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 Second Quarter 2025 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. Please go ahead, sir.

Good morning everyone, and thank you for joining our second quarter 2025 results conference call. Before moving into the details of the presentation, let me express that Fineco is recording and sizable acceleration of its growth dynamics supported by a very healthy underlying quality. Our growth is leveraging on our superior customer experience and on our fair and transparent position, not on short-term aggressive offer. This approach is memoried in the quality of our revenue mix, which is entirely recurring with a very low percentage of upfront fees and no performance fees at all. Later in the presentation, we will also share our industrial action further accelerate our net sales and improve our mix through an AI-powered network of financial advisers. Let's now move to the second quarter results. Net profit in the first half of 2025 is EUR 317.8 million, half flat year-on-year. Revenues at EUR 644.4 million, supported by our nonfinancial income, investing up by 9.8% year-on-year, thanks to the volume effect and the higher control of the value chain by Fineco Asset Management. And brokerage is up by 15% year-on-year, thanks to the enlargement of our active investors and higher market volumes. Operating costs well under control at EUR 173.1 million, increasing by 5.9% year-on-year by excluding costs related to the growth of the business. Cost income ratio was equal to 26.9%, comparing operating leverage as a key strength of the bank. Moving to our commercial results, the underlying step up in our growth dynamics gets crystal clear month by month. And for 2025, we expect a higher asset under management and deposits, net sales compared to 2024. This is underpinned by the positive tailwinds from the structural trends, and we are leveraging on this solid momentum through more efficient marketing activity. The result of this acceleration has been clearly visible in the first 6 months of 2025. First of all, we added around 100,000 new clients dropped by 36% year-on-year. In July, new clients have around of 50,000 up to more than 20% year-on-year. Second, our net sales were EUR 6.6 billion in the first half, up by a strong 32% year-on-year. In July, we are estimating total net fees for a further acceleration at around EUR 1.1 billion, up by 45% year-on-year. The mix was very positive with assets under management debt around EUR 0.4 billion net sales after by around 35% year-on-year deposits were at around EUR 0.3 billion and assets under custody at around EUR 0.4 billion. Brokerage recorded EUR 19 million estimated revenues. Our capital position continued to be strong and safe with a common equity Tier 1 ratio at 23.5%, and the leverage ratio at 5.2. On the right-hand side of the slide, you can find a summary of our 2025 guidance more in detail. On investing revenues, every EUR 1 billion change of assets under management on August 1, generate around EUR 2.9 million of management fees from August 1 until year-end. [indiscernible] versus 2024 due to new regulation on instant payments. On brokerage, we confirm 2025, expected revenue strong with a continuously growing floor, thanks to the enlargement of our active investors. For 2025, we expect a record year for revenues. For 2025, we expect operating costs to grow around 6% year-on-year, not including 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 the AI. Finally, in 2025, we expect a payout ratio in a range between 70% and 80%. Let's now move to the Slide 5. As you can see in the P&L in the slide, we are now sharing a new P&L representation with the nonfinancial income being the sum of net commission line in the trading profit line. This is aimed to better show the industrial nature of our trading profit, almost entirely represented by client driven brokerage revenues. As announced, net profit in the first half of the year stood at EUR 316.8 million, almost flat year-on-year. Revenues at EUR 644.4 million supported by acceleration of the nonfinancial income, led by the solid contribution of the investing and brokerage business. This has almost offset the decline in interest rates. Operating costs at EUR 173.1 million, well under control and increasing by 5.9% year-on-year, excluding costs related to the growth of the business, mainly additional cost for Fineco Asset Management to further expand its business and have a higher control of the butane, additional marketing costs to further improve our growth and catch the strong momentum of the business. Artificial intelligence has -- we are launching a project to further boost our network productivity. Let's now move on the Slide 6. Investing revenues reached EUR 191.1 million in the first half of 2025, increasing by solid 9.8% year-on-year on the back both of growing volumes thanks to our best-in-class market positioning and of the higher efficiency of the value chain through Fineco Asset Management. Let me please remind you that the great quality of our investing revenues mirroring our transparent and fair approach towards clients. Our revenues are mostly driven by recurring management fees with a very low upfront and no performance fees at all. quarterly management fee dynamics are temporarily affected by lower average asset under management due to the negative market performance in March April 2025, So this set of results is particularly remarkable given the more challenging market environment for the asset management industry. Let's move on to Slide 7. In this slide, we are representing the 2 main sources of growth for our investing business going forward. On one hand, Fineco Asset Management is progressively increasing the control of the investing value chain its contribution to the group's net sales has been consistent over the cycle, thanks to its incredible time to market in delivering new investment solutions aligned with client needs. The contribution of Fineco Asset Management, assets under management out of the total stock of assets under management has been steadily growing, and it's now equal to 38.7%. On the other hand, building a platform Fineco is the best place to catch the latest trends in terms of client investment behavior. There is a clear change underway in the structure of the market with clients increasing looking for quality, efficient and fair solutions. All of this is channeling a strong demand towards advanced advisory services with explicit with an explicit fee, where Fineco is by far the best positioned in Italy, as you can see down in the line. Let's now move on to Slide 8 for a focus on brokerage. Brokerage registered a very strong first half with EUR 128.4 million in revenues, driven by our larger active investor base. July was another solid month with EUR 19 million estimated revenues. Average revenues from [indiscernible] 2025 and around 10.5% higher versus 2020 with a much more healthier underlying dynamics. This is driven by the structural increasing client interest to be more active in the financial market and building up a clear bridge between the brokerage and investing were. The brokerage business represents the best sign of how fast the structure of financial market is evolving. As technology is driving a swift change of price behavior, thanks to higher transparency. For this reason, we consider that the brokerage Italian market still very underpenetrated, and we are -- and we see a strong opportunity to grow despite already being the market leader. Let's now move to the Slide 10 for a focus on our capital ratios. Fineco confirmed once again capital position well above requirements on the wave of a safe balance sheet. Common equity Tier 1 ratio at 23.5% and the leverage ratio is at a very sound 5.2%, while risk-weighted assets were equal to EUR 5.81 billion, total capital ratio at 32.07%. As for the liquidity ratios, liquidity coverage ratio is over 900% and net stable funding ratio over 400%, while the ratio, high-quality liquid assets on deposits is at 79%, well above the average of the inset. Going forward, we confirmed that we will continue to generate capital structuring and organically, thanks to our capital-light business model. Given the strong acceleration in our growth, we are taking more time to have a clear view on deposits net sales going forward. As the underlying dynamics are strongly improving. If despite the strongest generation in our growth, there will remain excess capital, we will decide on the best way to return it back to the market. Let's now move to Slide 16. Let's now focus on our 2025 guidance. On investment revenues, having EUR 1 billion change of assets under management on August 1, generates around 2.9 million management fees from August 1 until year-end. Banking fees are expected with a slight decrease compared to 2024 due to new regulation on instant payment. Brokerage revenues are expected to remain strong with a continuously growing flow, thanks to the enlargement of our active investors. For 2025, we expect record revenues Operating costs are expected to grow at around 6% year-on-year, not including a few millions of additional cost for growth initiatives in a range between EUR 5 million and EUR 10 million, mainly for marketing. Fineco Asset Management and AI. Cost/income, we expect it comfortably below 30%, thanks to the scalability of our platform and to the strong operating gearing [indiscernible]. On the payout ratio, we expect it for 2025 in a range between 70% and 80% on leverage ratio, our goal is to stay above 4.5% flat. Cost of risk was equal to 6 basis points, thanks to the quality of our lending portfolio, and we expect it in the range between 5 and 10 basis points. Finally, with respect to robust and high-quality net sales with increasing assets under management and deposit flows and the continued strong growth expected for our client acquisition as we are in a sweet spot to keep on adding new market share. Let's now move to Slide 17 for a deep dive on our growth opportunities. Fineco enjoys a unique market position to catch the long-term growth opportunity resulting by the huge household wealth and the fast changing client behaviors. In the graph, you can see the strong potential for our growth given the stock of financial wealth of the Italian payments, our market share is still small and the room to grow is huge. We are very positive on our future outlook as we have no competition on our market position. As a matter of fact, Fineco is the only big player with a service model truly based on transparency, efficiency and fair pricing. Moving on to Slide 18. The step-up of our growth trajectory is clearly materializing as you can easily see in our recent client acquisition. On top of the slide, you can see the impressive acceleration of new clients which is partly building up in the first half of 2025. This acceleration is very healthy because it's based on the quality of our offer and not on an aggressive marketing campaign with a short-term rate remuneration. As a result, all our new clients are improving the metrics of the bank by bringing more deposits or more business for our brokerage and investment solutions. These value is recognized by our clients, as shown by our customer satisfaction of 94% on our Net Promoter Score, way above the industry average, as you can see down in the slide. Let's now move on to Slide 19. The accumulated growth of high-quality new clients is translating into better net sales dynamics shown by the 32% increase of our total net sales year-on-year. The same applies to our deposit growth, which before the investments is up 34% year-on-year. Let me remind that we see a sizable mix shift opportunity coming from the huge stock of [indiscernible], our clients booked over the last couple of years, given that a large percentage of this as a short-term maturity. This will give our commercial planners and unprecedented opportunity to improve client mix into assets under man. In this regard, the banks continue to enlarge the offer of investment solutions. As an example, in September, a new and innovative private market solution by Fineco Asset Management will be launched. Let me now hand to Paolo Grazia, General Manager and Head of Global business to comment on Slide 20, please.

Thank you, Alessandro, and good morning, everybody. As you know, the financial industry is quicking heading into an inflection point and it's going to be heavily shaped by technology. Thanks to our deep internal know-how and data control, Fineco is the only real player to be able to take massive advantage from it and to further accelerate our growth journey. This will be reached with our usual cost-effective approach, of course. We are planning to launch the launch of an efficient and pervasive AI implementation in 2 directions. First, focusing on the productivity of our network of personal financial adviser; and second, paying attention to the cost efficiency of the bank by reshaping completely the internal processes. While on the latter, we will update the market in the next month. We have already started to reengineer our financial adviser platform with the integration of AI assistant. We will be it will be a key enabler to boost our network productivity and deliver a better quality service to clients and ultimately improving our revenues growth via stronger net sales and assets under management. Let me stress that this is not a book of dream, but already -- it's already a reality. Our very first initiatives are already live, used by more than 2,500 personal financial adviser with more than 1,000 unique weekly log in. And by the way, we have never seen in the past an adoption like this for a new application like this. Our financial planners have now in their hands a powerful AI assistant, which is going to be a game changer for wealth management. Below in the slide, you can see the main features of the system among which is worth underlying -- the portfolio builder, which is a powerful tool to immediately create quality portfolio fed with Fineco financial logic and optimized on client goals. The portfolio builder is also a content creator and a communication tool able to create professional and customizable reports, proposals, portfolio reviews, broker automatically generating narratives and to support the financial plan. It's also a powerful marketing tool, allowing for comparison of existing portfolio of prospect lines. It's also search too, a faster Infratech process for internal memo and communication. So the next wave of artificial intelligent implementation will focus on CRM for our financial adviser and will be fully integrated with client data. It will empower our financial adviser to manage their agenda more efficiently, enabling a structured approach to client engagement and cross-selling by streamlining customer management and unlocking new commercial opportunities. This will represent a further step in enhancing productivity across our network and driving for an even stronger growth. And I will hand it back to Alessandro to move to Slide 21.

Thank you, Paolo. So let me now focus on asset under custody. Let's -- a component of our business that is sometimes undervalued by the market, but is the real cornerstone of our fee-driven growth. This is true for investing as assets under custody remains the main source filling our assets under management mixes. As you know, around 90% of our growth is organically driven. As a consequence, new clients tend to show an asset allocation more oriented towards assets under custody the job of our financial advisers to improve their mix into assets under management. For Brokerage, expansion of assets under custody and the growing base of active investors are key factors leading to a structurally higher flow in our revenues. Finally, in the past growing ATS space, we are actively exploring new revenue opportunities, which we expand moving in is uniquely positioned to capture the strong client-driven shift towards more efficient investment solutions such as yes, as you can see, the stock or ATS is now in excess of EUR 13 billion. Yes, now accounting for almost half of the assets under [indiscernible]. Thanks to our focus on transparency, efficiency, we take pricing. We are the only player capable of fully recognizing and monetizing the structural trend with no harm on our profitability. [indiscernible], the growing interest in ETF is generating a positive volume effect for our investment business. Thanks to our advanced advisory [indiscernible] ETF, we can move in the investing world clients that are not interested in traditional mutual funds. This with no cannibalization risk on the existing and business. At the same time, our leadership ETF retail cost make us the main gateway for issues into the Italian retail market, while we currently manage all costs to enter clients without recurring revenues credit, yes, talks are underway with our partners to find a fair balance. Finally, Fineco tax management is going to play a big role in the ETF our Harish term already launched it's the refers acts and more are going to be introduced. Thank you for your time. We can now open the call to questions.

[Operator Instructions] The first question is from Luigi De Bellis of Equita.

I have 3 questions. The first one is on the ETF. So can you provide us an update on your strategy in particular, where do you stand in terms of ongoing negotiation with ETF, has the client appetite evolved in the recent months? And what is the current pipeline of FUM in terms of new active ETF? The second question is on the NII margins on management fees. So what we can expect for the coming quarters, in particular, on margins, also considering the pipeline of new products, both in private market and EPS? And the last question on the crypto organization. So can you give us an update also on your crypto strategy? We have seen some U.S. players recently announced new product launches for European investors also U.S. stock and ETF tokens in Europe. So how is Fineco position in this space? And what opportunities and risks do you see from this trend?

So first of all, let me start by the update on the strategy in ATS, as we explained during the presentation. we are advancing in the process of making the EPS growth, and we are characterized by recurring revenues, and we expect this is going to be finalized by the year-end beginning of next year. And so again, yes, it's going to become progressively more -- more than a business that is generating recurring fees, so much more similar to the -- in terms of cost to the asset under management [indiscernible]. The client appetite by the client is remaining robust and strong, as is demonstrated by the fact that half of the net sales on the asset under custody is represented by EPS. This for sure, is absolutely in gigantic trend and what is making the position of Fineco unique that considering the combination of an extremely very,very well-working platform together with the extreme tax positioning we have in the advisory solutions in which clients are paying an advisory fees is making Fineco the perfect place, the natural landing spot for everybody that is interested in being engaged with the ETF world. The pipeline of farm [indiscernible] keeping on building up. And so we expect that progressively, Fineco's management to start on playing an important role in this space. And -- but again, this is not -- I'm going back to looking to the example of what has been the journey presented charge so in U.S., but they've started the offering [indiscernible] clients and progressing behave to propose to their clients, not just the ETFs provided by the someone, but yet by the expert [indiscernible] there, yes. Regarding the -- on the NII, we expect NII bottoming and reaching the bottom within the year-end and starting by next year. the NII expected to keep on growing again. And this is going to be extremely healthy in terms of direction is not going to be driven by, for example, hedging activities on the portfolio. So the bank is not taking any risk and view. We are going to keep on maintaining an extremely conservative approach with continuously lowering the duration and decreasing the interest rate activity. The gross interest income is really to be driven by clear and there is a continuous process of building up of in terms of gross net sales. So in case the net interest income is expected to keep on growing, again, starting by the end of the year. And trends on margin, continuing [indiscernible]. At the moment, we are not factoring yet in the margin, what we can expect to get by the private market because clearly, we prefer to remain cautious. But we are quite optimistic on the evolution on this side. The product is going to be launched at the beginning of the fall, and we think that considering the way it has been structured, the extremely modern and innovative solutions were being topline, and we expect a positive welcome positive sectors by the client. And so this clearly is going to be a quite end and progressively an interesting contribution to the markets. ATS, as we were -- we discussed several times in the past, are not really a threat on the market because the ETFs are mostly used by the financial planners into the advisory [indiscernible] and on which the clients are paying an explicit fees. And overall, the margins are not significantly different by the overall margins we have on the asset under management business. So the ETFs are playing a role of being accretive in terms of revenues because they are helping in building up volumes are helping us in making our way gaining market shares. And it is not a point of attention on the possible pressure on margins, considering the Fineco as a starting point, respecting industry that is much more sustainable because it's Fineco has been all capitalized by a lot overcharging clients. And so -- but overall, at the moment, we remain conservative. Our margins are expected to remain stable. On the grid tokenization and state and so, I give the floor to Paolo in order to give a little bit more color on what's going on there, our plans, what we can expect to happen.

Yes, basically, on crypto, we are currently discussing with the regulators to have the permission to start offering cryptos on our platform. We see a lot of interest among our clients, but in general in the country with a raising interest in cryptos and -- so it's a piece of the offering that we're trying to put in the platform, but we don't know yet when exactly because before we had to clear everything with the regulators. And again, we we're in talks in these days with the Italian regulators. We know very well that there are other banks that for example, from Germany that are offering cryptos also in Italy. And we know and we see our clients also using this platform to use to basically trade or have exposure mainly in bitcoin and material. In this platform, we that's why we see this as a great opportunity for us. At the moment, we are going to be able to offer the service to our clients. On the tokenization topic, it's a huge topic. We know for sure that this is the future. So tokenization -- in our view, every asset is going to be tokenized. The fact -- the important point is that to get a real advantage for the client to have tokenized assets. We need to have tokenization very spread around in the system. So not only Fineco offering tokenization assets, but also other counterparties and maybe the financial market. And so for sure, one of the first big advantage is that we can have even before the spreading of the tokenization technology is the fact that we can be much more effective in managing costs related to, for example, post trade activity, custody and so on. So it's one main project that we have in our R&D projects, and we don't see the tokenization far away years far away. It's pretty much closed. And so while we are also positive on the opportunities that we can extract from the tokenization of the assets, not only ETFs, of course.

The next question is from Alberto Villa of Intermonte.

I was wondering if you can provide us with the figure for the advanced advisory revenues for the first half of 2025, and I've seen advisory fee assets sales growth still quite positive but declined year-over-year. I was wondering if that's due to the fact that the penetration is starting to increase. So how is the outlook in your view for the net sales under advisory fee going forward? And the second question is on the scenario for recruitment. Maybe if you can provide us with an update on the outlook for the industry and for Fineco in terms of how it's going and if there is any pressure you see on the market on that point on that side?

On the advanced battery revenues in the first half, the growth is clearly continuing. It's -- so we expect that this to be the case. So the main driver on the asset under management is going to remain driven by the advanced advisery platforms and also the building up the uses of ETFs inside that. And together with the extremely successful solutions provided by Fineco asset management that is incredibly consistent in capturing the emerging needs of the clients are transforming these solutions that are not available yet on the market. So the outlook for the -- so the outlook for the net sales is remaining extremely strong. We see the after [indiscernible] accelerating going forward, thanks to the positioning and in the positive macro environment catered by shorter rates at the role and the head cool that is shape. On the recruitment, there is no change, particularly significant change on the horizon. The situation is remaining pretty much unchanged. We have part of the industry that is characterized by an approach in which very aggressive in which they are -- clearly, the model is the model is based on overpaying financial planners for [indiscernible] in joining in. And clearly, this is that it is translated in the overcharging clients or going to after let me say, a little bit question about market practices in order to maintain a decent they are a decent payback period market. Clearly, this is not our model. never has been our model because always we consider this approach in which the growth is mostly driven by aggressive recruiting as not sustainable. And now considering what's going on in terms of change of the behaviors by clients changing the trade market, this is even less sustainable. So our recruiting is continuously focused on taking onboard people that they are really convinced that the future of this industry is going to be a future which we to go end-to-end with the evolution of the market. which fairness, transparency and convenience are going to be key in the client charges. And so we are absolutely progressing very well. Clearly, we are not interested in chasing at any cost, the recruiting of operation planes, that we are clearly extremely interested in keeping on hiring and preparing young financial planners for the future job because the One of the main challenges for the industry is the aging of the financial climates. And clearly, for the market is extremely heat to understand which kind of strategies managed by the different companies. because the higher the average hedge of your financial planners and the more means that you are relying on a aggressive hiring and of hold financial planners. And the younger is the average age of financial planners and it means that clearly, you are moving to the future. So this is more or less [indiscernible].

Okay. Sorry, if I come back on the advanced advisory fees, you cashed in the first half. Do you have any euro million number that -- to share with us on that?

No, we are not sharing these numbers.

The next question is from Christiane Holstein from Bank of America.