Banca Generali SpA

MIL:BGN

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Banca Generali First Quarter 2023 Results conference call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Gian Mossa, CEO and General Manager of Banca Generali. Please go ahead, sir.

[Gian Mossa, executive]

Good afternoon, and thank you for participating to our first quarter result conference call. Before starting, I would like just to inform you that we have changed some slight just to better represent the business model of the bank. So the first quarter was pretty impressive on different aspects. First of all, the total assets of our clients achieved the highest level ever and basically thanks to an increasing productivity of our existing sales force. On the financial numbers, pretty impressive, the new eyes of the recurring fees and recurring net profit. Thanks, of course, to very strong net interest income, but also sticky recurring revenues, thanks to diversification and cost control. The capital ratios and the liquidity ratio strengthening in the last 3 months. And even more important, we are very confident to achieve to deliver all the targets of our 3-year business plan. Page 4. Net profit closed at EUR 83 million, of which [ 7 ] recurring net profit, while variable net profit closed at 6 million, so a positive contribution in terms of performance fee.

Let's now go through line by line, our P&L, starting from Page 5, net financial income. Net financial income closed to EUR 75 million of which EUR 71 million comes from net interest income with a margin of 1.8%. While the trading result stemmed stood at EUR 4 million, in line with the same period of the last year. Page 6, total gross fees slightly down. We closed at EUR 243 million, of which EUR 238 million coming from gross recurring fees. And as I mentioned, we start to receive some performance fee, EUR 5 million. This is thanks to our flagship fund is in-house Flex board fund that is at the iWatermark level, and the total assets are at above EUR 1 billion. If we go through the total growth fees, we see management fees down 5% and is all driven by a reduction of average managed assets, while margins are keeping pretty well at 1.43%. Pretty impressive at Page 8, the result of other fees. Other fees closed at 58.3% or 10% higher than the same period of last year. Thanks to the contribution of all the major components. Entry fees, 10.7%, thanks to higher volumes in primary market, structured product certificate.

Brokerage, impressive acceleration of retail brokerage and contribution at 11.6. Advisory fees, we achieved new eyes, and we will dip later, EUR 9.4 million, and also other banking fees well supported by expanding volumes. Focusing on margins, you see that both measure. So the overall margin and the margin excluding the more cyclical components are -- have been steadily in the last quarter. Moving on, on the cost side, Page 9. You remember that we decided to show explicitly the cost of the payout on net interest income. It accounts for EUR 2.5 million, while the total fee expenses for revenues, incentive scheme and third-party payments stood at EUR 122.4 million or down EUR 2 million on a year-on-year basis. In terms of payout ratio to the network, no news, good news. Everything is in line with our guidance. Ordinary payout of 35.6 incentive payout 10% and also the payout to third parties is stable in line with our guidance.

Moving on to the operating cost. You see the graph on the top of the page, some one-off, which is basically related to some M&A activities, some analysis, we run some potential targets that when we didn't go through. And then main street partners. Sales personnel costs are in line with some seasonality, but it's no news also from this side. Core operating cost closed at plus 6%, in line with guidance, including all the inflation impacts and all the projects that we are developing and including also, of course, the BG Suisse.

Overall, the ratios continue to stay at best practice level with the cost/income ratio close to 33%. Summing up the first part, we can say that the operating result, excluding performance fee, was very, very strong. Thanks to the increase in net interest income, sticky recurring revenues but also cost discipline. If we move below the operating line, the total nonoperating charges amounted to EUR 50 million or 2.4 million higher than a year ago.

Towards on the tax rate. Tax rate closed higher than our guidance, close at 27.4.This is basically due to major effect. The increase in contribution of net interest income and lower performance fee. But also in this case, we do expect normalization in the next quarters, thanks to a normalization of the market and so forth for the performance fee. On the balance sheet, you will see new slides. To show in more details our solidity and the strength of our balance sheet. Page 14, we start from total assets, and you see the trend in the last here, and you see also the deep dive on interest-bearing assets.

Overall, interest-bearing assets closed at EUR 15.5 billion or minus 2. And in terms of margins, you see the overall margins stood at 2.3 in with all major components, of course, increasing the contribution. So you have 2% for loans to banks and other liabilities, 3. almost 5 the loans to clients and above 2% the financial assets.

Next page, you see a deep dive of the financial assets. First of all, the trend and the breakdown you see the percentage of Italian gov bonds that is constant at EUR 5.4 billion or 47%. 22% of other goes in euro terms, and then you see significant contribution on covered bonds with very, very high rating. On the right of the slide, you see, first of all, that we have a very high-quality financial assets with almost 96%. That is eligible for ECB 96% equals to EUR 10.9 billion. And we have EUR 8.2 billion of high-quality liquid asset .

That number is pretty impressive. The duration is very low, and we have more than 50% of the portfolio with a maturity by the end of 2025. On the liability side, and I'm at Page 16. Here, you see the overall liabilities and the equity and then zoom on total deposits. Total deposits amounts to 15.2 or 2% lower than the end of last year, of which EUR 12 billion comes from client deposits.

Cost of funding closed at 0.5% with a cost of 0.24 for, let's say, clients and above 2% for deposits held by banks and institutions. Here on the right, you can see also some more information on our current account. First of all, the average client deposit balance stood at EUR 34,000 of which clients with more than EUR 5 million, the average is slightly lower than EUR 100,000 for [Indiscernible] client, the average is EUR 17,000. And even more important, the ratio of H2 LA on total client deposits stood at 68% that is probably one of the highest ratio in Italy. In terms of total capital ratio, all good news.

Total capital ratio stood at 17.1. Also once we have posted for this first quarter, 81% of net profit for the dividend policy. So we posted EUR 67 million for the dividend of this year. Leverage ratio 4.5 and liquidity coverage ration and net stable funding ratio definitely above the SREP requirement of 100.

So I think that the balance sheet represents probably one of the main strengths of our bank, very flexible, very liquid, and I say that we can manage the overall assets also to manage net interest income, and you will see in the business update some new guidance. Page 19, there is a new representation. First of all, on the -- at the top left, you see the total assets highest level ever. It's about almost EUR 86 billion. You see that the asset under measurement start resuming. So it's a little bit higher compared to the end of last year. And then you see the significant increase of asset under custody and the slight reduction in banking assets. At the bottom of the page, on the left, there is a new information that it's about the asset under advisory with an explicit fee.

You see that now advanced advisory account for EUR 7.8 billion or 9% of the total asset. But even more importantly, if you focus on the breakdown, you see that the orange part accounted for 9 or 3.9%, so EUR 3.9 billion of advanced advisory with the underlying invested in stock and bonds, so in assets under custody. And you see that this part increased by EUR 1 billion in 1 year.

On the right, you see a new representation because this is about all the assets in the bank with a recurring fee. So we have the managed solutions. We have the traditional life policies, and we have the part of advanced advisory with the underlying invested in assets under custody. And you see that the overall portfolio with an explicit recurring fee amount at 70% of the total assets. But in the -- say that in the business update, we will see some more information on that. Page 20, we see on the left, the asset management product, pretty impressive the result of the financial wrappers at the highest level ever, EUR 9.6 billion. And then we see a slight reduction in the, let's say, in the fund industry, in-house and third party. On the right, you see a lower contribution in terms of total assets of the insurance products, but also here, I will comment during the last chapter of the presentation.

Page 21, we have the inflows. We already said that the inflows are slightly higher year-on-year. Let's focus on the quality of these inflows. Of course, the major part comes from assets under custody. So it will be important to focus on margins on the asset under custody. The managed solutions accounted for EUR 400 million. On the right, you see that this EUR 400 million comes from financial wrappers and funds.

But you can also see at the bottom of the page, the net inflows on asset under advisory. They closed at EUR 300 million, of which EUR 400 million is an explicit fee on assets under custody. So if you want to work out the total of the net inflows invested in risky assets with a recurring fee, you have just to add these 2 numbers, 0.4 and 0.4 for a total of 0.8. Page 22, pretty impressive results. We are -- we have been increasing the productivity of our existing sales force, EUR 1.3 billion thanks to the implementation of some strategic projects we start to see some results for the project on the data, but we are just at the beginning.

So I'm very confident on the inflows, especially for the existing sales sports, thanks to all the projects that we are executing. If we focus on the recruitment, the net recruitment, the contribution was very low. Not for the part of out. So the phase that decided to leave the company because the retention is probably the highest ever. So we have just EUR 100 million of outflows, probably is the lowest level ever.

But for the recruitment for the [Indiscernible] in because, as I mentioned in the previous conference call, in this moment, it's very difficult to transfer portfolios with performance in the range of minus 10, minus 12. But the interest is pretty impressive. In terms of headcount, we have 29 new colleagues, of which 9 without recruitment package or talent the Junior face. 11 from banks and 9 from the secondaries. Page 23, we have also an update on the inflows in April. We closed the first 4 months with EUR 2 billion of inflows -- net inflows. Focusing on the right, you see that the Managed Solutions closed at EUR 0.5 billion.

If you look at the bottom, we have EUR 600 million under advanced advisory with the underlying invested in assets under custody. So it means that more than EUR 1 billion provide recurring fees with an underlying that is invested in risky assets. In terms of banking assets, in terms of traditional life insurance, you see in both cases, that the outflows are slowing, but I will focus more on this in a few minutes.

New recruitment. April was a pretty positive month with 12 new colleagues. So the total new recruits for the year stood at 41. So I think that from a commercial perspective, 3 major considerations. First, we achieved the highest level of assets. And this is really important because I think that, as usual, there is some seasonality in how you invest in these assets, but in the long term, higher the assets, higher the profitability for the bank. Second, the acceleration in inflows comes from existing sales force. So we are achieving higher productivity. And third, that recruitment is not contributing to the numbers.

As it happened in the past, but there is a very important great interest from different players. So once we're going to see a normalization of the market, I'm confident to see, start of the contribution from recruitment. So now let's enter the last chapter of the presentation that is about business update. Here, you have 2 focuses. The first one is on net interest income. And the second is on client assets, the major trends and major consideration on what we have to expect for the last part of the year.

Page 25, net interest income. If you remember, during the previous conference call, we gave a guidance at or higher -- the net interest income at EUR 200 million. And there were some assumptions. The first assumption was about the cost of funding, and we set the cost of funding the average cost of funding for the year at 130 basis points. And the second assumption was about the deposits, client deposits. And we set the guidance to an unchanged level. So we said, basically, we don't see the case of increasing deposits and we want to be very conservative in defining an expected cost of funding.

Of course, we can either work on the level of deposits, paying less cost of funding or we can reduce the cost -- the deposit optimizing the net interest in. So in the case that we discussed during the last conference call, 130 basis points and stable assets. Now we have just updated this projection, trying to maintain the same assumption that we discussed at the beginning of the year.

So just maintaining as a cost of funding, 130 basis points for the remaining 8 months of the year, just because April was, again, a very positive month for our net interest income with the cost of funding almost in line with the first 3 quarters -- 3 months. So maintaining a cost of value from May to December at 130 basis points. This would imply an average cost of funding of 100 basis points, okay? This is the first assumption. Second assumption, very conservative. If we project linearly what happened in the current accounts in the first quarter to the remaining 3 quarters, and this should set a range between EUR 10 million and EUR 11 million of client deposits.

At this condition, you will achieve a net interest income of EUR 230 million. This EUR 230 million is a [ floor ]. How can I work out a potential number for the full year? We can give you the sensitivity to the cost of funding, any 10-basis point saved in the cost of funding would impact on a period of 8 months, EUR 8 million. So EUR 1 million per month.

If you want to have, let's say, this is the floor, EUR 230 million and average cost of funding 100. If you want, let's say, an optimistic scenario, you can set the cost of funding at almost 50% of 100, so around 50 basis points. So this could be a range between 50 and 100 basis point of cost of funding. The same can be said for client deposits. If I look at the numbers in May, I should be very optimistic. But since we don't want to pass through Net interest income to the client deposits, we maintained this very cautious assumption to a slight reduction, ongoing reduction in deposits in the repeat in May, I'm not seeing this kind of trend. So April was pretty positive with a strong deceleration. May we see stabilization, but we continue to maintain a very low cost of funding for client deposits.

Now let's move on the second part of the business update that it's about the client assets. First of all, we are all convinced that our business is to sell and to provide advisory on managing solutions. Having said that, and having said that, I do expect a normalization of the overall contribution of assets under custody in the medium term on overall assets. So I see tremendous upside there. We have to understand in depth what we have been doing in the last 3 years to increase margin on our sealer custody.

Because we are in a unique example in Italy that succeeded in increasing systematically the profitability of asset under custody.

Page 26, you see, first of all, retail brokerage, EUR 5.1 billion compared to EUR 1.8 billion, first quarter 2019, is almost 3x. Primary plus structured products, EUR 5.5 billion in just 1 quarter compared to EUR 100 million in the first quarter 2019. Advanced advisory services, fee-based business with the underlying of assets under custody from 1.6 billion to EUR 3.9 billion. At the end of the day, the margins of these initiatives stood at 0.44. This is about retail clients, and it accounted for almost EUR 19 million in just 1 quarter.

So it's true that we're going to see a normalization of assets under custody in the next quarters and next year. But it's also true that we found the way to get profitability also on this part of the portfolio. Second, we have a terrific competitive advantage in the high-value investment services. What do I mean high-value investment services are of 2 kinds: financial wrappers and advanced advisory services.

And if you look at the graph, the acceleration. So the growth has been pretty impressive from EUR 9.3 billion to EUR 17 billion. This is all driven by in-house capabilities and his best practice in the market.

This is, of course, all about also any doubt on ban on inducement because the answer to the inducement is to be very strong on this kind of services, and we are definitely best-in-class. And if you look at the margins and the revenues coming from these 2 services, again, the numbers are pretty impressive. Financial wrappers stood at 1.38. Advanced advisory considering the underlying the profitability of the handling at 1.45. On average, 1.41.

So this is, again, another way to see the quality of our financial advisors and how to provide complementary services to high level -- and I'd say, the high-end clients. Then, of course, it's not just about investment solutions, but it's also about, let's say, bread and butter products. So if you move on to Page 28, you see fund results. And here, you see a different representation, you see 3 colors. The first consideration is about the red one. In-house fund we reviewed our offering in October. And since that, every month, we got positive results. Not very significant, not impressive but, let's say, steadily growing and also with a different trend compared to the third-party plain vanilla products.

Plain vanilla flower products are the gray one. So you know asset management is suffering third party is a proxy. You see that in the last 3 months, the contribution is negative, and this is due to the fact that there is a disaffection on this kind of product. The orange part is about specific target initiatives organized for Banca Generali. An example, a target found launched with JPMorgan in February.

And you see that the orange contribution is positive. So the changing strategy at the end of last year in focusing more in-house products and developing partnerships with target funds is providing results. Last part of the presentation is about Page 29 of insurance. And again, here, we have to invest sometimes to understand the trend. Let's start from the red focus numbers. That is about traditional insurance.

We shared several times the opportunity to reduce traditional life insurance also to reduce the risk of diluting the yield for our existing clients. And if you look at the monthly trend of 2022, also in that case, the outflows were pretty impressive. Then we saw an acceleration of outflows driven by 2 facts. Increasing interest rates and some bad news on other insurance companies. We decided to reopen the offering of this product.

And you see the sharp deceleration of outflows in April, and I can assure you that in the second half, the numbers will be different. If you focus on insurance wrappers, same story. Insurance wrappers invest also in traditionalized insurance. So at the beginning of the year, we had negative inflows we review the offer, we focus more and more on efficiency and the results are pretty clear. It gain, positive inflows. So we represent the lion. Generali is the strongest brand in Italy and is a competitive advantage.

This, combined with the investment services will be a competitive advantage also to strengthen the inflows in managed solution for the remaining part of the year.

Page 30 is about the financial target. I already said we confirm all the targets. Consistent growth is about net inflows. As already mentioned, several times, while increasing the focus on product mix, I see some seasonality in the peak of asset under custody, is good to continue to get the inflows to have inflows and then we will convert these assets under custody also in asset and management products. The project on data-driven approach is the solution to accelerating productivity or existing sales force we are back to in-person activity meetings, and this is very strong in terms of utilization.

And this explains why the churn rate is so low. Profitable growth, we gave very important numbers at the beginning of our 3-year business plan with a growth in the range of 10%, 15%. We raised the target of 15% and 20%, and we confirm that. We increased the guidance with net interest income, and we already gave you some flexibility on the guidance on net interest income. In our solutions are working pretty well, and we know how to extract value also from asset under custody.

Last but not least, remunerative growth. We already discussed several times that we are 1 of the fastest-growing company, but we care about the remuneration of our shareholders. in May 22, we will pay EUR 1 for the dividend payout of last year. And we already paid 0.85. We are perfectly in line to achieve also this result. And now I will hand over for any questions.

[Operator]

[Operator Instructions] The first question is from Elena Perini of Intesa Sanpaolo.

[Elena Perini, analyst]

Yes, thank you for taking my questions. got some questions. Actually, the first one is on your net interest income guidance because just to check out if I have understood correctly. So if we assume a cost of funding of 60 bps instead of 100 bps. We will recover multiplied by 5, so approximately EUR 40 million of NII just to check. And then the second question is about your performance fees, which were quite good for this period. So I was wondering if you can give us some date about some other potential funds that are well positioned to recover performance fees in the second quarter. And then looking at your tax rate.

So should you come out with a net interest income of in line with your guidance. Should we assume a normalization of the tax rate towards 25% or for the current year. You still see a higher tax rate. And finally, on your net inflow guidance. I don't know if you can provide us with some assumptions or some scenarios about the managed asset component also considering that it seems that the situation regarding life insurance is improving.

[Gian Mossa, executive]

Thank you, Elena. So let's start from net interest income. You are right. If we estimate or project a cost of funding of 0.5%, the overall result of net interest income for the full year would be EUR 270. We gave the floor of 2030, just because we have to be conservative and then a bit. But now I must be a little bit more optimistic because April worked very well, and May is working very well. So I gave you a range so that you can set your own expectation. On performance fees. The performance fee of our flagship fund that is a flexible fund was basically amazing. And it accounts for more than EUR 1 billion.

So this plan now is at a high watermark level, and it can provide the other performance fee. In general terms, we have almost 20% of assets that could achieve performance fee this year. I'm very optimistic for next year. We hear, let's say, depends mostly from the market, but we have some flexible strategies that are performing very well. That is the reason also why the financial wrappers are working well because we are performing better than the market.

In terms of tax rate, let's say the guidance, I mean I have in mind that the guidance for next year, this year, depending on performance fee, basically, we should stay above our guidance. And in case of recovery of performance fee, of course, the guidance would be targeted. But let's say that I'm not so sure to have significant performance with this year. We set the target -- internal target between EUR 20 million and EUR 30 million of performance for this year. with an assumption of -- from today to the end of the year of performance of 1 percentage point, 2 percentage points overall. The last is about inflows guidance.

Not to be conservative. But again, in this case, it's difficult because I think that in this case, the quality of our professional will drive an excellent result. In terms of life insurance product, I would be surprised to see numbers below 0 as a net result for the second half, but you could have some parts in surprise. The high-value investment services that both provide recurring fee. So I'm talking about financial wrappers as well as advanced advisory services are doing very well. So I'm confident to continue to deliver on these 2 services.

And in terms of fund, I think that the average that we are achieving in the first 4 months is again a floor, and we could again have positive surprise also on this side. Of course, this consideration are in a situation in which the markets stay at these levels. So in case of positive surprises of the market, I would be even more confident in case of negative performance, we should review this kind of targets.

[Operator]

The next question is from Giovanni Razzoli of Deutsche Bank.

[Giovanni Razzoli, analyst]

The first one is on your strategy in terms of product mix. You have showed an increase in the percentage of assets under advisory. I was wondering what the percentage of total assets that do you plan to move under that model in a 3 years' time from 9% today. And how can this impact the overall remuneration of the -- your managed asset. I've seen that more or less, if I'm not mistaken on this, products, you do have a slightly higher than 40 basis points of remuneration, which compared with slightly above 1% on recurring fees on total assets. So I was wondering whether we are taking into consideration those 2 data points for making our assumptions going forward.

And related to this, I was wondering whether you do plan to increase your exposure to this product as a kind of defensive strategy vis-a-vis possible regulatory changes, which doesn't seem to me to be taking place, at least in the short term. The second question, thanks for the disclosure that you've given. You mentioned that you have some cost in terms of M&A counting without clearly mentioning what you had in mind, but is this something the domestic market or foreign market? And I think you are referring to something like bolt-on acquisitions. And the very last question, as I have you on the line, allow me the opportunity to ask you this. We have seen that so far, the asset gatherers are a little bit of the traditional banks in terms of remuneration of their deposits and in general, the clients I was wondering whether going forward, you as a defensive strategy from the banks also a similar move? Because so far, we have seen divergent trends between you and the commercial banks.

[Gian Mossa, executive]

Thank you. Let's start. Thank you, Giovanni. The impact of advanced advisory services on total assets, we set the target during the Investor Day in the range of 10-12, if I remember well. and we're confident to see this target considered that in terms of profitability, on average, assets under advisory provide higher margins than, let's say, financial wrappers especially on private clients. We show in the presentation -- we've shown in the presentation a profitability in the range of revenues above EUR 1.4. And of course, the advanced advisory services normally is about private clients. So it's a very good margin if you think of the kind of clients. And as I mentioned before, even if you see an acceleration of the advanced advisory services with the underlying of assets under custody. These assets, the assets invested in stock and bonds provide good profitability. And I show you the slide with the volumes implied in brokerage structure certificate and so forth. And of course, under advanced advisory services, you use more and more this kind of services.

So to cut long story short, I think that especially if you have in mind that sooner or later, we will go through higher transparency or inducement ban. This is the way financial wrappers and advanced advisory services. I don't believe that we'll go in that direction soon. I ensure that we're accelerating transparency, and I consider the Banca Generali best-in-class on this topic. In terms of defensive strategy and products and so forth.

We say that I do expect some rethinking of the asset management industry, where you give more transparency over the underlying where you focus more on the expected into maturity. And so something that should convert to financial wrappers on end or to the traditional, let's say, bonds on the other one. And we are working in this direction. So I think that we are ahead of the market in terms of innovation in products.

In terms of M&A, you're right, we are scouting different opportunity, always pretty small. Always to accelerate the integration of capabilities. But at the end of the day, in this moment, we do not see any other opportunities excluding the ones that we closed at this Main Street, that in my opinion, is a great advantage in terms of sustainability and business linked to sustainability. And we scouted basically small companies in -- both in Switzerland in Italy. But again, I confirm that after having closed the deal with Main Street, we don't have any potential deal in this moment on our best.

[Operator]

The next question is from Alberto Villa of Intermonte.

[Alberto Villa, analyst]

Thanks for the detailed guidance, especially on the net interest income. 3 questions. The first one is on your conservative provisioning you made in the first quarter since we have been hearing other banks being very quite positive on the cost of risk. I was wondering if there is any specific reason for this provision? Or is it just a generic one you are booking -- and if you can provide us an indication of what are your expectations in terms of provisioning -- provisions for the entire year? The second question is on the brokerage activity.

You have shown a significant increase in volumes, but steady revenue contributions. So I was wondering if we can expect going forward a higher contribution from brokerage revenues thanks to higher volumes you are expecting? Or if there is any reason why instead it should be considered to be quite flattish going forward? And then I think I'm basically done. Just another point is on the cost of funding the 24 basis points you are seeing now. You have had also some campaigns of repos.

Is that something that could act you expect to accelerate in the remainder of the year and how this could eventually impact the cost of funding?

[Gian Mossa, executive]

I will hand over to Masso for the provision, just to say the short answer is a generic one. And for the target of the full year, I answer to the second and the third one, and then I will hand over to Tomas. Brokerage I see stable profitability despite higher volumes just because the mix is in favor of bonds in this moment. So the increase in volumes offset lower margin of the single trade. But Saks is working pretty well.

All the activity also in the secondary market of structured products could start gaining momentum because we start also to trade on the secondary market or the primary assets, the primary activity. And on the cost of funding to consideration. The first 1 that we set about EUR 10 million for initiatives in the next 8 months. I don't know whether we're going to use it or not, but we set about EUR 10 million. Second consideration, we have almost EUR 2 billion of current accounts with the remuneration with current accounts linked to the labor to the percentage of the labor is normally 60%. So the projection that I provided as a positive scenario take already into account the, let say, the increasing weight of the cost of this -- of these current accounts plus the money that are set apart for any potential initiatives on repos that this time are very negligible and just 100 million in the last -- let's say, in the last weeks. So we are talking about nothing.

But I set apart some cash just in order to, in case acceleration and to manage any specific campaign. So the cost of funding that we communicate of 100, if you well understand that would imply a significant acceleration of cost of funding for commercial banks just to answer also, Giovanni. I don't see an acceleration of cost of funding from the commercial banks.

So we have decided, and we are trying to reduce as much as possible the pass-through, and this is very positive also for us. As other players, we use some small campaigns, and we have part of the book that is remunerated so current accounts remunerated, especially for corporate software business normally are important entrepreneurs. This part is in common also for the commercial bank, but you cannot see that just because it's a small part of the total balance sheet of the commercial bank. On entrepreneurs, let's say that there is some competition and almost all the players pay some parts, some percentage of the labor. And Tomas, on the provision.

[Tommaso Russo, executive]

On provision, I confirm that the provision that we did was a generic one. Basically, we don't have a particular issue to cover with provisions. Going forward, we expect to stay in the range between, I mean for the year,30 million, 35 million. This is what we would get today in terms of provision for the full year. So we have been very conservative in the first quarter. We don't expect to have the same number for the quarters going forward.

[Alberto Villa, analyst]

Okay. If I may, just a little follow-up on the fee expenses for the network on deposits. Should we expect there where we're seeing it starting from the fourth quarter of last year? And should we expect this number to grow significantly in the coming quarters trying to retain, I would say, liquidity.

[Gian Mossa, executive]

The short answer is no, we pay 15% of the spread and with a CapEx EUR 50,000, on each account. So it's say that the worst case is around ...

[Tommaso Russo, executive]

We'll get stay between the range between EUR 7 million and EUR 10 million of payout for the full year because -- of course, it depends also on the assumption that you make on the liability side because if you have a higher cost the liability, you reduce the spend on which you pay the bank while if you have improved the spread. You have higher payout. So I mean -- but our assumption is between 7 and let's say.

[Gian Mossa, executive]

EUR 3 million per quarter is a very conservative assumption. So between 2 and 3, let's say.

[Operator]

The next question is from Gianluca Ferrari of Mediobanca.

[Gian Ferrari, analyst]

I'll start again from the NII. First of all, I would like to understand how much is the so-called non-transactional liquidity. So I appreciate the breakdown of the deposit balance among the 2 segments above 500,000 and below 500,000. Could you tell us also how many clients you have in the 2 brackets or eventually what is the level of the non-transactional liquidity. And linked to this, can you share also a bit more the managerial view of the strategic view that took last conference call, the 90-basis point cost of retail funding going up to 130 and now done again to 100. So what were your thoughts? So you were expecting the sector to fight a bit more on deposits?

And then utilize that nobody else is moving and you can be a bit more soft in terms of remuneration is that the rationale. So you prefer to lose some 1 billion in the first 4 months and EUR 3 billion if we take your full guidance instead of overpaying for deposits or what are your thoughts behind this change in the guidance?

And also on the banking book, I was noticing that you keep remaining super cautious in terms of duration on the asset side on our banking book, much more cautious than some of your competitors. And you are still a super liquid bank. So why not taking a bit more risk on the banking book, passing through as part of those extra earnings to your clients and to, let's say, retain and to make more loyal to your top end clients. So a bit of thoughts on this. And the second one is on the Ramotrimo on the last traditional what are practiced the strategic moves we are planning together with Generali. So a launching new Ramorimo new segregated funds to be offered only to existing clients it is a way to soften the level of outflows or there are other moves behind it.

[Gian Mossa, executive]

Transitional liquidity, I can answer like this, we see outflows when the stock on current account is above EUR 250,000, as a general rule. And I can see 30%, 40% of assets that could be, again, could be part of this story. So the assumption to project the result of the first quarter is a very, very conservative assumption. Because on average, on the affluent clients, not the case, but also in the product clients, most of them overall exposure to current account is already pretty low. So I would say that I consider transitional 60%, 70% of the overall liquidity, from a commercial perspective.

The second question is the cost of funding. I try to explain a little bit better the exercise we run. In the previous conference call, we set a cost of funding of 130. And I confirm also in this projection, 130, but 130 is applied only for the remaining 8 months of the year. So if you consider 0.25 for 4 months and 1.3 for the remaining 8, the result is EUR 100 million. So the conservative assumption of 130 is unchanged.

Then my impression is that thanks to the resistance of the commercial banks the pressure is probably lower than previously expected. In terms of duration, I mean from an actual perspective, we are leading a context with an inverted curve yield curve. And in this situation, I think that staying in the shorter part of the yield curve is the best place to be.

Then, of course, any normalization of the core could imply rethinking of our strategy in terms of duration. We set also a cap in terms of maturity to stay below 4. So you have some rounding effect, but we said that also in terms of maturity, we don't want to exceed for year. Again, our portfolio is very conservative, and we want to be perceived also from a commercial perspective as the most liquid bank in Italy. On the traditional life insurance, it's also a way to attract new clients. So we will launch some specific initiatives where the cost of the product will be paid. And then we are thinking of also launching some new traditional life insurance policies where we start from 0 to the underlying. So where you can leverage on higher rates. The combination of these 2 initiatives should more than compensate the outflows that we already see that area reduction.

[Gian Ferrari, analyst]

Will the existing clients be allowed to subscribe the new one? Or -- and eventually only for additional payments and the switch from the old to the new, I guess, it will be forbidden, right?

[Gian Mossa, executive]

Exactly only for new cash.

[Operator]

[Operator Instructions] There are no more questions registered at this time.

[Gian Mossa, executive]

Okay. Thank you, and hope to see you soon. Thank you all. Bye.

[Operator]

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