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

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the FinecoBank Fourth Quarter 2024 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 FinecoBank.

Good morning, everyone, and thank you for joining our fourth quarter 2024 results conference call. Net profit in 2024 reached a new record high at EUR 652.3 million, up by 7.1% year-on-year. Revenues achieved EUR 1.3165 billion, increasing by 6.4% year-on-year, supported by all our product harvest. Net financial income is increasing by 3.4% year-on-year, investing by 11.7% year-on-year, thanks to the volume effect and the higher control of the value chain by Fineco Asset Management and the brokerage is up by 13% year-on-year, thanks to the enlargement of our active investors. Operating costs were under control at EUR 332 million, increasing by 6.1%, excluding costs related to the growth of the business. Cost-income ratio was equal to 25.2%, confirming operating leverage as a key strength of the bank. Moving to our commercial results. We are clearly experiencing a step up in our growth dynamics. And for 2025, we expect higher asset under management and deposit net sales compared to 2024. This is underpinned by the positive tailwinds from the structural trend, and we are leveraging on this solid momentum through a more efficient marketing activity. Also, we have recently released our new advertising campaign, where we are marketing with a more aggressive stance, our main concept of transparency, innovation and quality. The result of this acceleration has been clearly visible in 2024 and is further improving at the beginning of 2025. First of all, in 2024, we recorded for the second year in a row, the new record in terms of client acquisition, with new clients increasing by 27.8% year-on-year. This trend saw a further improvement in January with around 1,880 new clients by far our best result. Second, our net sales continue to be very solid with EUR 10.1 billion inflows in 2024. In January, total net sales saw a further acceleration at EUR 887 million, up by a strong 53% year-on-year. In terms of mix, January is characterized by the usual monthly seasonality for asset under management, with net sales at a solid EUR 221 million and with Fineco Asset Management at EUR 250 million retail net sales. Asset under custody was equal to EUR 1.18 billion and deposits at minus EUR 512 million, as our brokerage clients they've been very active on the platform buying govies on the bit after the strong increase in yields. This resulting in a very solid brokerage revenues estimated at around EUR 21 million, up by 26% year-on-year. Our capital position continues to be strong and safe with a common equity Tier 1 ratio at 25.9% and the leverage ratio of 5.22%. We are very pleased to propose to the next Annual General Meeting, a dividend per share of EUR 0.74, increasing by 7% year-on-year. On the right-hand side of the slide, you can find a summary of our 2025 guidance more in detail. Investing revenues are expected to increase low double digit versus 2024 with a natural market assumption. Banking fees are expected in a slight decrease in 2025 versus 2024 due to the new regulation on instant payments. From brokerage, we confirmed 2025, expected revenues stronger with a continuously growing floor, thanks to the enlargement of our active investors. For 2025, we expect operating cost to grow around 6% year-on-year, not including EUR 2 million of additional costs for growth initiatives in the range between EUR 5 million and EUR 10 million, mainly for marketing, Fineco Asset Management and AII. Finally, in 2025, we expect the payout ratio in the range between 70% and 80%. Let's now move on to Slide 5. As announced, net profit in 2024 reached a new record level at EUR 652.3 million, in a very challenging macro scenario with an outstanding increase by 7.1% year-on-year. Revenues achieved EUR 1.3165 billion, up about 6.4% year-on-year, and we have been able to catch the strong acceleration of the structural trends in place. The growth of our net financial income increasing by 3.4% year-on-year supported by our high-quality and capital-light net interest income. Net commissions increased by a sound 7.6% year-on-year, underpinned by the solid contribution of our investing business, up by 12% year-on-year, and our Brokerage business up 9.6% year-on-year. Trading profit increased by 30.9%, mainly thanks to the higher brokerage activity. Operating costs at EUR 332 million, well under control and increasing by 6.1%, excluding costs strictly related to the growth of the business, mainly additional cost for Fineco Asset Management to further expand its business and having a higher control of the value chain, additional marketing cost to catch the strong momentum of the business. Let's now move to Slide 6, for a deep dive on the performance of the Investing business. Investing revenues reached EUR 367.5 million in 2024, increasing by a solid 11.7% year-on-year on the back of both growing volumes, thanks to our best-in-class market positioning and to the higher efficiency of the value chain for Fineco Asset Management. Let me please remind you the great quality of our Investing revenues mirroring our transparent and fair approach towards clients. As a result, our revenues are mostly driven by recurring management fees with no performance fees at all. Our second result is particularly remarkable given the more challenging market environment for Asset Management industry. Let's now move on to Slide 7. In this line, we are representing the 2 main sources of growth for our investing business going forward. On one hand, Fineco Asset Management is increasing the control of the invest in value chain Its contribution to the group net sales has been consistent over the cycle, thanks to the incredible time to market and delivering new investment solutions perfectly aligning with what the clients are looking for. As a result, the contribution of Fineco Asset -- assets under management out of the total stock of assets under management has been steadily growing, and it's now equal to 37.7%. On the other hand, being a platform, Fineco is the best place to catch the latest trend in terms of client investment behaviors. There is a clear change underway in the structure of the market with clients increasingly looking for quality, efficient and fair solutions. All of this is channeling strong demand towards advanced advisory services with an explicit fee, where Fineco is by far, the best positioned in Italy, as you can see down in the slide. Let's now move to Slide 8 for a focus on brokerage. Brokerage registered an excellent 2024 with EUR 217.1 million, its second best just after the pandemic year. The start of 2025 has been very promising with EUR 21 million revenues in January. This is confirming a structural increase in the clients' interest to be more active on the financial market and building up a clear bridge between the brokerage and the investing world. The brokerage business represents the best sign of how fast the structure of financial market is evolving as a whole. As technology is driving a swift change in client's behavior, thanks to higher transparency. For this reason, we still consider the brokerage Italian market very much underpenetrated, and we see a strong opportunity to grow despite already being the market leader. Let's now move to Slide 9 to further deep dive on the potential of our brokerage business given the most recent development. As you can see in the graph on top of the slide, on the left, our base of active clients has recently seen a substantial increase, around 20% higher compared to 2023 and with a 40% step-up compared to the level recorded during the pandemic. The driver of such an increase are all structural. Namely, we are delivering on a number of new initiatives like the new brokerage-only account and the new platform, Fineco X. The new market structure is confirmed in the bridge between brokerage and investing. The recent increasing rate environment has resulted in renewed interest in govies with Fineco emerging as the platform of choice for clients. In the graph down in the slide, we are showing the executed orders have been increasing in 2024 compared to 2023, and they are back at the pandemic levels despite the poor market environment for brokerage overall last year. Let's now move on Slide 11 for a focus on our capital ratio. Fineco is confirming once again a capital position well above requirements on the wave of a safe balance sheet. Common equity Tier 1 ratio at 25.91%, leverage ratio at 5.22% and total capital ratio at 35.78% as of December 2024. And the risk-weighted assets was equal to EUR 5.06 billion. As for liquidity ratios, liquidity coverage ratio is at 909% and the net stable funding ratio at 382% with the ratio, high-quality liquid assets on deposits is at 77%, well above the average of the industry. Going forward, we confirm that we will continue to generate capital structurally and organically, thanks to our capital-light business model. Now let's move to Slide 17. Let's now focus on our 2025 guidance. On investing revenues, we expect a low double-digit growth versus 2024 with a near-term market effect assumption. Banking fees are expected with a slight decrease compared to 2024 due to the new regulation on instant payments. Brokerage revenues are expected to remain strong with a continuously growing flow, thanks to the enlargement of our active investors. Operating costs are expected to grow at around 6% year-on-year, not including a few millions of additional costs for growth initiatives in a range between EUR 5 million and EUR 10 million, mainly for marketing, Fineco Asset Management and artificial intelligence. Cost income, we expect to hit comfortably below 30%, thanks to the scalability of our platform and to the strong operating gearing we have. On the payout ratio, we expect for 2025 in a range between 70% and 80%. On leverage ratio, our goal is to remain above 4.5%. Cost of risk was equal to 5 basis points, thanks to the quality of our lending portfolio, and we expect to hit in a range between 5 and 10 basis points. Finally, we expect robust and high-quality net sales with increasing assets under management and deposits flows and the continuous strong growth expected for our client acquisition as we are in the sweet spot for -- to keep on adding new market shares. Let's now move to Slide 18 for a deep dive on our growth opportunities. Fineco enjoys a unique marketing position to capture the long-term growth opportunity resulting by the quite significant Italian household wealth and the fast-changing client's behaviors. In the graph, you can see the strong potential of our growth given the stock of financial wealth of the Italian families. As you can see, our market share is still pretty small and the room to grow is huge. We are particularly positive on our future outlook as we are enjoying a clear market positioning on which we don't have no competition. The most recent market trends are leading to a client investment behaviors. Infineico is the only big player with a service model truly based on transparency, efficiency and fair pricing. Moving now to Slide 19. The step-up of our growth trajectory is clearly materializing, as you can easily see on our recent client acquisition. On the top of the slide, you can see the impressive acceleration of new clients as in 2024, we have set the second record year in a row, and we recorded in January by far, our best results ever. This acceleration is very healthy because it is based on the quality of our offer and not on aggressive marketing campaign, for example, with a short-term rate remuneration. As a result, all our new clients are improving the metrics of the bank by bringing in more deposits or more business for our brokerage and investment solutions. In the box down on the left, you can see that it's not just about quantity, but we are also seeing a strong increase in the underlying quality of our new clients like on the private banking and brokerage. The cumulative growth of high-quality clients over the last 2 years is now translating into better net sales dynamics as shown in our most recent monthly updates, allowing us to be particularly positive on our growth trajectory going forward. Finally, let me remind you that we see a sizable mix shift opportunity coming from a huge stock of [govies] of our clients booked over the last couple of years, given that a large percentage of this has a short-term maturity. This will give our financial planners an unprecedented opportunity to improve client mix into assets under management. Thank you for your time, and we can now open the call to questions.

The first question is from Enrico Bolzoni of JPMorgan. The first question is from Panos Ellinas of Morgan Stanley.

My first one is on the cost growth. Obviously, 2024 costs were up 11% year-on-year. But for '25, you're guiding for 6% cost growth plus additional costs for the initiatives. So all in all, it gets to about 9% growth. Shall we assume that 2024 was a year of to rebase the cost base to a higher level and then from there, growing 6% organic plus the extra cost for the initiatives? That's my first question. My second one is on brokerage. We have seen activity picking up strongly in Q4 as well as in January. Do you see some opportunity there for the -- for an improving average fee per trade given the mix of the trade as well? I have seen in Q4, there was some shifting into U.S. trades with clients preferring trading for U.S. And then on the margin loans or lombard loans, do you see opportunity as well for leverage there to push more on the lending side? So I think -- and then my last question is on the expansion abroad. Some of the European competitors, Nordnet recently announced plans to expand in Germany. So you have been more vocal about expanding abroad. So what's your thinking there? That's all for me.

Thank you. So let me start by the cost growth. So during 2024, we -- we had a step-up on cost. I'm referring to the cost -- the cost base they are above the operational cost that has been driven by an increase in marketing expenses because as we are explaining, the opportunity that is building up is absolutely enormous. And so we thought that was the right decision. And the opportunity that is building up is absolutely enormous. And so we thought that was the right decision. And we -- and this is going to -- and so we are going to stay on them in terms of marketing cost, we expect to stay pretty much aligned with what has been spent during 2024. And so yes, so let me say that probably the cost base of 2024 can be seen not exactly as a base because probably it's about something very close to that. So yes. Brokerage activity is picking up in January. So in January, as we said, there has been -- as usual, Fineco is running what is the platform of choice in Italy. And so every time that there is something relevant developing in the market, clearly, this is immediately reflected in the brokerage activity of our clients. So our clients are as we are continuously repeating are typically hacking as a contrarian. So when there is something that is going down, they are buying and when there is something going up, they are selling. In January, we had quite a significant pickup in it's yields. And so the clients, [indiscernible] us, they bought in a big way, govies for taking by the higher yields. Regarding the -- in terms of mix, yes, we confirm that there is a continuous, steady change in the mix. And so the clients are more and more moving in the direction of foreign markets and with a particular strong interest for the U.S. market. And we expect that this trend is going to keep on building up considering that the U.S. market. And probably we don't know exactly what it is going to happen in terms of timing, but this trend is going to be further accelerated as much as we have the U.S. market moving in direction of 24 hours trading activity on 7 days in a week that is expected at least going through 2026. Lombard loans, the bank loans is typically extremely correlated to the level of rates, the short-term rates. The more we have short-term rates going down and the more we can expect lombard loans building up. So yes, we expect that progressively the lombard loans is going to keeping on building up driven by the expected continuous decline in short-term rates. On the expansion abroad, yes, we are still waiting for the final answer by the Italian fiscal authority in order to be sure that the nonapplicability of the stamp duty of the nonlocal residents, we remain positive on the outcome. So we think that there is a high probability to get the green light by the local fiscal authority. And as soon as we are going to receive this, we are going to start on preparing a plan for moving abroad. And we confirm that Germany is going to be the first country that we are going to target. And we also -- we are going to use a little bit different approach probably by the other players because the approach is going to be more focused on providing platform solutions for the local financial advisers. Clearly, we are going to as well presenting also in B2C solutions. But what is going to be distinctive is the offer of an extremely efficient and very well working platform for financial advisers, clearly leveraging on the infrastructures we are using for our financial partners.

The next question is from Enrico Bolzoni of JPMorgan.

So just a few questions from me. So the first one, can you stretch out and tell us whether you think the total revenues in 2025 will grow again versus '24? And on top of that, can you give any indication on the path of NII you foresee for this year and for the next one? Some of the other Italian banks have reported, they mentioned that they expect NII to grow in 2026. So I was keen to hear your thoughts there. My second question is related to the financial advisers. I noticed there was a small drop in the number of advisers over the quarter. Can you just give us an update on the reason why the growth in advisers has been stable relative maybe to history. And in the past, you talked about the opportunity connected to increasing the productivity of adviser. So I was just wondering whether you're taking any specific action there to make sure that the adviser productivity can increase. And then finally, I just wanted to ask you on the customer growth. In January, it was very, very strong. Related to that, first question is, can you break down the additional customer that perhaps you onboarded via Fineco X and via the new junior bank account offering? And then considering the strength of customer growth over the last few months, can you commit and give us a target in terms of what sort of medium-term customer growth you think the business can print? Is it -- can you say it's going to be above 10%? Or can you give us some sort of range that would be really interesting.

So let me start by the revenues. So on the 2025 differently by traditional banks, we -- clearly, our -- the evolution of our financial income is just driven by 2 components. One is the level of rates. So clearly, but this also is the same story for traditional banks, but clearly for us. So the level of rates. And regarding this, as you can imagine, we -- it's very difficult to make a precise prediction because we -- it's not in our hands. So what I mean, we don't know exactly the timing and the dimension of the evolution of rates. So the example has been the beginning of the year, which there has been a relatively unexpected rise in yields. and that has been quite different by what the market was expecting before. And so for example, the month of January is a perfect example of the -- what can happen because we had a decline in deposits driven by the quite brisk activity by our active investors. And this clearly has dropped down the deposits. But at the same time has caused a positive effect in terms of projected financial income driven by the higher rates. So for example, if we put everything on the balance, so the negatives represented by lower deposits and the positive represented by higher expected rates, the balance is more positive than negative. So the expectations in terms of evolution of financial income has improved driven by this. But clearly, this is something that can move extremely quickly, rapidly and is relatively unpredictable. So it's -- in traditional banks, they are -- for example, they are quite active in putting in place hedging strategies on the portfolio. But -- and we are not doing that for a very simple reason because putting in place hedging strategies means taking risk. And we are a bank that we are -- the investors, what are expecting by us is the generation of revenues really industrially produced and not driven by just because we are making bets on the market. So this is the reason -- this is not what the market is expecting by us. Second, traditional banks are heavily involved in lending business, particularly to the small and medium firms on which they have a quite significant pricing power. And so they can -- when the rates are going up, they are quite fast in hiking the rates to the small and medium firms. And when the rates are going down, they are not so fast in decreasing the rates. And so they can enjoy this. We are running a completely different kind of business. And so this is the reason why for us, it's extremely difficult to make such a kind of forecast on the evolution of rates because there are elements that we are not controlling. But again, we -- what is very important to underline that we expect, in any case, higher deposits. And so this is going to be positive for the evolution of the financial income. The small drop in the number of financial planners, the comment I have to make that generally speaking, all the industry is experiencing a pickup in the churn rate of the financial planners driven by these new fiscal rules that they are allowing to -- I don't want to bore you entering into details, but this is a law that is practically is making possible for financial planners not paying taxes on the upfront premium they are receiving. The result is overall at the industry level is a zero end game because there is some financial planners that they are moving tactically in the organization, some of them are leaving. The result on the -- generally speaking, the results at the level of the industry has an increase in the churn rate. This is going to be -- is going to finish in the next months because this kind of incentive -- fiscal incentive is going to progressively finish. Yes, we are absolutely working at a full steam. When we are referring to the expected additional cost on top of the operational costs related to artificial intelligence, the largest part of the activity we are putting in place on the artificial intelligence side is exactly related to the actions in order to improve the productivity of financial planners. So helping them in being more efficient in building up the portfolio, helping them in being more efficient in managing clients, helping them in being more efficient in planning their activities. So yes, we -- and we -- this is going to be one of the most important point of focus of the bank. The customer growth in January, yes, has been very strong. And we -- our expectation that this growth is going to keep on accelerating. So we are very positive because as we were describing during the presentation, Fineco is enjoying a quite unique positioning because there is a very clear evidence of a huge growing demand by the Italian families for fair, transparent and efficient solutions. The generational change is keeping on accelerating and building up. And as we were mentioning, we don't have a real significant competition there because all the industry, I'm referring to the decently large established financial institution, nobody of them is focused there because the industry is mostly focused in squeezing to be the most efficient possible in squeezing they choice by clients. And for this reason, clearly, we are quite extremely positive on the evolution of the client acquisition that is expected to keep on accelerating. The rationale behind the new marketing campaign is exactly there in order to make very clear how different is the positioning of the bank and how Fineco is the perfect place for everybody that is looking for in quite a much more efficient approach. In terms of breakdown of clients, what we can confirm that there is the acquisition of clients is in terms of contribution is polarized between the let me say, the young clients and the upper end clients, the private banking clients. These are the 2 segments which we are growing the most. And it's pretty reasonable because of the 2 segments that are the most reactive in terms of chase for fairness, transparency, efficiency. The reach because, as you can imagine, is the richer client is and the more focus is on what is really getting and the new generation by definition is there. target on midterm customer growth, it's very difficult to give such a precise guidance because it's a developing story. Everything is incredible. So we have been -- despite we are very positive, we have been taken a little bit by surprise by that such a big acceleration in order to be very transparent, the client acquired during the month of January, the real number of clients has been larger than nearly 19,000 and the reason that the acceleration has been so strong that we had a kind of backlog of -- in terms of opening accounts. So the real numbers probably are above -- definitely comfortably above 20,000. So for this reason, it's not easy to give you such a precise indication because everything is happening fast, is extremely -- but what we can confirm that we are incredibly positive on the future growth, but for structural reasons because the market is changing and the industry is not taking care of this.

The next question is from Domenico Santoro of HSBC.

I'm glad that everything is going into the right direction. I do have a few questions. First of all, I would like to follow up a little bit on the [indiscernible] question about the revenues for 2025 because I know how much you are reluctant to give guidance that are not put black and white on the presentation. But I just wonder whether -- I mean, there is a little bit of ambition from your side to replicate at least the number of this year. Because when I look at consensus, consensus is implying a cliff edge on the NII, but in such a scenario, probably other sort of revenues they might be better. And probably my sense is that consensus is failing to understand the other pots of revenues that could be better in a scenario where you have low rates, not much on the deposit inflow. So just please try to help us to understand if the ambition is to replicate the number, maybe which kind of revenues you think consensus is underestimating a bit on the moment. I got a lot of questions on the cost side. So it would be very useful if you could isolate in the P&L of 2024, the costs related to marketing, FM, everything that on which you give us the delta, but not the total part. So that would be useful. The other question is out of this EUR 20 billion of sovereign in the hands of your clients, what's basically the maturity for this year? And then I have a question on the remuneration because it's not in the press release, it's not in the presentation. You just mentioned a 4.5 optimal leverage ratio. You're running the business at a leverage ratio, which is above that. So my question is when should we expect you take a decision on a potential share buyback, if -- and how we should quantify that, I don't know, assuming EUR 2 billion, EUR 3 billion of deposit inflow this year, the rest will be allocated to remuneration. Anything from you, it will be very helpful.

So on revenues, by definition, we have a great ambition we have to stay there by definition. So what is making difficult to give such precise guidance is mostly related to the evolution of the net financial income because we -- is a component that we are not controlling. So that, again, is how fast and by which -- and the magnitude of the evolution of the declining rates. So this is not in our hands. And this can have a significant impact on the evolution on the financial income. On the other items, we -- clearly, Fineco is different by traditional banks is a fast-growing company. It's completely different by traditional bank because traditional bank is much more predictable because traditional banks are not really growing. So we -- and what we can say that we are very, very positive on brokerage, for example, because the evidence is pretty clear that the market is absolutely keeping on building up. And we are very positive on the investment side for the combination of the volumes and the level of margins and also more efficient and also a more efficient approach on the insurance [indiscernible]. But to give you exactly the -- and precise guidance, it's we think that it would not be serious. So we -- probably as much as we have the interest rates approaching -- starting on approaching the terminal rate, at that point, we can return in giving a more precise guidance there. But clearly, the bank is in an absolutely incredible position because everything is exactly -- all the cylinders are running at full steam because what is very important to consider that the growth is incredibly -- is key because the more we grow, considering that the growth is driven by extremely solid rational. It's not driven by extraordinary push marketing campaign. So the clients adjust coming to us because they want to use our platforms, our services. So every single more clients we are taking on board is, as we were explaining, is increasing the metrics of the bank. So this for us is the polar star of what we are doing. And so for this is the reason why we are really, really very, very positive. Regarding -- if you can isolate the 2024 cost rate, I don't know, I'm asking to Lorena, our CFO, if she can help me in doing that because it's...

Yes. Thank you, Alessandro. Good morning to everybody. The '24 costs related to marketing are EUR 43 million, increasing EUR 13 million year-on-year. And the cost for Fineco Asset Management are EUR 23 million, increasing [indiscernible] EUR 13 million year-on-year. And the cost for Fineco Asset Management are EUR 23 million, increasing EUR 2.4 million year-on-year.

On the EUR 20 billion govies in the hands of clients, was running off in 2025, if I remember, it's probably something that is close to EUR 5 billion, yes, EUR 5 billion -- and also, there is -- in terms of balance, there is a larger component that is going to expire before -- in the first half. Yes. So this is what we expect. Remuneration, yes, we confirm our 4.5% optimal level on the leverage ratio. And as we discussed in the past, clearly, we -- now we took a little bit we put on hold any kind of consideration on the possible share buyback because we -- our expectations for going forward for a higher-than expected initial base of deposits clearly is that the probability is building up. And so during -- in the presentation, there is an extremely helpful metrics that is showing a little bit the -- what -- so the possible evolution. So it's -- for this reason, we think that driven mostly by the quite significant acceleration in the growth and combined with declining rates, we expect the deposits are going to keep on building up. And so we are not to rush. It's clear that as much as it's going to become evident. Probably -- my personal feeling is that at the end of the story, we're going to find ourselves with a significant increase of deposits, a significant increase of all the metrics attached to this. And in any case, leaving again, still excess capital on the table of the bank. And clearly, this is going to be -- in that case, we are going to put in place initiatives for giving back to the market. The example is like the guidance we gave on the -- for 2025 payout that is now in a higher range exactly because the bank is an incredibly comfortable position regarding the capital position. So we think that the possibility to have all these situations materialize, so higher deposits, higher financial income, higher metrics, but in any case, leaving and still some excess capital on the table, we think that this is something that can make sense. It's not a remote possibility.

So basically, are you going to take a decision about that during 2025 or any decision is postponed push back [indiscernible]?

No, we are -- so when you have in front of you such a fast-evolving company, a company that is on the fast lane of growth that is clearly a company that has in front of [indiscernible] and clearly gigantic opportunity. It's very -- so if you look to the progression of our growth in terms of client acquisitions and so on, it's really impressive because it's a massive -- and so it's normal that we have to take some time in order to understand exactly the dimension of this growth. But this exactly because when you are preparing a share buyback, you have to -- in any case, you have to be, let me say, a little bit conservative because it would be in my opinion, not a great choice if we announced a share buyback, then the growth accelerate in a way that is much above what you were expecting to be -- we don't think. So we are not to rush. We are not a dividend company. So we are paying generous dividends, but probably the main reasons why the market is interested on us is growth. And so we are not -- there is no reason to rush. The business model of the bank is incredibly capital light. It's the most capital-light among any other banks here in Italy. There is no doubt on that. And so we -- yes, the generation of additional capital is going to continue. And as much as we are -- the more we become visible the dimension of this growth that we have ahead, probably we are going to be a little bit more -- we are going to start on being more precise on the capital allocation. But again, what we want to be very clear, we have no interest in keeping an amount of capital that is in excess with respect to what we need.

The next question is from Luigi De Bellis of Equita SIM.

Four questions for me. The first one is on the banking consolidation ongoing in Italy, where we are seeing a lot of announced deal. What impact do you expect for the financial adviser network sector in general, impact, if any, on the quality of services and on Fineco in particular. So if you see a positive angle to catch up potential short-term opportunities from this? The second question on the insurance business. We know that margins are lower than average for this business, and there are still some outflows. Are you considering any strategic move in this regard if there are some update on this? On the third question on the NII. So can you elaborate a little bit more on the trends for deposits that you expect in 2025? So also considering seasonality and the govies that should be issued to the retail customers in the coming weeks by the government? And if you expect 2025 as the bottom year for NII considering the current level of interest rate curve? And the last question on net inflows. We are seeing more dynamic inflows in the last months. What kind of seniors are you receiving from your clients regarding the cash sorting? Where are the new flows being allocated, so equity ETF products? And does fixed income products still have a significant weight in the choice of your clients?

Okay. Let me start by the banking consolidation. So the banking consolidation is something that is extremely positive for the future development of our business for 2 reasons. So the first one that is structured because the Italian banking system is clearly moving and becoming more and more similar to the French and Spanish market in which we have the 4, 5 largest banks are controlling nearly between 75% and 80% of the market. So -- and why this is positive? It's positive because the Italian market is more and more moving in the direction of becoming an oligopoly exactly. And oligopoly is a situation in which clearly the main priority of the oligolistic players is not the quality of the services, it's not the way they are managing their clients because -- so -- in Oligopoly, clearly, the focus is not on the growth because you don't need to grow. And also the focus is not on -- I'm not saying that Oligopoly, deliberately the bank are trying to deliver poor services. What I'm meaning is that this is not the top priority because in any case -- and this is the reason why usually antitrust authorities are not particularly happy with any kind of oligopolistic and monopolistic position. So this means that there is the risk to have someone starting on really putting an eye on what's going on in terms of change of behaviors of clients is extremely limited. Second, there is a technical reason because consolidations are bringing disruptions among the clients by definition because you had to restructure services, you had to change platforms and so on. And this is going to put on top of a relatively not particularly exciting customer experience. This is going to accelerate even more the decision of clients or -- so the concept change is good of our marketing campaign is becoming even stronger in this kind of environment. On insurance business, we don't have at the moment on the table any strategic move. What we are doing. We are going through an extremely practical and fruitful restructuring of our solutions, and we expect this is going to bring an increase in the margins on the insurance business, not because we are increasing cost on clients, but because we -- as I was saying, we are restructuring the services and what we are doing. Trend of deposits, we confirm is definitely up. driven by 2 components. One is the growth because the more clients we are taking on board and the more this is going to generate continuously growing transactional liquidity. And second, because clearly, declining rates are making -- lowering down the sense of diligency of clients of reinvesting the liquidity. And so this is the -- on top of that, always because we are always cautioning the market to be very careful in reading too much in every single month because there are components like we have seasonality that it's a bit comp usually, it's not a great month for liquidity because clients are -- there are all the payments of what has been spent during the Christmas period. The restart of the activity is low because at least the first 10 days of the month, they are gone and lost. And then the second element, again, I'm sorry if I'm a little bit boring sometimes. But Fineco is not -- cannot be considered as a typical bank. We are controlling more than 50% of the retail brokerage in Italy and the percentage is growing. So this means that our clients that they are actively trading on the market, clearly, they can have a quite significant temporary impact on the, for example, the liquidity of the bank in the month. So as I was saying, our clients are contrarians. And the active clients -- they are moving rapidly. They are more or less probably more than EUR 8 billion that they are really actively managed by clients and some. And this clearly, they can cause some quite significant short-term temporary impact on the liquidity. But net of this, the trend is the deposit is clearly up. There is no -- and yes, probably 2025 is going to be -- expected to be the bottom for the net interest income because then if we put together the bottoming of the rates and the continuous building up of growth, yes, we think that this could be the case. The net inflows are more dynamic, which kind of the messages that we are receiving are coming by this growth. First of all, we can confirm that there is an absolutely accelerating trend of -- among the Italian families in direction of getting high-quality, transparent and fair solutions. So if you are a client that is really looking for the most efficient possible solutions, like, for example, portfolio made by a blend of govies, ETFs and high-quality actively managed funds, there is no other place in which you can do that than in Fineco. So this is a very clear signal. We are also observing that there is a progressive increase of the interest of clients for taking more credit risk, lengthening the duration. And also, we are starting on observing the restart of building up on any equity exposure through the accumulation products or the accumulation products depends from which angle of view you are looking to that. So these are more or less the -- there is an absolutely amazing growth on the ETF side. This is a tide that is building up. And in front of a tide, you have 2 choices, you can surf the tide. This is exactly what we are doing or you can try to swim against the tide. And this is what the most part of the industry is trying to do.

The next question is from Gianluca Ferrari of Mediobanca.

I think you just answered to one of the 2 questions. I wanted to ask you a comment on what Vanguard said earlier this week, cutting fees. I think you just said that basically the industry is going from a rebate mechanism to a fee on top mechanism where you are very well positioned. But again, if you can comment if you think that the decline in ETF fees is more a U.S. issue or it could come also in Europe and some of your competitors in Italy are still relying too much on a rebate kind of mechanism. And the second one still on strategy is on private markets. We saw last night M&G making a deal. Amundi Generally speaking loud about that. And basically, the new trend seems to be giving access to affluent and private clients on these particular products, private credit and infrastructure in particular. I was wondering if you expect to do something along these lines? And what are your thoughts about this emphasis on private markets?

Yes. So first of all, I think the 2 questions are quite strictly correlated. So let me start by the on what's going on the ETF side, yes. So it's -- what's going on there in U.S., it's extremely important because it's anticipating what we can expect to happen also in Europe. And for example, another trend that is the market is ignoring is related to the massive growth of the active ETFs -- so it's probably -- it's not completely insane to think that going forward, in the future, progressively, we are going to have active ETFs replacing the traditional mutual funds and because they are much more efficient and so on. And this clearly, I'm totally with you, is going to move the market is going to move the market more and more out of from the traditional inducement-based system in the direction of a system in which the clients are paying an explicit fee. And again, this is an absolutely gigantic trend. We expect that it's going to keep on building up. We have been, by far, the first mover because we started in offering this kind of solution in 2008. Now we have more than half of our investing business that is on which the clients are not paying an explicit fee. So it's -- we think that this is the future. And so when I was commenting that this is a tide that is building up and you have to make a choice if you want to serve the tide and putting in the right direction or if you want to keep on fighting against the tide. Fineco traditionally is characterized for surfing the tides and not going against. On the private market, we expect in the second half of the year, starting on offering private markets to our clients. We are going to do that connecting to our platform with the old funds platform that is going to give us the possibility to offer an extremely broader choice of solutions, helping us in understanding the real appetite by clients and financial planners and later on, considering also to move in even more, let me say, internalized solutions. At the same time, we probably -- in the same time horizon, we are going to have something structured by Fineco Asset Management in teaming up with one of the largest private market organizations. So -- but yes, during the second half of the year, we are going to start moving there. We think that it's an extremely interesting market, but we think that it's going to remain the backbone of the business is going to be the traditional activities.

Would you consider acquisitions?

No, no.

The next question is from Elena Perini of [indiscernible].

Actually, I've got -- one is a clarification on the cost guidance. So I haven't understood whether I have to consider the 6% year-on-year growth on 2024 basis net of the costs, the marketing costs and the cost for FAM or I have to consider the full amount of operating costs reported in 2024 as the base to apply the 6%. So this is the first one. Then I have other questions, just some small guidance on the provisions for risks and charges because you were mentioning about a step down in 2025 related to the banking contributions and then the tax rate guidance, all other questions that I had have already been answered actually.

I leave the floor to the CFO. Please, Lorena.

Yes. Regarding the first question on the 6% growth, yes, you have to apply this percentage to the overall cost 2024. Regarding the provision in 2025, the usual provision for risk and charges could be estimated at around EUR 15 million. They are related to PFA fiscal [indiscernible] indemnity. That is what we must give to PFA when they are retired. And the ordinary provision are related also to our normal claims and charges. On top of that, we have to consider the contribution to the newly launched insurance resolution fund, for which the contribution for insurance distributors like Fineco is equal to EUR 0.1 per thousand of the technical reserves of the life insurance stock at the end of the previous year. And this contribution could be estimated in a range for Fineco between EUR 1.5 million, EUR 2 million -- we have also to consider possible additional contribution to deposit guarantee scheme and single resolution fund in case of the increase of protected deposits or in event of bank failure. As you know, deposit guarantee scheme and single resolution fund have already reached their target. But in case of increase of protected deposit or bank failure, it's necessary to maintain the level of the target. Regarding the tax rate for 2025, we expect a tax rate around 31%, slightly increasing versus 2024 due to the end in 2024 of the Patent Box benefit.

The next question is from Marco Nicolai of Jefferies.

First question, again on the deposit growth. So you are saying the deposit stock will grow in 2025. And -- but I mean, After, it grew also in 2024 despite the macro environment, which was probably more complicated for deposits, especially in the first half. So shall we expect that it grows at least more than it grew in 2024 -- so this on the deposit stock. And well, I understand that probably the difficulty here is around your retail clients, trader clients that create always some volatility around this number. So this was the first question. The second question on the distribution, 70%, 80%. So I guess the decision between 70% and 80% in terms of payout is going to be linked to the leverage ratio and to this at least 4.5% of leverage ratio. Are you going to base your decision on this?

Regarding the deposit growth, yes, you're right. So the 2024 has been, for sure, more -- it has been challenging and expected to be been more challenging than 2025, considering the level of rates in the first half. And so it makes sense to think that the growth of deposits in 2025 is going to be higher than the growth we experienced in 2024. Yes, makes sense. And on the distribution on the 70% to 80% payout, again, I ask the CFO to make some comments on the ratios behind.

Yes, the rationale behind are for sure, related to the level of leverage ratio. Our target is to maintain a leverage ratio above 4.5%. And considering also that due to the expected reduction of net interest income, an increase in the payout ratio is expected.

In that case, yes, the -- so yes, the level is going to be linked to the level of the leverage ratio. Yes.

Okay. So 80% if it remains above 4.5%?

Above 4.5.

The next question is from Ian White of Autonomous Research.

A few follow-ups, please. Just on Advanced advisory and the shift towards that model, is the increased penetration of advanced advisory being driven by conversion of existing clients or because new clients are increasingly adopting that pricing structure? That's the first question. Just secondly, in general, can you say a bit about how your advisers perceive this shift to fee-based advice. Why would they prefer that model versus charging for advice via product fees, which is, as I understand it, much more commonplace in the sector? And just lastly, just to come back briefly on NII. I know you're saying things are difficult to predict like short-term interest rates and deposit levels. But can you give us a sense just on a static balance sheet, deposit levels unchanged, interest rate expectations as they are today, what sort of level of NII or year-over-year decline would you expect in 2025, please?

So let me start by the advanced advisory. So the increased penetration is mostly driven by the new clients because the -- so one of the rationale behind our growth is also because more and more new clients are considering this approach as more transparent and more aligned with what they are looking for. So yes, sure, the growth is driven by the acquisition of -- is more driven by the new clients than -- much more than the conversion of the existing clients. And the reaction of the financial plan is how they are reacting, how -- so we have to consider that Fineco started this approach many years ago. Because we started in offering advisory services with clients paying explicit fees in 2008. At that time, this was perceived by the most part of the financial planners as something and not very interesting because the typical claim by them was that never clients would accept to pay a fee because -- and so for many years, this has remained the point and has remained a little bit more a niche solutions for particularly advanced financial planners. Progressively over the years with the progressive building up in terms of changes by client's behaviors, culture, technology and so on, this is more and more becoming something that is absolutely considered by our financial planners in the future. So the financial planners are not stupid. They are understanding what's going on. And for this reason, now we can say that practically more than 90% of our financial plan, they have at least one contract in which the client are paying an explicit fee. So it's been a progressive change. Now we are in a clear acceleration path because, for example, the big tide represented by ETF, the renewal interest from govies is paving the way for more and more in this direction. On the net interest income, it's clear that, again, so it's very difficult to give a precise indication regarding the level of decrease because to -- sorry, I'm understanding that I'm a little bit boring on this point, but we don't have any precise visibility on the dimension of the decline in rates and the timing because the ECB is remaining the narrative of ECB is remaining that are going to act driven by the numbers. And so the situation is -- so it's very difficult to give such a precise guidance. But again, we -- usually when we are making our plans, we are assuming the worst, so to have having so the market moving rapidly in the direction of what can be considered the terminal rate. And on the other hand, we have the clear evidence of the growth of the bank. And so we can say that -- so the only thing on which we can put some kind of, let me say, a little bit more precise indication that the net interest income 2026, there is a high probability it is going to be higher than the net interest income of 2025. On this, clearly, we have, let me say, a little bit more of a solid base for giving a more precise guidance.

The next question is from Adele Palama of UBS. Sorry, a follow-up on the NII.

A follow-up on the NII. Can you give us a guidance on the sensitivity, at least 100 basis point rate cuts or like if terminal rate is as 2% to where like the decline in 2025 will go and in 2026 as well if terminal rate is as 2% to where like the decline in 2025 will go and in 2026 as well? And then on the financial assets, so you had an increase in the financial assets quarter-on-quarter, probably driven by the deposits. Do you have any target there on the growth of the financial assets as a way of offsetting the decline in NII? And then on the investing business, I know you have dropped the guidance on AUM flows, but do you have a long-term ambition for AUM flows per year? And then on the aet management fee margin, it's 69 basis points. How do you see that to evolve in 2025? Are you expecting that to remain stable at 69 basis points?

So regarding -- on the sensitivity, so Lorena, if you can.

Yes, the sensitivity for -- in case of parallel shift of the curve by 100 basis points, the sensitivity for net interest income is EUR 117 million is slightly declined versus the previous quarter that was slightly above EUR 120 million.

Regarding the -- so where we can expect to have the net interest income with the terminal rates of 2%. And clearly, there is an element that we don't control that is the timing, which this is going to happen. So because, again, I'm returning to the point I was discussing before that we don't differently buy the other central banks, like, for example, the risk Bank, the Swedish Central Bank that has given a precise indication regarding the terminal rate and the timing on which they are going want to reach the terminal rate. This is not the case for ECB. So it's difficult to give. And in any case, I consider that there is also a quite significant correlation between the, for example, if you have rates going down to the terminal rate more rapidly, clearly, this can be on one side, negatives, but from -- in terms of impact on the net interest income. But for example, this is going to accelerate the growth of deposits, and this is going to be positive. So it's impossible to just look to the rates without considering what's going on around. The example is January. January has been a month characterized by, let me say, a little bit unexpected jump in yields on the market. This has caused a quite significant activity by the clients buying more govies, and this has driven a decline on deposits that theoretically is negative for the evolution of net interest income. But at the same time, now the forward rates are higher, and this is positive for the for the net interest income. If we put on the table the 2 elements, clearly, at the moment, the expected net interest income is higher than the beginning because the positive impact generated by the higher forward rate minus the negative impact caused by the decline of deposits has been more positive than negative. So it's impossible to give you an answer, say, if tomorrow morning, the terminal rates at 2%, where it is going to be the net interest income because the speed at which we are going to move there is very important. And then we have to consider the correlation between the level of short-term rates with the evolution of deposits. Increase on quarter-on-quarter financial. I suppose that you are referring to the -- so the increase..

To the balance sheet. financial asset in the balance sheet.

But you are considering all the -- so you are not -- so on the balance sheet, you are referring to the deposits because the deposit -- because the assets under management and assets under assets are not on the balance sheet.

The financial asset in the balance sheet of Fineco.

So we are just referring to deposits. Yes. Sorry if I'm repeating myself, but again, it depends on the -- how this decline of rate is going to happen. So if it is incredibly fast, immediate and so on, clearly, this is going to have -- can have a significant impact on the evolution of deposits because this is going to accelerate, it's going to make clients completely -- so their sense of urgency, for example, investing the liquidity is going to go down. Second is going to accelerate the appetite by clients for taking profits, for example, on the bonds on the bonds they book. So it's -- again, what is extremely important is the timing in this is going to happen. And so we don't have any specific target in mind. We know that on the -- and then on the other side, what is very important that we have to consider in the evolution of net interest income is the growth because every single client, more clients we are taking on board is contributing for increasing the deposits of the bank because all the clients we are taking on board, this is very important, are not clients we are attracting because we are giving them a gift. So we are not attracting clients because we are paying them out of the market rates. We are not paying nothing to clients. the clients are joining -- are opening the account with us because they want to use the platform, the services. And all the clients that they are using the -- whatever is the service they are using, they are leaving some kind of transactional liquidity on the current account. So the metric is pretty clear. Every single client, more single client we are taking on board and the more we can expect in terms of additional deposits that the bank is going to get exactly because the rationale behind is extremely solid. So I'm repeating clients that they are truly joining the bank because they are interested in the service of the bank. On the asset under management net sales and long-term ambition here, clearly, we -- our ambition is to be definitely above the latest numbers. We think that there is clearly absolutely -- this is absolutely in our possibility considering the combination of growth on the base of clients, the macro environment that is evolving in the right direction. I'm referring to the decline in rates. And then we expect also a contribution by the increase of the productivity of the network through the investments we are making in artificial intelligence used for the network. On the management fees pretax margins, we expect a possible slight increase going throughout 2025 that is related to the expected better mix going forward, yes.

The next question is from Alberto Villa of Intermonte SIM.

I have really not much left. It's just one clarification on the last answer you gave on the AUM margin. I was trying to understand what is your ambition in terms of rebalancing the mix of the assets under management of clients towards the equity-related products. What is the current mix? And what is your ambition? I know you had the convention for the anniversary of -- so in December. Did you, let's say, gave a message to the network in terms of, let's say, improving the penetration of these kind of products and -- what are you doing in terms of product launches in this direction?

So regarding the asset under management margins, so the last year margins, they have been penalized by the mix of the net sales because the mix has been mostly skewed in the direction of short-term fixed income solution. And now there is -- the more we have short-term rates going down and the more there is room for the appetite for clients is definitely is going to move in the direction of longer duration and credit risk and equity. And so clearly, we -- this is going to be -- as usual, this is going to be driven. We are not forcing clients moving there because our business model is a business model in which we are fulfilling what are the real needs of clients. We are not pushing them. And so our expectation on margins is driven by a very simple concept that the more you have short-term rates going down and the more by definition, the risk appetite of clients is going to increase. And we -- in terms of products, we -- the most recently launched products are products that are focused on, again, longer maturities, credit risk and investment solutions and they are helping clients in progressively moving out of the, for example, money market solutions into equity solutions. But this is absolutely very smoothly driven by the changed conditions -- the changed macro conditions. And also very important to underline that Fineco is in a better position than the industry regarding the pressure on margins because we were discussing before that the trend is pretty clear. One thing is to be sit on products characterized by absolutely incredibly high level of fees. So it's clear that this is going to -- by definition, you are much more exposed to the pressure on margins. Another thing is to be characterized by being someone that has been offering extremely fair solutions to clients. So by definition, Fineco is less exposed to the incoming pressure on margins. But if you look to our numbers also going back past, the Fineco margins are definitely more resilient than the industry.

The next question is a follow-up from Enrico Bolzoni of JPMorgan.

Sorry, very quickly. You mentioned that you will plan to offer private asset investment in the second half of the year. Can you please clarify if this is just going to be fund of funds product or whether you actually think to offer the so-called evergreen funds in partnership with the private equity or private credit player, perhaps to your private banking clients?

The old funds platform is a platform that is very efficient because it's giving to you the possibility to have access to the most interesting solutions by the most established players in the industry. And so it's an extremely efficient way of starting the business. because we are not being -- we are not going to be requested to commit any specific amount. So the financial planners are going to be able to invest also in relatively -- without taking any particular commitment. It's going to be very flexible because the range of offer is going to be extremely broad. And for us, it's the perfect way for starting on entering this market. For us, what is very important is to understand the real appetite by financial planners and clients for these products with the idea in any case to make some additional steps going forward. But the first step is to start this way. And so all funds, it's a great platform for doing that because at the same time, is offering to you great flexibility and a quite really significant broadness in terms of offer.

The next question is from Gerald Deutsch of Berenberg.

Just a quick question on the increase in RWA quarter-on-quarter. Maybe you could give us some color on that.

I leave the floor to Lorena.

Yes. So the quarter-on-quarter increase was around EUR 400 million. And it's mainly driven by operational risk-weighted assets due to the update of the relevant indicator, including 2024 revenues and excluding 2021 revenues. As you know, this kind of calculation consider a percentage of revenues of the last 3 years and the update at the end of 2024 has generated an increase for operational risk-weighted assets. And this is the main impact on risk-weighted asset increase.

Mr. Foti, there are no more questions registered at this time.

Thank you for attending to our conference, and thank you for the extremely interesting questions. As usual, we are available for any follow-up later on. So thank you again.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.