FinecoBank Banca Fineco S.p.A. (FBK) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the FinecoBank's Full Year 2020 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Alessandro Foti, CEO and General Manager of Fineco. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining our 2020 results conference call. Before we start going through the details of the presentation, let me please underline the key messages. This set of results confirms once again the soundness of our business model, able to deliver sustainable and industrial growth in every market condition, and to accelerate growth in the current complex situation. Adjusted net profit increased by 19% year-on-year, reaching EUR 325 million in the year despite the increased contribution to systemic charges. Adjusted revenue stood at EUR 776 million in 2020, increasing by 18% year-on-year, mainly supported by brokerage and investing. Operating costs, well under control and confirming operating leverage as a key strength of the bank, with cost/income ratio at 34.7%, declining by 3.2 percentage points year-on-year, also thanks to the extraordinary performance of brokerage. As announced, 2020 also recorded a strong acceleration in the commercial activity, with net sales hitting EUR 9.3 billion, increasing by 59% year-on-year, and with a strong contribution by asset under management, reaching a new record level at EUR 4.3 billion, thanks to the increased productivity of our network of financial advisers and to the success of the new generation of products launched by Fineco Asset Management. Let me remind you that these results have been organically generated, reached with no aggressive commercial offer and despite the introduction of the repricing on current accounts. Those dynamics were also confirmed in January, with net inflows extremely robust at EUR 891 million, and a solid asset mix with asset under management equal to EUR 470 million. As for brokerage, estimated revenues in the month of January were around EUR 19 million, increasing by 30% year-on-year. This confirms once again that the floor of our business is now definitely higher. Let's now move on Slide 5 and start commenting on our 2020 results. As announced in 2020, we reached very strong industrial results, thanks to our diversified business model, with adjusted net profit standing at EUR 324.5 million, plus 19.2% year-on-year, despite the higher contribution of systemic charges and complex scenario. Adjusted revenues in the period stood at EUR 775.8 million, up 17.9% year-on-year, mainly thanks to the contribution of brokerage and investing, as we have been able to capture the acceleration of the structural trends in place. On the banking side, our initiative on the smart repricing on current account allowed us to offset the impact coming from the lower interest rate environment. Please note that in December, after the final communication by the authority, we refunded the banking fees related to the smart repricing to a cluster of clients. Let me remind you that the effect on the net profit is equal to 0 as this refund was already accounted in the previous quarters under the line provisions for risk and charges. Excluding the contribution generated by banking fees for the smart repricing, our revenues in the fourth quarter would increase by 1.7 percentage quarter-on-quarter. Operating cost stood at EUR 269.6 million, increasing by 4.4 percentage year-on-year, net of marketing costs in U.K, additional marketing cost in Italy to catch the positive momentum for growth and additional staff expenses related to the unexpected lockdown in December. The quarterly distribution is characterized by the usual seasonality. We will deep dive on cost later on. Cost income decreased to 35% despite the continuous expansion in assets and clients, thanks to our operational leverage and the scalability of our platform. Let's now move on to Slide 6 and start to analyze more in details the dynamics of our results. Net interest income in 2020 remained resilient at EUR 270.7 million, decreasing by 3.8% year-on-year despite the worsening of the interest rate environment, thanks to the positive contribution by more than EUR 7 million from our treasury activities, namely yield enhancement strategies, like unsecured lending and collateral switch and tiering into our quality lending book. Let me please highlight that the negative impact generated by the low interest rate scenario has been offset by the positive contribution coming from the introduction of the smart repricing in 2020, which produced almost EUR 12 million of banking fees in the year. Therefore, overall banking revenues remained flat year-on-year. In the fourth quarter, net interest income stood at EUR 63.9 million, declining by 7% quarter-on-quarter as the lower interest rate environment affected both financial investments and lending. Please note that in the fourth quarter, there has been a further deterioration in rates. As an example, 5 years Eurirs moved from 39 basis points in the third quarter 2020 to minus 46 basis points in fourth quarter 2020 and Euribor 1-month from 52 -- minus 52 basis points to minus 55 basis points in the quarter. The lower interest rate environment led to a reduction in average gross margins on interest-earning assets from 0.98% in the third quarter to 0.88% in the fourth quarter. Finally, cost of funding decreased by 3 basis points year-on-year to 1 basis points due to the lower USD LIBOR. Please let me remind you that our cost of funding related to deposits in Euro, which represents 96% of our total deposit is 0. Later in the presentation, we will deep dive on the new commercial initiatives we are undertaking to sustain our banking revenues and further react to the decrease in interest rates. Let's now move on Slide 7 to deep dive on our noninterest income. Fees and commissions stood at EUR 404.3 million in 2020, growing by 24.3% year-on-year, thanks to the positive contribution of all products areas. Please let me note that the net commissions in the fourth quarter would increase by 8% quarter-on-quarter, excluding the contribution generated by the banking fees on the smart repricing. Trading income net of nonrecurring items reached EUR 97.2 million 2020, more than doubling year-on-year, thanks to the strong brokerage performance. We will deep dive more in-depth in the following slides. Let's jump now on Slide 26 for a focus on brokerage. Brokerage acted once again as the perfect countercyclical business, and it is producing structurally higher revenues compared to the past. In 2020, overall brokerage revenues stood at EUR 229 million, increasing by 73% year-on-year. On the top of the slide, you can find our usual chart showing the monthly brokerage revenue since our listing. As you can see, they are structurally higher since 2020. January 2021 has been another strong month, confirming that the flow of the business has increased. This is true regardless of the level of volatility, thanks to the contribution of 3 structural components. First, the deep reshape of our brokerage business. Let me remind you that we have recently launched a new U.S. option platform and that we are in the process of vertically integrating certificates, becoming issuer, market maker and distributor through our -- throughout our platform. We will deep dive later on this project. Second, on the client base using our platform is widening, with active investors that are -- that have grown significantly in absolute terms in 2020, standing well above the average level of 2018 and '19. Please note that our active investors have an average of 4 executed orders per month, are wealthy people in their 50s with assets above EUR 200,000 on average. And the vast majority of them have a relationship with our financial advisers for the long-term planning of their financial wealth. Third, the increase in our market share. For example, our market share in Italy on equity traded volumes has increased to 27.8% in December 2020 as recently confirmed by Assosim. As announced, brokerage revenues were strong also in January, reaching around EUR 19 million. Please let me note that in January, for the first time, executive orders were higher on foreign markets than on the Italian one, and this is very positive news for our international expansion plans. Let's now move on Slide 8 for a focus on investing. Investing revenues amounted to EUR 245.3 million in 2020, increasing by 7.1% year-on-year, thanks to volume effect and strong asset under management net sales, driven by a higher contribution by Fineco Asset Management. The strong investing dynamics were confirmed also in the fourth quarter, with revenues increasing by 5.6% quarter-on-quarter and by 11.3% year-on-year. Please note that management fees in the year increased by 4.6% compared to 2019. The quarterly increase was 5.2%, with management fee managing stable. Let's now move on Slide 9 for a focus on our cost. This slide once again confirms efficiency to be part of our DNA and core in our bank, representing a clear and unique competitive advantage. Operating costs stood at EUR 269.6 million in 2020, with the usual seasonality among the quarters. Let me please highlight that in the last part of the year, we decided to spend additional $1.3 million of marketing costs in Italy, given the extremely favorable conditions. On top of this, we recorded the highest staff expenses as in December, some employees canceled their annual lease, given the expected lockdown in Italy. Excluding this one-off cost and EUR 7.2 million of marketing cost in U.K., operating cost grew only by 4.4% year-on-year. On marketing costs in U.K., let me please remind you that given the positive feedback reached so far in the acceleration of the business, we decided to spend more compared to the initial guidance. Going into the details, 2020 non-HR cost stood at EUR 170 million, excluding U.K. marketing expenses and the additional marketing costs in Italy in the fourth quarter that we decided to spend to catch up growth opportunities. They only grew by 1.3% year-on-year, confirming our strong operating leverage. Finally, staff expenses stood at EUR 99.5 million in the period, increasing by 9.9% on a yearly basis, excluding EUR 0.5 million cost for annual lease canceled in December to the lockdown. The increase is mainly due to the growth in the workforce related to the business development and to the internalization of some services after the exit from UniCredit Group. Let's now move on Slide 10. In this slide, we summarize the breakdown of the bottom line in the fourth quarter. Within the provision for risks and charges, we released EUR 2.9 million related to a positive adjustment on systemic charges, thanks to a lower-than-expected growth of deposits compared to the system. This once again proves the effectiveness of our initiatives to absorb our clients' liquidity. On top of this, after having refunded our clients for banking fees for the smart repricing, we also released EUR 6.3 million of provisions that were set aside in the previous quarters, under the line provisions for risks and charges. Let me confirm that the full effect of the smart repricing on the whole customer base is now in place, starting from January 2021. Finally, we recorded EUR 2.3 million of higher provisions related to our sovereign exposures. This was not driven by the underlying quality of our bond portfolio, but by the accounting process according to the IFRS 9, under which, we had to update the macroeconomic scenario after COVID-19 outbreak. Let's now move to Slide 11. As you can see on the left-hand side of the slide, commercial loans grew by almost 23% year-on-year, with a usual strict control on credit quality. Let me remind you that our lending is offered exclusively to our loyal comer base and our deep internal IT culture allows us to fully leverage on Big Data analytics. This translates into commercial cost of risk very well under control, decreasing at 10 basis points as of December 2020, in line with our guidance on the cost of risk between 10 and 15 basis points, which is confirmed also for 2021, even considering the present context of COVID-19 outbreak. Expected losses for mortgages and personal loans remain very low, thanks to the quality of our lending portfolio. As a confirmation of the letter, we granted only less than 300 requests for mortgages moratorium. Let's now move on Slide 13 for a focus on our capital ratios. Fineco confirmed once again a rock-solid capital position on the ways of a safe balance sheet. Let me remind you, the strong recommendation by ECB and Bank of Italy in December 2021 -- 2020 that provides to refrain from paying dividends or to limit a dividend payment until September 2021. Dividends are recommended to remain below the minimum amount between 15% of cumulated 2019-2020 profits and 20 basis points of 2020 core Tier 1 ratio. For Fineco, the more stringent condition is the second one, corresponding to $7.6 million. Therefore, we decided to refrain from distributing dividends until next indications from the regulators. In any case, our intention is to give back our excess capital to our shareholders at the first window of opportunity. Please note that 2020 capital ratios consider the allocation of 100% of the 2020 profits to reserves. Common equity Tier 1 ratio stood at 28.56% as of December 2020. Risk-weighted assets stood at EUR 3.812 million. And let me please highlight that increased risk-weighted assets is partially related to our treasury activity. But this should not be considered as a run rate forward as we are very confident to deliver on the new industrial initiatives we are introducing to reduce customers' liquidity, and are completely in our hands. Total capital ratio stood at 41.68% as of December 2020. On Slide 15. As you know, 2020 has made it even clear that Fineco is in the sweet spot for growth, as the bank was [indiscernible] together EUR 9.3 billion net sales with a very strong asset mix. These results were reached, thanks to the quality, reaching almost EUR 900 million in January, confirming the solid dynamics seen last year. Let me please spend a few words on important development we have observed in 2020 on the recruiting activity that has been historically driven by an aggressive approach by the industry in overpaying financial advisers with huge upfront. Last year, we have experienced a strong increase in the interest of financial advisers to join our bank, thanks to our business model, which proved to be the best positioned to grow in the new landscape. Indeed, our beautiful digital platform allowed our advisers to have no disruption in the relationship with clients, and helped them to manage their wealth more efficiently. To sum up, Fineco merged more clearly as the perfect bank for professionals looking to grow their home business in a sustainable way. And this is the reason why we have recorded a net increase of 65 Personal Financial Advisors in our network. Let's now skip to Slide 21. In this slide, we summarize our guidance for 2021. Net interest income is expected to remain solid and resilient. And we are confirming a decline in the region of EUR 13 million, EUR 15 million compared to 2020. Let me please underline that we are containing the effect of decreasing interest rates, thanks to the smooth run-off of our bond portfolio. The positive effect from lending, with a new production expected in the region of EUR 1.5 billion, a more dynamic treasury management through the yield enhancement strategies and the enlargement of the scope of our investments to non-European govies, the full benefit from the ECB tiering and TLTRO, let me remind you that we joined TLTRO III on December 16 and borrowed the maximum amount available. On top of this, we are launching a new platform for tax credits towards the state under the Ecobonus and Superbonus, and this is going to sustain net interest income with no use of capital and on which we will deep dive later. Please note that the guidance does not include the additional contribution we expect from the new initiatives that we will describe later. On investing, we expect revenues increasing high teens compared to 2020, with margins remaining stable. Brokerage revenues are expected to remain strong with a flow that is definitely higher than in the past. Banking commissions related to the smart repricing introduced in 2020 are expected in the region of EUR 20 million, EUR 22 million. Moreover, we are also expecting additional revenues in the region of few millions from the new pricing on the new current accounts, on which we will deep dive later. Operating costs are expected to grow in a range between 4.5% and 5%, mainly due to the increase in the workforce, given the acceleration in the growth we are experiencing in the latest month. Going forward, we confirm our guidance on a continuously declining cost income in the long run, thanks to the scalability of our platform and to the strong operating gearing we have. We expect our core Tier 1 ratio to remain above our floor of 17%. Leverage ratio is expected to remain above 3.5%. Cost of risk is confirmed in a range between 10 and 15 basis points, even in this environment, thanks to our high-quality lending book. Finally, we expect a robust and high-quality net sales with a lower component of deposits, thanks to the new initiatives we are undertaking. Let's now move to Slide 22. The recent events have generated a gigantic opportunity and have increased the speed at which we are growing as we are benefiting from the acceleration of the structural clients and place. Generally, net sales are only the latest confirmation of this big jump. This is why we are launching a set of new initiatives to take full advantage from the powerful strengthening of the flight to quality in our direction. Let me now go briefly through the new initiatives. First, thanks to the powerful flight-to-quality we are experiencing, we can afford to strongly focus our commercial strategy only on net sales in assets under management through a change in the incentive scheme of our network. Second, we will further increase financial planners' productivity through new software developments. Third, we will improve the quality of our client base, focusing our target market on the upper end. In particularly, we have introduced a new pricing for the new current accounts, and we'll be strongly focused in transforming full-liquidity current accounts that have been inactive for an extended period of time. Fourth, third-parties savings accounts through our platform in order to further reduce the amounts of clients' deposits with us. The second one will allow us to manage tax credits towards the state. All these set of new initiatives will allow us to be more selective in the growth we are pursuing, resulting in a better-quality revenue mix, coupled with the lower growth of our balance sheet. Let's now go through the details of the initiatives for each business area, starting from the Slide 23. Let's start with banking. Thanks to our high-quality balance sheet, low-risk investments policy and strong Fintech DNA, we are able to put in place new industrial initiatives to sustain our growth. By integrating together treasury initiatives with business actions, we aim to better manage clients' liquidity and offset the headwind cap from the lower interest rate environment. This confirms once again that Fineco is a very agile and fast-moving company. Let me spend a few words on the most recent ones. First, we will launch a new platform to manage the tax credits towards the state under the Ecobonus and Superbonus. Thanks to our strong liquidity position, we'll buy tax credits in order to sustain the net interest income with an interesting yield, no use of capital as the counterparty of the credit is the state. Please note that we can afford to be particularly aggressive on these initiatives as our strong operating leverage allows us to cope with the complexity deriving from the granularity of the single fiscal credit to manage, and thanks to the fact that we act as a withholding agent for our customer on their big brokerage volumes. Second, we will launch a multi-brand platform to distribute third parties savings accounts. The result will be a lower amount of clients' liquidity with us and the higher contribution to revenues, with new pricing on the new current accounts to better control the flight-to-quality and be more selective in our client acquisition, focusing our target market on the upper end. Please also note that we have introduced a new termination clause on new current accounts, allowing us to close them if only used to park an excess of liquidity. Fourth, we will be more proactive and undertake more actions to transform full liquidity current accounts that have been inactive for an extended period of time. Let's now move on Slide 24. With regard to investing business going forward, we expect revenues to keep on growing as a result of a combination of strong volume effect coming from the acceleration of structural trends in place and the resilient margins despite the cautious approach hold by clients. Let me please go through the -- all the details of the new initiatives we are undertaking to strengthen both the volume effect and increased operational efficiency by Fineco Asset Management. First. As announced, we are changing the incentive scheme of the network, which is now only targeting net sales in assets under management and in solutions with a strong risk management. Since Fineco Asset Management already allows us to have a daily look-through on each solutions, we expect a strong acceleration in direction of its products. Second, we will continue on accelerating financial planners' productivity through new software developments to be more efficient in transforming deposits, leveraging on Big Data analytics. This also -- this is also going to help us exploit the strong potential of assets held by our customer with other players, mainly in the Private Banking segment. Please note that an important portfolio portion of our 2020 net sales was the result of Private Banking clients increasing their share of wallet with us, thanks to the superior customer experience we delivered. Third, Fineco Asset Management is confirmed to be key in our move to accelerate the conversion of deposits into assets under management. The penetration of Fineco Asset Management retail class total assets reached 23% of FinecoBank's total assets under management at the end of 2020. More in depth, the penetration of FinecoBank's funds reached 33% compared with 29% on December 2020. Going forward, we expect: first, a continuous extraction of additional operational efficiency; second, the increase in Fineco Asset Management volume, resulting in a dramatical growth of its margins contribution; third, our Irish companies developing a new product range based on advisory services by third parties, which is going to make the value chain even more efficient. Finally, in 2021, Fineco Asset Management, we also widened its product offering by adding new solutions focused on equity and sustainability. Let's now move on to Slide 27. Let's now deep dive on our brokerage initiatives. As you know, our strategy is to progressively increase our ability to extract value from the vertical integration of the business. We have successfully done this in the asset under management business through our Irish company, and we are now applying the same strategy with the leveraged certificates. We will launch our offer in the first half of the year and become an issuer, market maker and distributor. This will allow us to convert over time, low-value flows in other -- on other issuers' into our own. The market size of this product in Italy is relevant, equal to EUR 13 billion in volumes and EUR 100 million of estimated revenues. On top of this, we will also target volumes on leveraged ETFs and covered warrants. Please note that the vertical integration of the business, coupled with a strong market share and the full control we have with the relationship with clients, allows us to be particularly confident on these new initiatives. Finally, let me highlight that today, the Board of Directors approved the binding offer for the acquisition of a 20% stake on the Hi-MTF venue, which will increase our ability to extract value from the vertical integration on brokerage business, thanks to our clients' strong volumes. Please bear in mind that all these initiatives underline how the continuous reshape of our offer is a key structural component to explain the increase in the floor of our brokerage revenues. I will now leave the floor to Paolo Di Grazia, our Deputy General Manager, for an update on the development on our U.K. business on Slide 30.

Thank you, Alessandro, and good afternoon, everybody. Our one-stop-solution offer in the U.K. is proving to be very welcomed and our marketing campaign is providing a strong boost to quality client acquisition. As you can see on the left-hand side of the slide, since the start of our marketing campaign, we have recorded a strong acceleration in our customer acquisition dynamics and in the quality of our client base, in particular, we last -- in the last few months. Let me please highlight that in 2020, we have recorded a stickiness of 90% of our active clients, and this is a confirmation that we are not attracting hit-and-run highly speculative and volatile customers. But we are attracting experienced traders, loyal and looking for quality offer and the increase in penetration of active clients on brokerage, representing more than 60% on new current accounts, confirming once again that we are targeting the right clients with the right offer. This translates in a boost of our leverage generation. As you can see, on the right-hand side of the slide, 2020 has marked a turning point in our U.K. business and resulted in increasing revenues with an improved mix as OTC and listed products are now the lion's share of gold. Together with our huge operating leverage, this is allowing us to be at the operating breakeven, excluding marketing expenses with the first quarter of 2021. Let me please add that the strong momentum we have discussed so far has further accelerated in January, with around 900 new current accounts added in the month compared with 4,800 in 2020. And as of today, February has already overcome January figures, showing an even faster acceleration in client acquisition. This also translates into a strong improvement in our revenue generation. On the last leg, let me add that in January, we recorded a number of current accounts active on CFDs equal to the one we had in the whole 2020, confirming the effectiveness of our marketing campaign in improving the cross-selling. February is projecting a further record. Thanks to the acceleration of these dynamics, we now expect to reach our first target of 30,000, 35,000 good clients well before the initial time horizon we estimated. Finally, on Slide 31, we sum up the next steps that are getting us closer to the full launch of our investing offering. In particular, the ISA account is now live in Family&Friends phase and has already recorded an interest in feedback by our clients. While in 2021, we will continue to progressively enlarge our fund offer with a wide pipeline you can see in the slide. And thank you for your attention. Now I will hand it back to Alessandro.

Thank you, Paolo. Let's move on to Slide 33. Sustainability is at the heart of our business model. We were born and have developed as a company, always oriented towards the long-term sustainable growth, and aiming to generate a positive impact for all our stakeholders and the society as a whole in the long run. To achieve this goal, we have chosen to follow the path of transparency and fair pricing for services offered, and this is in line with our corporate purpose, to offer clients a quality and a multichannel one-stop-solution with a fair pricing, leveraging our 3 strategic pillars: transparency, efficiency and innovation. This has allowed us to be, from the very beginning, perfectly in-line with an ESG trajectory, based on a sustainable long-term view in our revenues generation. In parallel, with this approach, we have introduced a number of ESG objectives to be achieved by 2023. In 2020, many steps were taken in completing this plan, including our hydrants to 2 important voluntary initiatives today of the United Nations, the Global Compact and the Principles for Responsible Banking, while Fineco Asset Management signed up to the Principles for Responsible Investing. Let's now move on Slide 34. As a responsible bank, Fineco has continued to develop a market friendly, corporate governance and expanded its ESG product offering, strengthening the management of ESG aspects in credit and investment products, and maintaining a constant focus on cybersecurity and other ESG risks. Moving onto -- into the Slide 35, Fineco is also recognized as a sustainable bank by the major international rating agency, having been included in the FTSE4Good Index in July 2020 and in the Bloomberg Gender Equality Index in January 2021. In July 2020, Standard Ethics improved our rating from EE to EE+, a very strong investment grade, given to sustainable companies with low reputational risk and strong long-term growth prospect. In addition, MSCI confirmed our ESG rating in a scale ranging from CCC to AAA. Finally, our bank positions itself as one of the best companies in the world, according to risk evaluation by Sustainalytics, obtaining the Low Risk rating equal to 18.7 compared to the industry average of 30.3. Thank you for your time. And now, we can open the call for -- to questions.

[Operator Instructions] The first question is from Domenico Santoro with HSBC.

Very interesting presentation, actually. I understand, I mean, all the initiatives that you are putting in place to redirect this huge liquidity on your balance sheet into asset management products, which is, of course, the right thing to do, given where rates they are going to be, and looking also at the way sovereign Eurirs are moving. I just want to understand a bit more the impact on your P&L. First of all, thanks for quantified impact of NII in 2021. But given that you're ready to incentivate more and more your financial advisers, I'm just wondering how should we look at margins on your products. I mean, you say that you're going to be resilient on asset management, but given that potentially you're going to pay more potential buyers for the right, of course, reason, I just wonder, how they could move margins. And looking a little bit more forward, especially the way sovereign hits are moving, I'm just wondering whether you might accept a bit more pressure on the NII on top of the EUR 1,350 million that you just mentioned in order to get some better numbers on the asset management that probably we should factor a bit more of the high teen that you just mentioned in terms of guidance on the asset management. The other question is on brokerage. I remember that you guided for EUR 50 million more or less per month, given the structure of the products. But given that now you are also ready now to get more money in the leveraged certificates, can you give us a bit more color in terms of guidance, how much should we consider on top of this EUR 15 million in our model? How much you will get to this EUR 100 million pot of revenues? The other question is capital and dividend. First of all, did you accrue a dividend in 2021 numbers? And then, I mean, the banks are getting more and more positive in terms of distribution. So probably, it's the right moment to talk about what you would like to do in September if things come back to normality and you might use part of your excess capital for dividends or for distribute part of it. Can you start to give us some color on this? And then tax rate, I see that the constant [indiscernible] flattish tax rate. So is ignoring completely the Patent Box? And also, the way FAM is getting more and more money, so how can you give us a guidance on the tax rate for the next 2 years? And sorry for the long questions.

Thank you very much for your questions. So let me start from the beginning. So first of all, it's absolutely very important the point you raised on liquidity because it's clear that the net interest income is the final recipient of everything we are doing. And so we think that one of the usually sentiment sometimes is a little bit misleading in terms of approach, is to think to net interest income, as a stand-alone component of the bank because it's clear that if you keep this as a stand-alone component, it's not -- it's quite evident that the continuous run off of the portfolio is bringing down the net interest income. But at the same time, clearly, there is a strong impact that is going to be caused by everything we are doing. Clearly in the guidance, we gave on the -- on assets under management remains, to some extent, cautious because we are not still -- because I want to be extremely fair and transparent, the speed at which the bank is growing over the last few months is really huge. And it's month-by-month taking us by surprise. But before embedding this upcome in strict guidance, we prefer to be absolutely 100% sure that this is really solid. But it's clear that the progression we are observing in terms of increase of the productivity of our financial planners in moving into assets under management is really big. At the same time, also, it's like to say that the bank has changed dimension. So it's -- we have entered in a completely new dimension. And so clearly, it's clear that the more we are accelerating in assets under management direction, and the more this is going to have a double effect, increasing further the revenues expected into investing, but at the same time, reducing the headwind on the net interest income because the less liquidity we have to invest and the less we have to invest in zero yielding bond, for example. And so clearly, this is very important to keep in mind. On the -- regarding the incentives to the financial planners, the new incentive scheme is based on the concept that we are focusing our network just on assets under management, but for a very simple reason because the net inflows, the growth is so strong -- so incredibly strong that we don't need to incentivize them for getting new clients and assets because they are coming. And so we can concentrate our financial planners just in moving clients into the asset under management products. It's clear that for example, if we look to the numbers we are -- the numbers on asset under management over the last few months, clearly, the progression is clearly higher with respect to what we are embedding in the guidance. But as I was saying, we prefer to maintain a cautious approach before embedding in the guidance, something that is building up. And so the point is that the more we are accelerating in direction of asset under management and the better is for investing revenues, but it's also good for net interest income as well. So it's not something that is penalizing the other. And I would like to remind also that just underlying the importance, for example, of the -- how the bank is so very well positioned for buying fiscal credits because Fineco, differently from other banks, we are extremely profitable. Our profitability is absolutely stable and continuously rising. So we have no volatility in our profitability. And differently from the other banks, we have the huge advantage that we are running the largest brokerage platform in Italy. And based on the fiscal Italian system, we are paying in substitution of our clients their capital gains. And so we have an additional, I mean, ammunition in order to buy fiscal credit. So really we -- and cap it together with our capability to manage granular business, this is generating an absolutely great opportunity. And finally, I would like to underline that we are going to launch practically a new asset class that is comparable to asset under management because the new platform in which we are providing to our clients' temp deposits of other high-quality banks, it's not different from an asset under management product. In this, again, we expect definitely an absolutely very, very high contribution. So personally, my personal expectation that probably going through next year, the headwind represented by net interest income is going to be completely offset. And probably, I don't want to be too optimistic, but some aspiration to reverse this decline in net interest income, thanks to the combination of these actions we are taking. On leveraged certificates, it's as we have not too much to head. It's a market that at the moment, is generating more than EUR 100 million of revenues. At the moment, we are getting by leveraged certificates, something that is the region of EUR 2 million. Our market share on retail brokerage is above 50%. I'm not saying that we're going to get a 50% market share on leveraged certificates because clearly, it's too much, but you can imagine that there is a quite wide room for getting additional commission by -- from this business. On capital and dividend, we can confirm what we probably regarding the point on the accrual of dividend 2021 numbers, I don't know. Lorena our CFO, Lorena, can you give some more color on this point, some more details, please?

So we have not decided yet the amount of dividend that we will be able to distribute in 2021. As already said by Alessandro, we will distribute our excess of capital.

So the point is that we think that the right approach to keep is to wait for the final conclusions. I thought we would do that. There is a very high probability that by September 2021, the rules related to the dividends paid, that is going to be absolutely relaxed. And our goal is to give back to the market everything that is in excess of capital we are building up. On the tax rate, this year, the tax rate has remained flat, but mostly driven by the fact that the very -- the quite large growth in brokerage, this has increased the amount of revenues generated in Italy, and this has contributed in maintaining the tax rate flat. We expect that going forward, probably our tax rate is going to start on -- keeping on declining. But again, Lorena, if you want to give some more details on the possible evolution of the tax rate, please?

So we expect in 2021 slightly decline, given the expected growth of the contribution by Fineco Asset Management to the consolidated income. Please bear in mind that the precise contribution of this effect will depend on the relative weight to the consolidated income of both Fineco Asset Management and FinecoBank. Also, based on the success of the new initiative on transformation, liquidity into asset under management that we have introduced in our market presentation. And regarding Patent Box, as you know, we have obtained the renewal confirmation of the renewal by Italian Tax Revenue agency, regarding the software for the period 2020 and 2024. So we don't expect changes also in the methodology used for calculating the positive contribution of Patent Box. So we expect linearity in going forward.

Can I ask you, just a follow-up question on the realized gains that you have in the sovereign portfolio at the moment?

Is in the region of EUR 1 billion.

They are not in the capital -- all right.

No. No.

The next question is from Azzurra Guelfi with Citi.

A couple of questions. Just coming back to the dividend point, would you expect or would you aim to do a distribution in the fourth quarter of this year if the rule has relaxed in September or is it something that investor will need to wait for the dividend of 2021? And if you can just explain to us why you decided not to pay even a small dividend for this year? Is it logistic or is it -- if you can just spend a couple of seconds on that? The second question is on your ESG. Thank you for the additional information. Just a question about what are your main focus in the next few months on developing your ESG strategy? And how do you control this at in terms of governance and at Board level? And the last question is on your U.K. business. You are expecting to expand the product range in the Q1 and also with the launch of the ISA product. And would you expect this to have an increase in terms of number of customers interacting with you or more in terms of increased asset wallet of these existing customers because you offer one of the key products in U.K.?

Yes, thank you. So regarding dividend, clearly, as soon as it's going to be possible, we are going to distribute dividends. So if there is a wind of opportunity in the 4Q, we are going to consider to pay a dividend to our shareholder. And the reason why we decided not paying any dividend is exactly what you were raising because EUR 7 million of dividend practically is nothing, and was much more the administrative complexity to go in that direction. So we prefer to wait because, again, unfortunately, for banks like Fineco, the regulation is extremely penalizing because probably, the regulators, they are not considering that they are banks like asset [indiscernible] is saying. They and [indiscernible]. And so we have been -- that is quite counterintuitive because it's been allowed to pay more dividend to banks that they are exposed to higher risk and less to banks that are exposed to less risk. But we are living in a regulated burden, so we have to accept the rules. On the ESG, main focus in the next few months, I'm going to leave again the floor to our CFO. So please, Lorena, if you want to give some more color on the next future steps and on that direction, please?

Yes, thank you. So we have defined an effect of ESG goals that are explained in our non-financial statement, we will publish our nonfinancial statements in the next weeks. And these main goals are related to 6 areas: human resources; responsible finance; financial education; supply chain; relation with shareholders; and the environment. We have worked on set up corporate governance, appointment and sustainability committee that have approved this first step of -- the first set of sustainability goals for the period 2020 and 2023. And we periodically monitor these goals inside the bank and with the approval by the sustainability committee.

On the growth in U.K., Paolo, if you want to give more details, regarding what we expect to get going forward? Thank you.

Yes, Azzurra. Yes, basically, in U.K., we still have a few clients because we have won 11,000 clients right now. So we need to increase our customer base, of course. But we also need to get the right clients to want. I mean, we don't need to get onboard millions of clients that worth nothing. We had to get on board clients that they can create value for us. And so, I would say, we will measure the U.K. business, of course, mainly on the increase of assets, share of wallet, it's a few things for now. And so, we need to focus on acquiring more clients, but the good clients -- good quality client.

The next question is from Enrico Bolzoni with Crédit Suisse.

I have a couple of questions. So one, on your new platform to basically provide third-party deposit to your customers, so it sounds very interesting. It's actually something that various players do in the U.K. I have 2 questions related. One, which kind of margin would you expect to make on such deposits? And the second is, how would you balance the possible risk, if any, you think that suddenly some of your clients would prefer to choose these products rather than actually going into AUM product? My second question is regarding the U.K. So previously, you gave some guidance in terms of extra marketing expenses. Now so you have a new guidance for the year of between 4%, 4.5% in cost growth. Does this mean that we should not expect any sharp increase in marketing expenses in the U.K. this year? And related to that, a key date in the U.K. is the 5th of April 2030, where the fiscal year when people basically need to put money into their eyes up. What should we expect in terms of actually marketing campaign for the ISA accounts? Seems to me that so far, there's a lot of push on the broking account, but in a way, almost feels that now could be the perfect timing to actually get also a lot of clients that would like to open an ISA type of account. Last question, please, on the acquisition of MTS. Can you just give some further clarity in terms of -- you say you can extract more value. Practically, what that would mean, what that would imply?

Thank you. So let me start from the first questions. So you're totally right. So we -- what we are preparing to do here in Italy is quite similar to what is, for example, is done in the U.K. And in terms of, clearly, from a certain point of view, there is not such a great difference between an asset under management solution and the time deposit, and this is the way we are treating. First of all, the banks that we are -- that are going to be used for cooperating together are banks that they are absolutely not in collision with our business model because they are doing -- they have a completely different business model. And so they are -- they have no interest in managing their clients' assets. Second, the concept is that Fineco is -- yes, to look to Fineco that is going to become more and more less and less of a bank and more and more a platform. A platform, enabling the clients to reach their goals. And so clearly, we see exactly the contrary because the client term deposits are remaining an interesting product for Italian clients. What is making them sometimes reluctant is that the approach is not user-friendly. So as usual, Fineco is going to create a platform that is going to be currently with our DNA, absolutely smooth, incredibly easy to use. Second, we are going to be -- we are going to act -- exactly like we are acting on the asset investing platform as a kind of filter. So providing to our clients just exclusively banks that we consider absolutely best-in-class and absolutely solid and some -- typically put together, clearly, there is absolutely for us, is going to be different. And so to other clients buying, and I don't know, a money market fund or a temp deposits, probably in types of margins for us is going to be better the second one because the margins, probably we are going to stay in the region of between 10 and 20 basis points. And so this -- clearly, this is a quite big change in respect to the fact that the liquidity on the marginal way is going to be negative for the bank. So to move in a direction, which liquidity is going to become something that is absolutely at the same level of an asset under management product in terms of the impact on the balance sheet and profitability. It's -- we think that it's an absolutely fascinating direction. And the gain is confirming that the real strength of Fineco is the concept at Fineco is a platform, making possible for our clients to fulfill their goals. On U.K., again, Paolo, if you want to elaborate a little bit more in terms of guidance, in terms of marketing, and also on the ISA campaign, please, Paolo?

Yes. Basically, we don't -- right now, we are planning to spend pretty much the same we spent in 2020. But of course, we are open to increase our budget if we see that there is a strong acceleration that there is a need to improve the spending, to increase the spending. So right now, the forecast is about EUR 6.5 million. But again, we are ready to increase the budget during the year. On the -- actually, also I have to say that the campaign, money we spend in 2020 are paying off very well because we're starting to acquire a good -- very good number of clients, as we said in the presentation before. In January, we had a very strong acceleration. In February, even better than January. So it seems that we spent very well the money. And so we don't need to put in the place more money from now, but that is the situation. So -- and on the ISA account, yes, we are ready. We have already tested with Friends&Family (sic) [ Family&Friends ], where we have a couple of hundreds of clients already using the ISA accounts and we're ready to open to the whole customer base. And we have in mind to launch a campaign on the ISA. Mainly, we -- probably, we will launch the promotion, giving rewards to the clients that will transfer funds and use their ISA accounts. But also we are going to spend money on dedicated advertising -- ISA dedicated advertising. So that -- this is pretty much the plan.

And jumping to the -- then to the question on the MTS, how to strike value. So the concept is pretty simple because Fineco, we have to remind that is a market in the market at the moment because we have -- we are in control just on the -- regarding the Italian market. We control 27.8% of the total volumes. And this is considered also the institutional volumes despite the fact that Fineco is probably -- is not involved in any institutional business. So clearly, it's by far the largest player in the market. And the possibility to have an alternative venue means that we can be much more flexible in terms of new products to bring to the market listed products, for example. And also, we can expect also looking forward to become more efficient in the volumes management. But this, for example, if you look to the -- some other markets presently in Germany, Germany is a market in which -- is the alternative values to Dutch boers are become the rules. For example, in Germany, we are cooperating quite a lot with for example, with Equiduct, that is an alternative venue and so on. And so clearly, in -- we've been entering in the -- in this new venues is going to give us the possibility to become even more flexible and agile in launching new products, and also to be able to extract more value from our clients' volumes. And because for sure, the Fineco is going to bring quite a lot of contribution of this market considering the dimension of -- that we have.

The next question is from Angeliki Bairaktari with Autonomous Research.

Can I ask a couple of follow-ups? First of all, with regards to the third-party savings accounts that you will be offering, will this be from Italian banks only or also any other European banks? And what do you expect to see the headline remuneration of those timed deposits? Considering that, you mentioned around 10 to 20 bps that you will earn on those. I would imagine that the headline remuneration for the customer will be much higher than that. And will there be an automatic switch from one provider to the other assigned for the class? That's my first question. Then, the second question on brokerage. Could you give us a number or the percentage of the volumes that you have internalized in 2020 versus executed in exchanges? And then, I noticed in your presentation and your guidance for loans that you are now guiding for a much lower yield on new loan originations, especially in mortgages and personal loans in 2021 relative to the guidance that you had given in 2020. Is that attributed only to lower benchmark yields or do you also see price competition in Italy?

Thank you. So on the -- at the beginning, we are going to use -- we are going to cooperate with Italian banks. In a second phase, clearly, it's going to be enlarged also to other European banks. And in terms of yield, in any case, it's at the moment, I don't know, Paolo, which is where is the market right now for -- it depends on the maturity of these deposits, but they're ranging probably between 50 and 100 basis points, depends on the life ...

Yes, yes.

Yes. So this is -- more or less is what you can expect that it's going to be received by the clients. We are going to -- when we are referring to a great customer experience means that for Fineco clients, it's going to be possible to switch automatically from their current account to these deposits in a very easy way, so just pushing a bottom. So this is the way we are used to work. No, we are not planning to make a switch from a deposit to another because, in many cases. We don't think that we need to do it to the depth. So -- but again, in terms of approach, it's not going to be too different from the same approach we are providing to our clients with our investing platform because, again, term deposit is not such a great reference with an asset under management product. On the internalized volumes in 2020 versus executed in exchanges, I don't know if Paolo, Lorena, if some of you has the number. Otherwise, we have to return to you. I don't know, Paolo, do you...

Yes. Yes, I have it. I have it. It's in the range of 25%, 30%. And yes, it's pretty much stable.

And regarding the lower yield on mortgages and so on, is not due to the price competition, but is just related to the dynamics of interest rates because clearly, as you can imagine, we are now the largest part is transformed in variable rates because clearly, we don't want to run an unbalanced position in the -- on the asset/liabilities management side. And so clearly, the most part of the -- for example, the mortgages production is practically transformed in a variable rate. And so the declining yield has been mostly driven by the continuous declining interest rates.