EFG International AG (EFGN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. A very warm welcome to our results presentation for the first half of 2026 this morning in Zurich. I -- obviously I'm joined as usual by the management team, our CEO, Giorgio Pradelli, our CFO, Deputy CEO, Dimitris Politis and as usual, we will have obviously 2 presentations. Afterwards, we have enough time for Q&A. And obviously, as usual, I also point out the disclaimer in the presentation. And with any further delay, I hand over to Giorgio. Thank you.

Thank you. Thank you, Jens, and good morning. Good morning, everyone, and also from my side, a warm welcome to EFG Half Year 2026 Results Presentation. I'm actually quite pleased to be here today in Zurich and a beautiful summer day. First of all, because we have a strong set of results, and we're looking forward to presenting them to you, but also because yesterday, we managed to close the acquisition of Quilvest, a Zurich-based bank. This was a transaction that we have announced back in January. And after the regulatory approvals, we were able, as I said, to close yesterday. And thanks to this acquisition for the first time ever, EFG was able to cross the CHF 200 billion mark in terms of assets under management. Again, I don't want to enter into debate where the size matters or not. And in fact, at EFG, we are very much focused on quality and not only quantity. Having said that, in our business, international private banking, scale is important, especially you want to be the private banking of choice of generations of clients and you are present in all the major financial centers on the planet. I also believe that the CHF 200 billion mark is somehow a testament of a great entrepreneurial success story that started back in the '80s and accelerated in the '90s. We had an IPO in 2005. At the time, the IPO, we had less than CHF 40 billion assets under management. So in the period, we grew more than 5x. And 10 years ago, when I was standing here as CFO and presenting the figures, this was before the closing of BSI, we had CHF 80 billion assets under management. So in the last 10 years, it was a growth of more than 2.5x or precisely 2.5x. Now again, I believe that this is extremely important because it shows that we were able in the period to serve our clients, and this is the main purpose and clients obviously have followed us through the last years and the last decades. Now coming back to the last 6 months, or the last 12 months when we compare year-on-year. Again, if you look at the CHF 200 billion assets under management, you see that the growth year-on-year was in excess of 23%, which, as such, is already remarkable achievement, and this is very important. We're going to talk later about the future and the outlook and the trends. And I think starting this new semester, with CHF 200 billion is clearly an important advantage. Acquisitions for EFG are obviously part of the menu are important. But our core strategy is about organic growth. And we are pleased to report that our net new assets for the first 6 months of 2026 was CHF 5.7 billion. To some of you, the figure might sound familiar. But for us, the growth in percentage terms is 6.2%, which is in excess of our target range. You know that our target range is 4% to 6%. And again, here, I'm very pleased to say that this performance in terms of NNA is quite sustainable. It is the 15th consecutive semester where we had positive growth in terms of NNA, but also if I look at the recent past, the last 5 semesters, we were able in the last 5 semesters to grow every single semester more than 5%, so at the top end of our range. I think this is quite important. As you know, we are quite focused on NNA. We believe that clearly, for us, but also for analysts and investors, this is the leading indicator for future profitability and future growth. On the other hand, for us, is also a sign that clients like what we do, clients like what we offer. Clients appreciate service, appreciate our client services, and appreciate, obviously, are impartial advice during this period, I would say, of volatility and uncertainty. So from a commercial standpoint, I would say that the organization is in great health. Now growth is important. Growth has to be sustainable, and we have covered that, but it's also extremely relevant that growth is also profitable. And moving now to Page 5, we are very pleased that we were able to translate our strong growth into profitability. Actually, the first half of 2026 has been the best semester performance with the highest net profit of CHF 185 million IFRS net profit. And this translates into a return on tangible equity 22.4%. This is 3 percentage points higher than a year ago, which I would say is quite remarkable and is already ahead of our target for 2028, which is, as you know, 20%. Now we were pleased and we are pleased that despite a decline in margin, which was particularly relevant in the second half of last year, but obviously had some impact in the first half of this year. We were able to grow our operating income by 7% year-on-year to over CHF 850 million. And obviously, this led to a strong capital generation from an organic standpoint and our CET1 now is in excess of 15%. So all in all, we have started the new cycle. As you know, this is the first semester of our new strategic cycle, 2026, 2028. We started a new cycle in a position of strength with a good momentum in our business. But I will pause here, and I will give the floor now to Dimitris Politis, our CFO and Deputy CEO, who will do a deep dive on our financial performance. Dimitris, the floor is yours.

Thank you very much, Giorgio, and also a warm welcome from my side. We will start with Page 7 of the presentation, which is just the highlight of the day. The highlight of the day as you realize is that we have achieved our best profitability levels ever in a semester at CHF 185 million bottom line. That figure is up 5% compared to the first half of last year. Clearly, we exclude a one-off gain that we recorded last year to make sure that the compatabilty makes sense. I think the number that actually stands out in the financial performance of this semester is the return on tangible equity at 22.4%. That is 3 percentage points up compared to last year and is clearly ahead of our target of 20%. We'll come back to the financial targets later, but you will notice that we are already meeting 3 out of 4. And in the fourth one, which is cost-to-income, we have made improvements compared to last year and we are moving closer to our 68% target levels. I think in the sort of a bit of a broader viewpoint, the only thing I would note is that the actual bottom line of the first half of this year of CHF 185 million is practically the bottom line we had for the full year back in 2022. So in the course of 3 years, we've managed double profitability through several actions, some of which continue. Some of them also get augmented with additional actions. Moving on to Page 8, gives you a bit the sense of what happened over the last couple of years, so it's a bit of zooming in. As I said, profits are up 5% compared to last year and they are 13% up compared to the second half of last year. So we have an acceleration of profitability as we move closer to the first half of 2026. I think what the picture shows you is that we've been successful in the strategy that we have been describing for quite a bit of time now. And the strategy has been that we need to defend the margin and we need to build scale. In an environment of dropping interest rates, that was the only set of actions that could actually increase our profitability. And you'll see that now the margin has dropped from 97 basis points to 91 basis points. So we've been good at defending and we're keeping the revenue margin above the 90 basis point level. And at the same time, on the right-hand side, you will see that we moved from AUM of CHF 166 billion to AUM of CHF 200 billion as we speak today, primarily because of our organic growth. We'll come back to the margin and what we expect going forward. But in general, we believe that we're going to see limited headwinds going forward on the margin. Moving to Page 9. Here, we try to strip out a bit of the noise because we have a bit of noise from life insurance, and we show to you the operating profit, excluding all the exceptionals. This is the chart on the left. You will see that over the course of the last 2 years, we've moved from CHF 162 million of operating profit to CHF 227 million. That's approximately 19% on average per annum. And we have also grown that figure by 7% in the last 6 months, which comes to also our promise of delivering approximately 15% growth in bottom line every single year in this strategic cycle. For us, what is very important is the consistent delivery on these numbers. You will see that, that figure is actually going up every single semester. It doesn't matter that rates have been going down. We've been compensating by volume. We've been compensating by increasing our commission margin and making sure that it's not just about the actual quantity of our profit, but also the quality of our profit, and I'll come back to that later when we talk about our composition of our margin. I think that also in these figures, we have now 2 acquisitions incorporated fully in the first half of 2026. These are already contributing profits but they are far off from our expectations as we move along, we expect to be able to expand their business and also make sure that our technology helps them be more cost efficient. So we do expect a higher contribution, especially after the technology migration. And you will see that clearly we have some positive from life insurance in the first half of 2026. However, it is smaller than what was in the past, in the first half of previous years, and we do expect it to windle down to 0 as we move along in the next couple of years. Page 10 is our usual set of numbers, 6.2% annualized growth in NNA, 91 basis points of margin and 72 CROs who have actually already entered in the first half or to whom we have already issued offer letters or have signed the offer letters. In terms of profitability, 5% up year-on-year, cost-to-income ratio at 71.5%, which is 1.6 percentage points better than it was in the second half of last year, so an improvement. A net profit of CHF 185 million. And on the right-hand side, not to be forgotten, very strong organic capital generation at 230 basis points and we have added 1 full percentage points in the last 6 months, both in core Tier 1 capital and in total capital. Now our core Tier 1 stands at 15%, and our total capital stands at 18.3%. On Page 11, we have the 4 financial targets that we track for our 2028 performance. You will see that in terms of net new asset growth, we came at 6.2%. The last 3 semesters, we have been above the guidance of 4% to 6%. In terms of revenue margin, we are at 91 basis points. Cost-to-income ratio is flat compared to last year and better than the second half of 2025. And we have an increasing return on tangible equity. I think the -- what is impressive if I look at these set of numbers is that we've managed to absorb a drop of 6 basis points in revenue margin while keeping the cost-to-income flat. I think that is a great success. It comes with clearly building the book and growing the business. It also comes with significant effort in managing costs the best way we can without stifling growth because otherwise, our cost-to-income ratio would not have remained at the same level as the first half of 2025. Page 12, in terms of the evolution of the AUM, we added CHF 5.7 billion of net new assets. In this period, we also had positive contributions in AUM by market effects and currency effects, CHF 3.5 billion and CHF 2.3 billion, respectively. This means that we have reached AUM of CHF 196.3 billion at the end of June 2025. I think what is very important is that, that level of revenue-generating assets are up 21% compared to June 2025. This is what I mentioned earlier about making sure that you build scale while you're defending margin and this has been a clear driver in our performance in this first half of the year. In terms of the breakdown of the NNA between existing CROs and new CROs. In this semester, we had new CROs contributing 46% of net new assets. In the previous year, we had new CROs contributing about 65% of net new assets. In general, our expectation is that going forward, the contribution between new and existing CROs should be balanced. So I think in both last year and this year, we are very much within the range that we expect in terms of composition of -- between existing and new CROs as a source of the net new assets. Moving on to Page 13. You'll see the contribution of the different regions in the net new assets of the period. All the regions were positive. Switzerland was running at 3.7%. It's just below our 4% to 6% range. We had exceptional performance by Asia Pacific and Continental Europe and Middle East. They are both double digit in terms of growth, and both were above CHF 2 billion of net new assets for the period. And we had a smaller contribution, solar pace in the U.K. and the Americas, which is mostly because of some very specific outflows in those regions. The gross inflow for both regions was actually very solid, so we do expect them to come back to a more normal performance in terms of net new assets going forward. Page 14, the very important topic of CRO hiring. You will see that in the period and this is in the middle of the page, in the middle chart, we hired 39 CROs. We have extended offers to another 33 CROs in the same period, which are now currently pending. At these levels, we're coming in with a hiring which is at the higher end or even just above the guidance we have provided of 50 to 70 CRO -- gross CRO hires within a year. And you'll also see that in terms of CRO evolution, we are growing at a small pace on the left-hand side of the page. What is very important is on the right-hand side, the AUM per CRO. We've managed to reach AUM per CRO of CHF 360 million. This is the highest we've ever had. This is pretty much double the number that we had when I joined the bank about 8 years ago, and the value of this figure is twofold. One is, it gives you the indication of the quality of the CROs that we currently have, and it also helps very much in being very efficient in terms of running the business. Now I think Page 15 is very important because clearly in a transition where you have both your volumes and your AUM going up and your margin going down, looking at the composition of the revenues is very important. So overall revenues increased by 7% compared to the same period of 2025. What was the driver? Net commission income was the biggest driver, growing by 20% year-on-year. A large portion of that came because of volume, but also we managed to increase the commission margin year-on-year from 44 basis points to 46 basis points. And that was also contributed very much. How did we manage to do that? A lot of it has to do with expanding the penetration of mandates, but I'll come back on the next page on a few more explanations. I think what is equally important is that the interest-related part actually went up by 4% year-on-year. I know that on the face of the P&L, you'll see that our interest income has actually gone down year-on-year. But also the swap -- the treasury swap activity has gone significantly up from CHF 69 million to CHF 127 million, and I'm comparing Half 1 '25 to Half 1 '26. You see the figure on the chart. And in combination, those 2 actually grew by 4%. We clearly lost some margin, but in terms of absolute levels that is 4% up and is positive. In terms of the net other income compared to the second half of the year, we have also increased, and this is mostly due to the FX and Metals business. And in terms of the life insurance portfolio, we had 2 basis points of revenue last year. We have now 1 basis point in the first half of 2026 and that is also one reason that our revenues were slightly impacted in the first half of 2026. Now moving on to Page 16, which is a bit of a deeper dive on the margin because I'm sure that the question that is going to come at some point is, is this revenue margin sustainable? And the -- I would decompose it into these 3 parts, starting from the interest-related part, which is the middle of the chart on the left. You see that we started like back in 2024 with interest rates being at their peak. We're earning something between 34 and 36 basis points of revenue on everything, which is interest related. This is now 28 basis points. The average of the last 10 years is 29 basis points. We've seen interest rates being flat for the last 6 months. In reality, the risk of any significant further cut in the rates is probably not there. We've seen actually increases in interest rates in [ several ] countries. So we believe that at these levels, there are going to be limited headwinds, if any, headwinds when it comes to the interest-related part of the business. Moving on to the commission margin. You will see that we were 44% for the first half of last year, 43% before that. We are now at 46% with an average of the last 10 years at 43%. So we are clearly doing better. We are doing better because in the last 3, 4 years, we've expanded quite a bit in our capabilities in providing advice to the clients. We have added more resources. We have beefed up our investment and credit solutions team. And we've managed to increase, as you see, the mandate penetration now to 67%. And this is the basis of having higher recurring commission margin as you see at the bottom right. And we do expect to continue building and increasing this revenue margin -- commission revenue margin going forward. Now lastly, we have the net other income, which includes -- largely includes the FX and Metals business. You'll see that in the last 5 semesters, the range has been between 14 and 20 basis points, maybe 20 was an exaggeration. Currently, we're at 16. I believe that given where we are today, we are fairly safe to project, assuming the same client activity that this will not dramatically change. So all in all, we believe that for a first half performance, and I'm saying first half because there is some seasonality between first half and second half because we know that July and August are usually a bit slower on client activity. For the first half performance, the 91 basis points, maybe 90, excluding life insurance, which is not going to be there for very long, should be the right level of margin for us in the medium term. Moving on to costs. Headline costs were up 8% year-on-year. The entirety of that 8% has been because of acquisitions. You'll see on the next page that excluding the acquisitions, costs were flat year-on-year and pretty much semester-on-semester compared to the second half of the year. Also, the acquisitions are coming in currently in the first half of 2026 with a higher cost-to-income ratio than the 71% that we are posting. This is because we still are carrying some restructuring costs and the synergies have not clearly been realized. We expect them to be realized fully after we have the full integration on a technology level which will happen in the second -- in the first half of 2027. So we're looking forward to increasing the contribution of acquisitions in the next 12 months. Moving to the next page, Page 18. Here, it's -- we show the operating expenses, excluding acquisitions. So the business that we actually had in the first half of 2025 excluding Cite Gestion, excluding ISG. You will see that everything is pretty much flat. And this is what we've always said about self-help. It's our ability to do efficiency gains of roughly 3% every single year on every single unit in order to make room for additional investments. And once you invest that, you manage to be flat on a year-to-year basis. We're also progressing on our Simplicity 2.0 plan. We told you back in November 2025 that we have a cost and efficiency plan, which is going to be order of CHF 70 million to CHF 80 million of benefit by 2028. At this point, we have identified and we are acting of about half that amount. We expect to build on that amount as we move throughout the year. And we are very confident that by the end of 2028, we will be at the levels that we expect to be in terms of the Simplicity program. Moving a bit away from the P&L on Page 19. This is the high-quality balance sheet with not many changes from what clearly, you saw back in December 2025. We are -- we have about CHF 20 billion of liquid assets. So in terms of liquidity and LCR, we are at 267%. The important element is the increase in core Tier 1, which has now increased by 100 basis points compared to last year, going from 14% to 15%. At the same time, the total capital ratio has reached 18.3% and in terms of share buyback, we have acquired 2 million shares in the first half of 2026 to fund our employee incentive plans. How did we manage to actually grow our capital by 100 basis points in the first half? The biggest driver, as always, is organic capital generation. We added 2.3% from organic capital. There was a small benefit from risk-weighted assets as we have been optimizing risk-weighted assets throughout the period. And we are accruing a dividend according to our progressive policy on dividends with a payout of 60%. And there's a some limited consumption from the share buyback. That gets us to the 15% core Tier 1 ratio for the 30th of June 2026 and to close in terms of linking the performance of the first half to our expectations for the future. The beginning of 2026 has been a very solid start to our 3-year plan. In terms of execution, we have been executing on all priorities. The priorities that you see here in the middle of the page, so business development, defending the revenue margin and being strict in costs has been there. These are the same 3 priorities that we showed to you that I presented to you back in February. We've been doing very well in terms of delivering on all 3 elements. And this is the reason why we feel confident that this robust start in 2026 gives us a very solid stepping stone to move on to succeed for our -- to succeed towards our financial targets. Clearly, the acquisitions are there. We -- as Giorgio mentioned earlier, we managed to close the third one yesterday. They are already contributing. We expect them to contribute even more going forward, and we try to exploit them in full by 2028. On that note, I would like to pass the floor to Giorgio for his final remarks. Thank you very much.

Thank you. Thank you, Dimitris, and let's now look at -- look ahead. Let's look now at the priorities for this year and the following years and the outlook for our industry and our firm what we can see at the moment. Let me start from where actually Dimitris left it. First of all, we are very pleased that our operating model continues to deliver strong results. These were the priorities for 2026. So for this year that we have showed you on the 18th of February when we presented the full year results for 2025 basically was to continue the organic growth momentum, complemented by M&A to focus on margin resilience and to continue to generate operating leverage. And as Dimitris mentioned, and you can see here on the right-hand side, I think we have delivered. As far as 3 out of the 4 targets, we are ahead on 3 in terms of NNA, revenue margin and return on tangible equity. And as far as the cost/income ratio is concerned, we started the cycle at 73%. This was the cost/income at the end of 2025. We need to reach 68%. So if we manage to reduce every year by 1.5 to 2 percentage points, we are going to get there. And in the first 6 months of this year, we reduced by 1.6 percentage points. So we are absolutely on track. Now looking ahead, and let's look at the second, the environment. We believe that the macro environment remains constructive for our business and the financial markets are resilient. We have introduced in November 2025 when we presented our 2028 strategy, the concept of wealth on the move, wealthy family considers private banking as a geopolitical risk diversification and we see that actually the cross-border flows continue to grow. The growth last year was in excess of 8%, which is a multiple of the growth in terms of nominal GDP. And clearly, as I was saying earlier, for us, the key objective is to intercept these flows, and I think we're doing a pretty good job about that. The other key question is what are the financial markets going to do? Overall, what we observe is that the investors have demonstrated an incredible resilience, I would say, despite all the events that we have seen. And we believe that this -- or at least our Chief Investment Officer and our colleagues believe that this will continue for the foreseeable future. We don't want to downplay possible risks. People talk about bubbles in AI, bubbles in the sovereign debt and so on. But for the moment, what we have seen is actually a risk on approach coupled with a lot of client activity given the volatility of the markets. And to be fair, for us, this is an ideal situation because clearly, if clients [indiscernible] on, but the markets are volatile, we see an increased client activity, and this is positive for our business. Now in terms of our strategy and our vision, again, we have presented it at the end of November last year. I believe to have a clear vision and a very articulated strategy is important to guide the firm and all the colleagues forward. Our vision is very clear. We want to become the private bank of choice for generation of clients delivering truly personalized services and impartial advice. We have a clear strategy. On the left-hand side, you see our strategic framework that we presented last November. We want to build on our strengths, and we want to capture new opportunities for growth. And in order to capture new opportunities, it is clear that we need to augment our CROs. And the way we do that is to associate our CROs with specialists in the different asset classes from investment and client solutions and global markets. And obviously, we augment our CROs with the new solutions in technology. As you know, we have implemented now in Switzerland, we are rolling out across the Globe Aladdin, which is, I would say, the reference tool for advisory and advisory for us is obviously a critical service. So the vision is clear, the strategy is well articulated, but as everything in life, what is important is how you execute a strategy. And we believe that we are set to deliver an increasing operating leverage and a strong performance going forward in line with our strategic plan. We believe that because we are focusing on the levers that we can control. We are coming in the second semester of 2026 with record assets under management. And to a certain extent, we can control that lever. As I said earlier, in my introduction and Dimitris reiterated later, we are growing for the last 15 semesters, semester in semester out, and this is not by coincidence. So we are in a good health in terms of commercial performance, and we will continue. And also regarding the margin, I think Dimitris gave, as always, an insightful deep dive on the matter. I think we need to focus, and we have been always focusing on what we can control on the margin. For sure, everything related to client activity, net commission income, the mix of our assets, that we call it Mission 75 to increase the mandate penetration. These are all areas that we can control, and we have done very, very well over the years. The area that, obviously, for us is difficult to control is the level of interest rates. And clearly, there is some correlation on interest rates. But as Dimitris was saying earlier, and you can see on the chart on the bottom left-hand side, we see that the headwinds coming from interest rates are reducing. We see a sort of stabilization. Some central banks have started already raising rates. And so if this component of the margin stabilizes, clearly, we are very confident that we can improve the other components that are under control. If we do this, and I have no doubt that we are going to execute in a very diligent and consistent way as we have done over the last years, we will be able to deliver a consistent performance and to unlock what we call the power of compounding. On the right-hand side, you see the chart that we presented back in November. We have complemented the results in terms of IFRS net profit for the first half and the return on tangible equity also for the first half. And you can see that we are on track to deliver on our ambition of a 15% CAGR for our IFRS net profit going forward. Obviously, we love the 15% CAGR because in 5 years, you doubled your profitability. Now recapping the situation. We are confident and convinced that a consistent execution on our plan will drive sustainable and profitable growth for the benefit of our shareholders, our clients and all other stakeholders. We see the environment as being constructive, and this will support our strong organic growth. And clearly, with M&A, there is some lag in how you can -- how fast you can integrate them, but they will increase their contribution to the group. We have a clear strategy, as I was saying, and we will continue to augment our CROs, which basically will result in an improvement in the productivity and efficiency of our firm. And so we are set to deliver an increasing operating leverage and strong performance in the next quarters and semester. And to close, we reiterate our confidence in achieving our targets. With this, I pause here, I hand back to Jens for the beginning of our Q&A session.

Thank you very much for the very insightful presentation. As always, now we come to, obviously, the Q&A session. As usual, we will start with questions in the room first, and then we will move to the telephone lines. [Operator Instructions]

This is Daniel from Zürcher Kantonalbank. My questions and -- for me, it would be interesting to hear a bit the trajectory over the first half year. Obviously, after 4 months, you had a bit of better key numbers. Gross margin was a bit higher. Cost/income was a bit lower. So can you maybe talk a bit about the exit rates of the last 2 months and what makes you confident to kind of return back to, let's say, the 90% plus gross margins .

Daniel, let me take that. You're right. The margin that we posted in the first 4 months was 93 basis points. And the -- what we have now for the 6 months is 91 basis points. The difference between the 2 is 1 basis point lower for life insurance, which had a smaller contribution actually a negative contribution in the last 2 months of the semester. Otherwise, the performance between the first 4 months and the last 2 months was not very different. . We had a bit more client activity in January and maybe March. But I wouldn't say that it's not something that we would not see in September or November of a year depending on market conditions. And to be fair, because I had the opportunity to look at all the analysts and the consensus where Clearly, there was about an expectation of maybe 1 basis points higher of revenues. That difference is exactly that life insurance, which did not repeat in the last 2 months. Again, we know it's volatile and it's between 0 and 2 basis points in the last few years in terms of contribution, but that's the main driver of the volatility. Otherwise, the business has been quite stable.

Let me add. I would like to add one point on this. First of all, regarding NNA, there has been no, I would say that the last 2 months have been as good as the previous 4 months. We are maintaining the 6% or better than 6%. And also, I would like to mention, I know that you guys need to look at all the possible data points and look at the last 2 months versus the previous 2 months. But this is a long game, right? This is a game where you do not focus on 2 months versus the previous 2 months. And we put this slide and this chart at the bottom left. Our margin when interest rates were 0 or negative in certain jurisdictions were in the 70s, you see . You see our margin is the Bronze line ROA in basis points, which excludes life insurance and exceptional. So this is the truly representation of our business. It showed up because of interest rates almost -- well, actually [ 200 ]. So you had a movement of 30 basis points. And now there is interest rates came down in the cycle, and now we are coming down. Obviously, we are focusing a lot of as we said, on commission income and all client activity, but the interest rate is such a powerful force, which we don't control. And now we are down to 93%, 91%. So on top, there is the noise by the life insurance that can create 1 or 2 basis points of noise. And so it's very difficult for us to predict to the exact basis point. But I would say that in the cycle, we have come from a very low -- our secular trend is around 85%, which is, if you see, there is a slide on Dimitris, that shows the last 10 years. So we have gone down massively, then we have showed up. Now we're normalizing at the top end. There is the noise of life insurance. Now the issue is, and I understand where you guys are coming from that 1 basis point is CHF 20 million. So if you're off 1 basis point for half a year is CHF 10 million and that might create some issues in the models. But looking at our business, I repeat the quarterly movements, we need to take them with a pinch of salt. This is what I'm trying to say with a very articulated answer.

This is Mate Nemes from UBS. I have 3 questions, please. The first one would be on hiring. You obviously had a really strong hiring print in the first half, 72, including those that you signed and approved but haven't joined yet, that is already ahead of the full year guidance of the 50 to 70 per annum. Typically, you have. What do you expect in the second half? And are there any specific regions that these hires are being made in? Second question, I'm sorry to return to gross margin, but I have to. If you could comment on the exit gross margin at the end of June. And also, if you could share your expectations on the interest-driven margin component in the second half. Is it fair to expect a fairly stable movement on that front from here? Or is there any downside? And the last question would be on costs. You're saying that the current level of execution on Simplicity 2 is at 40% to 45% of the '28 ambition. What does that mean exactly? Does that mean these actions have been taken and will yield results in the next 2 years? How much of this is visible in the P&L today? If you could just help me understand that. I'm not 100% [indiscernible] that.

Maybe I'll take the first question on the hirings, which is on Page 14. We -- as you know, this is not a target for us. I mentioned earlier that we try on many aspects of our business to focus more on quality than quantity. So we always focus on the quality of the talent that we can hire. It is fair to say that the first half was not bad with 39 that were hired in the period. So it is quite plausible that we will be within the range, if not at the top end of the range for the full year. . Now what we can predict on the second half, obviously, we have 33 that have signed and have been approved. So they should start. And we continue to have, I would say, a good pipeline. We have the same, I would say, consistent process in hiring talent as we have on the pipeline for NNA and the pipeline is good of talent. I think that EFG in the last years has improved its positioning in -- among professionals, and we see more A teams that want to join us. This is very important. Regarding geographies. I think this was the second part of your question. We see interest across the board. There are more areas where maybe it's always a pull and push. So there are certain situations when there is a bit of a push and then it's easier to recruit. But in general, is across geographies. There is nothing -- there is not a specific area where we are doing very, very well in another area where we're not recruiting at all. So we are quite pleased. And as you have seen in the previous page, also the delivery of the new CROs is good. To close, I think we're going to be in the range most probably at the top end and it could be higher than the 70.

Moving on to your other 2 questions, Mate, on margin and costs. Look, I don't see the exit margin being very different from the average margin of the first 6 months. And I'll tell you why. We have a balance sheet that adjusts very, very quickly to interest rate changes. And the last cut happened back in 2025 on the [ dollar ]. It was December '25, if I'm not mistaken. So this -- by the time you reach January, end of January, this has already been incorporated in the P&L. So we don't see a tail from the interest rates cut still hitting us. Otherwise, the commission margin has been fairly stable. Maybe January was a better month than others, but 1 month out of 6, that doesn't really make a big difference. So I would say that overall, the gross margin has been -- excluding life insurance, have been fairly stable. Now on the cost side, Actually, if you turn to Page 18 on the presentation, you'll see that we incorporated there some information about our Simplicity program. So the target of CHF 70 million to CHF 80 million is the run rate of efficiency and cost benefits that we will get by the end of 2028. You'll see that we expect CHF 15 million to CHF 20 million delivered in 2026, which means that in the first half of this year, we probably have something like CHF 7 million, CHF 8 million already included in our P&L because we have delivered that amount. What we are doing now is we are adding more actions to that list. We expect that by year-end, we should have a very decent set of actions that probably comes very close to achieving the CHF 70 million to CHF 80 million of efficiency gains. These actions will happen in '26, in '27 and in 2028. So it's a continuous execution program. And by the way, the nature of these programs is that they need to be continuous because whatever you think today, you will manage to fully describe and design by tomorrow, and you will execute 3 days -- well, 3 semesters after. So it needs to be a continuous generation of ideas and a continuous effort to be cost efficient.

Andreas Venditti from Vontobel. Maybe if I look at the new asset generation, maybe you could comment on the topic of leverage. So have you seen releveraging? I've seen that lombard loans went up -- maybe you can comment on that. Also on new CROs, can you maybe update us on how you see the success rate of people and business case? . Then in terms of the acquisitions, thank you for the disclosure in terms of the cost side. Maybe you can spend a few words on the revenue side as well, given that you mentioned the negative impact on the cost/income ratio. And also in terms of your expectation for the contribution in the second half from the second half of next year. How should we think about that? Finally, on litigation, I don't think you have really an update, but maybe you can provide some information on the time line and how you see that.

I can take the first on the NNA and about leverage. To be fair, yes, there has been an increase. And I will say what we have seen in previous years in terms of deleveraging, I would say, stopped. But it's not that we are seeing a lot of leveraging yet despite the fact that I was expecting actually more because now the curves are becoming positively sloped and across, obviously, currencies, and this should increase the current rates. But we have not seen that in a significant way. I'm looking at the Chief Risk Officer to get the confirmation. To be fair, for example, as you know, we are in London. In London, we had a business that was real estate financing. And for example -- and for us, out of the real estate financing that is, I would say, half of the book. There, we see that the conditions remain depressed. And actually, we don't -- is on the contrary there. We are -- if it is good, we are positive. Otherwise, we are in decline. So all in all, again, we have stopped a big deleveraging of the year 2022, 2023. and we are leveraging a bit, but it's relatively modest, I would say.

Just a small technical point in the figure that you see us publish. Clearly, you have a benefit from currencies. So the currency effect is also adding to the nominal amount that you see as the increase. .

Now regarding the CROs, I think the question was how they deliver with this -- with Dimitris, we have always a debate in terms of how we can predict the model. And in this, I am -- Dimitris is more bullish than I am and usually is right. But by and large, I would say that when you hire and despite the fact that we always ask the candidates to do due diligence on us, to be sure that they can deliver the services and the products for their clients. And obviously, we do a lot of due diligence on them. On average, about 1/3 does not make it. . Regarding the people that make it, I would say that there -- and this is where Dimitris is right. In the last years, actually, the performance has been improving. And there, the delivery is obviously the business case, we always -- for every new hire, we get a business case, which is quite detailed. It's over 3 years. It's simple, but quite comprehensive. And then I would say the delivery has been over the last years between [ 70% ] and 80% of the business case. Now you might say that the business case is usually a bit ambitious. Obviously, if you are starting a new venture, you want to be ambitious, which is actually good because my expectation is usually 50%. Expectation is higher. So I think...

I am at 60%. So the bid ask is 50% to 60%.

And they have been better than both of us. So usually, we see between the last years, 70% to 80%. So the quality it has improved. If I compare to 5 years ago or earlier, it has improved. Acquisitions contribution?

Sure. So in terms of the contribution of the acquisitions at this point in the first half, you're talking about single-digit Swiss million P&L contribution. I think what's important is that because we're still carrying some restructuring costs, in terms of cost to income, the contribution of the acquisition is roughly speaking at around 85% or 85-plus percent. So it is a drag on the cost to income. Actually, if we have not done the acquisitions, our cost to income would have been significantly better in the first half. Now clearly, as we add more products -- product availability to these new acquisitions as they have the opportunity to use our balance sheet because they were all small banks and have small balance sheets and they couldn't give credit. So all these things will clearly increase revenues. And at the same time, we expect that in the first half of 2027, we'll be able to have the full IT integration. A lot of these banks use third-party systems. They don't have their own core system. They used -- they're outsourced, and we will take over that outsourcing. Clearly, at a very small fraction of the cost that they're paying today because for us, it's really marginal in terms of additional costs. So through that, we will also create more. In the end of the day, I expect that the cost to income of the acquisitions is going to be better than what we have on average. So incrementally, there would be a positive influence to our financial performance. And you had a question on litigations where we have nothing to update compared to what we told you back in February, there is no more new information.