EFG International AG (EFGN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. A very warm welcome from Zurich on a rather rainy day today. So we haven't had the sunshine this morning. A very warm welcome to everybody who is joining us today in person and also, obviously, for all the people that are joining us via conference call and video webcast. We are presenting our First Half 2023 Financial Results. As usual, we will have presentations by the CEO, Giorgio Pradelli; and the CFO, Deputy CEO, Dimitris Politis, and then we will follow up with the usual Q&A with enough time for your questions, be it in the room or on the phone lines. Without further delay, I assume the disclaimer of the presentation to be read, I hand over to Giorgio for his intro. Thank you.

Thank you, Jens, and good morning, everyone. Also from my side, a warm welcome to this half year 2023 results presentation for EFG, and welcome to the people here in the room and everybody following us via webcast. Now, obviously, as you can imagine, we are very pleased to be here. We had a very strong set of results and the presentation will follow the usual structure. I will start with an introduction and focus on the highlights of the last 6 months, then Dimitris, our CFO and Deputy CEO, will go in detail over the financial performance, and I will close with a presentation about the strategic priorities going forward. It is fair to say that the last 6 months, again, have been quite intense, and we have seen in the banking industry also some turbulence. But I must say that for EFG, the last 6 months were actually very good. We were well positioned from a strategic and balance sheet standpoint to take advantage of the macro environment. We live in a high interest rate environment. So we were benefiting -- we have been benefiting from that. And also, we were very well positioned to take advantage and benefit from the, I would say, the fact that a lot of talents in the international private banking and wealth management industry who was on the move, and I think, we have been quite attractive for many of the professional across geographies and across function. Now, starting with the presentation and the highlights, I go to Page 4. I would like to emphasize that we were able to deliver a record performance. In terms of IFRS net profit, we delivered CHF 148 million. This is an increase of 47% year-on-year. We could, again, benefit from our strong operating leverage, following what we call our golden rule, which is to grow revenues double the rate of growing cost. And as you can see here, our operating income was up 20%, and our operating expenses were up 11%, although as we will see later, they include some front-loading of investments that have a one-off nature. Obviously, we are pleased with our return on tangible equity, almost 18%. So, financial performance, very strong in the first 6 months. But also we are very pleased to announce a strong rebound in terms of growth in terms of net new assets. We delivered CHF 3 billion of NNA, which is 4.2% annualized within our target range. Obviously, we are very pleased with our operating and financial performance in the last 6 months, but I'd like to emphasize again, given what has happened in the last 6 months that clearly our business model is very solid, is very resilient. We have been working over the years to have a very strong balance sheet, strong capital ratios and strong liquidity. Now, the -- I'm now on Page 5. We are pleased, as I said, with our operating performance, but we are also very pleased that in the last 6 months, we were able to seize various strategic opportunities, and this allows us to invest in future growth because, clearly, we will want to continue to sustain this growth trajectory and this growth momentum. The key -- the 2 key points, we mentioned here on this Slide 5 is, first of all, the fact that we have been hiring 75 new client relationship officers in the last 6 months, and this is across regions. And we have also been able to hire top talents in the industry across functions and across regions. This, again, is extremely important to sustain our future performance. I also believe that this is also a testament of the fact that our competitive market position and our recognition in the market have improved over the last few years. Second point we would like to emphasize on this slide is the fact that, as we announced in October 2022, when we presented our strategy for 2025, we are accelerating the deployment of digital solutions. This, again, will allow us to sustain our performance going forward. And clearly, as we will discuss later, the focus for 2023 is, in particular, in improving the client experience, the CRO experience and to improve the operational efficiency. So to close this first section, I would like to recap with 3 key messages. First of all, the performance has been in terms of profitability at record levels, and we have also delivered strong growth. We were able to invest for the future and this is very important for us. And, obviously, with such a strong start in the new planning cycle ahead of 2025, we are even more confident than before that we are on the right track to achieve the 2025 targets and possibly to beat them. With this, I hand over to Dimitris for a detailed presentation of our financial performance in the last 6 months. Dimitris, the floor is yours. Please.

Thank you, Giorgio, and good morning from me to the people in the room and the people who are joining us remotely. As Giorgio said, this is a record first half of 2023. I think before we go into the detail, I will take you to Page 7 of the presentation. Just to give you a bit of a high-level overview of where we are today and also give you an idea of how we're thinking a bit about the future. So clearly, if you look at the progression over the last 5 years, you will see that in terms of profitability, '19, 2020, we are running at about CHF 30 million, CHF 35 million per semester. We managed to bring that up to a CHF 100 million per semester in '21 and '22. And at this point, we have a record year, plus 50% roughly year-on-year in terms of profitability, and a half 1 bottom line result of CHF 150 million. Now, what actually happened, and we go to CHF 150 million? The reality is that, nothing really happened. It's just diligent execution of the plan that we announced to you back in October 2022. The only difference to what we were discussing back in October is that, how should I put it, I think the plan is being executed a bit in fast forward in the last 9 months. And what we have seen as key drivers in this last 6-month mostly is that, we have seen revenue over performance, like the higher interest rate environment has been supporting our revenues. But also on our side, we are taking advantage of what is happening in the market and what is happening in general. And this taking of advantage is grasping the opportunity to invest for higher growth. In terms of how you see that in the P&L at this point, you will see that there are some one-off hiring costs in the cost side, you will also see that there are some charges in the P&L because of the acceleration of our digital transformation and how we are improving on our digital channels. Overall, the result is that, we have had strong operating leverage. The cost-to-income has dropped further. It is now at 72%. And as Giorgio mentioned, our return on tangible equity is at 17.8%, which is at the higher end of our target range. Now, clearly, this is a step change in profitability. I guess, the question is, how do you see the future evolving? For us, look, executing the plan has worked very well. It has worked well in the last 6 months. It hasn't worked well in the past 4 years. It is a matter of continue to executing the plan. First step clearly is solidify this profitability level of CHF 150 million per semester, and the next step is to use that as a stepping stone to further enhance profitability as we move towards our 2025 close of this strategic cycle. Now, moving to Page 8, where we have some of the details of the performance. NNA in the first half were CHF 3 billion, annualized rate 4.2%, which is within our 4% to 6% guidance. And clearly, this is marked with a strong acceleration of business development in the second quarter of 2023. AUM at CHF 146.5 billion in June 2023, and we have either hired, signed or approved, so under offer 75 CROs in this period. It is part of the acceleration that I was discussing earlier, and we expect these new CROs to start providing tangible results in 2024. The profit is a record at CHF 147.6 million, 47% year-on-year. We've discussed the return on tangible equity. The margin on revenues has moved to 100 basis points. That is 27 basis points year-on-year, and this is on higher interest rates on increased client activity on currencies compared to the first half of 2021 and through a positive contribution of the life insurance portfolio. Further operating leverage, plus 20% revenues, plus 11% costs. This drives the profitability and this is what drives the cost-to-income down to 72%, which is 6 percentage points down compared to what it was in the first half of 2021. And in terms of investment, and we'll discuss it further later, you will see that there is upfront investment in new hires, that actually creates a 3% drag on the cost-to-income for the period, and the continued investment in the digital delivery channels, means that we have taken a one-off charge in 2021 to impair some intangible assets. These are assets of systems that we will not be using going forward. So what we've done is, we've gone through a complete review of all the assets that we're using to consider it whether we're going to use them or not, and this led to this one-off charge of CHF 21 million. To close on capital and liquidity. It's the strongest capital position we've had in recent years. Core Tier 1 is up 70 basis points. It's now at 17.3%, and the total capital ratio is at 21.2%. We have a gross capital generation of 220 basis points. This is part of our capital-light model. You'll see that even on a net basis, so after dividends, after risk-weighted assets, we created a 150 basis points of capital in the first half of the year. And we are also announcing today a buyback program for up to 6 million shares in the next 12 months. The buyback program is in order to offset any dilutive effect that we get from equity incentive plans as we did in previous years. In terms of liquidity, the LCR is at 203%. Page 9 has all the numbers to give you even more detail on the P&L. I will not comment on that. And on Page 10, you will see a comparison of current performance to the targets that we have set ourselves for 2025. Clearly, net new asset growth is within the range. Revenue margin is at 100 basis points, well above the 85 basis points, which has been sort of the through the cycle figure that we have been targeting for 2025. Cost-to-income ratio is at 72% and return on equity is at the upper end of the range for the targets. Now, taking things one by one, net new asset growth. Clearly, very good performance in the second quarter, CHF 3 billion of net new assets for the full semester. It is the strongest NNA performance we've had in the last 3 semesters. So the last one, which was [ awhile ], it was back in 2021. Clearly, we know that 2022 was not an easy year. But for us, it is important to go back to be within our 4% to 6% target range in the first half of 2023. We've seen more normalization like clearly, the annualized growth in the second quarter is well above the 4% to 6% that we have as a target range, which compensates for the first quarter. And what is more important is the pipeline is still very strong. We see a lot of deals that we were not concluded in Q2, and they have been now going over to Q3. The only risk we see is that, we expect deleverage to continue, like we've had pockets of deleveraging that continued in the first half of 2023, and given the rate environment, the deleveraging is a risk going forward. If we look at who are contributing to this growth, if you look at the right-hand side of the page, you will see that new CROs brought in most of the assets this period. This was helped very much from a very good hire that we did in 2021, which are now maturing as people move their clients and expand their business at EFG. The existing CROs were a bit subdued, but to some extent, the existing CROs are also the ones who suffered from deleveraging more. So in a -- excluding the deleveraging, their performance has been better than what it looks on this page. In terms of regions, we've had substantial growth across the regions. Continental Europe and Middle East has been leading the pack at CHF 1.5 billion and 12% annualized growth. The performance in Continental Europe and Middle East is a combination of strong business development in a new location like Dubai. We still call it new, it's 3 years old at this point, but we tend to still call it new, but it's still building business. And it's combined with strong performance in more mature markets like Luxembourg and Monaco. Asia Pacific is also at 7% with CHF 1.1 billion, which is above the 4% to 6% range. Asia Pacific benefited from good hires in 2021. U.K. and Latin America are roughly at 6%, each one contributing between CHF 500 million and CHF 600 million. And Switzerland and Italy is negative. That region was also the one hit mostly from deleveraging. Now, moving to the next page, Page 13, which is a bit of how we look forward and how do we plan our hiring to make sure that we continue to develop as fast as possible. You will see that we had a very strong hiring momentum, 75 CROs that have been either in the bank signed or approved. This is another step change from what we were hiring in the last 2 years. If you look at the bottom left, we were at about 25 to 30 CROs in the first semester of 2021 and 2022. And the reason that this is happening is because in the first semester of 2023, we had a combination of what we call, both the push factor and the pull factor in order for us to hire, clearly, we need to be attractive. We see it very much so in the interactions we're having with the people that we're trying to hire. We are now an attractive employer of choice compared to our peers in Swiss private banking. At the same time, we all know that there was somewhat of a strategic market dislocation happening in the first quarter of this year and this created more of the push factor. So the combination of the 2 means that we are now hiring high-quality experienced CROs, we are mostly signing on teams. And when I say teams, the hiring of the talent in each team is not just CROs, it's support staff, it's compliant, it's investment counselor. So when you get the team, you get the entire team. And in general, the size of the portfolios and the businesses that we're getting are substantially higher than what we were noticing in the last couple of years. At the same time, clearly, we need to continue managing the performance of the existing CROs. We have about 430 existing CROs at this point in time. And what you see at the bottom right is that, the level of AUM per CRO has remained stable in the last 3 years. I think the way you should read it is, it has remained stable, although there has been a significant market correction in 2022. So the actual -- being flat means there has been quite a bit of performance management over the last couple of years. Moving on to the margins and the revenues on Page 14. Revenue margin at 100 basis points, also supported by a rebound in commission margin in the first half as compared to the second half of last year. So if you look at the chart, if you look at the bottom part of the chart, you will see that we are now at 41 basis points of commission income. We were at 37 basis points in the second half of last year. So we are now back to roughly 2021 levels, let's call it that way. Year-on-year, we're clearly seeing a significant increase in net interest income, driven by interest rates. What we're also seeing is that, the level of interest income is probably in a static level at this point. There is various small increase compared to where we saw it at the second half of last year of 2022. As I said, commission margin increased by 4 basis points. And on a like-for-like basis, the absolute level of commissions has gone down 10%. You will see 17% on the chart, but the 17% is not like-for-like because in the first half of 2021, we also included our Spain subsidiary, which was sold in July 2022. We see continued strong appetite from our clients to do currency trades. And also, there is a positive contribution for life insurance in this margin. It's about 3 basis points. So excluding that, the revenue margin would have been 97 basis points. Now, I'm sure that given the very strong performance, there's going to be few questions coming up in terms of what happened with the margin and what you expect going forward. So in order to preempt those and give you some more information of how we think about it, I'm turning to Page 15. So Page 15 on the left, you see the -- our revenue margin over the last 3 years. And in this case, we have excluded the life insurance impact, just to make sure that you understand what are the real dynamics of the business. Clearly, whatever comes for life insurance is going to be over and above these margins and adds to our result. Now, there are 2 broad categories of drivers, the ones that you cannot influence like interest rates and the ones that you can influence. On the first one, just talk a bit -- interest rates a bit. The first question I very often get is, what's going to happen with interest rates going down? How much will that actually impact you? And as in previous times on the top right, you will see the sensitivity of our P&L to a 100 basis points increase or decrease on all the major currencies. So this is -- for each one of the currencies is 100 basis points. What you'll see is that, primarily for the dollar, at this point, our interest rate sensitivity is practically 0. It is actually CHF 3 million for annual P&L for a 100 basis points move. This means that the balance sheet is positioned in a way that whether interest rates go up or down, our profitability or our revenue is not going to be affected on the dollar. I'm mentioning the dollar because I think that, at least in the short term, the uncertainty of how the dollar rates will move, the short-term dollar rates will move is a bit higher than the other currencies. I think that like, and we have the Fed today, we have the ECB during the week, so we'll see exactly what's going to happen. But in general, the message is that, the sensitivity that we have now to rate is limited. So we don't expect any significant impact in net interest income or in income in general, coming from interest rate. The second big driver for interest rates is the conversion of client deposits from non-interest-bearing deposits to interest-bearing deposits. And this is a topic that we've discussed also in the past. This -- we have some information for you in the second chart at the right-hand side. This is the evolution of our sight deposits, which shows how the sight deposits have been turning into interest-bearing deposits. So what happened since the end of 2021 is, rates started coming up around April, May, June 2022. Up until then, you'll see there was no real reaction by the client. So we had CHF 24.5 billion of sight deposits at the end of '21. It's practically the same level in mid-2022. Then because interest rates were also accelerating, we saw a conversion to the tune of CHF 7 billion between the half year -- between June '22 and December '22. This was primarily dollars. And then what we also saw is that trend continuing for the first few months of 2023. That conversion in the first months of 2023 was primarily Swissy and euro. Clearly, the timing matches what we expected because the ECB and the SNB raise rates later, they also raised rates less. So it was a bit of a delayed reaction on the euro and the Swissy in terms of that conversion. Now, what we see in the last 3 months or since the end of April is that, we don't see practically any movement in that conversion. Can I say that that conversion has stopped? No. I will not say that. I think there is clearly a risk with interest rates remaining higher for longer, there is still a risk. But clearly, we are not seeing the same dynamics that we were seeing at the end of last year or at the beginning of this year. Now, moving a bit to the items that we can control because, clearly, the ones you can control, you position the balance sheet the best way you can. But the ones you can control is the ones that you act. And this is the commission margin. This is the chart at the bottom right. Well, you will see that we have a breakdown between recurring margin on the commissions and non-recurring. Clearly, between 2021 and today, we've seen a drop in the margin for non-recurring. We see a lot less client trading activity in bonds, equities, funds in the period compared to 2021. And we've maintained our recurring margin at about 33 basis points, which is practically the same as in 2021. For us, what is very important is increasing the recurring revenue margin. The efforts we are making now is to drive this up. We can discuss how many basis points we can actually get. But our approach is to try to provide better services to our client, higher value services to our client. This means, more discretionary mandates. This means, more advisory mandates, more structured products, more private equity. So that will drive the recurring margin up in the next 3 years. Now, personally, I believe that also the 8 basis points of non-recurring should rebound to a higher number. I think that you talked with any bank in the market, everybody is saying that the level of performance and client activity is lower than they have seen in the past history. So, I do expect also a rebound on that side. Now, the question is, where does that all leave us? And I think that the 85 basis points that we mentioned in our plan was a through the cycle margin. And it was based on the information that we had available at the time. Now it is 9 months later than that. And I think what I can definitely say is that, we expect the revenue margin to remain higher for longer as we move towards 2025. Moving to Page 16. This is important because this is also part of how we are trying to improve the recurring margin. This is the evolution of mandate penetration. It's combination of advisory, discretionary and funds as part of the business. Clearly, we had a drop in the first half of 2023. It is through a reduction of discretionary mandates, and it's a result of market developments in 2022. The reaction on our side is, we are strategically upgrading both people and content to deliver these high-value services. When I'm saying people is at all levels. So this is a combination of investment counselors, managers and senior managers who will be helping us improve in these lines. The focus is clearly to increase the penetration. You'll see that we have a target of 65% to 70% penetration by 2025. And this will help drive the margin up. And we have recently relaunched and our discretionary solutions and advisory solution. This is already in this month. This is the revised offering to our clients. I would invite you to visit our site. I think that Giorgio also has a QR code that you could use even instantly to access them at this point if you wish. But it's clearly an improvement -- a significant improvement to the offering that we had before. Moving to Page 17 to talk about costs. Clearly, we are improving the efficiency even further, while we are investing in growth. Cost-to-income now down to 72%. If you look at the costs between the second half of last year and the first half of this year, you'll see that, in all practicality, the other operating expenses are flat. There is no significant change. And the only real change that we have in personnel expenses is because we have invested CHF 20.7 million this semester into upfront one-off investments to hire talent. This has been very important for us and we believe that this will help us drive the business going forward, and it's clearly a one-off investment in the first half of this year. Now, moving to Page 18 because having good revenues is perfectly fine, but none of us actually would depend just on good revenues to make this happen. And if you look at our performance in the last 5 years, we've had a very strong track record in managing costs. We have very -- been very active in managing costs and the philosophical approach. I don't know if it's philosophical or practical, but the approach we have when it comes to cost management is, each one of us needs to make room in his or her cost base to be able to invest further. So it's not a matter of just adding resources without managing existing resources down or becoming more efficient for that matter. For instance, maybe you don't add costs, but you can actually manage high volumes with the same cost, that is also a very good result. So what you see on the chart is, the evolution between the second half of last year and this year. And what you'll see is, clearly, we invest in new hiring and this is a bit taking advantage of the revenue over performance. But what you will also see is that, we have cut CHF 13 million in operating expenses in the first half of the year through our cost management actions. Now, these are structural. These are tactical. It's also sort of actions, but that is 3% of our cost base. And this is how we manage cost. It's a matter of continuous cost management, so we make room to invest for more talent. Now, this will definitely continue. And on top of this, we are expanding our Simplicity cost management program. We're going to take it from CHF 40 million that was to CHF 60 million. This is all deliverable in -- by 2025. This will also make more room for us to be able to invest and hire all the talent that we've discussed already. And just to close, it's not included on cost, but as I mentioned earlier, we also have a one-off P&L charge of CHF 21 million for the write-off of certain intangibles, which are not going to be used going forward. Now, having said all that, the question is, how do we manage the business going forward? We've always managed the business trying to expand operating leverage. So, this is the only way we can make sure that we deliver on our promise. On what we mentioned in October, where we said that, on an annual basis, we would be increasing our profits by 15%. Clearly, this year, we'll deliver a lot more than 15% for the year. But it's a matter of making sure that your trajectory on the costs matches the way that you -- the revenues are coming in. Giorgio mentioned the rule of 2:1. So you need to make sure that your costs are growing at, at least -- well, not more than half the rate of your revenues to make sure that you can actually deliver on the promise that we set ourselves back in October. Last couple of pages on balance sheet and capital ratios. Clearly, a very strong balance sheet, a very liquid one as well. If you look at the chart on the left and you add cash, treasury bills and financial instruments, we're talking about CHF 22 billion of liquid assets. This is not by accident. This is clearly by design. There have been -- if you look at the last, at least 10 years of this bank, we have always been operating on a very liquid basis and on a strong balance sheet. Capital ratio quarter at 17.3%, total at 21.2%, increasing compared to half 1. And also, you'll see that the liquidity ratios are either stable or improving, for instance, the NSFR improved to 189%. We bought 4.4 million of our own shares in the first half of the year. And we're also announcing today a new program. It's going to be for 6 million shares, or up to 6 million shares in the next 12 months. To close a bit on capital evolution, you will see that clearly, our capital-light model is allowing us to generate a lot of excess capital. We made 220 basis points simply on our organic P&L this semester. And if you take in account of risk-weighted assets and dividends, we generated 150 basis points of net capital. Clearly, we used up a bit of in the share buyback. But clearly, the way we are managing this is, given our strong capital position, the combination of the high dividend yield coupled with the share buyback is also enhancing the return that shareholders are getting from EFG. To close, a few highlights for you to take away for -- from our half 1 results. Clearly, another step change in profitability and this is going to be the stepping stone for us to further improve to 2025, actively investing in future growth. You see that from the hirings that we have been going forward with. And clearly, a very strong and constant progress towards our 2025 financial targets. Thank you very much. And on that note, I'll pass it to Giorgio for his closing remarks.

Thank you, Dimitris. And again, let's close the presentation looking forward. A couple of words about the outlook. Obviously, we are very positive given our results, but I also want to make it very clear that out there is not a walk in the park. I would like to make it very clear that out there the environment remains very tough, remains very fragile. We have high inflation. Clearly, this will remain probably for longer than we anticipated. So there are risks for the macro economies, the risks of recessions. There are risks of defaults. There are certain parts of the economies that are much more vulnerable to high interest rates. Central banks remain quite hawkish. And clearly, you cannot exclude that some parts of the economies will see defaults. There is the big debate about real estate globally. Clearly, geopolitics and the tensions remain high. This creates a lot of headwinds from an operating standpoint. And also, I must say that in our industry, the competitive landscape has significantly increased. So, the overall environment remains, I would say, quite tough. We need to be vigilant. And there are, obviously, risks that you need to face and to mitigate. For us, the answer of on how to address all these issues and this situation is about having a consistent strategy and having a consistent execution of our strategy. That's why on Page 23, we put forward again the slide that you have seen already on the 12 October, which is, if you want, the strategic road map for the next 3 years. We want to achieve sustainable and profitable growth. We want to be close to our clients, as you can see on the left-hand side, and we want to continue, as Dimitris very eloquently said, increase our efficiency and productivity via the Simplicity program. We believe we have been doing this already over the last 4, 5 years. So I believe that we have shown that we can do that. And we believe that we can accelerate our growth, as you can see in the middle of the page, investing in content innovation, in digital acceleration and investing in our people as you have seen that we have done in the first 6 months of the year. It goes without saying that you can accelerate your performance only if you have a very strong foundation, and you have strong operational and financial resilience that, as Dimitris already illustrated, we believe that we have and we have achieved and we continue to work to improve. Now, we believe that the strategy is clear, the strategic road map is clear. But as we all know, strategy is great, but the execution of the strategy is even more important. And on the next chart, Page 24, we try to give you a sense on how we are executing our strategy in this environment that, as I said, remains quite tough and fragile. And we have a dual focus. We have one focus on developing our business day in, day out. This is running the bank. This is being close to our clients. This is optimizing our performance. This is becoming more scalable and productive. And on the other hand, the second focus is about transforming the bank for the better, making sure that we are able to meet the evolving needs of our clients and to become more scalable, and more visible. In a nutshell, we need to deliver a superior service and first-class client solutions to our clients. We need to become, we are already, but we need even to become more attractive home for our CROs and an employer of choice for talent in our industry and, obviously, to deliver a consistent financial performance. Our strategy and execution of our strategy, as you can see here, is mainly in organic growth strategy. We haven't mentioned it, but obviously, Dimitris clearly showed that we have a lot of capital. We have excess capital. We have capital that we could deploy in M&A and in doing acquisitions. We have illustrated that already in October. But for the moment, there is nothing on the horizon and, therefore, the focus is organic growth strategy. And the foundation of our organic growth strategy on Page 25 is our CRO model. We believe that our CRO model, client relationship officer model, appeals to clients and appeals to client relationship officers. Obviously, our CROs that we already have, and prospect CROs. Some people yesterday said when I was presenting this slide, that it's like that I'm trying to pitch to hire CROs. And in a way, this is what I'm trying also to do hoping that on the webcast, there are many prospect CROs. But jokes apart, I think that our CRO model is fundamental, especially in this day and age. We are living in an age of volatility and uncertainty. And this is when clients need an independent and unpartial trusted advisor, who is focused 24/7 on their needs, who is focused on building a long-term client relationship, who is a partner to the clients and obviously, we want client relationship officers that are partnership-oriented and solutions-oriented. I always said publicly also many years ago when it was less obvious maybe given the performance that our CROs are second to none in delivering superior service to our clients. And obviously, we see that this model is appealing to our clients. We are attracting, as you see, NNA. We are attracting new clients. We are increasing the share of wallet of existing clients. Now, in this day and age, on the other hand, service is extremely important. There's a conditio sine qua non, but content is also fundamental. And this is why Dimitris mentioned that, we are investing, and we are improving in delivering first-class client solutions and content. Our client relationship officers are not alone are together with the asset specialist, investment counselors, portfolio managers to deliver the best client solutions to our clients depending, obviously, on the stage of their life and the family needs. Some clients, obviously, love to invest, some clients, especially now with a lot of volatility, like to have direct access to the dealing room and trade. Some clients are more focused on wealth planning and succession planning for their families. Other, they want to leverage existing assets to invest more, et cetera. So we believe we have a very competitive platform, but we want to continue to invest to be able to deliver more sophisticated solutions, more adding value and solutions to our clients and obviously, if you do that you are also able to deliver high-margin services and products. And as Dimitris was saying, one of our strategic objectives is to increase the net commission margin and you can only do that if you focus on sophisticated services and products. So, by the way, here is the famous QR code, if you want to see our offering, you can just with your smartphone look into that. We have revamped our offering in the last 6 months. Now, another area that for us is fundamental, we already mentioned it throughout the presentation, but again I come back to the notion of consistent strategy in this volatile environment and consistent strategy execution is about digital solutions. Here, you see our 5-pillar digital strategy, very concrete, very focused. One of the key objectives is, I mentioned it earlier is to improve our client and CRO experience. We believe that if we do that, if we have better connectivity, better tools, better way to interact with our clients and our CROs, we would be able to do more business and ultimately, we will be able to improve our revenues and, obviously, digital solutions are fundamental to improve our scalability and efficiencies, and clearly, this will ultimately improve our cost-to-income ratio. It goes without saying that, without digital solutions, you cannot have, I would say, a resilient and safe bank, and we are investing a lot in the last 2 areas. Last but not least, in terms of the core banking platform and cybersecurity. So these are the cornerstones of our organic strategic plan of our organic strategic execution. On Page 28, we confirm again the targets for 2025. We have announced them in October of last year. I think they are well-known. There is no need to go through them again. But I think it is important to say that clearly, we have started on a very strong way in the new planning cycle, as you can see on the right-hand side, and Dimitris mentioned it also earlier. And for us, this gives us a lot of confidence going forward. And to close my 3 key messages that I'd like you to take away from this presentation and this performance in the first 6 months are the following. First of all, we know that we entered this new planning cycle from a position of strength. And I believe that the last 6 months and the record performance that we have delivered is a testament of our ability to execute our strategy throughout the cycle. And clearly, as I was just mentioning, the strong start in this new 3-year planning period and the investments for the future -- in future growth, they further increase our confidence that we are on the right track to achieve our 2025 targets and possibly to beat them. With this, I close here, and I hand over to Jens for the Q&A session. Thank you.

Thank you, Giorgio. Thank you, Dimitris. Obviously, for your very insightful and detailed presentations.

[Operator Instructions] We start maybe with Mate.

This is Mate Nemes from UBS. Thank you for the presentation and well done on the results. I have a couple of questions, please. The first one is more of a technical one, I guess, for Dimitris on the CHF 20.7 million hiring costs. Could you share a bit more color on that? Is that essentially a combination of recruiting cost, sign-on bonuses? Does that amount include the costs, as you mentioned, for the teams, the investment counselor, admin staff and so on? And can we take that as an indication also perhaps for future hiring cost pro rata? And in this context, I'm not sure, maybe I missed it, but have you updated your hiring ambition from the 50 to 70 given where you are already in the first half. So that's the first topic. The second one, still sticking perhaps on the cost side. The cost evolution broadly in the second half of the year in light of the higher headcount, the one-off costs in H1 and also given that you have enlarged the scope of Simplicity. What should we think about timing there? Is it more back-end loaded or are perhaps some benefits in the second half of this year? And the last topic is on the recurring commission margin. I think both of you were very clear that this is an area, which is the focus going forward by increasing the mandate penetration, new discretionary solutions and so on. I'm just wondering, could you talk about what level you deem possible to going up to from the current 33 basis points. And what is the main lever here? Is it simply just discretionary margins going significantly higher? Or are there other ways to address this?

Let me start with your first question. The CHF 20.7 million includes, as you say, upfront costs. So it's sign on bonuses, it's headhunter costs. The -- what is important for you to know, it is not just the CRO population, it is also all the other talent that we are hiring at the same time. As I mentioned when we hire a team, what we try to do is, not just hire the CROs is to add to that the CSOs, to add investment counselor to our credit structures, to add compliance people from that unit because we find that integrating them as a team when they come in altogether is a lot faster, a lot more efficient and a lot more successful. So the CHF 20.7 million is a combination of everything that has happened until now. To the extent that whether this will continue in the second half, we will continue hiring in the second half. And, I guess, this goes a bit to your second question on -- in terms of what -- whether we are exceeding our hiring ambition. Like the guidance we gave was for 50 to 70 CROs per year. We already had 75 reported in the first half. So clearly, this year, we will definitely exceed. And the indication that we gave, the 50 to 70 was just understanding or knowing what is out there. Clearly, what is out there has changed dramatically and as long as we can get the high-quality large and reliable business cases, for us, it makes sense to actually hire because in the end of the day, we will be becoming a bigger and a better bank through that -- through those hires. Now, on the costs, I think that there are several moving parts, you have people joining in, you have Simplicity coming more into force, like if you saw the chart, we are maybe close to halfway there of executing the CHF 60 million. But again, not all of it has gone through the P&L. There are several other tactical source -- tactical cost management actions that we're taking at this point. In the end of the day, it's about managing the operating leverage. I'm not going to tell you exactly what's going to be happening in the second half. Clearly, the -- we do expect revenues to continue to be strong in the second half. We have no indication that they shouldn't be strong in the second half of the year. So we will manage costs accordingly and in an active way. Now, Giorgio, I don't know if you want to take the question on what is the aspiration for recurring cost. By the way, Mate, the -- on that question, it's -- clearly, it's not just penetration of advisory and discretionary. That is one element. But it's structured products, it's private equity. It's more fees from lending because lending is another asset class, and it is the always present topic of repricing because it's -- so it's not that we have one action. And if you look at what we've done in the last 3 years, actually, repricing has been a good source of making sure that you replace some income that you didn't -- that you're not having any longer with some more recurring income.

No. I think, Dimitris, you mentioned it from my side. The only thing I can complement is that, we always focus on things that we can control, and we try to get -- to be positioned well for things that we do not -- we cannot control, obviously, interest rates, we cannot control. I think we positioned our balance sheet well. We will continue, obviously, to defend as much as possible and to maintain, let's say, the situation for as long as possible. But the key focus is on what we can control. And for sure, the penetration of high-margin products is fundamental. The repricing to also engage with clients and bankers that are on the more sophisticated side. I think this is extremely important. We have ambitious targets in terms of penetration. And, obviously, we see the 41 basis points in terms of net commission margin as a starting point. Last year, obviously, because of the markets, we went below 40 basis points. But traditionally, we have been between 41 and 44 basis points, and our ambition is to go over that.

Right, if we take Andreas next here in the front as well, please?

Andreas Venditti, Bank Vontobel. One area that was very strong and you mentioned it was the FX clients trading, I think, in the magnitude of CHF 40 million improvement, I guess, quite a nice bottom line contribution there as well since I believe the cost-to-income ratio should be relatively low on such revenues. So maybe you could just tell us your view, how sustainable this is and what you expect going forward? Then on CRO hiring. I appreciate what you mentioned on the gross side, in terms of hiring, how should we think about net numbers? The number came down in the first half on the net side. How do you see it going forward there? You also mentioned private equity. I'm not so sure what your offering there is. Maybe you can add some color in terms of how you see that and maybe also in terms of size? Well, I have a lot of points, but I keep one more on the -- given the FX moves we just had this month, maybe you could provide an update on your cost side in terms of currencies.

Let me take the FX question first. Just to make sure that we're working off the same information. The -- in terms of the incremental revenues between half 1 of '22 to half 1 '23, you're talking about more like CHF 20 million, the delta. The way it's disclosed, it includes swaps and everything else. But the actual FX activity is about CHF 20 million higher that we had half-on-half. Look, given the volatility that we've seen in currencies like I -- it's something that we do accept, but we always have had currency trades from our clients for hedging reasons for other reasons as part of their business. So we've seen an uptick. It's part of what is driving net other income. What happened to some extent is compared to 2021, we saw client activity in bonds, equities, funds to drop. This is the reason we lost 3 basis points on the non-recurring, and we gained something like 1 to 2 basis points, call it, on the FX trading. So I think there's a switch of activity. Now, if things normalize, should we expect -- I would expect that the trading of bonds and equities would go up and probably currencies will be a bit more stable and this will go down. So net-net, this is probably a reasonable estimate of what's going to happen.

And I think this is important to mention, right? It is extremely difficult to predict what's going to happen, right? I remember in 2021, everybody thought that the equity markets are going to be here to go forever and FX was dead because the volatility between currency was not existent. So then in 2022, things changed completely for us. What is extremely important is to be well positioned to take advantage of the shifts to mitigate, obviously, when a shift is negative and to take advantage when a shift is positive. And from a business standpoint, one of our key opportunities but also challenge is to ensure that most of our CROs are able to be well versed in the various asset classes, which, as you can imagine, is not always the case. So I think this is how we are trying to manage the business. Maybe should I take regarding the product side on the private equity. So to cover that. To be fair, we are, I would say, not where we would like to be, to be very blunt. This is an area where we are investing, where we will be expanding. We have already some products that we develop ourselves, obviously, that are funds-of-funds. And I think that we are leveraging very much also the expertise that our shareholders have that in their own right, they are very much focused on private equity, but this is something that we want to develop further. Clearly, the reality is that, you should invest now in private equity, usually, like we have seen 15 years ago, these are the best vintages. And that's why we are trying to push. But to be fair, the penetration is still very low for us or relatively low compared to competition, and this could be an opportunity going forward. I could take the CRO hiring. We have always expressed the target or it's not a target, it's an ambition in terms of hiring the famous 50 to 70 gross because it is quite difficult to manage and foresee the net. There are many, let's say, moving parts on the net. Clearly, there is regarding the new hires, the success ratio, obviously, we are doing a lot of due diligence that the new bankers, they do it a lot of due diligence on us. We welcome that because, obviously, we want that they know exactly how is our platform, how is our model, et cetera. And conversely, we do a lot of due diligence. Dimitris and I approve all business cases, all of them. Obviously, the regional business heads and the heads of private banking are proposing those. But -- so there is a lot of scrutiny. I believe that we have improved in terms of success rate. But again, unfortunately, you don't have a guarantee. Then within the existing population, there are now -- we are becoming a bit older as a bank. So there are also retirements, there are people that change of circumstances. So, if you ask me, what would you like to have, but I will never put it on a slide. Obviously, if we grow -- if our target is to grow NNA between 4% and 6%, I would love to grow net around that range, also the population. But on the other hand, we don't want to be bound by a target because at the end of the day, we need to see what we can recruit, how we can manage. And we are very transparent in terms of performance management. People have a business case, everybody is super professional and adult, and we try to do the best and to make everybody succeed. But in the worst situation, obviously, we partway. So, sorry for the long answer, not very precise, but this is how we manage the business. There was a cost...

There was an FX question about cost. The -- our cost composition is about 50% of our costs are in Swiss francs and the rest is in other currencies. Clearly, if you just take -- the Swissy strengthening, which is what has happened in the last couple of months. In a stand-alone basis, that doesn't work in our favor because we have 90% of our revenues in other currencies and only 10% in Swiss francs. But having said that, what happened in the first half of the year is a combination that works very good for us because we had some market appreciation and an equivalent amount of FX negative impact because the Swissy appreciated. So that is a net -- it's 0 impact net on your AUM. So your revenues are not affected. But with the Swissy strengthening, your costs are decreasing. So in this combination, you're actually -- the -- so if, what we saw in the first half continues, you're actually getting a benefit from the combination of market improving and the FX and the Swissy strengthening.

I think we take the 2 questions here and then we move to the telephone lines. So the gentleman on the left and then in the back.

Mr. Blechner from Finanz und Wirtschaft. [indiscernible]. Could you explain how strong the NNA of CHF 3 billion was influenced by the CS, Credit Suisse crisis? Did you have money flows mostly from Credit Suisse clients in Europe or more in Asia? And then the second question, could give a concrete forecast for the net profit in this year and the full year? And the last question, the stocks -- your stocks increased the last 13 days. How do you explain that? Was that -- did the biggest shareholders from the Greece and the Brazilian stakeholders buy so far? Or what are your impressions?