Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Banca Generali (WBO:BGN, Financial) reported a strong first half with net profit reaching almost EUR240 million.
- Net interest income improved year-on-year, with a robust second quarter contributing EUR78 million.
- Total gross fees increased by 7.5%, driven by all major revenue components.
- The company saw a significant increase in assets under management, reaching EUR99 billion.
- Recruitment efforts were successful, with 94 new colleagues joining, including younger talent.
Negative Points
- Non-operating charges increased due to higher contributions for bank resolutions and insurance provisions.
- The cost of funding rose to 1.19%, with client costs averaging 0.88%, potentially impacting future profitability.
- The company faces competitive pressure in the market, particularly in the remuneration of deposits.
- There is a potential negative impact from Basel 4 regulations, which could affect the capital ratio by more than 100 basis points.
- The tax rate is expected to normalize to around 26-27%, up from the current below 25%.
Q & A Highlights
Q: What is the allocation of your clients to domestic government bonds, and what effect might future placements have on your inflows?
A: The allocation to European government bonds is EUR10.4 billion, up from EUR7.4 billion last year, representing about 11% of total assets. Most investments are in short-term duration instruments.
Q: Can you share the year-to-date inflows generated by your initiative in Switzerland and the breakeven timeline?
A: We have achieved around EUR150 million in assets related to Switzerland, with expectations to reach at least EUR0.5 billion by year-end. It is too early to project breakeven, as part of the revenues will stay in Italy.
Q: What is the expected impact of Basel 4 on your capital ratio?
A: The major impact is on the requirement of operating risk, calculated based on gross fees. The net effect of the new regulation will be around 100 basis points.
Q: What are your expectations for net interest income in 2025, assuming a 100 basis points reduction?
A: We project a reduction in the range of 5% to 10%, depending on the level of interest rates next year.
Q: What is your outlook for recruitment and its contribution to net inflows?
A: We expect to close the year with about 150 new recruits, with recruitment contributing 20%-25% to total net inflows. The existing sales force's productivity remains strong despite some competitors' aggressive tactics.
Q: How do you view the current M&A landscape in the financial sector?
A: We are open to opportunities, particularly in private banking in Italy and potentially small targets in Switzerland. However, we are focused on organic growth and leveraging our existing strengths.
Q: Can you provide guidance on performance fees and net inflows for July?
A: July started positively with almost EUR10 million in performance fees. Net inflows show some seasonality, but the mix remains very positive.
Q: What is the expected trend in risk-weighted assets and capital ratios for the second half of the year?
A: We expect stabilization in risk-weighted assets. We remain open to remunerating shareholders properly, depending on the economic and political landscape in the second half.
Q: What is the outlook for advanced advisory products and the mix of assets under investment?
A: We expect strong inflows in financial wrappers and in-house funds, with a stabilization in advanced advisory services. The 40% target for assets under investment is a floor for the foreseeable future.
Q: What is the rate on fixed-rate bonds in your portfolio maturing between 2024 and 2026?
A: We have around EUR2 billion maturing annually, with most linked to fixed-rate bonds. The exit rate for 2025-2026 is around 2%, and for 2024, it is around 0.5%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
