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

Good day, and thank you for standing by. Welcome to Banca Mediolanum Q1 2025 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Alessandra Lanzone, Head of Investor Relations. Please go ahead, madam.

Hello, everyone. It's a pleasure to welcome you as we take a look at the Banca Mediolanum first quarter performance and the outlook for the rest of the year. We share some thought on the outlook for the rest of the year. It's been a strong start with very solid numbers that reflect the commercial momentum that we've built, and we look forward to sharing the key highlights with you. Just a quick reminder before we start, please feel free to ask your questions in the language of the line you're calling from. We'll provide responses in Italian with a simultaneous English translation. With that, it's my pleasure to introduce our CEO, Massimo Doris, who will present the results and share some thoughts on what's next. Along with him is our CFO, Angelo Lietti. So Massimo, the floor is yours.

Thank you, Alessandra. Good afternoon, everyone, and thanks for tuning in. The first months of the year have shown us just how quickly things can change and how the global outlook can go sideways. Since the middle of March, in particular, we've seen a noticeable shift in the macro and geopolitical landscape in ways that are still playing out with heightened volatility and fresh uncertainty around rates, market dynamics and investor confidence. The current stop-and-go tariff saga cast a shadow of unpredictability that can weigh heavily on any business, keeping the near-term outlook unsettled. But in the middle of all this, we had a great quarter. Our commercial effort really paid off with strong net inflows helping to offset some of the expected pressure on interest margins, a positive trend that continued and even got stronger in April. These are times when staying in close contact with customers and staying true to our strategic direction really makes a difference. And this is something we are very good at. In fact, I'm proud to say that our first quarter results reflect the value of our business model and the effectiveness of our customer relationships. And it seems you guys recognize these qualities. It's great to see that these trends don't go unnoticed. You called out our steady leadership in asset gathering, the power of our advisory network and the stability of our results across the market ups and downs. With that, let's take a closer look at the key highlights of our first quarter results and more importantly, at how we are planning to build on this strength to keep delivering value whatever the road ahead may bring. First up, the economic and financial highlights on Slide #4. The key message is right there. Net income came in at EUR 243.3 million, 10% ahead of Q1 last year, mainly due to a greater impact from market effects. But the takeaway here is that both the contribution margin and the operating margin, which, as you know, are the metrics we look at when assessing our core business have added up well, only a touch below last year levels at EUR 495 million and EUR 279 million, respectively. And that is despite the anticipated decline in net interest income, which was strongly driven this quarter by the cost of funding supporting our extremely successful commercial initiatives. In fact, the 18% drop in NII, a difference of EUR 40 million, bringing the total to EUR 180 million beyond the impact of a declining rate environment is primarily due to the combined effect of the 2 most recent addition of the 6-month time deposit promo offers, namely the EUR 1.9 billion at 5% collected in September and October last year and the EUR 1.8 billion at 4% gathered in Q1. This unusually large funding volume, which had a much greater impact this quarter than in Q1 last year, leads us to believe that this will mark the low point in NII this year. Looking ahead, we'll also benefit from a more favorable quarter-on-quarter comparison. Just to stay with this for a moment, we reassessed the assumptions behind our guidance following President Lagarde recent statements, which have resulted in a downward shift in the yield curve. The scenario we are now working with assumes that the 3-month Euribor will fall below 2% by year-end to around 1.8% with an average of 2.18% for 2025. This impact could be partially offset by a different volume mix. For instance, we are seeing an increase in noninterest-bearing current account deposits, which may help smooth the effect. So although several underlying factors have changed, for now, we are confirming the guidance we previously shared for the net interest income, which for the full year remains at around minus 5%. Having said that, while the success of our commercial initiatives weighed on net interest income, it was also crucial in driving net commission income, which increased 9% to over EUR 316 million, to a large extent, offsetting the decline in NII. In fact, we can attribute this increase to recurring fees. Combined management and investment management fees rose to EUR 410.5 million, a solid 13% gain versus Q1 last year, although slightly below what one might have expected and not exactly reflecting the strength of the inflows. To be clear, the impressive net inflows into managed assets we've had supported us in Q1, which proved especially helpful since the higher average assets were indeed impacted by the market downturn that had already started in mid-March. Another point worth noting is that we saw a renewed interest in equity-oriented investment this quarter in contrast to the recent dominance of fixed income funds. However, this shift isn't visible yet in equity inflows as it happened via our intelligent investment strategy, where investments initially enter money market funds and are then progressively reallocated into equities over a 4-year period. It was, of course, the most sensible approach our customers could take given the high market valuation at the beginning of the year and the volatility that followed. But this means these investments start with lower management fees. We will see that money market funds of intelligent investment strategy went up a further EUR 730 million in the quarter versus year-end and reached EUR 3.6 billion, a 26% increase. And this, in turn, had a slight impact on margins in terms of basis points. Recurring fees on average assets came in at 205 basis points on a like-for-like basis pre-IFRS 17. What's more, it also contributed to temporarily lowering the equity component of our customers' managed assets, which stood at 55% at the end of March, as shown on Slide 15. Let's now turn to the key ratios that defined this quarter in Slide #4. Our cost income ratio was at 38.4%, slightly better than our guidance. Despite the top line being affected by the drop in NII, we maintained strong operating efficiency. Thanks to our disciplined cost management and a different cost seasonality compared to Q1 last year. Furthermore, the ratio of acquisition costs to gross commission income remained broadly stable across quarter and came out at 34.2% in Q1. Finally, the cost of risk annualized over a 12-month rolling basis came in at 13 basis points, even lower than usual. Thanks to a more favorable outlook indicated by our risk models. For now, we think it makes sense to stick with our guidance of 20 basis points for the cost of risk despite the favorable position built up in the first 3 months of the year. We prefer to wait and see how the macroeconomic picture play out, especially given the current geopolitical tensions. Slide 8 gives us a more detailed view of the other line items in the income statement. Maybe a few of these deserve mention. Banking service fees are down 5% to EUR 48.5 million, solely due to a lower volume of certificates this quarter compared to Q1 last year. All of the other components of banking fees are on the increase. You've certainly noticed that loan loss provisions are significantly lower than usual. This quarter, they reflect a sharper seasonality effect than we typically see. While Q1 generally includes collective scenario adjustments, this year's impact was more pronounced and in a favorable direction. Also thanks to the adoption of our internal risk model, which captures the lower risk in our portfolio much more effectively than the standardized model. As far as costs are concerned, G&A rose by only 5%. However, this is not representative of the run rate for the year due to a different timing of certain significant expense items. A clear example being our annual convention, which this year took place in Q2 rather than Q1. The 32% increase in provisions for risk and charges is due to 2 separate factors. For risk provisions, the increase stems from some legal cases that were settled favorably last year, which allowed us to release part of the provisions. On the network indemnity side, the growth isn't linked to interest rate this time, but to volumes. Commissions are rising, so we need to set aside more. Finally, performance fees. This quarter, we benefited from the daily crystallization of 2 of our Italy-based funds, unlike all other funds, which crystallized at year-end. This contributed EUR 39 million, 32% more than the same period last year. Fair value also showed a significant improvement. Although Nexi went down in value again this quarter, the impact was less than last year. I think it's useful for you to know that we've reduced our shareholding by more than 50% since the start of the year. In addition, we recorded a positive contribution from treasury trading activity in fund units. Let's move on to Slide 5 for a quick comment on the business results of the quarter you're already familiar with. With no doubt, we got off to a very strong start this year with total net inflows up by 23%, reaching an impressive EUR 3.77 billion, boosted by the 4% time deposit promo offer. Once again, both new and existing customers contributed meaningfully to this result. What really stood out was the strength in managed asset flows, which climbed to EUR 2.01 billion, a 71% increase year-on-year, supported by our consistent investment approach. Slide 33 shows that once again, in Q1 2025, we confirmed our leadership in the Assoreti rankings for the net inflows into managed assets, a position we've consistently maintained over the past 3 years. This still holds true under the updated classification, which now includes net inflows into administered assets with advanced advisory, meaning those with either advisory fees or fee-only arrangements. But the real cherry on top is the month of April, as shown in Slide 35. With EUR 1.13 billion in net inflows into managed assets, April stands up as our best month ever, beating the previous record set in July 2024 and with equity funds moving back into positive inflows. And this despite a turbulent market condition and rather uncertain outlook at the beginning of the month, conditions that could have easily triggered a slowdown. Instead, what we saw was a clear confirmation that it's the strength of our strategy and our customer relationships that really made the difference. So this leads us to a truly remarkable figure for the first 4 months of the year, over EUR 3.1 billion in managed asset net inflows compared to EUR 1.8 billion over the same period last year. It's a result that speaks volumes. It's not only about the numbers, but about the trust behind it. At our last update, we guided for managed asset inflows to stay close to last year's level, around EUR 7.5 billion, assuming normal market conditions. While the current pace suggests that this target could likely be exceeded, we believe it's prudent to maintain this guidance at this stage as the markets remain unpredictable. Back to Slide #5. At the Q1 point, supported by the growth of deposits and the strong managed asset flows, which offset the negative market performance at the end of the quarter, total assets reached EUR 140.3 billion, 1% higher versus year-end. In April, the market shakeup caused a temporary dip, an impact that has already been largely reversed as assets have rebounded. A fair number of step-ins took place, helping to accelerate to move towards equity allocation within the intelligent investment strategy. In Q1, loans granted totaled EUR 849 million, 51% more than in Q1 last year. And by the end of April, they had further increased to EUR 1.12 billion. Our credit book stood at EUR 17.78 billion at the end of the quarter, with asset quality remaining exceptionally strong. We also saw healthy growth in general insurance gross premium, which reached EUR 53.3 million in Q1, up 26% and EUR 71.8 million in the first 4 months, thanks to the solid contribution from both stand-alone and loan protection policies. As you can see on Slide 6, our customer base continues to grow at a good pace, supported also by our promotional initiatives. In Q1, we acquired 64,500 new customers, bringing the total to over 1,963,000. Our Family Bankers network is expanding as well, both in Italy and Spain, with total headcount at group level reaching 6,491, up 1% since year-end. As mentioned earlier, our intelligent investment strategy is gaining momentum. In today's declining rate environment, more investors are turning to long-term equity exposure, supported by our automated investment services. Assets currently parked in money market funds set to be progressively reallocated into equity over the next 4 years now stand at EUR 3.6 billion, up EUR 730 million since the start of the year. Another EUR 2.9 billion are scheduled to be gradually converted into mutual funds in 2025. As shown in the last 2 lines of Slide 6, just under EUR 1 billion comes from double chance deposits and over EUR 1.9 billion from growing installment plans flows. This model continues to demonstrate its strength, offering convenience for the customer while ensuring a stable long-term inflow pattern for the bank. It's a structure that not only supports recurring fees, but bolsters the sustainability of our revenue stream quarter after quarter. Let's move on to another key area, balance sheet ratios, which you can see on Slide 7. Each of you cites our robust capital position as one of the key reasons supporting your confidence in the long-term value of Banca Mediolanum. In Q1, our CET1 ratio remains exceptionally high at 22.5% with a leverage ratio of 7.8%, giving us ample capacity for organic growth-- organic growth. The impact of the implementation of Basel III final terms was slightly lower than initially estimated, and we also saw a positive effect from higher capital levels. Turning our attention to Spain. Let's review what's behind the results as shown on Slide 31. The outstanding increase in business volumes came with a natural rise in acquisition costs linked to our network and the commercial initiatives driving that growth, penalizing the P&L to some degree. Operating margin reached EUR 15.7 million, reflecting a 32% decrease compared to Q1 last year, mainly due to the factors we just mentioned. Net income stood at EUR 14.2 million, 25% lower year-on-year, in line with the expected quarterly dynamics. Total assets grew by 3% since the start of the year, reaching EUR 13.4 billion, with managed assets rising 1% to nearly EUR 9.8 billion over the same period. Net inflows were impressive, totaling EUR 705 million, 130% higher than Q1 last year. Managed assets inflows contributed EUR 451 million, a notable 73% increase. On the lending side, the credit book expanded further, surpassing EUR 1.55 billion, a 4% increase versus year-end. Meanwhile, the number of family bankers inched up by 1% since the beginning of the year to a total of 1,632. Finally, our customer base in Spain has grown to over 265,500, marking a strong 4% increase since the beginning of the year. Let's shift focus to the projects we are currently putting our energy into. I'd like to give you a quick update on our project NEXT, as you can see in Slide 37. As of April 30, 459 banker consultants were actively working alongside their senior private banker wealth advisers. And additionally, 173 are currently studying towards their certification in the Executive Masters program at our Medllanum Corporate University. So far, this setup has helped the senior bankers increase their productivity by 40% on average and bring in 80% more new customers. It's a strong confirmation that this is the right direction to scale up our private banking model for the future. And while we are on this subject, let me share a few words about another project we are working on. As part of the ongoing evolution of our wealth management offering, we are preparing to strengthen our presence in the high net worth segment. We are seeing clear signals from the market. Private banking in Italy keeps growing and wealthy households are looking for more complete long-term solutions to manage and protect their assets. As the segment of our wealthier customers continue to grow, we are evolving our offering to meet the increasing relevance of this group, building on the strength of our current wealth products and services as well as on the close collaboration between our wealth advisers and private bankers and our teams in wealth management, investment banking and fiduciary services. In a nutshell, we are introducing a new suite of services under the brand Grande Patrimoni, dedicated to high net worth customers. It's still in the works, but we expect this initiative to take shape at the beginning of 2026 as a further evolution of the wealth management model we've been developing over time. In closing, let me recap our guidance for 2025. Net inflows into managed assets at around EUR 7.5 billion, assuming normal market conditions. Net interest income to decrease by around 5% compared to 2024 based on current interest rate curves. Cost/income ratio below 40%, cost of risk below 20 basis points, base dividend to increase compared to the previous year. I'm sure you'll agree, it's been an interesting start of the year, certainly not without its twists and turns. And while we are mindful of the challenges, we remain confident in our ability to face them head on, thanks to our solid strategy and focus on long-term growth. Thank you all for your attention and continued support. Alessandra, over to you.

Thank you. We can now start the Q&A session.

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

[Interpreted] I have 3 questions for you. The first, April inflows. You've hit record highs in terms of assets under management. It's a really historic high for Medolanum. How is it that administered assets have been so weak in April? Because I heard of your peers, they are really focusing a lot on administered assets. In April, a very strong increase in administered assets was reported, and they trust that they will be able to turn administered assets into managed assets. I know your model is fairly different, but can you make a comment on this April trend? The second question, strong acceleration of the investment intelligence strategy asset stock. It's an important forward-looking element to support commission growth. Is it correct to say that this trend over the short term may have eroded the average margin on managed assets because much of these funds can -- may have gone on to money market funds. Third question, the next project is really unique in Italy. On Monday, you had already published data saying that wealth consultant and family bankers that adopt this model had already reported a very strong increase in productivity. Do you think that in 2026, you might use the same model in Spain as well since it is being so successful in Italy or not?

[Interpreted] Before answering to your questions, let me add one thing. The CFO was worried of possible misunderstandings on the dividend because in the speech, I said growing base dividend. Base dividend was EUR 0.75 last year, then there were EUR 0.25 special dividend and that topping it up to EUR 1. So the dividend will be above EUR 0.70 per share. Now having cleared this, let's turn to your questions. April inflows, basically all managed assets because we had a minus sign in administered assets. How is it since our peers have gone through a different dynamic? Well, this can be explained partly or rather can be explained with the 6-month inflows in deposit accounts that was -- the promotion that was launched last year that started expiring in April. There was a sort of maturity wall there. The EUR 1.9 billion that had been raised in those months, well, in April, we have already turned more than 40% of them in investments. As soon as they expired, they were basically turned into managed assets. So this is the first explanation to the fact that there has been this transfer from deposit accounts and to managed accounts. Second aspect, we were able to report a very strong inflow into administered accounts in January and February because the 6-month time deposit inflow with this 4% promo was possible only in January and February. So over those 2 years, we had very strong inflows into administered assets. In the following month, there was a sort of in-between effect. And then in April, it was stopped. And the promo was not repeated. It was really focused on January and February and the expiry of -- for last quarter last year was in place so that the entire inflow basically ended up in managed assets. Then you asked about the intelligence investment strategy, EUR 760 million more on funds that have some 20 basis points commission. The more this component grows, the greater impact it has on average basis points referring to the unit-linked and management funds. All this money, we're talking about or EUR 3.5 billion will end up into equity funds, as you know. So going from 20 basis points in terms of management fees to 250 basis points, this is what is going to happen. But in the short term, when we have a strong increase in the money market component, of course, this is going to have a strong impact on the average, which is fully understandable. The next project is certainly going to be broadened and implemented in Spain as well. The number of private bankers in Spain is still rather limited because this project may work at best when you have senior bankers who can boast hefty portfolios and that have a lot of clients because otherwise, a banker consultant is paid by the senior banker who is going to give up part of his fees and commissions by paying the banker consultant. So it goes without saying that the private bankers commissions have to be high enough so as to be able to pay the banker consultant. Let me remind you that in the first year, the banker consultant have a minimum commission of EUR 25,000. So of course, the senior banker necessarily has to have a certain level of commission inflow. But certainly, in time, this project is going to be broadened to Spain as well.

The next question comes from the line of Enrico Bolzoni, JP Morgan.

[Interpreted] The first question, indeed, there was a lot of movement in the market with the first correction we had in April. But if we look at the exit rate of end of April, when it comes to product mix, was there a deterioration versus end of March? Or are we actually more or less at the same level as we were before the announcement of tariffs and the enhanced volatility? Do you think this will have an impact on margins over the next few months? A more general question as well. Some of your peers, one in particular, is talking a lot about the growth of inflows into ETFs. There's a great demand from customers. So do you think this theme will be affecting your customers as well? Will there be a greater demand for ETFs according to you? And should that be the case, are you going to adjust your offering and may only focus on fee-only and fee on top advice that so far is quite limited? And then one last question. I wanted to ask you, I've seen that at your convention the other day, you presented this initiative called Grande Patrimony. In the medium term, according to you, Will there be greater opportunities in Italy for the high net worth segment? Or will it be mainly mass affluent? Will mass affluent be the main growth driver for the coming years?

[Interpreted] Honestly speaking, the first question was not really clear. You talked about exit rate. Did you refer to outflows?

[Interpreted] No, I do apologize. I clarified better. I've seen how the markets are moving and the equity volatility. How about the average margins at group level at the end of April? Were they lower than end of March?

[Interpreted] Well, Indeed, there was an impact on average masses because there was a V-shape trend in the market. I don't have the precise piece of information on average assets in April, but there was an impact indeed. But with the rebound plus more than EUR 1 billion inflows, that was more than offset. And then in April, the net inflows from equity funds was a positive one, positive for meaning about EUR 680 million. And -- and that should indeed drive average commissions up, and we're talking basis points, but it's difficult to see it through individual month. But those were the effects basically. It's a V-shaped behavior of the market, and we have a 55% of equity or our customers. But in April, again, there was a strong rebound and EUR 1 billion worth of inflows. So it was offset, as I said, and it's back in the positive. Equity is back in the positive domain, meaning -- and that is mainly driven by 2 factors. On the one hand, the so-called step-ins from IIS, the money market fund of IS to equity funds because as markets declined over that month, many clients had seen a doubling or tripling of that switch, specific switch. And then there was a strong decline of outflows from equity funds because of last year, last few months, the last few months, many clients, what were they doing? They used to sell equity, their holdings in their equity funds because equity markets had gone up a lot and therefore, to take profits and consolidate their gains they did that to somehow balance up their portfolios. And then with the decline they witnessed in April, there was a very strong decline in the number of customers who actually sold to consolidate -- sold equity to consolidate their gains, the capital gains with -- in a declining market scenario. So those 2 factors put together enabled equity to come up strong again, very positive again. ETFs. Your question on ETFs. We did not have any pressure coming from customers or clients forcing us or pressuring us to offer those instruments. And -- and then through our trading online, clients, they can buy all the ETFs they like to buy. And it's an instrument indeed where, of course, high net worth individual may ask for that kind of instrument. And last year, by the way, we created a line in that -- in our [indiscernible], which is the -- its assets under management. It can be fully invested in ETF securities or funds. And so that opportunity is already made available to our clients through our assets under management. And -- and in any case, with the launching of our project called [indiscernible] next year, in addition to providing additional service and products dedicated, devoted to this customer or clientele bracket, we want whose goal objective is to have very liquid products, private equity and private debt products to be offered to those customers. to that customer segment. And in addition to that, we will have an advisory fee system, a fee-only system, enabling us to provide advisory also on ETF and other type and similar securities, always thinking of a certain segment of clients, not EUR 20,000 customers. And always on the Grand Patrimony project, your question about the targets that we think will drive our growth better, be it mass affluent or high net worth individuals, we started by offering our services to medium, small clients. And then over time, thanks to the growth undergone by our products, by our brands, the fact that we are better -- we are more -- now our bankers are better suited and more competent to reach out to more meaningful client. But without stopping to acquire smaller and medium customers, we can go to a very small client opening their account through an app. And maybe it's a person who has a few thousand euros, they have nothing to invest and yet they need an account, a current account to manage their own liquidity. And to, for instance, a client acquired by a young family banker. And by young family banker, I mean a family banker is 30 years old. It's difficult to take home clients that would give the young family banker EUR 5 million to invest. Probably, they will acquire company with EUR 50,000, EUR 80,000 EUR 100,000 or EUR 200,000, that segment. And then as they grew their level of competence, the level of expertise, of course, they will be able to acquire customers that are worth EUR 1 million, EUR 2 million or EUR 5 million or EUR 50 million over time. So with the Grand patrimony project, we keep on raising the bar somehow. And we will still, however, invest in other types of clients and customers as well because they are -- well, this is determined somehow by either online experience or by the experience put on the table by our family bankers. And we will keep recruiting young people, young bankers who come from other industries as well, and they will -- they start from scratch. So we will still also focus on this other type of small- and medium-sized customers. But as we increase the number of our experienced family bankers, as our brand becomes more and more premium, as we provide more services to our these high net worth individuals, plus think of investment banking that is devoted to that customer segment. And over the last few years, we've grown a lot for that specific cluster in that specific cluster. And today, we have 3,500-- 3,400 roughly clients that have more than EUR 2 million invested with us and of which EUR 250 million have more than EUR 10 million invested with us. So -- and those numbers are growing and the Grande Patrimony project is exactly aimed at providing instruments that are better and better tools that are better and better to those bankers who can reach out to those high net worth customers to have a greater chance to really win them as customers. And we will still invest in products that are also meant for more ordinary clients for affluent, upper mass, for mass market or you name it.

[Interpreted] Next question. Gianluca Ferrari, Mediobanca.

[Interpreted] I have one question only, again, referring to Grande Patrimony. I was wondering whether you have an asset inflow target and with what time frame? And again, with respect to Grande Patrimoni, don't you think that this customer segment might want to have foreign booking centers. So maybe in 3, 5 years, Mediolanum might have offices in Switzerland itself. What do you think?

[Interpreted] We have not set for ourselves a target in terms of number of clients or in terms of asset inflows that we expect to be raising from these clients. But as of next year, we're going to work on that because for certain, -- during 2025, we are going to start working on this project and with the sales force this year. But really, the bulk of it is going to be implemented in 2026. Now with respect to offering something else to these clients, for example, having booking centers in Switzerland, not for the time being. In the short to medium term, we have not considered or planned this out. -- thank you, Gianluca.

[Interpreted] Next question. Marco Nicolai, Jefferies.

[Interpreted] I have 2 questions. Cost of risk. This quarter, it has been very low, close to 0 in terms of basis points. Can you give us some color as to the drivers of this very low cost of risk? So this was the first question. My second question is, no, actually, this was the only question I had for you.

[Interpreted] The cost of risk is very low, especially due to the fact that we started implementing internal risk models, whereas in the past, before we used a standard systems. Since we have high asset quality, in order to be able to use internal-- internal models, we had to wait to have enough data. As a guidance, in any case, we decided to maintain those 20 basis points because when we calculate provisions, so the cost of risk, we do not only have to take into consideration the risk level of loans you detail in a certain portfolio, but it also depends on the financial outlook of Europe or of Italy. Should the outlook change, this would, of course, affect the model. And as a consequence, should it deteriorate. As a consequence, we would have to set aside higher provisions -- and these basis points would increase. Still, our margins are good enough. And so we are quite confident that we'll remain below 20 basis points. In any case, this strong decline was due to this change in models, a more realistic model because it's an internal model that is based on our data and our numbers.

[Interpreted] One more clarification. This means that this is a one-off positive component this quarter. And if there are no changes in the macroeconomic inputs, you might maintain these levels also in the coming quarters or what?

[Interpreted] Well, that will also depend -- I mean, the cost of risk also depends on I'm sorry, they are trying to suggest -- I mean, to me to tell me what you mean. But if at macroeconomic level, things remain stable, we should be well below 20 basis points. That's for sure. If the outlook will remain stable, we should not get close to 20 basis points, but stay well below.

[Interpreted] Just one last follow-up on NII. The guidance has remained unchanged. But with respect to year-on-year dynamic, you are 18% below first quarter last year. So can you tell us what are your expectations or the guidance at quarterly level? Because as you said, in April, many deposit accounts have expired. So most likely, you're going to see a big change -- positive change quarter-on-quarter with respect to NII because you have less costs tied to deposits.

[Interpreted] On a quarterly basis, I can say 18 in the first quarter, 14% in 6 months, 8 in 9 months and 5 in 12 months. This is a dynamic that we expect to report considering the current interest rate curve and also considering the various initiatives we are planning with our 6-month deposits and the various promotions and initiatives we are planning ahead. So these is the dynamic 18, 14, 8 and 5.

[Interpreted] Next question. Next question comes from the line of Luigi De Bellis, Equita SIM.

[Interpreted] I have 3 very quick questions. The first one is on the Ganipatrimoni project. Do you also aim to increase or accelerate specific ad hoc bankers for this project? Assets under management, you talked about a recovery. What is the delta between what you have now and the high watermark for funds? NII, what are your expectations for 2026, retaining the current curve?

[Interpreted] Before answering these questions, let me answer the question that was asked before. If you go to Page 10 in the presentation, the minus 18 is indeed affected by the initiatives we undertook as far as cost of funding is concerned, but it's also compared with the 2024 Q1, which was about 10% higher versus other quarters. As you can see, last year, we did EUR 220 million of NII in the first quarter and then EUR 200 million, EUR 200 million, EUR 200 million in the other quarters. So the following quarters will be compared not just with EUR 220 million, but with EUR 200 million. So the comparison is more favorable, if you wish. Let me go to move on now to your questions. Specific hiring for the Grande Patrimony project, yes and no. Well, it is clear that the more tools you have available in your toolkit to acquire clients, high-end clients, the less difficult it is to hire high-end bankers to recruit high-end bankers because they would have the right tools to talk their customers into joining us, investing with us. Having said that, what do I expect? I expect that the Grande Patrimony project should help the existing wealth advisers and private bankers we already have, but maybe can help us recruit some major banker, very important banker from traditional banks more than other networks because from other networks, we recruit very, very little, very, very few people. So this project, according to me, won't make -- won't show any major difference from what we already do. So I prefer to recruit people who come from traditional banks who decide to change their life to move from having a wages, wages to becoming an entrepreneur rather than picking people from other networks. Well, the other questions, the high watermark, the distance between funds and the high watermark. We don't have the figure, and we don't have an estimate for the NII we expect to have in 2026. Thank you very much, Luigi.

Next question. Next question, Alberto Villa, Intermonte.

[Interpreted] Congratulations for your results. Always impressive. But now in April, you've really hit excellent numbers. We've seen the progression of your capability of raising managed assets that were difficult to expect or to imagine only a few years ago. And I believe that your father and the founder of Mediolanum would be extremely proud of what you're doing. I was wondering whether in terms of magnitude, April cannot be considered one-off. But certainly, it was especially strong. Is there any specific element that was able to drive this trend? And what can we expect? I mean, what -- you have a target with respect to inflows into managed assets. But considering the trends we are seeing, maybe you might be able to do even better. Second question referring to Spain. There again, I was positively impressed by the trends you reported more and more clients, the network remained fairly stable. So I was wondering whether in the future to be able to keep growing as you're doing. it might be necessary to increase also your family bankers network? Or do you still have room for maneuver to increase the number of clients without increasing the number of family bankers in Spain and whether you have a specific target in terms of inflows into managed assets for Spain?

[Interpreted] Right. So with respect to total inflows into managed assets for April, how did it -- how was it possible? As I said before, the EUR 1.9 billion on time deposits in September, October last year expired. And more than 40% of this amount has already been switched. So the swiftness with which we switched from deposit accounts into managed assets made it possible to increase the figure we reported in April. So this rapid switch was very important in bringing to this figure. Then Spain, last year, we had a decline in the number of family bankers. Why was it so? In the last 3 years, Spain had reported a swift increase in the number of family bankers from 2021 to -- I mean, from 2020 to 2022, there was -- in 2023, there was a big increase. At that point, we said, okay, we had this leap. But now we have to focus into really consolidating and supporting those who have joined us rather than keep on increasing the number of family bankers. So as you see, in 2023 and 2024 were sort of consolidation years. Average managed assets went from EUR 4.5 million per family banker in 2 years to EUR 8 million per family banker. Now of course, if we compare it with 28 in Banca Mediolanum, this is a big gap that we're seeing here. Why is it that the average managed assets are much lower in Spain? Well, the first reason -- there are 2 reasons, actually. The first reason is that the average age of Spanish family bankers is much lower compared to the Italian family bankers. So it's also a matter of how many people have a given age in a given seniority within the network, which really, really makes a difference. Second element is that, in any case, Spain is not as wealthy as Italy. It's slightly less wealthy. So the average savings of Spanish citizen are not comparable to those of an Italian citizen. Again, however, after 2 years of consolidation, why we are -- now we are starting off once again with increasing the family banker network in Spain. 1,600 is too little. We cannot -- of course, we cannot grow the sales network too fast. Otherwise, things are going to be sort of blundered. But the network has to grow, but based on quality. We started having bankers joining us from traditional banks who brought with them quite hefty portfolios, which did not happen before. So the strategy of being more demanding in terms of quality with respect to our network managers with respect to the recruitment they are carrying out is giving good results. We still have room for maneuver in increasing the number of clients, maintaining the family bankers number stable. However, if we don't broaden the family bankers network, of course, also growth will be constrained. So of course, we're going to work on both fronts. Last year, EUR 6 billion in Italy, EUR 1.5 billion in Spain, more or less. So we expect in these -- if we put them together, EUR 7.5 billion, the breakdown would be again EUR 6 billion in Italy and EUR 1.5 billion in Spain. But then again, if markets will keep on performing well, then maybe we can even better these results. Thank you.

Next question. There are no further questions on the Italian line. Let me hand it over to the English channel. [Operator Instructions] We will now take the next question from the line of Hubert Lam from Bank of America.

I've got 3 of them. Firstly, for the guidance that you confirmed for NII to be down 5% this year, do you assume further deposit promotions for the rest of the year? That's the first question. Second question is for the Grande Patrimony initiative. Can you remind us how big is the segment for you today? And how big do you think this segment can be as a percentage of the group assets over time? And lastly, also, can you talk about potentially for increased competition within maybe the private banking space, particularly on the back of the proposed acquisition of Banca Generali by Mediobanca. Do you see this as increased competition or threat to your strategy?

[Interpreted] Well, in this minus 5% or NII going down 5%, we are assuming a new promotion with a time deposit. We'll decide the rate at a later stage. And we foresee between September and October, just like last year, it's already been budgeted for, and it's already been included this cost of inflows. It's already included -- it factored into the minus 5% of NII and cost of funding. And as to Grand Patrimony, -- as to Grand Patrimony, we have 3,400 clients who have more than EUR 2 million invested with us for a total of EUR 16 billion worth of assets under management so far, EUR 16 billion assets under management. And we have not yet made a plan or we don't have a goal yet as to where we want to go in 1 or 2 or 3 years with this Grand Patrimony project because as we said, the Grande Patrimony initiative will mainly be growing next year or will be mainly developing in full in 2026. And at that point, will we be able to set new growth targets. But this is a segment indeed that over the last few years has shown the largest growth percentage-wise, not in absolute terms, but percentage-wise. And according to me, it will keep on growing also going forward, especially adding new services when we -- if we add new services for that type of clients. As far as the Banca Generali Mediobanca transaction indeed is concerned. Indeed, should it happen, we will be faced with a stronger and bigger competitor. But honestly speaking, I'm not concerned for this. And our peers, our competitors, well, 60% of financial assets Italians own are in the hands of traditional banks. And among traditional banks, there are 2 entities that are called Intesa and UniCredit, and they are huge players. They have all the necessary means to have a sizable impact. And despite these big competitors in the market, we've kept growing over time and even in a strong way. And within Assoreti , there's a certain player called Fiderum. It's not listed. It's within Intesa, but they rely on a model that is similar to that of Banca Mediolanum. And yet we keep growing despite the role Fiderum is playing, and they are supported by a parent company that is the strongest in Italy. the Italian banking industry. And they -- well, over time, they have consolidated a number of other networks. So if we consider the number of bankers and the number of assets under management, they're much bigger than we are, and yet we keep growing. So I am confident that this consolidation, this transaction, this deal will not negatively impact our future growth. And then a question on the distance -- the previous question that was asked, the distance of funds from -- with the high watermarks to get performance fees. On average, it changes from fund to fund. But on average, we're talking about 11%, including hurdle rate. And for equity funds, it's 5%, let me remind you. And for balanced funds, it's 4%. And it's -- if I'm not mistaken, it's 3% for fixed income funds, bond funds. And this 11% so it's already factoring in, on average, 4% of hurdle rate -- well, it already factors in a 4% hurdle rate.

Thank you, Hubert. Any other questions from the English line? There's no further questions from the English line. I would like to hand back over to the Italian line. No other questions from the English -- Italian line. Let me hand it over to Alessandra Lanzone for the closing remarks.

Thank you. Thank you all for participating, and we are going to meet again on July 31 for the next presentation. Thank you. Good evening.

This is the end of the conference call. Thank you for participating, and you can now disconnect. Thank you, and good evening. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]