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

Welcome to the Banca Mediolanum First Half 2024 Results and Business Update Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Alessandra Lanzone, Head of Investor Relations. Please go ahead, madam.

Hello, everyone, and welcome to the webcast presenting Banca Mediolanum's first half results. We appreciate you joining us today as we delve into our latest performance and highlights. Before we start, please remember to ask your questions according to the language you're calling from, the line you're calling from. In any case, the answers will be in Italian with an English translation. Now I'll hand things over to our CEO, Massimo Doris, who will guide us through the presentation. And joining him is our CFO, Angelo Lietti. Massimo, take it away.

Thank you, Alessandra. Good afternoon, everybody. It's a real pleasure to be with you today, and I'm proud to take you through a recap of Banca Mediolanum's performance over the half year and examine the key highlights and strategic initiatives that have driven our progress, and touch on how we play -- how we plan to maintain this momentum. When thinking about what the peer results meant to me, a famous Warren Buffett quote came to mind, "Risk comes from not knowing what you are doing." Today, I would like to unpack our first half results to show just how well we understand our future direction, and create our own way to get there. We could have easily fully capitalized on relatively slower-than-expected decrease in rates, enjoying an even better net interest income. However, as you well know, our vision looks beyond short-term gains. And so we implemented the well-known promo offer on time deposits, which allowed us to selectively share the persistently high rates with both our existing and newly acquired customers, solidifying customer loyalty and expanding our customer base. In fact, this strategic move, which was uniquely ours, delivered unprecedented growth in new customers and assets. Additionally, we decided to implement a couple of key initiatives to benefit our mortgage customers and to protect our portfolio. But what matters most to us is that we keep beating records in recurring commission income, which remains the cornerstone of our core revenues. The second quarter in particular was exceptionally positive, propelled by favorable movements in the equity market that significantly drove up our average AUM. Once again, our strategic equity gearing is yielding positive results, provided to be a consistently reliable payoff over time. Driving market conditions also fueled our net inflows into managed assets, which were already solid in the first quarter, but really took off in Q2. This has allowed us to reinforce our leadership position even more and look to the rest of the year with confidence. One of our analysts stated that commercial performance is undoubtedly the most compelling indicator of profitability, and we couldn't agree more. This observation underscores the critical importance of our commercial strategies and their direct impact on our financial success. That's why we put so much energy into attaining unparalleled excellence in our commercial results, ensuring that our efforts consistently drive outstanding performance. Well, let's now dive into the details of our performance in H1. As you can see in Slide #4, net income reached EUR 449.9 million, exceeding H1 last year by 24%, with Q2 coming in at EUR 229.4 million, 4% higher than in Q1. Indeed, an outstanding financial performance that not only features a strong NII, but most notably an impressive net commission income, up 15% to EUR 587.4 million. The growth in our recurring fees, driven by higher average AUM, was certainly supported by buoyant markets, but also by strong inflows into managed assets. This was truly remarkable given the challenging environment for inflows, especially at the beginning of the year. Our performance stood out in both quality and quantity, with significant contributions from both new and existing customers. As a matter of fact, management and investment management fees combined nearly hit EUR 743 million, pointing to a 15% increase compared to the first half of last year. Our distinctive high-quality asset mix continued to bolster our high margins. On a pre-IFRS 17 like-for-like basis, the recurring fees on average assets were 215 basis points. Even though our net flows were mainly in fixed income funds over the past half year, the equity component of customers' managed assets has consistently remained at a notable 61% as shown on line #15. Of course, we can't forget the major role played in our P&L by interest income, net interest income, which came in to EUR 418 million, increasing 20% versus H1 last year. However, down 10% over Q1. Keep in mind that NII decreased in Q2, since the quarter naturally got the full impact of higher customer cost of funding from the 6-month promo offer. Anyway, these funding costs peaked in Q2, and so we expect them to decrease in the upcoming quarters, as promotional deposits expire and phase out. We mentioned more than once that our NII would expand in 2024, and this projection holds through as the year plays out. Now in light of the latest market expectation and our very successful move in favor of mortgage customers, we slightly revised our NII guidance for 2024 to around a 10% increase compared to 2023. This assumes an average 3-month EURIBOR for '24 or 3.6%, assuming 2.5% of the EURIBOR for 2025, we expect relatively flat NII for 2025. Turning back to the P&L. I'd like to emphasize our most notable achievement. Our record-breaking operating margin, which surged to EUR 566 million with an increase of 22% for the half year. This reflects the diversification, profitability and scalability of our business model. Our net income also received a boost from market-related revenues in the first half, with performance fees generating over EUR 41 million compared to virtually nothing in H1 last year. Lastly, I'd like to draw attention to our improved cost income ratio, which stood at 39.2%, improved versus year-end 2023. This progress was driven by the income component that, thanks to higher recurring fees from increased average AUM. As far as costs are concerned, the 9% increase we saw in G&A in Slide #8, is perfectly in line with our indication, despite the different timing of the marketing costs in the first 2 quarters. The contributions to the banking industry showed an unusual increase due to a change in scope. As you know by now, the Single Resolution Fund reached its planned funding capacity, and was not allocated in Q1. Currently, Italian banks were required to advance the entire allocation for the deposit guarantee scheme in the first quarter. Additionally, we have allocated on a pro rata basis, the new contribution requested by [ EVAS ] on the insurance reserves, estimated to be around EUR 17 million for the year, although this is not yet official. On the topic of cost, it is important to note that the increase in provisions for listing charges is because last year, this line item benefited from a significant increase in interest rates, which positively impacted the discount rate. Now moving on to Slide #5. I'd like to brief comment on the business results for the first 6 months, which you are already familiar with. Total net inflows, which were already solid in the first quarter, had a major boost in Q2, ending up at EUR 5.66 billion for the half year, an optimal increase of 21%. More importantly, managed asset flows took an extremely positive course, surpassing EUR 3 billion, 43% higher than in H1 last year. And we can tell you that July was nothing short of spectacular. These strong net inflows showcase the effectiveness of our signature Intelligent Investment Strategy. And at the same time, the opportune timing of our fixed income mutual funds, which have been the major part of our flow so far this year, finally providing our customers with a perfect opportunity to rebalance their portfolio effectively. As you know, for us, fixed income funds represent a high value alternative to BTPs. And this is why our net flows are less impacted than our peers by the competition presented by govies, which are gradually losing their appeal, also due to a natural saturation effect, but continue to be a competitive factor for the industry. It's worth bringing up that the conversion of the EUR 1.9 billion from matured time deposits tied to the last year promo offer into managed assets is progressing smoothly, and is on schedule. In fact, 60% of the new money brought in by customers responding to the offer has already been invested into managed assets. And it's particularly gratifying that only 3% of the customers we acquired throughout this offer turned out to be rate hoppers. To repeat, what we said at the beginning, flows are the core of our business and vital to our success. Skipping to Slide #33 for a moment, to find ourselves at the top of [ authority ] ranking says a great deal in terms of gaining market share. That said, we are confident in our strong inflows into managed assets won't slow down in H2, thanks as well to reinvestments of the newly expiring time deposits. Therefore, we believe there is plenty of room to outperform our previous guidance of some EUR 5 billion. So we are adjusting our 2014 guidance to somewhere between EUR 6.5 billion and EUR 7 billion. As a consequence, thanks to solid net inflows, steady deposits and supporting markets, our total assets reached the record level of EUR 129.5 billion at the end of June, showing an impressive 10% growth since the beginning of the year. On the other hand, our credit book has remained stable versus year-end at EUR 16.95 billion, reflecting current loan granting volumes and is picking back up again, thanks to a significant reduction in early payoffs as a consequence of our initiatives in favor of our customers. Loans granted were down 25% year-on-year due to a lower appetite tied to the still high interest rate environment. However, the net NPE ratio of 0.81% indicates the good health of our loan portfolio, along with the 12 months running cost of risk of 19 basis points, which is consistent with our expectations. Lastly, general insurance gross premiums were up slightly, coming in at EUR 92.7 million. Indeed, the growth in stand-alone premiums, especially in new business which is in keeping with our long-term objectives, was able to offset the slowdown in loan protection policies. Finally, as you can see on Slide #6, our growth drivers are trending positively. Amidst an overall positive outlook, the highlight is the acquisition of bank customers, which set a new record with 109,300 new customers by the end of June, representing an 8% increase from an already exceptional half year 2023 in terms of acquisition. The superb growth was driven by our targeted marketing efforts focused on attracting primary customers. And regarding customers acquired digitally through Selfy, we added 16,100 new users, reflecting a 16% increase compared to last year. As a result, the total number of bank customers reached 1,865,500, marking a 4% increase since the end of the year. The [ NEXT rules ] expansion maintained its growth path, supported by the recruitment and training of professionals from various sectors, along with the gradual addition of new banking consultants to the franchise. So the total head count of Family Bankers at the group level reached a total of 6,314, up 2% since the start of the year. Included in this number are the 298 banking consultants from the project name NEXT, who were actively supporting our private bankers as at the end of June. By the way, this number reached 334 at the end of July, with another 125 banker consultants in training, currently advancing through the executive master program at our Mediolanum Corporate University. Just as a reminder, our objective for 2024 is to reach a total of 400 banker consultants. Finally, I'd like to draw attention to our automatic investment services, which are pivotal in driving our growth and explain the unfailing consistency of our net inflows into managed assets. At the end of June, the assets parked in the money market funds of the Intelligent Investment Strategy service and the deposit accounts of Double Chance were EUR 3.2 billion, almost 10% higher since the beginning of the year, especially thanks to the money market funds from IIS, which turned the course back around. As you are well aware, these assets are set to be systematically transferred primarily into equity funds on a monthly basis over the next few years. This strategy guarantees a dependable baseline ensuring consistent future inflows and supporting the growth of recurring fees over time, something we can rely on regardless of any other factors. Also keep in mind that at this point, our installment plans automatically invest EUR 1.61 billion into mutual funds on a yearly basis. There is another quote from Warren Buffett that perfectly captures the long-term and automatic nature of our services. "Someone is sitting in the shade today because someone planted a tree a long time ago." Now I'd like to shift your attention to the balance sheet ratios in Slide #7. Our bank's capital position is remarkably strong, providing a firm foundation for future growth and keeping us with a buffer against economic and regulatory uncertainties. This solidity makes us a trusted and safe institution for our customers and investors alike. Our CET1 ratio moved up even further to 23.7%, while our leverage ratio rose to 7.4%, leaving ample room for organic growth and granting the Board flexibility to keep increasing our generous dividend distributions. Anyway, please note that the introduction of the Basel III final regulations next year, is expected to impact our CET1 ratio by approximately 2 percentage points according to our initial estimates. Let's shift gears now and check out our business performance in Spain on Slide 31. Spain registered a significant increase in commission income. Therefore, the operating margin in H1 grew by 11%, while net income had a substantial gain of 16% compared to H1 last year, reaching EUR 36 million. Total assets progressed 12% since the start of the year, reaching EUR 11.8 billion, with nearly EUR 8.5 billion in managed assets, up 16%. Net inflows reached a total of EUR 655 million, with managed assets making up the lion's share, amounting to EUR 604 million. This is more than double the inflows from a year ago, benefiting greatly from the Double Chance service. The credit book picked up the pace over the course of the 6 months and reached EUR 1.4 billion, up 4% since the beginning of the year, primarily due to the steady volume of mortgages issued. The number of EMEA bankers remain mostly stable, with a slight decrease of 1% to 1,620. Remember, our focus has recently shifted towards enhancing the quality and productivity of the Family Bankers, with the objective of growing average assets per adviser. And we are particularly concentrating on the individual development of those who have joined us in recent years. Finally, the number of customers in Spain has reached 242,775, representing a solid 5% increase since the beginning of the year. To conclude, I'd like to express how proud we are of our first half results. They establish a strong basis for optimism regarding the future of our business. In fact, 2024 is shaping up to be in line with our expectations. And by that, we mean very strong indeed. Just to provide a recap of the guidance for 2024, we expect net inflows into managed assets between EUR 6.5 billion and EUR 7 billion. Net interest income to grow by about 10% compared to the previous year, and stable in 2025. Cost/income ratio in line with 2023 at approximately 40%. Cost of risk in line with 2023 at some 20 basis points. Dividend to increase compared to the previous year. It's clear that our strategic direction and efforts are yielding positive results, and it's incredibly gratifying to see that our hard work is being recognized by you, the analysts. Thank you for your time and attention today. Alessandra, I hand this back to you.

All right. So now we can open the Q&A session. Feel free to ask up to 2 questions each, so that we can give anyone the chance to participate. If you have more questions that we don't get to, we'll follow up at the end -- we'll follow up later. Thank you.

[Operator Instructions] Let's move on to the first question from Elena Perini, Intesa Sanpaolo.

[Interpreted] Massimo, I have a couple of questions. My first question concerns your guidance. You think -- you focused more on the cost income ratio rather than on the growth of G&A. But I'd like to know whether the guidance you had provided on that front is still valid in terms of year-on-year growth or if any changes took place? Second question, in the press this morning, some articles were talking about new taxes for banks and insurance companies. Could you please share your view on this issue considering that last year as well, during the summer, they tried to push through some legislation for new taxes, but we know how that ended up.

[Interpreted] I confirm that it is important to focus on the growth of G&A of costs, but I believe it's a lot more important to focus on cost-to-income ratio. If we double costs, we can triple revenues, I would go immediately for double the cost, but it doesn't work that way. So you have to keep costs at bay. But considering that our business is expanding so rapidly, the number of clients is increasing. The number of Family Bankers is increasing and also assets under management are increasing. Obviously, costs are on the way up, too. Variable costs are up because they are tied to volumes, but also more costs and expenses are necessary to manage a larger customer base. That is why we believe it is important to keep under control the cost income ratio, which we expect remain at about 40%. Should income be reduced, we can step in and diminish discretionary costs so as to reduce expenses and retain an acceptable cost-to-income ratio. As far as the tax, the windfall tax is concerned, yes. I read the same articles in the press. We've been talking a lot about this tax on excess returns, but then nothing happened. My interest is really working for Banca Mediolanum and making the bank grow. Thank you very much.

Next question, Giovanni Razzoli, Deutsche Bank.

[Interpreted] I have 2 questions. Which is the deposit stock you were able to collect with the promo, the 5% promo? Then during your presentation, you said that a certain percentage has been turned into assets under management. Can you remind us what was the result of the promo campaigns you had launched in previous years? And what was the impact on net interest income for the second quarter coming from these promos? Second question is the fund performance. Is it possible to have an idea of how many funds more or less have exceeded the high-water mark and the hurdle rate? And what is the performance we can expect by year-end? Can you give us a guidance thereof?

[Interpreted] I'll start with the second question. We have some 50 funds that are above the high-water mark and the hurdle rate. And we have EUR 140 million worth of potential performance fees in excess of the [ EUR 40 million ] we have already booked should we close the year today. So the EUR 140 million is something that may remain stable, grow, completely be wiped out depending on how markets are going to perform. Right now, it's [ EUR 140 million ] more in addition to those we have already booked. So we'll see. As to what we gathered with the 5% deposit promo, that was EUR 2.2 billion in the first part of the year. Last year, over the same period, we had collected EUR 1.9 billion. This was the 4% promo, of which 60% has been turned into assets under management. The impact on the net interest income, it's EUR 20 million quarter-on-quarter. So the cost of funding goes up [ 20 ] -- by EUR 20 million, 2024, quarter-on-quarter, first quarter compared to the second quarter. I don't know whether you were asking how much is the cost of funding increased in quarter-on-quarter, first quarter -- [ 20 ] -- or second quarter, if this was the question, then cost of funding increased by EUR 20 million. Thank you.

Next question. from Alberto Villa, Intermonte SIM.

[Interpreted] I'd like to go back to the topic of inflows because this is really one of the most important elements, characterizing your equity story, your ability of being so good at this. So the acceleration you expect in the second half of the year, I believe it's tied to the promo campaigns for deposits, but also tied to the propension customers have to switch assets under administration into assets under management. Do you have any visibility on any deadlines because maybe you have temporary investments in securities that may be converted into managed assets? Spain did very well in the first quarter in terms of conversion into managed assets. So I was wondering whether this exceptional commercial performance could be maintained in the next quarters as well?

[Interpreted] I really have to say that net inflows into managed assets in January and February kicked off rather slowly. But I was sure things would change as months went by and the numbers are proving me right. There are a number of deadlines coming up between June -- sorry, July, August and September. That's to say government bonds in our customers' portfolios that will reach maturity. And also, there are certain unit linked and certain other securities in the treasury portfolio that will expire. And this is going to help managed assets. Plus I have to say that the first few 5% interest deposits that were opened back in January are now reaching the expiration date. So those were made in January and then those made in -- opened in February will expire next month and so on and so forth. In the second half of the year, [ EUR 1.1 billion ] government bonds will reach maturity. And in the second half, [ EUR 2.2 billion ] worth of deposits collected or gathered in this part of the year will reach maturity, [ EUR 3.3 billion ] in terms of assets under administration, and I'm sure that our Family Bankers will start putting that money at work immediately. As far as Spain is concerned, I really think that they will expedite inflows because in July, in terms of net inflows into managed assets, July was an extremely good month for Spain. So barring incredible or unexpected events in the market, I believe they will keep growing at this pace.

Next question, Luigi De Bellis, Equita SIM.

[Interpreted] I have a question on recruitment competition and new customers. Can you give us an update on these aspects, considering that in your sectors, there are a number of moving parts connected to new projects. Does this bring about any discontinuity on the market. So how is the recruitment going? And whether by the end of the year, you might competition might be fiercer, and whether you may have the same customer acquisition rate you had in the past?

[Interpreted] Let's start with customers. The acquisition rate in terms of customers depends on the type of offerings you can propose. Since we've proposed the 5% interest promo in the first quarter, this, of course, supported customer acquisition quite a lot. Repeating the same -- in order to have a repeat in the second half of the year with respect to these results, we have to think about new offerings. And of course, this is something we are doing. Maybe we will not be able to repeat exactly what we obtained in the first half, but I believe that we will still keep a good acquisition pace. As to recruitment, since we recruit from traditional banks, insurance companies and also people coming from other sectors, but as we really have very few records from other networks. We don't feel the brunt of a great competition here. I don't expect to see a major change. Every couple of years, there is a network that may be -- really tries and recruit more people from other networks. One year, it's [ Sella ], on another, it's Banca Generali. And then we have [ Fineco ] stepping it. Another year, it's [ Azimut ]. So they sort of pass the baton to one another in trying to recruit people from other networks. So we might have these up and downs, but there is not something upsetting or really disrupting the recruitment market as far as we are concerned, as things stands now. But again, let me highlight the fact that we don't recruit people from other networks specifically, very, very few of them come from other networks. 95% of people we recruit do not come from other networks.

Next question which comes from Marco Nicolai, Jefferies.

[Interpreted] A question about your inflows guidance. You provided a rather high number, absolutely in positive territory. Maybe this guidance is due to the fact -- partly due to the fact that some of these promo campaigns concerning deposits will expire this year? Or is it maybe a number we can expect in future years as well? This [ 6.7 or 7 ], is it something idiosyncratic to this year? Or given the greater customer acquisition, given the growth displayed by the bank, is it something we can expect in the years to come? Then, of course, it all depends on the macroeconomic picture of the future. But in general, I'd like to hear your views on this. And then a few questions about NII. First question, could you tell me which portion of the fixed rate banking book have expirations or maturity dates in 2024 to 2026? And the rates you have in those years to understand the positive impact there will be on NII this year and the next 2 years? Then in terms of cost of funding, you mentioned 120 basis points. What do you expect at year end?

[Interpreted] In terms of net inflows into managed assets, we have improved our guidance because at the 6-month point, we have already reached the EUR 3 billion point. Our target was EUR 5 billion. We are already at EUR 3 billion at the end of the first half. So we still have 6 more months to go. July is a good month. December is normally a very strong month, so sticking to the EUR 5 billion target for year-end seemed to be too low. July was an extraordinary -- it was an exceptional month. So this guidance reviewed upward to EUR 6.5 billion or EUR 7 billion makes a lot of sense. Plus, we have already made EUR 6.5 billion in the past because in 2021, as you can see on the slide, back in 2021, we reported EUR 6.66 billion in terms of net inflows into managed assets. So my answer is absolutely yes, EUR 6.5 billion to EUR 7 billion are within reach. Of course, the markets will have to help us because you know that managed assets -- inflows into managed assets are highly influenced by the market performance. In 2023, we reported EUR 4 billion inflows into managed assets. While the market was struggling, very many banks reported negative numbers, that's to say outflows from managed assets. So we always have to come to terms with the market. We always have to take the market performance into account, but I believe that EUR 6.5 billion to EUR 7 billion inflows -- net inflows into managed assets are really doable. Then also, it's a matter also of when government bonds in our customers' portfolio reach maturity. For instance, BTPs, they were quite widespread this year and were absent last year. Then we have time deposits and these are situations or say these are offerings that we come up with on a yearly basis. And in that case, the expiration would have a positive impact, plus the market is performing well. We are doing better than the others, but I have to say the entire market, the entire banking system is recovering. And as far as NII is concerned, rather, the cost of funding. We expect plus 10% NII, and we expect in the third and fourth quarter, a cost of funding lower than the one reported in the second. The other question is about govies. I'd ask you please to get in touch with our colleagues off-line later at the end of the conference because it requires a detailed answer as it was a detailed question.

There are no more questions on the Italian line, and hand it over to the English channel for English -- for questions into English. [Operator Instructions] We're now going to proceed with our first question. The question comes from the line of Hubert Lam from Bank of America.

I've got 2 of them. Firstly, on your CET1 ratio, you're saying that with the impact of Basel III so now about a 2 percentage point impact on it. So it would come down from 23.7% to 21.7%, which is still a very high number. Does that change the way you think about the dividend? Or should we still expect similar thoughts around the dividend even though the CET1 ratio goes down, but it's still a very strong number. Just any comments on that? Secondly, on your NII target or guidance for 10% up this year and flat next year. How many new deposit promotions do you bake in or factor in for your NII guidance over the next 2 years?

[Interpreted] As to your question on dividends, the fact that the CET1 ratio went down a couple of percentage points does not change in any way our dividend policy, i.e., paying [ euro cents ] per share in every year as an increased trend. So it would be CET1 at 21.5% or 21.7% is more than enough to keep on paying and to absorb possible lower net income compared to the previous year due to market effects. As we've experienced many times in the past, in one year we have a lot of performance fees, so it's possible to distribute a higher dividend or we can increase it a little bit more. Then next year may be a little less, but with such a high capital ratios, it is possible for us to increase the payout ratio, the dividend over net income ratio and maintaining the target to pay dividend per share ratio that year after year grows higher. As to the NII, the value promotions we launched with having a 6-month time deposit offering, there were 2 of them launched last year. Well, the idea is of launching a couple of these promotions this year as well. One has already been kicked off. And the second should come by the end of the year. And the same will go also for next year. The thing that may change is the rate being offered in these promotions. Every time we will see and understand what is the right rate to be offered in order to be competitive on the market, but not really paying too much or too little. As to the impact on NII, I mentioned this during my presentation. We also have to consider the initiatives for mortgage customers. You know that our mortgages are primarily floating rate mortgages, so we really benefited from the interest rate hike. Our interest income increased a lot. Also thanks to the fact that our mortgage book was not predominantly at fixed rate. Otherwise, the interest rate hike would have had no benefit on net interest income. So quite the reverse. The -- most of the book was floating rate mortgages. However, the customers, the borrowers may skip payments. For example, they may decide that maybe they are in distress. They cannot pay for 1 or 2 months. So they may choose to go for this option. There is no cost for the borrower. Of course, the term of the mortgage, the length of the mortgage will be extended but the customer will make it -- we'll be able to skip payment. This will allow us to retain customers. Our customers will not have to renegotiate to remortgage their loans. This goes to the benefit of the customer, but also of the bank because it allows the bank to avoid discussions with the customer or to have to renegotiate a lot. Of course, skipping payments has given thresholds and limits. But again, borrowers may decide to go for this option. And it's a very straightforward thing. You don't have to renegotiate or to change the rate. You don't have to go through this lengthy process. This makes it really straightforward. And over this last year, borrowers have been making use of this option because of the rate hikes. But now that we have the first reverse of the EURIBOR 3 months because our mortgages are tied to the 3-month EURIBOR, many borrowers starting paying again, they are current again on their payments. So far, for the time, they decided to use this option, but now they started repaying their mortgage. Thank you, Hubert. Are there any other questions?

We have no further questions on the English call. I'm now going to pass back to the Italian call. Thank you. [Operator Instructions] Next question comes from Gian Luca Ferrari, Mediobanca.

[Interpreted] Just 3 final questions. What was the volume of certificates in the second quarter and what do you expect in the second half of the year for this product? Secondly, Germany, we expected a few hundred millions of net income. In the second quarter, we have just seen a limited number. So it's quite unexpected. Could you provide some explanation about this unexpected result? And finally, the CSM for the closure of the quarter? So CSM is -- used to be EUR 2 billion and it's EUR 2.5 billion, EUR 2.1 billion on January 1, 2024, went up by EUR 400 million over the 6 months period. Do you think it's a sustainable growth? It's very, very high.

[Interpreted] Well, it's essentially due to new business, a sizable portion, which surpassed the release of CSM of the past. This is an interesting piece of information. If you are used to starting the market, seeing a new business at a [ 1.3 ] value, which is higher than the release figure, I think that it's lower than the release exactly.

[Interpreted] So you are confirming what I was saying?

[Interpreted] So the delta between new business and release is about EUR 40 million out of the EUR 400 million I mentioned. Other significant changes are due to the curve effect, about EUR 140 million, EUR 120 million due to the increase in assets under management in funds or in insurance, which led to an increase in the CSM level. And then we have a final change that is due to a technical factor. As you know, we settled with the [ IRS ] concerning the 2014, 2017 years. So we settled in terms of the rebate between Ireland and Italy, taking it from [ 57 to 59 ], which generates a positive CSM going from EUR 2.191 billion to EUR 2.591 billion over the 6-month period. And as far as certificates during the quarter is [ 192 million ]. Germany, well, this is just an accounting phenomenon. When we closed Germany, we had provisions and we released those provisions, we freed them up. So a portion of that provision is there. And so there is an impact on the P&L.

There are no questions on the Italian line. Let me hand it over to Ms. Alessandra Lanzone.

[Interpreted] If I may, let me conclude by saying that I am extremely satisfied with the performance we achieved in the first half, and I believe that we are going to keep on being extremely satisfied with our business performance also in the second half of the year.

[Interpreted] Thank you, Massimo. Thank you for participating in this call. I wish you all relaxing summer, and we'll meet again in November for the 9-month results. Thank you.

Ladies and gentlemen, the conference is over. We thank you very much for participating. You can now disconnect. Thank you. Bye-bye. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]