Banca Generali SpA

MIL:BGN

Earnings Call Transcript 2022-Q3

[Operator]

Welcome, and thank you for joining the Banca Generali 9 Months 2022 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Gian Maria Mossa, CEO and General Manager of Banca Generali. Please go ahead, sir.

[Gian Mossa, executive]

Yes. Good afternoon, and welcome to our third quarter results conference call. The results over the last quarter were very solid, considering the financial market condition and the market environment. And first of all, I want to confirm that we are all confident to deliver the results of our 3-year business plan. But focusing on the last quarter, the commercial results were pretty solid with good inflows even with more conservative mix, while the recurring net profit was very, very strong, thanks to the resiliency of the business and a higher contribution of the net interest income. Overall, the capital ratio, the liquidity ratio are well above the requirement.

So let's start from page 4 on commenting the recurring net profit. The third quarter confirms a positive trend at quarterly level. So the third quarter closed at 55.6%, so slightly higher compared to the second quarter. And the overall result year-to-date is up by 24%. Moving on, on the variable net profit, you can see an overall [indiscernible] contribution, driven by one-off tax charges that we have already communicated at the end of September and very [ pure ] performance fee linked to the trend of financial market. We were saying that the net interest income is providing great support to the overall results.

This is pretty clear at page 5, where the net financial income jumped in the first 9 months at EUR 108.7 million, mainly driven by an acceleration of the net interest income. The result over the third quarter stood at EUR 36 million is basically driven by an increase in the yield from 0.75% to 0.89%. We will see in the next pages also our new projection for the full year and for next year. Page 6, total gross fees also on this side, positive news. Let's say that if we start from the first 9 months, the overall total gross fees were pretty sticky with an increase of 2.8% with the third quarter result at EUR 229 million or minus 2% quarter-on-quarter on quarter-on-quarter basis.

We say that the pretty solid result in the gross fees is driven, first of all, by very sound management fees. Page 7, where you can see that the result of the third quarter is pretty stable quarter-on-quarter to EUR 202 million, on year and year-to-date, it's been up almost 5%. Why basically thanks to very solid and resilient margins in the first 9 months, overall margins stood at 1.42%, and we are pretty confident to stay around this level. It's not only thanks to management fees, but it's also driven by some components of banking in entry gross fees, the resiliency of the overall result.

And at page 8, focusing on the year-to-date results, first of all, very sound result coming from advisory fee up to 26.9%. So we continue to see a good interest in such a kind of service Other banking fees, again, up to 17.9%, which, of course, this is not directly linked to the performance of the market. The negative contribution comes from brokerage commissions but when you work out the 2 main components, volumes and margins, volumes are pretty stable on a year-on-year basis. So the result is driven by lower margin due to a more conservative mix in the brokerage activities, so more bond, less equity.

And then we have the entry fees down by EUR 9.7 million. You know that in the entry fees, you have 2 main components. The first one is strictly linked to asset management products. It's about front fee, one-off charges. And of course, during negative performance is pretty difficult to charge extra courses and this reduction accounts for almost EUR 6.5 million. The other entry fees are mainly linked to issues of new bonds, structure problems, certificate. Also in this case, I think the good news is about the fact that the volumes are almost in line with last year, while margins are a little bit lower due to also in this case, a more conservative mix. So to sum up, once excluding while shipping out the most volatile and pro-cyclical components, the banking entry gross fees are pretty stable in line with the last year and even more important commercial activity is pretty sound.

Page 9, we move on to the payout ratio. You know the third quarter typically has some seasonality in the numbers. So it's useful to compare the third quarter this year with the third quarter of last year, starting from payout to financial adviser, the ordinary component closed at 34.6%. Apart from the seasonality, let's say that we are confident to confirm our target to stay below 36% in the mid and long term. Probably in the short, medium, we could be even closer to 35% than 36%. So there is a good improvement, good control of the payout and the ordinary component.

Let's say in the cost of growth, here, you see that the number is pretty aligned with the second quarter despite a more conservative mix in the net inflows. This is basically due to some base effect because the incentive is paid in absolute terms. The ratio is out of total assets. And of course, due to the market, total assets are down year-on-year basis. Other positive numbers, if you focus on the payout to third parties, you see a slight decline, 5.7%. This is basically due to partly to internalization, optimization of trading activities. And on the other side, is the consequence of the reduction of the brokerage in [ APT ] products.

So overall, let's say that the payout is under control is all in line with our targets or even better than previously expected. Moving on to the second component of the cost, the operating cost starting from the core operating part is in line with our 3-year business plan is below -- in the range 5% to 6%, also included the BG Suisse project. As you can see in the third quarter, there is a higher contribution of the G&A, and this is basically linked to the focus on all the projects to enhance our 3-year business plans. So project about data, about new platforms for our financial drivers, to increase productivity and so forth.

So we continue to stay very -- stick to our 3-year business plan and to invest for long-term sustainable growth. Excluding the core operating cost in the other components, you see that the sales personnel cost is slightly lower than the previous quarter. This is basically due to lower contribution to growth and lower recruitment costs. Page 11, operating leverage and operating efficiency. Here, we confirm the downward trend of the bank. I would like to just focus your attention on the adjusted cost income. So once without let say, the more volatile component you see that now we stay below 40%, while the operating cost on total assets is slightly increased due to the reduction of total assets.

So to sum up this first part of the presentation, page 12, let's say that we are very proud of the results so far achieved with operating results ex performance fee up by 10%, thanks to net interest income and resilient margins. Focusing on the total non-operating charges, the overall effect is positive. There is a positive contribution from the upward revision of the discount rate for the -- say for the indemnities of the financial advisers. And this more than offset higher cost for the contribution to banking fund and some conservative adjustment.

We already commented the one-off charge of tax, EUR 35 million. And then last comment is about the tax rate in the third quarter closed at 24.4%. This is driven by a different mix in the revenues. And we have to reset our targets for the 3-year plans close to 24% due to higher contribution of net interest margin. Second chapter on balance sheet and capital ratios, page 14, the year, no news, good news. So the numbers are in line with the second quarter. Overall balance sheet at EUR 17.8 billion or EUR 1.6 billion higher compared to last year, and this is driven by client deposit expansion. Page 15, we can see the reason why the net interest income accelerate. It is basically on the bottom left of the page, all the components of the assets has been improving over time.

So lower cost of loans to bank, higher yielding loans to clients and higher financial asset yield and with the cost of funding almost stable. We continue to maintain a conservative approach to the overall banking book with 96% invest in bonds, a good diversification in terms of underlying with government bonds, Italian government bonds below 50%, maturity close to 4, duration close to 1 and held to collect and sales -- with held to collect part of the portfolio increasing over time at 83%. Overall, page 16, we already commented very solid capital and liquidity ratios.

Solid capital ratios also considering that these ratios are calculated on the base of an implied 79% dividend payout in line with our dividend policy. Total capital ratio closed at 16.8%, CET1 15.7%, leverage ratio a little bit lower for the client deposit expansion, as I mentioned before, and liquidity and net stable funding ratio well above the regulatory requirements. So also on this side, I would say no news, good news, very solid balance sheet and capital position. Next chart is about total assets and inflows.

Page 18, we start commenting total assets, of course, down EUR 80.4 billion, [indiscernible] to financial markets, [indiscernible] the negative performance also of the bond portfolio, as you know very well. Good news on this slide. First of all, Assets under Advisory on total assets, very sticky, it's good at 8.5%. And then just a quick comment on the overall contribution of asset management products on total assets stood at 68%. This is probably the lower level ever for the bank or at least over the last 10 years. Here, I'm very confident that once market resumes, we will stay above 70%. So the numbers we have commented is with a lower penetration of asset management products, so is an upside on my view.

Page 19, deep dive on asset management products, very good results coming from the financial wrappers. So the strategy worked pretty well. Lower performance for funds and particularly from the third-party funds. Insurance products, also in this case, insurance wrappers down but down less than [indiscernible] and so again, also in this case, insurance wrappers worked pretty well in terms of client protection and diversification of the portfolios.

And so the focus will continue to be on financial wrappers as well as insurance wrappers of the future. Page 20, we start analyzing the net inflows. First of all, total net inflows for the first 9 months were in line with 2 years ago, with 2020, where you can see that basically, the overall result is in line with the past, even if the mix is more conservative, as we already mentioned during also the previous conference call.

Focusing on the asset under management here is pretty clear positive contribution of the wrappers, both financial insurance, but with a higher focus on the financial wrappers. The EUR 0.5 billion of net inflows in the fund is well detailed on page 21. Here, you can see that the overall number is lower than expected, but the mix is pretty solid with good inflows in the equity and flexible total return solutions and negative inflows in products with a lower -- lower profitability like monetary and bond funds. Page 22, there is the usual representation of ESG products.

So yes, the results are pretty impressive. Assets, almost stable. The contribution of ESG as a percentage of managed solutions has been growing over time and net inflows pretty solid also in this first 9 months with an overall contribution of EUR 400 million. Here, the -- as you know, it's not just about products, but it's about our commercial approach that is working very well also in a very difficult market scenario. Page 23, there is the breakdown of the net inflows in terms of acquisition channels, the contribution coming from the existing sales [ stories is ] in line with 2 years ago as we had over last year.

While recruitment in terms of numbers are a little bit lower than our projection and lower compared on year-on-year basis. We closed in the first 3 quarters to 79 new colleagues. On top of that, you have add 9 junior profiles without recruiting package. But I continue to be confident with our target on 3-year time horizon because there is great interest for the bank, and this slowdown is basically driven to the fact that it's very difficult to transfer clients with important negative performance. Page 2-4 -- 24, with focus on the October numbers; I would say that October is a turning point for the bank compared to the last few months for 2 main reasons.

Inflows are pretty sound, EUR 0.5 billion. And the mix is pretty good even if the overall result sounds still in line with the previous months. There are 2 different paths in the math, the first 2 weeks and the second part of October. In the second part of October, we launched several initiatives, and I will comment more in detail but let's say that we start seeing very positive signals from the network. In terms of advanced advisory, the overall inflows stood at EUR 400 million overall since the beginning of the year and recruiting as I mentioned, recruiting activity slowed down to 6 new colleagues in October.

We are pretty confident to close very the numbers for the full year in terms of recruitment, very close to 100. So we still see some new colleagues joining the bank in the next few weeks. Now let's enter the last part of the presentation, where the new macro and the investment environment led us to rethink the offer for our clients to stay closer to our financial advisers, and we have just assessed the implication of this new macro scenario to our 3-year financial targets. So let's start from the first part. So sharing how we change and shift and reshaped [indiscernible] offer, and then I will focus on targets.

So page 27, this is pretty impressive. In the last few months, we have been working to launch a dedicated new offer for the new market scenario, and it's about mainly how to manage cash and how to manage let's say the risky solutions. And the first topic, how to manage cash? We launched funds, we launched financial wrappers. We launched dedicated new solution under advanced advisory services to manage the new contracts with higher yields. And we started a deep review of all current account offering to be ready to be very flexible and optimize the cost of funding for the next year.

And we will launch this newly created offer in current accounts in the first half of next year. For the block of risky assets, we have launched, in particular, we will focus on financial wrappers, a dedicated offer with implicit protection and, let's say, more flexible activity on the risky assets with also some hedging strategies and the feedback are very, very positive. And also in this case, we have launched a project to optimize the platform of the financial wrappers to expand the capabilities, in particular for hedging strategies and ForEx. And also this new release of the platform will be launched in the first part of next year.

Last but not the least, we asked the network to focus even more on the accumulation plans. So there is a commercial effort, but there is also, in this case, an optimization of the platform that will be released in the first half of the next year. So on one hand, we are very focused on delivering all the projects present during our Investor Day. And the other one, we developed a dedicated offering, dedicated solutions to manage tactically the new context. The results from the network are very good, consider we launched it second -- at the end of the second week of October. Since that day, on average, net inflows on this solution is well above EUR 10 million per day. So as I mentioned before, 2 different velocities in the commercial activity in October.

Page 28, there is also focus on issuance because, of course, the normalization of yield implies for us in the medium term, an opportunity, a huge opportunity in the insurance arena. In the short term, we are reopening some existing traditional life policies. We started also this during October and the inflows are pretty positive, about EUR 5 million per day. But at the same time, we are redesigning all our offer, focusing on leveraging the traditional life insurance, but directly connecting to investment and protection solutions and ancillary services. So this is a very important project.

I hope to see the first release in the first part of next year, as I said, more confidence after this summer. So in terms of, let's say, commercial activity, rethinking of our offering, we are very quick to adapt to the new environment. We stood very close to spend time with the network. We launched these initiatives. And as I mentioned, results and feedback are positive. On the other side, we assessed the impact of the new scenario on financial targets for our 3-year plan. And you see at page 29, some adjustments on the guidance both for this year and for the next year. You remember well that we gave 3 clear objectives with 3 KPIs.

The focus was on consistent growth, profitable growth and remunerative growth. Starting from consistent growth, we confirm the overall target for the 3 years. We have slightly adjusted the growth for this year in the range EUR 5.5 billion to EUR 6 billion net inflows, and we confirm the guideline for next year in the range EUR 6 billion to EUR 6.5 billion. In terms of profitable growth, you remember, we targeted recurring net profit, and we project growth rate in the range 10% to 15%. For this year, we probably closed the year even higher with a range now 15% to 20%.

This is, as I mentioned before, driven basically by resilient margins in the asset management plus higher contribution of net interest income. Now we expected a contribution of net interest income for the first quarter above EUR 45 million for an overall result in the range of EUR 130 million and EUR 135 million, also applying a conservative assumption in the cost of funding for next year. And now we are increasing our projection for next year with an increase in the range of 40% to 50%, with a range -- within a range of EUR 180 million to EUR 109 million for the net interest income.

And then we confirm, as I mentioned during the presentation, the payout and the cost guidelines for last -- next year and 2023. Last but not least, we are still confident to deliver on promises the overall dividends in the range 7.5%, 8.5% for the full year 2022-2025, thanks to the very flexible dividend policy that we approved during the Annual General Meeting. And that just to remind you that is made up by 2 main components, the possibility to move with greater flexibility in the variable components in the range 0% to 100% and a payout ratio for the recurring components in the range 70% and 80%. So we are very in good shape. Very happy to see this commercial activity and we saw the results and happy to confirm that we are all focused to deliver on promise the targets for the 3-year plan.

So now I will hand over for the Q&A session. Thank you.

[Operator]

[Operator Instructions] The first question is from Giovanni Razzoli with Deutsche Bank.

[Giovanni Razzoli, analyst]

A couple of questions. The first one is a clarification on the NII. Can you share with us what are the assumptions in terms of rates that are embedded in your targets for 2023, so EUR 180 million, EUR 190 million for 2023, which is a big improvement. And then I assume that the target does not include any contribution of the TLTRO, if that is correct. And if you can comment a little bit more on your deposit EBITDA because also in the previous conference, and you seem to confirm this, you will be pretty conservative in terms of assumption on the cost of funding.

So we'd like to know what are the expectations that you have on diesel for example, we've seen one of very large commercial bankers. It's not exactly your competitor, assuming a 30%, 40% deposit EBITDA for 2023. I would like to know whether this is applicable also to you. Second question is on the performance fees. Clearly, it's been a tough year year-to-date. I was wondering whether for 2023, assuming a normalization improvement in the condition on the financial market for 2023. Is it still possible to assume some contribution from the performance fees in 2023 or in light of how the high watermarks as evolved year-to-date, this is a challenging assumption.

And the last one is basically a clarification because you've confirmed the 100 recruitment at year-end. So you don't -- your commercial -- your acquisition policy does not seem to be impacted by the recent news flow and noise on M&A impact in Banca Generali. I was wondering whether this instead in the medium term may impact recruiting or the commercial policy going forward.

[Gian Mossa, executive]

Thank you, Giovanni. In terms of assumption, net interest income, let's say that we have a cost of growth that is more or less 50% of the year, but I will hand over to Tommaso to give you more color on the assumption. And why? Because first of all, we won't increase the cost of funding until the big commercial banks have not done it. So we won't be the first, probably will be the last. But I do believe that commercial banks will move, and will move during the second quarter of next year. So our assumption there is a sort of 50% cost of the funding.

I consider it pretty conservative, but we want to be in a safe territory. And then I will hand over to Tommaso. I will answer to the second and the third one, and then I will ask Tommaso to complete. In terms of performance fees, I see room to have a positive contribution next year. I would say that if in normal times, we are in the range of 80% to 100%. Next year, we could be in the range of 30% to 40% because we have part of the funds that are not so distant from the high watermark level. So we project some positive contribution in case of normalization of the market starting from Q2.

In terms of M&A, as I mentioned, now we are -- we seem to close the year with a number close to EUR 100 million. We'll be in the range of EUR 95 million, EUR 100 million, closer to EUR 100 million, hopefully. The rumors have no impact, zero impact also because you know that whoever would be interested in the bank, you know very well that our financial advisers being the best in the market must be at the core of all decisions. So any potential interest would be an opportunity for our financial advisers. So also external bankers or external financial advisers, if we have to see an impact, would perceive it as a positive one. So to explain more in detail how we work out on the net interest income projection for next year, I will hand over to Tommaso.

[Tommaso Russo, executive]

Thank you. So first of all, I would like to specify that we said before, but it's not an automatic repricing of our liabilities. So today, we have a rate, zero fixed rate, so we will adjust the remuneration rate only when we need. But of course, what is implied in our guidance is that the average rate of the year -- of next year will be in the range between 170 basis points and 180 basis points and the cost of liability will be around 80 basis points, 90 basis points. That's the, let's say, the most important assumption that we have in terms of volume. We see a small increase of the assets and liabilities, but I mean that are the most important assumption behind our guidance.

[Operator]

The next question is from Domenico Santoro with HSBC.

[Domenico Santoro, analyst]

Coming back to the question of the colleague, I have just to whether you have included the current forward yield curve in the 2023 guidance on the NII. And if not, what could be the related level of interest income in case rates are going to go higher next year accordingly to the forward yielding curve. And then a question on dividend because I understand your dividend policy is very clear.

And if I follow strictly your dividend policy, we should probably see the dividend for the year going down compared to the one last year. But I mean, even in the presence of nonperformance fees, your business is a capital light and you're going to grab more and more earnings from NII even in presence of no risk-weighted asset growth. So I wonder whether this EUR 7.5, EUR 8.5 per share over the full year implies also that you can smooth over the impact of the year, no performance fees on the dividend and maybe confirm the one last year?

[Gian Mossa, executive]

Thank you, Domenico. I'll start with the dividend. We gave a target on a free time horizon, and we have a very flexible dividend policy. And so we are confident to see again a performance fee next year as a mention of 30%, to 40%. And in 2 years, I think I do expect a normalization. And so we work out a projection, and we are still confident to be in the range without changes of the dividend policies. Then I do not exclude that if it is necessary, we can also decide to be even more generous to maintain and confirm the target. That is something that we will discuss in the Board of Directors meeting. Tommaso, for the.

[Tommaso Russo, executive]

So coming back to NII, let's say that, of course, our guidance is based on the implied [indiscernible] today. So that's why we are projecting basically the average asset next year, 180 basis points, 75 basis points. So the impact of the remuneration rate is 90 basis points, which means basically a cost around EUR 130 million basically, so to have an idea. If we -- in terms of sensitivity of our asset and liability, we confirm that for a movement of the crude rate of 100 basis points, we have a sensitivity of around EUR 70 million. So if we change the assumption of the curve, that's the sensitivity that we can give to you to make your own assumption.

[Domenico Santoro, analyst]

Sorry, sorry, just a follow-up. I still don't understand. Are you using or not the forward yield curve in the NII progression? Because I guess that the Q4 is going to be as said before, EUR 45 million, right? So is that simply multiplied by 4, you basically imply that all the extra NII from rates is going to be offset by increased cost of funding.

[Tommaso Russo, executive]

Well, first of all, we are using the implied forward rate. We are using them. What we said is that the -- of course, if we have implied a remuneration rate of 90 basis points, and the cost, which is implied is EUR 130 million. So if we change the assumption of -- for example, we have zero, we have EUR 130 million of net interest more.

[Operator]

The next question is from Luigi De Bellis with Equita.

[Luigi De Bellis, analyst]

The first one is on the new managed solution launched in Q4 and expected in first half. Can you elaborate on the management fees margin of these products, how they are positioned compared to the average profitability of the group? Do you expect to see positive net inflows in traditional life insurance already in November? The second question is on the performance of your products year-to-date.

Can you give us an overview of the average performance of the different family of products in the start of the year? The third question on the securitization. Can you provide an update on the reimbursement trend and performance of these products? And the last one, just 2 clarification. The first one is on the tax rate. If I catch correctly 24% should be the new run rate for 2023 going forward, assuming EUR 30 million, EUR 40 million of performance fees. Just a clarification on this. On the dividend, if you can provide your best assessment of DPS to be paid in 2023 on 2022 numbers?

[Gian Mossa, executive]

Thank you, Luigi. In terms of margins, the new products on average are in line with existing ones. So I don't see significant impact on overall margins. On traditional life insurance, we do expect to maintain EUR 5 million, EUR 6 million per day in November and for the first half of December. We have some claims and some maturities. So the overall results should be close to zero. In terms of performance, the overall performance of our clients is in the range of 9%, 10% with, of course, a negative performance, higher -- more impacted the funds, that is close to 15% -- 14% to 15% and lower for insurance wrappers and the financial wrappers that we are let's say, in the range of 10%.

Then you are asset under custody that, of course, the equity part is probably the worst asset class in the range of 15%, 20%. Bond portfolio between 5% and 10%, and of course, traditional are flat. So the overall is around 9% to 9.5%. In terms of securitization, as you know, the courts, the UK court upheld our demand to receive all the documents to determine the fair value. We have received a good part of this information, but not all. So we are seeking full disclosure from the court. At the moment, so the fair value is not worked out. I will say that in terms of performance, I would expect the same performance as the emerging market debt. So if you want to have a proxy of the asset mix in terms of asset class. In terms of tax rate, I confirm [ 24 ] as a guideline for the medium terms and should be all. Tommaso, if I lost something.

[Luigi De Bellis, analyst]

No, just on the dividend.

[Gian Mossa, executive]

On the dividend, Tommaso.

[Luigi De Bellis, analyst]

What is your best assessment?

[Tommaso Russo, executive]

My best estimate is as simple as that; if considering that it's not me to define the dividend and is proposed by the Board of Directors and approved by the Annual General Meeting. I would say that in this year, we would apply in an extensive way, our dividend policy, paying 100% of the variable components and 80% of the recurring components for this year because you know this is a capital-light bank. And the remuneration of our shareholders is one of the key goals of our new 3-year business plan.

[Operator]

The next question is from Gian Luca Ferrari with Mediobanca.

[Gian Ferrari, analyst]

3 questions. The first one is on the bonuses you have accrued for the net inflows that advisers made this year. If you can give us the absolute euro million amount accrued in the 9 months versus 9 months last year? The second is a clarification on the reopening of the traditional life policies. Is it a new one or you are reopening some existing G&A savings, products of [ Generali Life ]? And the third and final one is if you can give us a bit of color on the EUR 2.1 billion net inflows in custody ex structured products of this year, how much is in Italian govies or bonds in general and equities?

[Gian Mossa, executive]

So if I understand, Gian Luca, the first question is a comparison between interest this year and interest next year -- last year, where I said that the existing sales force, the contribution is almost in line. The recruitment, thanks to some good results of, you said bankers recruited last year is pretty good, it's EUR 1.5 billion. And we have higher outflows. This is basically linked to some bankers consider that the overall churn rate is 1% more or less. So there is a strong sense of [indiscernible] of our network.

A small group of bankers ask us, let's say, received an extremely generously remuneration for remuneration package from competitors. And the cost of retention in this case was too high considering the margins and the implicit revenues generated by these bankers because part of these portfolios were invested -- were basically by institutional investors. So we decided to let them go. So there is EUR 200 million - EUR 200 million, EUR 300 million, impacted by this decision of the bank. But at the end of the day, the overall performance of the existing sales force is pretty sound because you should invest more time in staying close to the existing clients and at the same time also to develop new business.

And in terms of recruitment, the quality of recruitment is pretty high this year. And part of the result is driven also to recruitment of last year. We have plenty of potential new colleagues, which we are discussing, the opportunity to join the bank. So I'm positive for recruitment for this reason. While in terms of outflows, I'm pretty convinced to see normalization in the next months.

[Gian Ferrari, analyst]

I'm sorry, if I can intervene a second. I was more referring to the bonuses you will pay at year-end on the net inflows into asset management products. If I recall properly, you have a threshold at EUR 1.5 million or something like that per adviser, if they go beyond that, you pay a bonus to advisers. Given that the overall inflows in asset management this year are definitely lower than last year, I was wondering if there are some savings on this specific line of the P&L so you are paying less bonuses at year end.

[Gian Mossa, executive]

Sorry, sorry, I haven't understood quite really the question. Let's say that I do expect good numbers in the last quarter and in this quarter coming from these new initiatives. Of course, the overall cost of incentive will be a little bit lower on a year-on-year basis, but it's almost embedded in the numbers because we allocated the bonuses and the cost of incentives during all the quarters. But I will ask Tommaso to.

[Tommaso Russo, executive]

Of course, the cash spend will be lower than you have to consider the impact of Generali. There is amortization of bonds in 5 years. So that's why you don't have the full benefit of the lower bonds in the P&L of 2022. So the impact in terms of cash will be more relevant and more important. But of course, the benefit in the P&L is less visible because what goes into the account the rules that we used to amortize the bonuses basically in 5 years. That's why we don't have such -- so if you look at the number of the 9 months, the impact of bonds in absolute terms are similar because this effect.

[Operator]

The next question is from Elena Perini with Intesa Sanpaolo.

[Elena Perini, analyst]

Yes. I have only one question left. This is about the tax rate, given that you will have a higher amount of net interest income and likely, as you mentioned before, a lower contribution from performance fees. Can you provide us with the guidance on your tax rate?

[Gian Mossa, executive]

Yes, Elena, just to complete the answer to -- for Gian Luca because I haven't answered to the mix of the asset under custody. Let's say that the investments in govie bonds, Italian govie bonds is around 60%, 65%. And the remaining part is well diversifying other govie bonds and corporate and financials. In terms of guidelines for tax rate, we set the new target at 24% for the next 2 years due to a higher contribution of net interest income. Then, of course, if performance fee in 2024 are very strong. The tax rate will be a little bit lower, of course. But we say that with the assumption of, let's say, average on performance being in line with the past and higher contribution of net interest income, the tax rate should be around 24% -- 23.5%, 24%.

[Operator]

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

[Gian Mossa, executive]

Okay. Thank you for participating to our conference call. Have a great day. Bye.