terms of customer acquisition. We are just looking for acquiring qualified digital customers in the long tail of our addressable market that we were not able to fully attract before and who can eventually be steered to a family banker when they find they need complete advisory services. What we count on is the overall growth of the Mediolanum customer base. And of course, we aim to generate incremental revenue streams in addition to those generated by the sales network. Banca Mediolanum was born as a revolutionary bank, which is not exactly the case among the digital players in the market who tend to play the game catch up. Our strategy is to increasingly become an enabler, a facilitator that aggregates what we hear and read in the market into a forward-looking open banking system. What we are talking about here is a pull versus push strategy. We like to think that this is a sort of humanistic approach where individuals can shape their own world, financially speaking, Banca Mediolanum come vuoi tu, in other words, as you want it. The positioning of Banca Mediolanum with this slogan is fully expressed. We've gone well beyond the idea of being a multi-target bank, introducing the concept of being many banks. Banca Mediolanum is the full advice account but is also Flowe and is also Selfy. Moving on to the next slide. Another project we are actively working on this year has to do with recruiting with the objective of growing and enhancing our network. The project called Next targets the next-generation of family bankers and represent an extensive reworking of our service model and of the family banker customer relationship. Here, we pair a high potential new graduate, preferably with a degree in economic and legal disciplines, with a senior private banker to work as a junior assistant. The task of the junior banker consultant is to manage day-to-day duties and operations in order to free up time for the senior private banker to focus on the advising aspect of the job with the larger, more important customers. At the same time, the junior banker consultant gets the benefit of intense on-the-job training, taking care of the smaller customers who might really appreciate the attention the private banker may honestly not have the time for. Although these new trainees do not receive any commission, we support them with a scholarship while they prepare for the FA licensing exam. And when they will officially become part of the network, they receive a percentage of the senior private banker's commission with a minimum monthly compensation. This project allows us to increase the network headcount and productivity with the economic contribution of the experienced advisers. We consider this a win-win situation. In fact, aside from the organic growth that we certainly want to boost over time and put on even firmer ground, our objective with this project is to increase AUM by pushing the productivity of every single family banker, which, in the end, impacts net inflows. We are currently in a pilot phase in Lombardia, in Lombardy, and our intention is to roll out the program gradually all over the country over the next 3 to 4 years. To conclude, I'd like to share something my father wrote to all our employees and family bankers, which I think expresses very well, on behalf of all of us, the mood we all have here at Banca Mediolanum. During this last year that changed the world, we made remarkable accelerated strides together, overcoming unimaginable obstacles and thus making a transformative leap. In a nutshell, we have grown and improved yet again, accentuating even further our distinctive traits and preparing ourselves for the challenges of tomorrow. We have deployed all the resources at our disposal so that the distance is not an obstacle, but a progression and a revolution in the way we communicate. We have taken on even more responsibility to support families by helping them to create serene life paths, supported and protected by positive and free economic and financial choices. And therefore, 2020 was a record year for total net inflows, for loans and mortgages as well as for general insurance protection policies. And also, thanks to Flowe, our overall number of customers exploded 15% compared to the end of 2019. 2021 will be a rebirth for the entire world after a complex 2020. And it will be a year where our goals will have an increasingly higher bar, maybe the best year ever. Thank you.

[Operator Instructions] Gian Luca Ferrari, Mediobanca, has the first question.

[Interpreted] Massimo, got 4 questions. First one, could you provide us guidance, with a guidance on NII for 2021? Second question, exceptional result in Spain, EUR 1.1 billion net inflows. How organically generated was it and to what extent was that due to recruitment? And also, are you still recruiting people? Are you still recruiting or have you stopped? Where are these bankers coming from, from all over the place or from just 1 or 2 specific networks? I read somewhere that you raised AUM guidance for 2021 to EUR 5 billion. How much of it will be generated by Spain in 2021? Service banking fee in 2020, certificates were sold significantly. And in 2021, I'd like to know what kind of net inflows we will see there, closer to EUR 400 million or EUR 500 million? Also, the combined ratio for general insurance, is it confirmed at around 70%, as we said in an earlier call?

[Interpreted] Okay. As far as NII 2021 is concerned, we expect it to grow slightly. Despite low interest rates, persistently low interest rates, the securities we hold will not come due all at the same time, but the maturities will be staggered across the year or over the year. And also, we are lending money to our customers, so customer loans are growing significantly. So we think we will have an NII slightly higher in 2021 over 2020. Spain. Spain covered a lot of ground last year and started off super well back in January this year because across all business lines they did better than last year. I don't have a detailed piece of information here with me so I really do not know how much was generated by recently hired family bankers and how much was generated by existing family bankers. I can get that info for you and let you have it. But this year's success of Spain is due to the awareness acquired by Spanish family bankers. I mean, while in Italy, distribution networks are just kind of run of the mill, so to speak. That's to say that it's a well-established system to distribute banking services. If I'm not wrong, the traditional banks account only for 12% of the market or maybe 15%. I'm not sure what the percentage is. But unlike Italy, in Spain, Banco Mediolanum is the only bank distributing its products via a sales network. Back in the past, they used to be the ugly duck, if you wish, but in the last few years Spain used to have a very strong banking system and that was characterized by a very high presence of branches across the country, higher than in the rest of Europe. Well, over the last few years due to the crisis between '20, they have closed almost half the number of branches they have. The number of banking groups was curtailed. And so they really went through a very tough crisis. And please consider that Spain has been doing well for a few years now. And during the pandemic, Spanish banks have found it difficult to continue serving their clients. While our bank, thanks to its infrastructure, never discontinued its service. So customers really were given a hands-on experience of how good Banca Mediolanum is. That turned out to be the best bank from the point of view of client satisfaction in Spain. So like I said, hands-on experience, plus family bankers realized that they were part of a winning business model. I believe that all of these factors taken together contributed to this incredible explosion, this boom this year. EUR 5 billion inflows, yes, this is an all-time high. Last year, we have broken all records with the exception of assets under management. This year, we can do better than the EUR 4.1 billion reported last year. I mean barring new market crashes or new black swans, I really expected this year a much higher flow into managed assets. We started off in January better than the year before, and I'm talking once again of inflows into managed assets. And February too is reconfirming a good trend. So EUR 5 billion are within reach. And once again, let me reiterate that Spain started off better than last year. So everything seem to be foreboding for a good performance. As to certificates that you mentioned, well, it all really depends on rates and volatility. These 2 factors are 2 decisive ingredients to create appealing, attractive products. I don't assume or expect huge volumes in this sector because low interest rates are a typical foe of certificates. And since interest rates are bound to go even lower, to end up even lower, it will be more and more difficult to create appealing certificates. As far as the global economy outlook is concerned, considering we are rather constructive there, I believe that January too started off well. So it will be easier to stir our clients towards services like IIS. So I don't really expect much from certificates. Rather, I expect a lot more from funds and insurance. And as far as P&C is concerned, the combined ratio is confirmed at 70%, correct, so with an average margin of 30%. Did I answer all your questions or did I skip anything?

[Interpreted] No. Okay. Could you just add some information to the 300 bankers in Spain, where do they hire them from?

[Interpreted] Well, some of them used to work with banks networks, but I don't have that piece of information. I'd let you have it later on.

[Interpreted] [Operator Instructions]

Next question is from Azzurra Guelfi.

[Interpreted] I have 2 questions. One on insurance and one on costs. As far as insurance is concerned, can you give us some color? In 2020, this item increased and they have an important effect on the group. Then as far as costs are concerned, you talked about the various initiatives. Can you tell us what was the cost impact? And whether they will decrease over time or will they increase with the increase of customers?

[Interpreted] Talking about insurance, our target is to achieve a very strong growth. The first goal is to protect our customers. I always repeat this. In this sector, we work hard for our clients to earn 1% or 2% more. But in the meantime, if we forget to protect our customers from large risks and maybe there is something that happens, that 1% more will not change anything. It won't change his or her life. Whereas it would have been very important to have a life policy or accident policy or something, a protection policy. This is the first target we've set for ourselves. Very few customers have an insurance coverage. Say that as a rule, only 3.5% of customers are considered to be well protected, i.e., with 2 policies. So there's much to do. We are really pressing hard on this. The family bankers are starting to add this to their sales pitch. We've closed at EUR 136 million. And for 2021, our target is to have some EUR 30 million more adding to this figure. So we want to grow at a sustained pace. We know that customers who subscribe to these products have a much more favorable asset mix between administered and managed, and they are extremely loyal. The asset mix is in favor of managed assets. As to costs, costs have to be analyzed in combination with revenues. So for 2021, on a like-for-like basis in terms of market conditions, we expect to report a 2% reduction in cost/income. So cost will go up, but revenues will grow more, even more. So the cost/income ratio should be at 2%. As to Flowe, what you said is correct. We expect to report a decline in the relative acquisition cost because once we reach a critical mass in terms of number of customers, the cost tends to decline.

Alberto Villa, Intermonte, has the next question.

[Interpreted] Good afternoon, everybody, Massimo. I got 2 or 3 quick questions. NII guidance. I guess this year, we won't have to expect commercial initiatives such as the ones you launched last year or am I wrong? Maybe you have something in mind or you want to launch some kind of initiatives to accelerate growth, so as to grow deposits to then shift them into managed assets. Second question, against the backdrop of a more stable or maybe a more pro business political background, is it now the time? Is it the right time to go back and sell certain products that didn't perform well in the last few years because of laws and regulations. I'm referring into traditional PIRS. They could become a lot more appealing in this new Italian political situation. Last question. Your clients via Double Chance or the Intelligent Investment Service tend to be more exposed to markets when there is a drawdown and tend to cut back on their exposure when valuations are high when the markets are rising because they take a profit, of course. So they tend to buy on dips and sell when the market is rising. Do you think they will perform this way this time as well?

[Interpreted] Well, let me answer to one of the questions that was asked earlier by Gian Luca Ferrari. 12% of new Spanish bankers have a banking background and the remainder used to work in different industries. Let me take your questions now. So you asked about NII. Well, NII growing 2021 over 2020 doesn't really depend on us launching an initiative similar to the one we launched in 2020. Meaning, if we do launch such an initiative at present, we have not foreseen anything. We don't have anything in the pipeline. But we have a different initiative at present. We pay 2% on a 6-month deposit for those customers that at the same time make a same amount investment into managed assets. So if a customer deposits EUR 100,000 and makes 2% on that deposit, they will have to invest EUR 100,000 in managed assets as well. So this is different from the previous initiative. If we really go ahead with this plan, we should report a significant increase in NII. If we instead decided to replicate the initiative we launched last year, we would expect anyway an improvement in interest income, even though slightly lower, but we'll see. It really depends on how things fare during the year. For the time being, in the short term, we have no intentions of launching any particular initiative. PIRs or similar products. I think that this year, PIRs may take off again because as you correctly pointed out, with a more stable political situation, they could really make sense again. If you think of the failure or inability to make it off the ground for PIRs in 2020, well, we must not be surprised because PIRs are meant for investors to invest in Italian companies. Well, what happened in 2020? Aside from the pandemic that hit the whole world, when you read economic data, inevitably, Italy's GDP was the lowest. Italy's recovery was the lowest. Politicians were always squabbling. So all these news were not incentivizing customers to really stick it all out on Italy. So now we are starting to see the light at the end of the pandemic tunnel because vaccines, though belatedly, are being rolled out so we are kind of exiting the pandemic situation. As far as politics is concerned, the arrival of Mr. Draghi makes us hopeful to have really a stable, strong government that will make significant decisions rather than that kind of crony capitalism of the past. And this may help rekindle investors in general, not only Italian investors or Mediolanum investors, so may rekindle investors' interest towards Italy. Meantime, the equity market has gone up. So I really think that 2021 will really mark the recovery of PIR that will, once again, report positive inflows. And I'm really sorry, I forgot your third question. What was your last question?

[Interpreted] I think, sorry, I forgot it, too.

[Interpreted] So you were asking whether customers are actually, I mean, buy on dips and sell when the market rises. Well, what I can tell you is that IIS is very successful and is actually attracting a lot of customers means, of course, people do take profits, number one, because they want to consolidate their gain. It doesn't mean they just exit from their positions entirely. They just take profit. And also because the Intelligent Investment Strategy -- Alessandra, let me tell you that the slide is just too bright, move the light away a bit so that we can see the, otherwise, there's too much glaring. Okay. You can see the green bar, which is the automatic profit taking of the Intelligent Investment Strategy. And you can see that in January there was strong profit taking because markets were actually rising sharply. So they were actually exiting from the equity market. I said earlier that we have something like EUR 2.4 billion in money market funds serving the Intelligent Investment Strategy and being used as the parking place for the money that will then be switched into asset management, EUR 1 billion so will be switched into equity.

Next question, Luigi De Bellis, Equita SIM.

[Interpreted] I too have 2 or 3 quick questions. In our fourth quarter, we had an increase in acquisition costs and payout. And you said that this is due to a higher level of incentives. Can you tell us what is the expected trend in terms of acquisition costs and payout for the coming months? Second question, managed assets have picked up a lot in the fourth quarter. Can you give us an idea of the average performance of your funds for your customers in 2020? And how did 2021 start? So theoretically, how much is performance to date? Last question, hinting back to Mr. Draghi. Do you expect any government action to incentivate money that is sitting in deposits so as to transfer them to managed assets? Do you think they are going to work on this as far as you know?

[Interpreted] In the last quarter of the year, acquisition costs have risen driven by the strong flows in managed assets. In the first part of the year, there were many inflows in administered assets, but then in the second part of the year, a great focus was on managed assets. In 2021, if we'll hit the EUR 5 billion target, acquisition costs might rise even further because, of course, there are higher inflows. The cost we are talking about is variable. The higher the inflows, since the cost is a percentage of inflows, the higher the inflows, the higher the absolute cost, not percentage-wise, but in absolute terms in terms of acquisition cost. And then, of course, it depends on the type of products that are being used, whether we have a high use of installment plans. There, the acquisition cost is slightly higher. And the cost paid by the customer, a high percentage is rebated to the network. However, I would like to underline that the network payout has not been changed. So if you see an increase, it's because we are selling more of these products. It's as easy as that. Then as far as performance and managed assets are concerned, Alessandra, do we have the slide illustrating the customer average performance thanks to our funds? I would like to see the 2020 figures. These are the last 8 years. I would like to see the one for 2020. This is the 4-year, just bear with me, we'll get to it. And here we have it. It was 3%. This is 2020, end of December, and we rank second at 3.01%. I don't have the January figure however. And so I would like to answer to your question on performance fees. To date, we have some EUR 47 million. But you all know very well that unless the customer divests and takes profit, so part of the performance fees are crystallized. Otherwise, performance fees are measured only at the end of December. Until then, these are only sort of unaccounted data or management data. As to government, I really have no news, no clue whether they are considering to implement incentives or take steps to move all the money that is parked in deposits so that they can be invested in managed assets. I'm sorry, performance fees are EUR 60 million, EUR 47 million in Italy and the remainder in Spain. The rest was correct.

Federico Braga, UBS. Please go ahead.

[Interpreted] I have 2 questions. Cost/income ratio, you expect a 2% decline and the second question refers to Flowe. Could you please give us some color as to the additional clients that you have? Are these maybe the children of Mediolanum's clients, maybe they were helped by the parent open this Flowe account? And also one as far as the exponential growth of the number of your clients, do you expect to reach a breakeven earlier or not? Do you expect to have revenues generated later than expected, earlier than expected?

[Interpreted] So cost/income was 47.8% in 2020, including performance fees. And if performance fees are equal, we expect a decline of 2 percentage points. As far as Flowe's clients are concerned, it is really only a minority of them who are actually the offspring, the children of Mediolanum, Banca Mediolanum's bank. Most of them, the vast majority are just new, completely new customers, completely new to the Mediolanum Group. I see that most of them are between 20 and 21, then there is a trough in the curve. Then the curve picks up again at around 50 or 60 because these are the parents of minors who decided to open an account, a Flowe account, but it was necessary to have their parent's signature. That is why there is a pickup again in the curve. And that is why the average age turns out to be 30 years of age. Otherwise, it would be lower. I really think that the average age is much lower because, like I said, those parents had to open a Flowe account is simply to allow their children who are not of age to open an account and also maybe to control their children what they do with their money. And sorry, I forgot the last question.

[Interpreted] Yes, breakeven point, breakeven for Flowe because you decided to postpone that? Was it a reason due to costs or revenues?

[Interpreted] Well, first of all, we started off a few months later than expected. We should have started in February or March, and we started, we launched in June. The pandemic, plus in addition, the pandemic slowed down everything. True, we achieved 660,000 customers, and we expected only 200,000. And we did that in a couple of months only. But it took a lot of work to cater to those customers, and we had to devote resources to Flowe and that kind of delayed other projects we had in mind.

There are no further questions. Let's see if we have some questions from the English channel. [Operator Instructions] And your first question comes from the line of Hubert Lam calling from Bank of America.

I've got 2 questions. Firstly, on G&A costs. I may have missed it, but can you give us guidance on how G&A cost growth will be this year? Should we expect growth to be lower than last year if we don't expect the same type of growth at Flowe? That's the first question. And the second question is on insurance revenues. Insurance revenues in Q4 was strong at about EUR 19 million. Seems like it's the best quarter ever. Is there any one-off in that number or should we expect this to be the new base going forward and for this number to grow from here?

[Interpreted] As far as insurance is concerned, P&C policies, as a rule, the last quarter is always the strongest quarter of the year. So we cannot just take the last quarter and multiply it by 4 because this sector goes through a seasonality effect and the distribution of these products is seasonal. But what I do expect is that quarter-on-quarter, if we compare the first quarter of 2021 over the first quarter of 2020, I would expect to see a growth. The same for the second quarter 2021 over 2020, I would expect to see a growth. And the same for the last quarter of 2021, I would then expect to do better compared to the last quarter of 2020. As far as G&A expenses are concerned, we expect to report a slighter growth when compared to 2019, so 2020 over 2019. But we'd rather focus on the cost-to-income ratio because this is really what is important. If I had a 30% increase in G&A costs and a 60% increase in revenues, then I would be just happy to increase G&A cost by 30%. So what we really want to focus on is the cost-to-income ratio. We expect to have a revenue growth that is greater than cost growth.

Your next question comes from the line of Angeliki Bairaktari calling from Autonomous Research.

First, a question on the number of financial advisers, which has declined year-on-year. Was this intentional? And what should we expect with regards to your total number of family bankers going forward? And do you observe competition for high-quality family bankers in Italy? And second question on Flowe, which has obviously grown really fast in 2020. Could you describe what level of revenues and profits you expect to achieve via this platform over the medium term? I do get that the breakeven is in 2023. But ideally, over the next, perhaps 5 years, what would be the level of, 5 to 10 years, what would be the level of revenues and profits you would wish to get from this platform?

[Interpreted] As far as the decline in financial advisers' number is concerned, that number declined in Italy. But if you put together Italy and Spain, as you can see, the total number grew. But anyway, let's focus on Italy here. In Italy, we have focused on quality. We raised the bar. We have raised the bar steadily. So what happened? Despite a steady, though, slow decline in the number of our financial advisers, our net inflows have always been very hefty. So inflows and assets under management or administration have been steadily growing. So we went from EUR 8.5 million average assets per family banker to over EUR 20 million per family banker. So we have improved significantly. That was a specific strategy. We went for the most talented, the best, most capable family bankers in the market. This being said, the transformation is over. It is never completely over because there are always a few of them who simply cannot make it. They will leave the company. They will step down and be replaced by others. The EUR 20 million average individual portfolio is already a good level. But in 2021, we expect to add about 100 family bankers. We closed the year at 4,100. We expect we'll have between 4,150 and 4,200. So limited growth because we still believe in high quality, in the selection of quality, high-quality candidates. This year, we have kind of fine-tuned the selection process so the recruitment process will improve. So we will hire or recruit more than 127 people this year. And the turnover is instead expected to remain unchanged. To your comment regarding competition in the market to acquire new financial consultants. I really have to say that things haven't changed there. We hire people who not only used to work for banks or other networks, but also people coming from other professional experiences. We have hired about 60% of our bankers that actually came or used to work in other sectors and the balance instead used to work in the banking industry, so say, 60%-40% or 65%-35% being the split. And we'll continue doing so. As far as Flowe is concerned, our objective is reaching breakeven in 2023. And also, we will start reporting profits starting in 2025, probably a double digit profit. So breakeven in 2023, so single digit, to then go up to a double-digit profit and growing from there in 2025 and further on. These very long-term predictions are always very difficult to make, but we believe that we aim at having a number, a significant, a large number of paying customers by a certain deadline precisely because we provide them with services. For the time being, Flowe, to the best of my knowledge, is the only company of this type that has really fully embraced the sustainability theme, a theme that is very dear to the heart of the young. And so Flowe is really, I mean, sustainability sets Flowe apart from the rest, from other banks or other institutions. And let me add one comment. I think it's only fair that Flowe has to break even and then generate profit. But please, you have to contextualize Flowe within the Mediolanum Group. The strategy here is acquiring very young clients, who, at present, couldn't care less about a bank. They don't need a bank. But we are sure that one day they will need a full-service bank. And a good chunk of them, not all of them, but many of them will need not only a full-service bank, that is why we launched the Selfy initiative, for instance, but they will also need advice. They will need some kind of advisory service. So we are ready there to step in with Banca Mediolanum and provide them with an all-rounded service via Banca Mediolanum. Of course, N26 or Revolut may also be -- who are competitors, of course, may provide us with a possible client base. But trying to find those clients or snatch them away from the competitors is quite different from trying to grow them internally if you pass me the term. So we think there is a lot of synergy between Flowe and Banca Mediolanum.

There are no further questions. I will hand the call back to Alessandra Lanzone.

[Interpreted] Thank you. Thank you, everybody. Thank you for participating in this full year 2020 results presentation. We'll be back on May 11 to present the first quarter 2021 results. Thank you again, everybody, and have a nice evening. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]