Banca Mediolanum SpA

MIL:BMED

Earnings Call Transcript 2020-Q1

[Operator]

[Audio Gap]

Alessandra Lanzone, Head of Investor Relations. Ms. Lanzone, please go ahead.

[Alessandra Lanzone, executive]

Good afternoon, ladies and gentlemen, and welcome to the presentation of our results for the first quarter of 2010. As usual, our CEO, Massimo Doris, will do the presentation today, while our President, Ennio Doris, will make the closing remarks. However, far different from usual, the entire team is joining via remote, as you can imagine, to accommodate the requirements being asked of all of us. Additionally, we will carry out a Q&A session exclusively in English. So please make sure to ask your questions in English.

Before I hand this over to Massimo, in the event of any blips, I'd like to ask you for a little bit of patience since we are all working on a new event format. Massimo, you now have the virtual floor.

[Massimo Doris, executive]

Thank you very much, and good afternoon to everybody. It is truly a great pleasure to be connected with you today. First of all, speaking of being connected, we'd like you to be aware that we have taken extensive and immediate measures to strike a strong balance between business continuity and the safety of all of our employees and family bankers as a response to a health tragedy that has caught the entire planet unprepared.

I'm very proud to say that even working under emergency conditions, we've been able to guarantee all banking services to our customers, every day and without interruption, thanks to our digital readiness.

Nearly 2,000 employees, over 85% of our workforce, are now smart working from home. More than 90% of all processes and transactions are being carried out digitally. Our family bankers are conducting customer meetings via Skype or via Teams, everything remote and extremely efficiently. Along with our family bankers, we are dedicating nonstop efforts to orient our customers' investing behavior during such a delicate moment.

Despite this unexpected challenge, our first quarter results are, by any measure, exceptional, particularly in this moment racked with uncertainty anywhere we look. No doubt that we are in the midst of one of the toughest time in recent history.

Market conditions during the past few months have been very difficult at best, to put it lightly, and the financial community has low, and perhaps, confused expectations for all players in our industry.

And yet, as you can see on Slide #5, our net income reached EUR 72.2 million, in line with the first quarter 2019. But more importantly, we managed to increase our operating margin to nearly EUR 100 million, up 12% versus last year, maintaining a very high level despite the current hurdles. In fact, there was just one major detraction to our net income, that is fair value, the most volatile of market effects. It has really, at March 31, strongly penalized our bottom line to the tune of a negative EUR 19 million. This is due to mark-to-market and will, of course, rebound in line with any market recovery.

But let me draw your attention to our recurring business, best expressed by the contribution margin, which rose 9% to EUR 263 million, and even more significantly, of course, by the operating margin.

Many of you recognize in your most recent reports, and in chats with us, just how well positioned we are, noting, in particular, our focus on the development of recurring fees and less reliance on performance fees in a lower return environment. But also, on a greater diversification of revenue streams, which are not correlated to volatile markets and in general, our focus on the strengthening of our operating efficiency.

In fact, although we are exposed to market volatility, as is everyone, we don't carry the corporate credit or capital risks other banks are facing during economic downturns, and our net interest income and insurance revenues are less affected by equity market moves.

But let's now start from the top. Net commission income, the main driver of our operating margin, was up 7% for the quarter at EUR 210 million. In fact, all of the line items had generous increases. Although, as you know, entry fees are subject to a gradual long-term downward trend, in Q1, they were up 53% to EUR 13.5 million, benefiting from strong gross inflows into mutual funds, a sign of super strength of the network, even or better especially under the stress of this unprecedented circumstance. Management fees were extraordinarily resilient, totaling almost EUR 261 million, up 7% compared to Q1 last year, despite over EUR 8 billion plummet in mutual fund assets in the first quarter.

As you can see in Slide #7, the sum of management and investment management fees, namely commission income from recurring fees, reached EUR 299 million for the quarter, corresponding to 207 basis points on average assets.

Going back to total commission income, in Slide #5, net insurance revenues up 43%, reflects the strong increase in general insurance volumes.

Before moving down to the P&L, it makes sense to talk about net inflows, considering their key contribution to such a high level of net commission income.

As you all know, I came here to Slide #11, in Q1, we generated a record EUR 3.3 billion in total net inflows, the great majority coming from the remarkable success of our 2% promo rate on time deposits, totaling EUR 2.3 billion. Please be aware that 2/3 of these flows came from new money from existing customers, who increased their share of wallet, embracing full strategy -- embracing the -- in full our strategy and model.

And it goes without saying that this amount is there to be developed into managed assets as soon as the term deposit expire in the second half of the year. However, the point that counts here is the extraordinary result of inflows of EUR 404 million in managed assets, at a time that was strongly influenced by the tragic pandemic and the collapse of the markets.

But by now, you see what happened in April, which you can find in Slide #39, with 300 -- EUR 739 million of total net inflows that were well beyond what anyone really expected, particularly in terms of managed assets, where we registered EUR 585 million, EUR 0.5 billion in equity mutual funds only.

This amazing result was accomplished also by virtue of the automatic mechanism of our one-of-a-kind Intelligent Investment Strategy service that gradually shifts investments from monetary to equity funds, doubling or even multiplying the installment up to 5x when market drops.

If you look at Slide #42, the light blue bar shows just how much our customers' installments have automatically increased in March and April, which really takes advantage of dollar cost averaging, maximizing our customers' long-term returns.

So going back to Slide #39. You can appreciate that in the first 4 months, of what has turned out to be an unfortunate year, we were able to generate over EUR 4 billion in total net inflows, with almost EUR 1 billion of net flows into managed assets.

On top of the managed asset's number, we need to consider the additional EUR 470 million invested into the double chance service, which we created back in 2008, with a dedicated purpose of dealing with deep market crisis and the unique opportunities they present. As a reminder, this long-term service initially parsed the lump sum invested into a remunerated deposit account, and gradually shifts this amount into equity funds over a time frame of 12 months.

This effectively brings the total commitment in mass products from our customers to nearly EUR 1.5 billion by the end of April. The history of Mediolanum is sprinkled with examples of crisis during which net inflows were a positive into mutual funds as well, consistently mitigating the decreasing assets due to market drops. The true value of our advisory model makes the difference, particularly in difficult times, by preparing our customers for the crisis, so that they can better seize opportunities more rationally.

I'd like to underline the fact that we had very few customers who engaged in panic selling, in contrast to what the industry experienced, and this reflects the high-quality level of our advising process and the tenacity of our network.

And what about mortgages and loans? Despite the obvious roadblocks and slowdowns presented by the moment, particularly with respect to mortgages, we managed to grant nearly EUR 800 million during the first 4 months, in line with the same period last year.

As regards to general insurance premiums, we saw a steady growth of 21% versus last year, totaling over EUR 34 million, while new business of stand-alone policies reached nearly EUR 6 million at the end of April, doubling the number versus the 4 months -- the first 4 months of last year.

So then, let's turn back to the income statement in Slide #5 and address net interest income, which totaled EUR 57 million, growing 11% over the first quarter last year. And this is precisely due to the substantial growth of our retail credit book, including salary-backed loans. On the other hand, the cost of funding increased somewhat as a result of our 2% promo on term deposits, although we feel this more so in Q2.

Okay. Looking ahead, as far as net interest income is concerned, we think we can, nevertheless, close 2020 in line with last year, based on the positive trend in the growth of the credit book. Net income on other investments registered a negative EUR 9 million, slightly better than a year ago, justifying the value of our credit rating model and the creditworthiness of our customer base. Our NPL ratio remained very low. In fact, it went down further to 0.64% net. Please take note that the moratorium decree as well as our own initiative to suspend mortgage payments upon customer requests will be calculated in determining credit deterioration.

Now moving down the P&L. G&A expenses totaled nearly EUR 140 million in the quarter, up 6% versus Q1 last year. Of course, responding to COVID-19 has required additional expenses related to ad hoc IT, employee and network support and accounts for nearly 1% of G&A. Moreover, we haven't cut any plans in terms of marketing communication activities for the quarter, nor for the rest of the year, even though we've had to get creative to find new ways to stay in close touch with our stakeholders.

As is our trademark, especially right now, we are committed to maintaining an uninterrupted and very high level of communication with our customers to convey the message that in a market crisis a loss is incurred only if money is withdrawn from their investments, and that actually market crisis are unique buying opportunities.

My father and I have personally participated in a variety of interviews and programs, often created by our TV network, addressing what's happening to all of us in this moment, involving the highly respected and influential entrepreneurs, economists and journalists.

And looking forward, we are all aware that this pandemic will create a new normal, whatever that would be. As always, crisis are moments of extreme acceleration of progress, and innovation will play a major role in how we all respond. So beyond emergency management, we haven't taken our eye off the future, and are actually stepping up our work and efforts on a new project to accommodate this hugely expanded new world. Anyway, in terms of G&A costs, we will continue to work hard to be able to confirm the 5% increase we already stated at the full year presentation.

Before leaving the income statement, I will just like to underscore, once again, the stamina of our underlying business. We are in the middle of a rigorous test, which is giving us the opportunity to prove that Mediolanum's performance is, now more than ever, less dependent upon a thriving economic environment. We have set up the conditions so that our operating margin can develop at a level that is sustainable and resilient.

Moving on from the P&L. Looking at Slide #9, we see that assets under administration and management felt the impact of the strong drop in the markets, totaling EUR 78.5 billion at the end of the period, down 7% since the start of the year, having lost more than EUR 8 billion in mutual funds assets in March alone. However, we had already recuperated some EUR 3 billion by the end of April.

And moving on to Slide #12, you can appreciate that we still had growth in our credit book, which stands at over EUR 10.6 billion, an increase of 3% since the beginning of the year. But of course, we expect to see slower growth rate than previously expected over the course of the year.

Switching gears. In Slide #16, you can see our updated capital ratios. The common equity tier 1 ratio at the end of March was 18.8%. As you can see, our capital position continues to be very strong, and this capacity entitled us to obtain from the regulators the right to approve the distribution of the dividend balance for 2019 equal to EUR 0.34 per share, although with the requirement to postpone the payment to October 21.

Now before we move on to Spain, I'd like to insert a quick comment about what we see in slide number 32. I think it's important for you to be aware that at the beginning of this year, we raised the minimum requirements for the portfolio characteristic necessary to earn the status of a -- as a private banker. So of course, a few private bankers didn't qualify this time.

Turning to Slide #34, you can see that our business in Spain went extremely well in the first quarter. Net income came in at EUR 5.3 million, an increase of 28% compared to the first quarter last year, with a very strong operating margin, increasing EUR 1.7 million, up 36%. In fact, all of the line items of the underlying business were on the increase, despite the market contingencies and the relevant impact on assets. In fact, assets decreased 8% since year-end, totaling EUR 5.5 billion, with managed assets at EUR 3.9 billion.

Net inflows, however, had a record quarter exactly as in Italy, registering EUR 233 million, EUR 169 million of which in managed assets. The sales network saw a growth of 3% since the start of the year, reaching 1,058 family bankers.

Now I would just like to make one more quick comment about Germany. Please note that the negotiation that we're underway with the interested third-party did not reach a conclusion. And so we are now working on alternative plans in order to divest the business as quickly as possible.

Before we close, I'd like to make a few comments about the year ahead of us. It is the general opinion among the financial community that the revenues in the asset gathering sector could suffer in 2020 as a result of market sell-offs, reduced spending activity and risk aversion. But crisis always highlight the need for advisory services and our proven ability to gather assets in market downturns is and will be one of the main differentiating factors during this current pandemic once again.

We have stated on various occasions, in the past, that Mediolanum is capable of doing very well even when market conditions are extreme and the financial community has greatly depressed expectations for the result of companies like ours. Of course, it goes without saying, our results could be dampened as well by this situation if it stretches out for an extended period of time. Yet, this crisis will turn out to be an opportunity, and will demonstrate in the future that you will have contributed to the increase in our results as well as our customers.

And as a testimony of this, just look at the inflows we are generating. We still believe that, in 2020, we can do higher numbers than in 2019. Given our results so far, I think it's reasonable to confirm, we can achieve around EUR 5 billion in total net inflows, with EUR 3.5 billion to EUR 4 billion in managed assets.

Thanks for your kind attention today. I hope you appreciated just how good these results are, and how well our business model responds under any circumstances.

We can now open the question-and-answer session.

[Operator]

[Operator Instructions]

[Alessandra Lanzone, executive]

Thank you, Massimo. Is there any question?

[Operator]

There are no questions at the moment in the Italian line. I will now hand the conference over to the English call.

Your first question comes from the line of Hubert Lam of Bank of America.

[Hubert Lam, analyst]

I've got a couple of questions. Firstly, on your provisions for lower loan impairments in the quarter, it was only just EUR 6.2 million. Just wondering what your expectations are of that number going forward? And also what are your macro assumptions pertaining to that provision you had in the quarter, as it seems relatively low? I'm just wondering if it could get worse. Or is that the limit you think it will be going forward by quarter?

Second question deals with your dividend. How confident are you that you'll be able to pay your dividend some time in Q4? And if you're able to, will you be paying the EUR 0.55 that you had originally planned for earlier this year?

[Massimo Doris, executive]

I'll start from the second question. We are quite confident that we will be able to deliver the dividend because, as you can see in this environment, our net income is good -- is strong. The -- we expect to have good results this year, both in economic terms and in commercial terms.

So I'm, repeat, very, very confident that we will be able to pay the dividend. Bank of Italy accepted also the fact that we didn't put as a reserve -- we put as a reserve -- sorry, accepted the fact that we didn't put as a reserve these dividends, increasing the common equity tier 1 ratio because we wanted to pay this dividend. So our very strong position in the common equity tier 1, plus the fact that we will have very good results.

And answering also to your first question, as we believe that our -- the cost of the risk in the credit book will remain stable, so all these together makes me very confident to pay the dividend. So we don't see an increase in the cost of the risk -- or the credit risk in -- for the year. Other questions?

[Operator]

Mr. Lam, does that answer your question?

[Hubert Lam, analyst]

Yes. Sorry. Just to confirm, it will be the EUR 0.55 you plan on paying at the end of the year? Is that correct?

[Massimo Doris, executive]

Yes. Yes.

[Operator]

Your next question comes from the line of Federico Braga of UBS.

[Federico Braga, analyst]

I'm not sure if I need to ask the question in Italian or English, but I will go for English. The first question is on the net interest income. Sorry. So the first question would on the net interest income for 2020. You said that you expect at least a flat NII this year. But given the recent moves in bond yields, I was wondering if you took advantage of the environment to do some front-loading on your bond portfolio? And if you actually -- we could expect some upside risks to net interest income this year?

The second question is on the double chance product. Just to have an idea, what can be the potential contribution to flows into managed assets from this product in the coming months and quarters?

And then the last question, sorry, if I missed it in the initial part of the presentation, I joined late. But in terms of costs for the full year, if you still stick with the 5% growth for the full year? Or given the one-off costs that you have seen so far, 6% seems more appropriate?

[Massimo Doris, executive]

Yes. Regarding the costs, yes, our forecast -- our guidance remains 5% for year-end. Regarding the NII, we took advantage of the market situation because during the first quarter, we front-loaded more than EUR 1 billion. We purchased the Italian government bonds, and so we anticipated the maturity of other bonds that will reach maturity by year-end.

Okay. So then regarding the double chance, we have now EUR 400 million by the end of the first 4 months, and I expect this to increase going forward. So I'd say another billion could come out from the double chance.

[Operator]

Your next question comes from the line of Andrew Crean of Autonomous.

[Andrew Crean, analyst]

Three questions, if I can. Firstly, your tax rate was pretty low for first quarter. And I wonder whether you could give some guidance on the tax rate for the year? Secondly, your management fee margin was higher than in the first quarter of last year. I wonder whether that has to do with more money being shifted from money market funds into equity style funds. And what's your forecast for the management fee margin is for this year, given that ongoing process? And then, thirdly, could you give us a little bit more detail on the difficulties that family bankers are operating under in lockdown? And whether they pick off the easy targets of existing clients first, you'll find it more difficult to generate new leads from new clients?

[Massimo Doris, executive]

Sure. Regarding the tax rate, it's extremely low because we went from a cash-based payment of taxes on dividends, intergroup dividends to accrual-based system. So usually, in the first quarter 2019, we paid the taxes on the dividends we received from the controlled companies we had, okay, for the previous year, while, by the end of 2019, we went on the accrual base. So this quarter, we only had the accrual of the first 3 months of potential dividends we will receive. While, in first quarter 2019, we had the payment on taxes on the 6 months dividends received from the other. So this is just technical. So there's no change, basically, in the taxes.

Regarding the management fees, well, in the first quarter 2019, the average assets were lower, okay? So we had more management fees. And -- so what we expect is we've seen -- what? No. What we've seen, we've seen a decline from 210 basis points to 207 basis points. This is due mainly to the fact that we had -- of course, the decline of the market hit especially equity funds, that are the ones with higher management fees. And so we felt the -- but in a recovery of the market, of course, we will see also a slight recovery also of these fees, even if, as we already stated, we see a slight decline over time of these fees due to the fact that the success of some unit-linked products that have a low management fee level. But in this period, for example, we are selling a lot other products, especially mutual funds, equity mutual funds, and also another impact is coming from the IIS product because all the new investments go into a money market fund with 50 basis points management fees.

Looking at the difficulties the sales network have, of course, during April, we've seen a slight decline in the acquisition of new customers because it's more difficult to acquire a new customer without seeing him. But still, we had acquisition also during the month of April. And I'm expecting, as they got used to deal with the customers from distance, through the PC or the phones and so on, they got used quite quickly. And of course, they were the ones that got used very quickly, and others that took more time to do it. I spoke with some of them, and some of the sales -- the family bankers, they told me, I'm -- it's not nice to say it because we are living a tragedy here. But from a business point of view, I'm living my best time ever because thanks to this, thanks to the fact that customers were home, and they saved the time of commuting from one customer to another, they increased the number of contacts with customers. And by doing so, they increased also the number of contracts, the net inflows and so on.

And as we are going toward less restrictions, I believe, that we will be able to continue to get new customers and increase the number of customers we are able to acquire. But I repeat, they are -- we continue -- we'll get back to you with the numbers. They continued also in April to make new customers.

[Operator]

There are no further questions on the English line. We will now move to the Italian call.

And our first question comes from the line of Elena Perini of Banca IMI.

[Elena Perini, analyst]

Well, I was wondering -- I already heard about the fact that you mentioned the double chance and IIS. As I had some difficulties during the call in the connection, I would like you, if possible, to add more color on the potential target that you have in mind for the transformation of your nonmanaged assets -- the deposits that got with the offer in the first quarter of the year into mutual funds and assets under management?

[Massimo Doris, executive]

Okay. We have now, at the end of 4 months, EUR 1 billion, basically, of net inflows into managed assets. We believe we can reach by year-end between EUR 3.5 billion to EUR 4 billion of net inflows into managed assets. So transforming good part of those EUR 2.3 billion that -- of inflows that we got, thanks to that 2%. Plus, of course, other part of those and part would be coming from new inflows that we will get during the year. So our target is between EUR 3.5 billion to -- our forecast between EUR 3.5 billion to EUR 4 billion of managed asset net inflows.

[Elena Perini, analyst]

Okay. And your total net inflow target or guidance is still approximately EUR 5 billion? Or could be even more?

[Massimo Doris, executive]

Well, at this point, I expect a bit more than EUR 5 billion. Of course, we will lose part of those EUR 2.3 billion of inflows that we got into the time deposit because we know from experience that part of those are coming from customers that once the promotion reached an end, they take away the money, and they -- we call them yield hunters, so they will move away. But the great majority will remain. So we will lose part of that, but we'll be compensated by new inflows from others. So my expectation is to go above those EUR 5 billion. Of course, this depends also on what will happen during the year in the market. But I'm positive that we will go above the EUR 5 billion.

[Operator]

And our next question comes from the line of Domenico Santoro from HSBC.

[Domenico Santoro, analyst]

I hope everybody on the call is okay. Just a couple of follow-ups, on my side. First of all, to understand a bit the sustainability of this number, given that the lockdown just started in the last part of the quarter.

First of all, just to liaison with the colleague question. I'm quite surprised about the margins that held up pretty well in the quarter. I would expect some decline, so I'm just wondering whether -- you said that direction is positive also for the next quarter. But I'm just wondering whether we should expect instead a decline given that the market effect will be, of course, plateaued in the second quarter?

Then the second question is on the banking service fees, where in my understanding you booked the upfront fees on the structured products. So just wonder how they are going to behave in the second quarter? And on which kind of a P&L line, in particular, on the revenue side, you might expect -- we should probably expect some weakness in the second quarter, that would be very helpful to have? And then on the IFRS 9 model, I'm just wondering whether you're going to update the model? And we should expect some extraordinary provision over the next quarter once you get, of course, the input from the ECB?

[Massimo Doris, executive]

So regarding the results that you expected lower results, of course, the market declined only partially the first quarter because January and good part of February, the assets were way higher than today. So the loss in management fees was limited. While in the second quarter, we will see the full impact of this. Even if -- it depends on how the market behaves because, for example, we recuperated around EUR 3 billion, those EUR 8 billion of decline. But of course, if the market stays down, we will feel the impact in terms of commissions, that is for sure.

Regarding the banking service fees, well, we believe we are doing very well in the sales of these kind of products, but they are very linked to the market conditions. So if market conditions allow us to come out with good products, we will see an increase in these fees. Otherwise, we will see a decline in this fees. But the sales network, if they don't have this product to sell, they will sell another one. So -- but that depends a lot on market conditions.

And regarding the provisions for the credit book, well, we -- as I told you before, we don't expect much of an impact there. Maybe they could come out with another change or worsening of the expectation on the outlook for the Italian economy, and so we will have to increase the general provision. But the great impacts come from the default of your own customers. That is where the great impact on provisions come from. And we don't see a strong impact there in our case because, on one hand, all of our loans are -- have collateral investments that customers have with us. So before not paying the loan, they sell the investment and pay the loan, of course.

And regarding mortgages, even there, the LTV is extremely low, meaning that our customers have a lot of money. We usually give loans to customers that have investments with us. So I'm quite positive that we won't see a major impact there on provisions.

[Domenico Santoro, analyst]

Can I just ask you a follow-up question? How much of your [ customers ] in terms of total amount, on your mortgage book have asked for moratorium?

[Massimo Doris, executive]

Yes. We had -- I know the total number was, just a second, if I'm not wrong, yes, 27,000 customers are out of -- I don't remember, I will ask my colleagues here, if they can give me the total number of the mortgages we have. So 27,000 asked for -- between -- I believe that number is between mortgages and also loans, the 27,000. So as soon as I get the number, I will get back to you. As soon as they come back with the number, I will give it to you. Meanwhile, I can give the number of new customers. So we had -- we acquired around 6,000 new customers in the month of April 2019 and 4,000 in 2020. So with the complete lockdown, April, 4,000 customers, new customers, acquired.

Regarding the amount of the corresponding of those 27,000 customers, if we look in assets, mortgages plus loans, we are talking about EUR 2 billion. So EUR 2 billion out of the EUR 10 billion of our book and $1.7 billion in mortgages, 300 -- yes, EUR 300 million loans, but just for the 2 months.

[Operator]

[Operator Instructions] There are no more questions from the Italian line. I now hand the conference back to Ms. Lanzone.

[Alessandra Lanzone, executive]

Because -- we actually have a couple of questions coming from the webcast. One is from Luigi De Bellis, Equita.

For management fee, do you expect to maintain the level registered in Q1 2020 also in the coming quarters? And then again, net interest income. What is the trend expected for the second quarter and for the entire 2020? What are the drivers? Third question from Luigi De Bellis. Could you give us an indication of risk-weighted asset evolution expected in the coming quarters? We have seen a slight reduction in Q1. And then again, new PIR. When do you expect a restart of inflow from this product after the outflows in Q1 for the industry?

[Massimo Doris, executive]

Okay. I expect a slight decline regarding management fees. I expect a slight decline in Q2 because, as I was saying before, while in the first quarter -- the first quarter wasn't hit completely by the decline of the market, of course, the second quarter will. So we are expecting a slightly lower management fees. That depends again on how markets will behave.

NII, we believe that we'll reach the same level as last year. You see that we have -- we started the quarter with EUR 57 million of NII compared to EUR 51.4 million of the first quarter 2019. We are going to lose this advantage, let's say, this head start because we will feel the impact in the next quarter of the EUR 2.3 billion into the 2% time deposit, especially in the second quarter, that will be hit completely by this increase in the cost of funding. But as we believe that we will continue to increase the retail book, we will be able to reach the same level of last year in terms of NII.

Regarding the PIR, well, if I look at the market, I'm not expecting much from this kind of product from the entire market because of 2 reasons. One, when you stop a machine, an organization, it's harder to make it work again, rather than start with something completely new. So they stopped this product for one entire -- 1 full year. So making it moving again is not easy. On top of that, [ we award ] -- but Italy, especially. And as this product invest in Italy, I'm expecting the market not to believe much in such kind of investment.

Regarding ourselves, regarding Banca Mediolanum, we are among the very few with positive net inflows, even if tiny in these kind of products. Because, if I'm not wrong, we are talking about EUR 23 million since the beginning of the year. But we will continue to insist on this product. Because, personally, I believe that even Italy will come out from this crisis.

And as we are investing, there is a fund manager behind a PIR fund. So the managers will choose the companies with the highest probability to recover -- and to recover faster than other because maybe they export a lot. So I continue to believe in this product, and continue to insist with the sales network on proposing this product to all of our customers, of course, looking for each of them, the risk profile, the diversification they have and so on. But I personally believe in this product.

And then regarding the risk-weighted assets, they went down because of Mediobanca, the decline of Mediobanca. But we believe that we will reach year-end with an increase of EUR 800 million.

Are there other questions Alessandra?

[Alessandra Lanzone, executive]

Okay. Also, Alberto Villa from Intermonte, had a question regarding the PIR funds. Do we have a new target to -- for net inflows in PIR funds for 2020? The second question from Alberto Villa was, what do you think of the proposals to launch new product with the same tax benefit of PIR, as recently put forward by Assogestioni?

[Massimo Doris, executive]

Okay. Regarding our target for PIR, I believe it will be quite hard to reach the EUR 800 million that we set at the beginning of the year. We didn't calculate yet what the new target will be. We will do it in the next couple of months, looking at how things are going. But anyway, as you've seen, net inflows have been extremely strong, starting especially from the month of April, regardless of the success of PIR funds.

Regarding new proposal of Assogestioni, what they call alternative PIR funds, I'm in favor of this fund. The idea is as PIR funds, the ones that we already know, can invest only in listed securities, so liquid assets because they are usage funds. Very little has reached the nonlisted companies, of course. And so they are looking at an instrument -- a vehicle in order to drive more assets toward the nonlisted companies. So these alternative payout funds could be the solution. But there would be illiquid funds, closed funds and so on.

So they will need more fiscal advantages in order to convince people to invest there because if they are the same of the liquid ones, I don't see much success there. So -- and in fact, they are asking for different things like, for example, increasing the minimum amount of money that you can invest and also increase fiscal advantages.

But also, in order for these products to have success, it is extremely important to -- either to create a new category of customers or find something else. Because, at the moment, if a customer is registered as a retail customer and not as a professional customer, he must, in order to invest in these kind of products, he must invest a minimum of EUR 500,000. And of course, we are talking about known liquid assets, minimum EUR 5,000, meaning a customer with at least EUR 5 million of assets, and this is limiting a lot the number of customers that can invest here.

So they are working also to find a way to lower this limit, for example, to EUR 100,000 minimum. So by doing this, you can multiply it by 5, the people who can invest in this kind of product, you multiply by 50, by 100. So if they are able to find a way to create these alternative PIR funds, I'm in favor. And they are -- they will not cannibalize the traditional one because they would be quite different. So they can stay both in the market.

Alessandra, if there are other questions?

[Alessandra Lanzone, executive]

No, there are no other questions. Actually, thank you for -- thank you all of you for all of your thoughtful questions.

We are now -- will be reconnecting with our President, Ennio Doris, for his closing remarks. And we are also connecting with our interpreter for our English-speaking audience. So if you could just hang on for a couple of seconds, we'll be with you right away. Thank you.

[Ennio Doris, executive]

Well, before sharing with you a few final remarks, I would like Massimo to specify something. Because when Massimo was talking about how many clients took advantage of the moratorium, he said 27,000. But if I'm not wrong, at least 23,000 were customers that took advantage of the provision that was embedded into the regular contract so that they could have back-ended 2 installments and pay them at the end of the loan maturity. So I'm asking Massimo, if this is correct? Because one thing that those who actually took advantage of the true moratorium is just the delta. So I'm asking Massimo.

[Massimo Doris, executive]

Correct. But 27,000 is the latest reading. It is only a few that actually took advantage of the 18-month moratorium offered by the government. Most of them were instead just taking advantage of the 2-month moratorium embedded into the contract.

[Ennio Doris, executive]

So since that is contractually granted, it's a provision that is embedded in the regular contract that not does not call for additional provisions. So this, once again, bears witness -- it is a testimony of the incredible strength of our customer base and portfolio. This being said, I would like to draw all analysts and investors' attention to inflows, i.e. the -- really extraordinary inflows into managed assets. I'm not talking about the total inflows of EUR 4 billion during the 4 months, but EUR 1 billion net inflows in managed assets and -- 85% of which into equity funds. To that EUR 1 billion, as the CEO said, we should add about 500 million worth of double chance that are temporarily parked into the administered fund so that will shortly be transferred to managed assets, specifically equity funds. So in total, EUR 1.5 billion, and this amidst the tragic conditions. How could it be possible?

So we often talk about the model of Banca Mediolanum. But the word model is not really clarifying. The defining characteristics of Mediolanum model can just be something very flat, very -- the pride of any life. What I would say is Mediolanum culture instead. Because, like I said, we had this great inflows in March and in April.

But take a look at what we did in Spain. In Spain, in the first quarter, we had inflows in the first quarter that were twice as much as the first quarter of 2019, and we set an absolute record for inflows in the month of April. And we are talking about Spain, a country that was hit as severely as Italy by the crisis. So once again, the difference is Mediolanum's culture. And culture is not a patent that can expire or can be copied, it's something that is built year after year over time.

And to realize this, you just have to refer back to the table that was illustrated by the CEO regarding IIS investment, i.e., the Intelligent Investment System. And there, you can see that when the market declines, monthly installments increase. Last year when the market was rising, there were some automatic profit taking made. While in March and in April, the amount of assets transferred from monetary to equity funds actually skyrocketed. So if you take a look at that table, you see the steady rise in monthly installments. What does that mean? It means that when markets were really rising sharply, we persuaded customers to invest in monetary funds, and then gradually shift the funds to equity markets because sooner or later, a crash or a market decline would have a hit. And in that case, a proportional amount of money would have been transferred.

So you see it is not when markets are crashing, that we go and talk to customers to persuade them to invest in equity markets, but rather, this is a culture that has been built over time. If you just wait until the storm strikes, or when the market is crashing, to ask them -- to try and persuade them to invest in equity markets, nobody would listen to you. You have to do that day after day and over time, and Spain is a clear confirmation of this.

We had something like 93 net inflows and 83 in April, so it's a much smaller amount of money. But the important thing is that it's exactly the same thing. We can swim upstream. We can run counter what the others are doing. We can transform a crisis into an opportunity. And we are the only ones that can do that.

Let me tell you one more thing. When this crisis was at the zenith, at the apex, this was a health care emergency. And the fear of falling yield doesn't give you the necessary peace of mind to tackle your investment problems, your money-related problems, you are afraid you may fall ill. So what do I do? I defend myself. I take very, very defensive approach and stance. And this is what accounts for the bad results reported by our competitors.

In our case, just the opposite holds true. Why? Well, not only because, as I said earlier, we have built a certain culture, but people are shocked by news -- by a steady stream of bad news about markets, about health care. So people are scared and afraid. So you have to really steamroll clients with good news instead. And this is exactly what we did. Every single day, even headquarter -- or headquarter and sales network were in constant touch and the sales network was in constant touch with customers. But it's not only a matter of being at the customers' side and talking to them, it's what we communicated that is difficult. What we focus on is extremely different, and it's fully in line with our culture.

Two final comments. I'd like to repeat what the CEO said earlier when he said that the family banker -- that family banker he was talking to felt almost guilty because, under these tragic circumstances for the Rest of the World, he has experienced, a bonanza, a very good moment, and business was very good for him. But this situation really forced the family bankers and all companies to really embrace innovation and new technology. And they proved with a great flexibility by actually embracing technology immediately.

And as the CEO pointed out, the number of contacts with customers actually skyrocketed in the recent period during a crisis. Thanks to technology, during this crisis, we could be even closer to customers. And we will not go back. We will not change our way of working.

Yes, of course, we'll go back and visit customers physically as we used to do in the past and have face-to-face meetings, but context will be even more frequent, thanks to the new technology. Plus, let me underscore that this significant increase in context did not generate any increase in costs. Because the 10% increase is due to the fact that when inflows grow so much, we pay one only -- a one-shot fee, which, if then the inflows are confirmed, like, for instance, in the case of the promo 2% rate. If the customer do not stay with us until the end of the campaign and reinvest afterwards, the family banker will not receive his fees.

So as I was saying, we have set up kind this one-shot fee that will be paid. It's an acquisition fee that will be paid to family bankers, and will be paid only if customers are actually retained. So that increase was achieved without having costs increase accordingly or proportionately.

One final observation, G&A increased by 5% -- increased -- 5% increase of G&A. This is the target, and we'll stick to it this year. Last year, G&A increased to a lesser extent. Why? This year, we increased investments in technology, and revenues will not be generated right this year, but in the years to come. But thanks to the fact that during a crisis we are capable of growing the business and gaining even greater market shares because our balance sheet is strong, because our P&L is strong. As the CEO said, we have not cut back on marketing or communication expenses, and this is something necessary to remain at least at the top levels in the sector.

So let me just say -- conclude by saying that I'm very happy with our results. I am very willing and happy to pay out a dividend. And we are pretty sure that, at the end of the year, we'll pay out dividend and we'll also cash in the fruit of our investments and belief in this company.

Thank you, and goodbye, everybody.