MLP SE (MLP) Earnings Call Transcript & Summary

Ladies and gentlemen, Good morning from Wiesloch, and welcome to our analyst conference. I also welcome the CEO of MLP, Dr. Uwe Schroeder-Wildberg; as well as our CFO, Reinhard Loose. Before we move straight into our business development, please allow me a brief comment on the agenda. Following the presentations, you can ask your questions. You can always submit your questions during the presentations. [Operator Instructions] And now to the exciting topics, I hand over to Uwe Schroeder-Wildberg. Please go ahead.

Thank you, Frank. Warm welcome from my side to you ladies and gentlemen. It's a pleasure to inform you about our business year 2022 and speaking with you about our forecast and our planning up to the year '25. We are looking back on a satisfying business year 2022, a year that burdened us challenges in historical dimensions. We altogether were faced with a war in Ukraine, geopolitical shifts, energy availability question, rising prices of energy, problems in global supply chains, come back of inflation, fast and significant rise of interest rates. And during this remarkable year, MLP again proved its relevance for our customers, and again its resilience. Total revenues increased to EUR 949.1 million. We again demonstrated broadly diversified revenue structure, and as a newcomer, after 10 years of rather poor banking business, strong interest rate development. Even wealth management, and as you know in detail, after difficult capital markets demonstrated strength with successful investments of client funds, reasonable good net cash inflows and for sure burdened by what we have anticipated at the beginning of this year, a reduction of performance-based compensation after a record year -- extremely record year we had in 2021 and even for sure also in '20. Despite all that, so this market changes and challenging framework conditions, earnings before interest and taxes, EBIT came up to EUR 75.6 million after the EUR 96.8 million last year, again also heavily driven by the performance-based compensation. And perhaps as a better comparison, the EBIT of '22 of EUR 59.4 million. And overall, we remained within the forecast corridor we announced 1 year before. Due to that and due to the business model and due to our confidence about our future development, the Executive Board proposes a dividend of EUR 0.40 per share, which is more the higher region of our pay-out ratio. That means also that the dividend in euro cents will remain stable compared to '22. And we will see in the next minutes that besides that, the strong fundament, we have built also significant and interesting growth potential for the future. The challenges I spoke about will not diminish. They will remain. And just to highlight some few aspects, we are all aware that international, political and trading relation are changing and are getting realigned and we should also be aware but -- that we have still historical dependencies in extreme dimension, just to look on the left side of the slide, the dependence on China in questions of solar waivers, wind turbines. Rare earth elements, it's very clear that we are still very dependent and we are also dependent that we find good, good ways out of situation that we have today. And that is -- when I said this, it's also very clear that we are doing that worldwide in the situation where our and the next 2 generations main big task is the question of decarbonization which requires all focus, all energy and immense, immense dimensions of innovation and new technique to cope with this very important but also big requirement. On the other side, we see that innovation technology is going forward, especially automization, artificial intelligence, we see that innovation cycles are shortening. That means also that there are new challenges, on one hand, but this is our result. There are much more opportunities to some extent, also huge opportunities also the coal wavier requirements which are coming up or came up due to demographic issues and cost inflation and whatever, automization will be also one of our answers to all these challenges in the future. And overall, and this should be also the main message coming from this slide, in such a world where so many new developments, new challenges, rebalancing of relations, a diversified business model is key, diversified model, especially with further growth potential. And this is what we have established in the last 15 years. We established the group with very strong customer-focus brands with leading positions in their segments, which is in the meantime clearly visible in the allocation of revenues and step-by-step with growing importance and the steadily growing synergies between components with partners in the MLP Group. Just give you 2 examples, for example, cooperation between MLP and FERI, when MLP advisers have customers with bigger volumes to invest, they're able to ask FERI colleagues for participation and cooperation. So for example, we reached a new peak in the meantime, out of that with EUR 0.5 billion of assets which have been won and are administrated together with MLP and FERI over next huge potential between FOM and TPC, both working in a very good position in the German SME market, and for sure it's clear that we've tried to focus and to work on both customer groups on the same time. These examples, there are many more demonstrate that our unique network offers very interesting opportunities to expand our services to our customers. That means also that on one hand the personal business will be very relevant and also what we were willing to invest. For example, the ongoing education of our people, our advisors, and for sure, we go ahead with strong initiatives in the field of digitalization and IT overall. Very few examples. I will come back to that after Reinhard Loose give you more details into the world of figures. Examples, like our investment in the startup named pxtra and the corporate benefit segment. Our developments for our direct brand MLP Choice, for example, so that means all these digital solutions with new techniques, good spirit, entrepreneurial spirit, but very important also backed by the strong MLP network. Before I hand over to Reinhard, I would use the opportunity to thank the whole MLP team advisers, employees, overall more than 4,000 people who did an excellent job in this extraordinary challenging year together with my colleagues and the Board, very proud and thankful and grateful. So now it's time for the CFO.

Thank you, Uwe, and a warm welcome also from my side. Total revenues rose to EUR 949.1 million in the last financial year, which represents an increase of around 2%. Revenue from commissions and fees was EUR 842.4 million, while revenue from the project business and interest income both recorded a significant increase. When broken down by consulting fields, we can observe various revenue developments. In real estate, the project business was able to more than compensate for the market-related decline in real estate brokerage. As such, total revenue of EUR 88 million was recorded here, albeit with declining earnings. In loans and mortgages, the drastic rise in interest rates encountered during the year had a strong impact. Consequently, revenue declined to EUR 22.3 million. As anticipated, wealth management revenue also suffered a decline. Indeed, as a result of the negative capital market development, just under EUR 6 million in performance-based compensation were recorded in '22, following around EUR 67 million in the previous year. Successful development was recorded in investment consulting at FERI. In 2022, MLP Group recorded wealth management revenues of EUR 316.5 million. Wealth management continues to make the greatest contribution in our broadly diversified revenue structure. Disrupted supply chains, the energy crisis and the inflation trend all had a negative impact on old-age provision consulting. Companies displayed reservations in terms of expanding their occupational provision while private clients were more hesitant in reaching decisions regarding long-term provision contacts. Nevertheless, MLP still recorded strong demand among clients for occupational disability policies, often in combination with initial old-age provision components. Despite all the negative external effects, MLP generated old-age provision revenues of EUR 228.8 million. Health insurance revenue rose slightly, while non-life insurance revenue enjoyed a significant increase of 17%. The first-time consolidation of the new companies of the industrial broker segment acquired in the year '22 also had an impact. DOMCURA and MLP's private client business also enjoyed positive developments. We're able to record a particularly strong increase in the interest rate business at MLP Banking in the last year. The normalization of the interest rate level is having precisely the opposite effect to mortgage lending and real estate here. To-date, we have had to pay negative interest on deposits at the Bundesbank. However the situation has now been reversed, meaning, that we were able to record a year-on-year increase in interest income of 68%. As such, what was previously a burden has now become an additional stabilizer. As we always do, let us now take a brief look at the key figures in the MLP Group. Despite, the pronounced declines observed, the capital markets at EUR 54.3 million, asset under management remained virtually constant relative to the value recorded both at the end of the previous year and the previous quarter, the latter of which was EUR 54.4 billion. More than ever before, MLP Group is now operating at high level with renowned private banks. With our investment of client assets, our colleagues from FERI successfully met the challenges associated with the annus horribilis on the capital market and reached a standard securities account compromising 60% U.S. shares and 40% U.S. bonds recorded its worst ever performance the post-war period. Multi-Assets is the keyword here. The successful development of the MLP Group is also reflected in other key figures. The non-life insurance portfolios we manage, rose to EUR 632.2 million as of year-end. MLP Group has long since reached the dimension of a medium-sized non-life insurer here. Growth was also recorded in terms of client numbers. The MLP Group was serving 569,200 family clients as of December 31, 2022. The gross number of newly acquired family clients in '22 was 90,200. The number of corporate clients rose to 28,400. We were also able to increase the number of consultants in the MLP Group to 2,100. This reflects our successful persistent recruiting above all young consultants in an employment market that is proving challenging for all companies. Since the young segment was established back in 2017, the total number of consultants working for MLP has risen from 1,909 to 2,100. This brings me to our EBIT for the financial year 2022. Despite the particularly difficult framework conditions caused by factors including Russia's invasion of Ukraine, a sharp rise in energy prices and spiralling inflation at EUR 75.6 million, we were still able to record earnings within the corridor forecast for '22 of EUR 75 million to EUR 85 million. Alongside the aforementioned decline in performance-based compensation in the wealth management, which can be attributed to poor capital market development, negative market and valuation effects also served to dampen earnings in the real estate business. Delays in the project business were one key contributing factor to this. We also increased the risk provision in real estate as a way of catering to the significantly altered conditions being faced by DEUTSCHLAND.Immobilien. Group net profit was EUR 48.6 million. Shareholders equity rose to EUR 525.5 million as of year-end. The core capital ratio was 20.1%. The net liquidity of MLP Group was EUR 142 million at the end of the year, which once again represents a very solid basis. The satisfactory business development recorded by the MLP Group, the aforementioned difficult environment, our strong economic basis and our confidence in the future are also expressed in the dividend proposed by the Executive Board, which is set at EUR 0.30 per share. At 67% of net profit, the pay-out ratio is in the upper end of the announced corridor. We have also launched another share buyback program. Since the January 2, 2023, we have acquired 605,000 shares, the total value of around EUR 3.1 million via the stock exchange, which we are assigning to our participation program for MLP branch office managers as well as MLP consultants. By taking this step, we are keen to further strengthen the collaborative component in our business model. Finally, please now allow me to briefly discuss our share price. Following a price increase of almost 60% in '21, a significant decline was recorded in the last financial year. MLP share was unable to avoid effects associated with the collapse of the stock markets. However, the current price level does not reflect the real value, or true potential of the company. I will now hand over to Uwe Schroeder-Wildberg, who will talk a bit more about how we are further realizing this potential in the MLP Group.

Thank you, Reinhard. So to speak about capital markets and share, also we can come to this very important topic and we are facing investors and potential investors acknowledging our leading role in all questions of sustainability we worked out and derived in the last years. For example, our carbon-neutral position since last year for the whole MLP Group, and as a new added value to our customers, we have developed extension of our product partner selection process towards the criteria of sustainability, together with Assekurata rating agency. We developed an evaluation of life, health and non-life insurers. For example, for the life sector, 26 life insurance companies contributed with their answers representing 60% of market share. What you're realizing is various intensive activity in these fields concerning sustainability, location, industry management, product management and especially capital investments which is for sure has been also one of the hot topics as a contribution into a world of less and less carbon usage. And what we are offering now and this is very specific for MLP, we can help -- we don't deliver aggregated results just very much more important to offer individual help for customers and we see increasing demand in discretion and that means we have now the knowledge for also insurance world to help customers to make their decisions up to their preferences, their individual situation. This is quite unique and we assure that in this way also contribute to a more and more step-by-step, more and more sustainable world. And for sure, we keep all sources backed, our results to insurance partners to help them also to develop and improve their position. So that means also here the next unique step of MLP. Besides sustainability, we have invested a lot in our digitalization strategy. And this -- one of the next steps was our stake in a startup called pxtra, working on corporate benefits, what has been developed and will come to market this year is all-in-one digital solution for selection and management. They're important of additional benefits for employers could be, for example, health programs, allowances for food or for driving to the company and going back home all of that stuff. Employees can compile that package of benefits, which perfectly suits to their own individual needs. We have a stake of roughly 79%, so the clear majority. That means also we integrate our customer contact and we've just seen the big corporate customer base we have in the meantime. And additionally also we bring the services we're offering with TPC, our broker for corporate pension. So it means here the offering we have in occupational pension provision, but also occupational health insurance to name 2 examples. Very important is for companies and employees, that is the integrated process coming from the budget up to payments due to the salary and wages process, which is part of our story. And overall, this initiative is the next clear signal and part of our corporate customer strategy, which is getting more and more relevant and successful. The next important example for our digital offerings is our new direct client support under the label of MLP Choice. We're addressing here those customers who are not in a close relationship with an adviser for whatever reason because they try to do other aspects of their financial question on their own or that's not relevant for them for example. So in this sector, we are mainly concentrated, mainly -- not overall, but mainly the first-hand on the non-life insurance sector. And very important, it's heavily technology-driven. So that means automated purely digital service and heavily event-driven. That means, for example, if -- easiest example, kids getting the age of being allowed for driving cars, getting driver license, that should pop up an offering to include the kid in the car insurance and to avoid any risk for the customers, just one example. And for sure also, if customers realizing that they need more, so coming back to a real holistic advice, it's always possible to go back, extend to an advice process with MLP consultant. And for sure also on the left side if -- and this also part of the life experience. We have all, to some extent, digital is nice but sometimes you're stuck in the process you need help. And the good thing here is that MLP Choice can come back to what we already also established with MLP dialog in north of Germany, a call center with also digital knowledge to help if necessary. So we combine digital approach with FinTech thinking here with our personal contact opportunity and possibility and the direct contact if needed here. That means overall, we are clear and very convinced that there is a very, very competitive offering compared to the existing fintech's and InsurTech's using modern digital solutions and this is very important is also that this thing to factor and the power of the MLP network. Another spotlight to our activities is the MLP School of Financial Education based on our well, well established corporate university. And you know how important education and learning is in our company philosophy. We have launched the new label -- MLP's School of Financial Education. We released MLP financial literacy report together with, which demonstrate unfortunately major gaps in basic and financial knowledge overall population, but even the group of financial decision-makers, they can see that also in the slides how important people think financial knowledge is and how small portion is of those people and the population who really are interested or even very interested. So there's a big mismatch exactly here. We are poised MLP School Financial Education, which offers now and the first time we started last year, also for the public, for example, expressed from a financial services sector for companies, entrepreneurs. Companies, for example, if I can ask for program for leadership circles or for a broader base of employees, we will customize that. And for example, last example is health professionals. [indiscernible] and here also is very clear. But the synergies are as you perhaps know we are one of the bigger players for the medical market. So we have more than 110,000 medicines already as customers of MLP. And for sure, it makes sense also to give them the offering of further education, financial education or business essential, whatever is needed. Very important. There's no offering of advice. The participants have to pay for it, and very important for sure, it gives opportunity for participants to experience a strong competency of the MLP brand. Before coming to the forecast and our mid-term plan, I would like to comment on the current discussion, the future of old-age provision. First, you can see that on the left side, the demographic shifts, no surprise is going on. So if you look back to the year '62, the year after the second world war, the pay-as-you-go system in Germany has been established. We established. There was a region in the end of 19th century. The relation between engineers and employees was something between 1:6. So 6 active people working, covered retirement of one. In the meantime, we are the level, no surprise. Even in these days, where research, which expected already what happened later, we are now at a level of 1.1 to 1.8. Shortly we'll be at 1, 1.5. So everybody should be clear that it does not work. So all the discussions are coming up, it's working. The reason why it's still working is illustrated on the right side. It's working that it's driven -- in the meantime by 30% of the system by tax. So tax payments are allocated to this pay-as-you-go system. Nearly 30% of the Federal budget is already allocated to the pension system. And this is just what it is today, and it's clear that the steps which have been made in the past, pension reforms from '14 to '20. And the latest pension reform, so-called German double stop line would end up and this is the research of [ IIFA institute. Would end up if it wasn't 50% ]. We have exposure of a federal budget of 60% of budget would have been allocated to the pay-as-you-go pension system. And I think this is clear already now, it's not possible anymore, and for sure it would be a real threat for the next generation because they would never have good possibility to cope with the requirements they will have in education, infrastructure and whatever. This is the truth, like it is, and is 100% clear it will come in this direction. So it means as a consequence, following the political discussions should concentrate better today than tomorrow on optimizing the existing solutions like research products and very good proposals in discussion to do so, strengthen occupational pension, for example. That means second private and occupational, old age provisioning is even more crucial for the future. And it means fairly, qualified advice is getting even more important because it's clear that in this sector of old-age provisioning, you need the personal advice and tools to think about the right level of saving, and this is on an ongoing basis. This is a clear consequence of the situation we have today. And unfortunately, it's not obviously the direction the political discussion is going on. That means also last point at this moment, the discussion about provision of commission would be fully counterproductive to the situation we have in our old age provision sustained at least in Germany, but I know also in the most parts of Europe. I'm very happy that after the proposals which came up out of the box which obviously based on research, which was not perfectly correct, I'm happy that it seems to be that there is strong headwind against these plans, so we are hoping that we are coming to a resolution which is positive for the question behind, that means we need good qualified advice and we already have in the market, for example, fee-based models, whereas the competition -- as an open market customers can make the choice. So we see no reason at all for the discussion we had and we still have for any provision of the regulation of commissions. Coming to the forecast, we cannot assume, very important, we cannot assume that the difficult market conditions we spoke about will improve suddenly. Nevertheless, we expect that we reach an EBIT for '23 between EUR 75 billion and EUR 85 billion, which is based mainly on assumptions that interest rate business is picking up, we will have a rising non-life insurance portfolio volume which as you've seen, is in good track. We have a growth in the industrial broker segment. Additionally, we see that our established young segment, we established that in 2017 on a new basis as you know, will further contribute, which developed very successfully. For sure we expect that we will keep our costs under control, as we demonstrated again the last year, in a pressing way, as I think. So this is our assumption for the year '23. In more detail, you can see, but if you go to the segments, starting with non-life insurance business here, we expect due to the experience we've made ongoing very positive development on an organic basis. We don't price any acquisitions in here at this -- in our forecast or planning. We are positive for the old age provisioning, because we see that after this very difficult year for companies, occupational pension business is coming up again. We see also good developments and, as I also mentioned, strong demand for private pension. So here we feel good, on track, and also expect strong business. We would expect from this point of view, that the interest rate business will have a positive development. It seems to be that we have not seen the last steps of the European Central Bank. Unfortunately, these steps came very late and therefore also quite dramatic. But for sure from in our business model is also to some extent very helpful. We are positive on loans and mortgages after the market came down significantly in the fourth quarter, after this decision of the European Central Bank. For sure, I have to mention here that, here perhaps some risks in our assumption, because we don't know how the next steps will be and what the effect will be. On the other hand, we see that in our customer groups for sure there is a demand to buy houses for own usage or as an asset. So that means also for sure we have a specific also view as a player in this mass affluent sector. But for sure, have to -- you should all be aware that there are some risks behind that. The same for the real estate brokerage and development. Here also, plus after the last year was not satisfying. Yet, overall, it was okay. But we had also weak moments in the last year, especially in the later months of the year. And also here we have positive because we believe that the asset class, also -- inflation scenario should play also significant role. Again here, I should address the risks which are behind this assumption. We are neutral on wealth management. I can also say carefully positive. Carefully positive because MLP in the meantime is very well established also in this dimension and this segment, which is one of the key strategic questions for MLP, but it's a real holistic advice. It means also that wealth management plays a role. And as you heard in what Reinhard said, good net inflows is a demonstration that we're in good position. And also fair reason in the meantime, the excellent market position, with an excellent job last year, we should not just see the performance-related fees, which are never part of our planning. The key behind that is strong customer base, good inflow, strong position, for example, in the meantime in the sector of alternative investments, which is one of the key questions in these days for family office, but also for institutional investors. So we should benefit out of a strong market position. And last but not least, health insurance, neutral. Also here we are carefully positive in my words. There is no changing of market condition expected. Customers are sensible on discretion of health protection and health insurance. So here we should have a good comfort and a good contribution to our overall goals. Let me come to the mid-term planning. To remind you, this is for mid-term planning from last year from '22 to '25, now from '23 to '25. So we confirm it, is the good message, despite all this market turmoil and changing environment. So we want to come to EBIT between EUR 100 million and EUR 110 million. We expect the revenues to be above EUR 1.1 billion. The 3 blocks which are the key drivers to reach that from a business side is we want to increase the managed further -- assets under management further. We want to see sustainable growth and group synergies on an ongoing basis and truly we are much more confident in the meantime, that we should see strong growing in the non-life insurance business and you've seen the growth rates of the past. We'll come back to these 3 blocks in a second. Everything is based on good cost efficiency, which we are used to and we are quite successful to do so. I spoke about automization, artificial intelligence will be the next driver also to be even more better and also to cope with inflation pressure, which is also on our desk. And additionally, which is not planned in these figures, M&A activities where it makes sense. As you know, in these days we are focused to build up a strong position in the brokerage of industrial insurances. If you take a further look into the 3 blocks, we expect an increase in assets under management, coming from EUR 54.3 billion to a range of EUR 62 billion to EUR 68 billion up to '25, using our strong position going ahead with our customers, getting new customers. That would mean in growth rates, we are coming from 11.5% from '19 to '22. So we are speaking about growth rates between 5.5% and 7.8% per year. So this seems to be for sure also depend on market condition, reasonable to reach this level. And just to bring it back to your mind, for sure this would mean that the baseline for performance-based compensation will be improved step by step. Again, we don't plan it, but for sure, it's clear that there is a growing potential because of volume, the basic volume is expected to grow. We expect sustaining growth. Secondly, in our -- all our other sectors of our group. I spoke about occupational pension schemes, there should be growth. We are very positive on our young segment, which has been established. We delivered exactly what has been planned. In 2021, we made the breakeven. So we expect here further growth and for sure all the other groups should be on track also in the future. And thirdly, now even more prominent, the growing non-life business, which should bring us to premium volumes in '25, between EUR 730 million to EUR 810 million. Again, here we discuss that in growth rates. We came from growth rates of 16% from '19 to '22. Growth rates for these assumptions would be 4.9% up to 8.6%. So it means there is some discount on it due to the uncertainty future has always, but for sure you see also that we're coming from very, very strong growth track. And we will go ahead. Organically, this was always the key in MLP's private clients business at DOMCURA, and for sure also in the new FOM Group and, by the way, because it's one of our youngest parts in the groups. And also, as you know, acquisitions are necessary and makes sense, especially in the way we are doing that, but also to some extent critical, because new roles are coming together. Customers could be uncertain what happens. But again here we demonstrated FOM delivered a strongest year in the history last -- last year, stable customer base, new customers. So it means we are very, very good, on track and we are very convinced that this new sector will bring us a lot of fun in the forthcoming years. So this overall should be the track of the next forthcoming 3 years. And now to summarize, we demonstrated that we are resilient, that we are well poised, that we are relevant, as I mentioned, to our customers. And so that means also we used the time to further optimize our positioning with the new initiatives. I just gave you some examples, that means we are always -- we are on track and we see our potential and we work consistently and heavily motivated now to make this next step. The stability has been proven. This is a good thing in bad times, that you can see that it really works. It's more than paper or PowerPoint. It worked again, and it's not just working. We see our growth potential to derive from a business model at all. And what I mentioned step by step in a growing group with the strongest synergies we are trying to realize and where it makes sense for customers and also for sure for the company. And that means for '25, so we have consistent progress along the chosen path. And we want to head towards the next level in earnings growth, which should be the level between EUR 100 million and EUR 110 million. So we confirm what we said 1 year before. And I think this is a good message because nobody spoke 1 year ago about what are speaking now about. Thank you very much for your time and your patience, and we are now happy to answer your questions. Thank you.

Thank you, Uwe and Reinhard. [Operator Instructions] We will start with the first question from NuWays, Mr. Wendisch.

You said that you report the strong intake of new consultants and you mentioned that is mainly because of the acts that is also attributable to the new MLP training program. That would be my first question. Shall I do them all at once now? Or would you like to answer them…

All at once, so it'll give us some time to think about the right answer.

Okay, no problem. If you look at the segments, I mean the overall EBIT margin went down a little. But if you look at some particular segments like MLP finance all the more banking or even [indiscernible] if you take our performance fees, you managed to grow the EBIT margin. I would like to know what were the drivers of that EBIT margin growth? Was it like cost cutting effective or other margin drivers? And if you could provide some color on that, it would be very helpful. Next question is on the wealth management part. You reported that valuation -- negative valuation effect from the capital markets was compensated by net cash inflows. Do you have a rough number for us? That would be really helpful. Next question is on the share of recurring revenues. You reported 64% of recurring revenues for full year '22. I would like to know the future, if you calculate with an increasing share of recurring revenues or should it rather stay on that level? Next question is on old age provision. You said in 2022, it declined a little and now you guide positively for 2023. What makes you feel so positive about the sector? I mean we know the trend that the state pension is underfunded. But what makes you personally or MLP so confident that you will grow in that field. And some color on pxtra would be helpful. So my next question is on pxtra, and I would like to know if it's already profitable and how many customers you managed to acquire since you took a majority share. Now I think all of the other questions have already been answered, so I'm done.

Thank you so much. I will start with number one, about the advisor base. The growth is not in relation to the new training model, which will be started in mid of this year in July. It's just a result of our ongoing initiatives to convince people make contact and convince people that we are offering a very unique business and top profile, in our way of interpreting the advice as you know, and this is result. We started in July and then perhaps -- and I think we will at least in latest November, we'll give you some more details and impressions how it works. What I can say today is that the first -- out of the first interactions, it seems to be quite attractive and reasonable and makes people, the entry in this world easier. So young candidates, for example, can also be sure that the first 3, 4 months are saved and they can concentrate on the first education and whatever. So it seems -- so first, we actually have a positive, but much too early to say something more in detail. I take number 5, old age provisioning, why are we positive. We are positive because we see that companies have to go back also to this topic after they had to deal a lot with energy prices, energy availability and whatever, but for sure here with the situation coming down to some extent. On the other hand, it's a hot issue to get qualified people. So it means old age provisioning is for sure also a core part in discussion. And this is what we are seeing. We see also that from a political side, there's a strong position that corporate pension is a key pillar in a reasonable old age provisioning system. And also, this is part of our conviction and also what we have seen so far goes in the right direction and the private pension, we see for sure, again the young segment. It means if we get new advisors, we are getting more customers again. And for sure, it's natural that for the young customers, especially old age provisioning, disability protection are key. And here, we have seen also a very good movement and this is the reason why we are positive. For pxtra, it's little bit early. So we are going live in the next few months. We have a beta version to test it. And so, it's still too early to speak about customer, real customer success, but I will give you an update latest beginning of next year. Perhaps, also we have some indication already when we speak in November about 9 months results. I hope -- this is okay for you at this point of time.

Then I would try to take over with the other questions. The net cash, the net inflows, overall in last year were at around EUR 2.7 billion. This was I think in this year quite significant number. Then you ask concerning the EBIT development or EBIT margin in different segments and you were mentioning, our financial services sector, they are the banking and the FERI. Obviously, there are many, many reason for that. I will just give you the main drivers there. In the bank, it's very easy. It's indeed the interest income. There will be change in interest, interest rates, and therefore, you see that we generated quite interesting result there from the interest margin quite opposite to the past. In our financial services sector, I think the main driver was cost, especially in the -- our IT sector. We did some changes, some -- we had a new IT strategy. And on the cost base, we were quite successful there and this helped us reducing the cost in this segment quite significantly. Additionally, we had some other incomes, which we can describe perhaps later. And then in FERI, I think the main reason why despite the decline in performance-related income and the result was quite good is that and fairly we continue with our shift of assets towards alternative assets and these alternative assets definitely have a higher margin than others and therefore overall we managed the margin in FERI also quite good. This I think was question number 2. And then you had a question concerning recurring revenues, what's our idea or plan there to be quite honest or to be with you comfortable with the ratio we have right now of something around 60% is a good thing for our business, you also need new business and we have inflows, we have income where we only have one-time income, like for example, this performance-based income and it definitely also -- I'm not unhappy if we generate performance fees in the future. But obviously, as you also know that our interest is to continue with the recurring revenues and therefore, that was the reason why we feel good with this ratio something around 60%.

The next one is Philipp Hassler from Pareto Securities.

I have also a few questions mainly on Q4. Let's start with the net interest income, which was very strong in Q4, EUR 9 billion. Could we extrapolate this for the current year or was there some extra effect included, or do we expect to pay higher interest expenses this year and so that's maybe the reason why we can't take this by [ 4/4/2023 ]. Then minorities, they were quite high. I've calculated correctly in Q4, maybe you could elaborate on this. And then the other revenues were also quite high in Q4, maybe you could also give some additional details on this. And last but not least net liquidity was down by EUR 70 million year-on-year to EUR 140 million, maybe you could also elaborate on this a little bit. I think the acquisitions could be the reason for that, but yes happy to hear your explanation.

Thank you for your questions. Yes, interest income in Q4 was quite positive. I think the main question there is, will we continue or will be able to continue this high margin on Q4. I'd like to comment too much on '23, but at least in the first quarter, I think we can continue on this as you can see -- if you see what people get right now, they bring their money to the banks, which is significantly lower than what the banks receive for example at the ECB and therefore, we will also see a quite interesting -- interest income in the first quarter of 2023 and for the next quarters, we will see our plans there a little bit more conservative than what we saw in Q4. I will take the net liquidity first. The net liquidity, why it went down. 2 reasons for that. One reason you mentioned already, obviously the acquisitions we did, for example, during the year. We acquired in our Industrial Broker segment, another company. This was reason number one. And reason number 2 was also that we injected some liquidity to the business of DEUTSCHLAND.Immobilien and this also reduced our overall liquidity. This also comes to the reason for let's say higher minorities and the Q4 results of DEUTSCHLAND.Immobilien were definitely not successful and now what we expected and in DEUTSCHLAND.Immobilien, we have a share of around 75%, and therefore, let's say the win on this case, the loss goes to minorities and that might be the reason. If I understood your question correctly, why the minorities area of our overall statement was a little bit extraordinary in Q4. And then you were asking why our other revenues went up so much. We were able to release some provisions which we had put for a legal case which in our position nowadays don't seem to be necessary and it helped us in our other revenues. Mr. Hassler, I hope this answered yours questions.

Yes, perfect. Maybe, may I ask a follow-up question, so that your CEO don't get too bored. So I have question for him as well. Mr. Wildberg, could you perhaps comment on your thoughts on the -- and I don't want to say possible, but the threat of the EU ban on commissions. How do you see that in general maybe I would be interested to hear your thoughts and what the impact of such a worst-case scenario would be on MLP?

Yes. So I made some comments in my speech, as you just have heard and sure, we were to some extent surprised because it came out of the box, very surprisingly. Obviously, also not very well prepared as we all know, in the meantime, because of basis of knowledge was obviously not completely accurate. Obviously, also experience which have been made in U.K., for example, where we have official statements of FCA about the success or non-success of the ban of commissions, which took place in U.K. long time ago, also very clear, for example that result was obviously -- that advice is getting more and more expensive and more and more rare, and not available anymore for especially for both groups of population which are financially not so strong. So obviously, this is all neglected. Seems to be some problematic view on that. You've seen also read in the public all the headwinds, which came up with good reasons as we see. We also contributed in our discussions with the political side. We will be also in the next study. We supported coming up in the next days to view on that also from an overall market perspective and question of competition. And so it means I'm much more relaxed in the meantime than I have been some weeks ago due to the development, and this is what I can say today. Overall, you know that we are not dogmatic. We're also offering fee-based advice, for example, 10 years ago we changed our model in the wealth management to pure fee-based model. We give back kickbacks to customers. That's not the question. But we're clearly convinced that into order for provisional markets, you need commissions, otherwise there would be no supply and offering anymore or not sufficient offering in this sector. We also are in discussion for sure with the national authorities about that -- even though the question of some restrictions in the market are dangerous because every player is on the old basis, we are completely different as broker to tight agent for example. So it means any regulation with some flat commissions or whatever in discussion would not be appropriate. So but I'm also here quite happy. Perhaps, you also have seen that Baffin changed view, obviously. We have official statement now that the ban of commissions even capping it seems to be not the right the solution because the market is so different. And so we are supporting the idea which also seems to be more and more prominent that we have a close look on the effective cost of contract. I think this is a fair approach. We are used to in other segments like mortgage or wealth management or whatever. So effective cost, I think a right viewpoint and we have seen perhaps also the Baffin survey about that's what our average costs, which are at 1.9%. Obviously, there are some players obviously also being higher in the pricing. I can tell you that we are low in our pricing than the average. So we are very relaxed about that and I will ask Baffin always then go to those players who have a higher prices and maybe create activity there but not -- don't blame the overall market. And I think this is also the key, because also this brings uncertainty also to shareholders. We have debates like that of ban of commissions and what it means for sure in the last part of your question, as you know, 10 years ago, it would have been a catastrophe for us with 80% revenues from old age provisioning. We did a lot to balance, helpful also for this question. I would not calculate anything now because it's just theory. But if something should happen, again, I would say, it would be, we have to -- we would have coped -- we have to cope with that. But here, I think the strongest position to do so, it would be for the rest of the market a real trouble. But this is from today's point of view. I would not expect this from what I know. Did that help you?

Yes, very much. Just on such a possible ban, this would only apply for a new business or that's what you understanding?

Yes, it would be the understanding, yes. Exactly, my or our understanding. Okay. You never know. You never know. But again, again for everybody, we can be much more calm than we thought about it 3 months ago and the surprise came up. So a lot of things happened. It seems to be some, some very good movements and rational thinking. And for sure we -- also we -- we fight for more quality in the segment, but it's the wrong decision to solve this with the ban or further regulation of commission. There is not the real solution, and we do what we can do to work for it, you can be sure.

The next one is Fabien Le Disert from Kepler Cheuvreux. Okay. Mr. Le Disert, your microphone seems to be open. Okay. Unfortunately, he can't hear us. So maybe you can write your questions in the text field? I think we just wait a few moments because there are no other questions right now. Okay. Now we got the questions and I'm going to read them out. The first one is at first glance your 2023 EBIT guidance might seem conservative. It is the same guidance as in 2022, which was a challenging year. Do you expect to reach to upper end of the range or do you think macro outlook is still unclear and warrants some caution. This the first question. Second one is on performance fees, do you expect -- what do you expect for 2023 after a very difficult 2022, maybe double digit figure? And third question, the final one on top of the dividend policy, what about a potential share buyback program if you think that MLP is undervalued?

Yes, this is Reinhard Loose. I will start with the first question about where we would see us at the end of this year, more at the upper end of a guidance. We'd be happy to do so. It's also the reason why we announced this range. But again, for sure, we have to see also the challenges which are still in the market. Nobody knows exactly when -- which defects will be also worked in making some example for sure, everybody has to cope now with the new situation, which was a normalization of situation of interest rates again. But for sure, it makes -- it's necessary on the customer side but also on the buy-sell side to cope with this new situation define the next balance. And so it means nobody can say exactly when it takes place. It will take place and this is the reason we have still this range of 75 to 85. But you can be sure that we will do everything. For sure, it will be very happy to deliver at the end result, which should be more in the upper region at least of our range. This is what I can say today and hopefully you'll see also that we have a strong ambition to do so, but again, we have to also speak about risks which are imminent in the market and we cannot put out of viewpoint.

Okay. Then, I will take over for the second question. You asked about the plans for our performance fees for 2023. In our planning, we have a medium-sized single-digit million euro amount for this, obviously, there are opportunities. There are also risk. And let's see how the capital market will develop and our performance in comparison to the capital market will develop. But, therefore more or less, it's the similar figure than what we've seen in '22. And your last question is on top of the dividend policy. What about potential share buyback? First of all, I think our payout ratio is quite attractive. Our dividend ratio at the moment more than 5% almost 6% is quite attractive. That means that we feel quite well positioned there, on the buyback, we are a little hesitating. First of all, because I think with the dividend payout quite a lot and there are, let's say 2 second reasons. Now reason number 2 is that overall, we are a regulated company and the regulator looks quite intense to our equity. And the question of buyback programs, there is -- it's not the most, the best seen activity you might do, number 1. And number 2, obviously, we'd like to continue with investments via acquisitions, via the real estate sector or investments in IT and therefore, we also continue to be happy to have some liquidities on our book. And especially with the look back into the last 12 months, I think it paid out that our cash ratio was quite good.

Thank you, everyone. It seems as we have no further questions. And this brings us to the end of our conference. Should you have any further questions later, please contact our team directly. You can find a recording of our conference on our website later today. And now, we bid you farewell and wish you a good day. Goodbye.

Thank you.

Bye.