Banca Mediolanum SpA

MIL:BMED

Earnings Call Analysis

Banca Mediolanum Reports Strong Financial Growth and Confident Outlook

Banca Mediolanum showcased remarkable performance in the first nine months of 2024, with net income climbing 18% to EUR 674.3 million and net commission income up 13% to EUR 874 million. Record managed inflows reached EUR 7.16 billion, driven by strong customer trust and effective promotional strategies. The company updated its guidance, anticipating net inflows of EUR 7.5 billion for 2024, alongside an 8% growth in net interest income. Operative efficiency improved, evidenced by a cost-to-income ratio of 38.3%. Plans for a higher dividend of EUR 0.37 per share further highlight solid financial health and strategic execution.

Impressive Financial Performance

Banca Mediolanum has reported exceptional results for the first nine months of 2024, achieving a net income of EUR 674.3 million, an increase of 18% compared to the same period last year. In Q3 alone, net income reached EUR 224.4 million. This robust performance is supported by net interest income of over EUR 630 million, up 13%, and a substantial growth in net commission income, which rose 13% to EUR 874 million. The firm also recorded a remarkable increase in recurring management and investment management fees, totaling EUR 1.13 billion, reflecting a 14.5% hike from last year.

Strong Inflows and Managed Assets Growth

Total net inflows for the first nine months reached EUR 7.16 billion, marking a notable 28% increase year-on-year. Notably, inflows into managed assets almost doubled, hitting EUR 5.44 billion. This momentum continued into October, with managed assets flows of EUR 703 million, showing significant traction from promotional time deposit offers. The company expects net inflows into managed assets to surpass previous forecasts, raising the guidance for 2024 from EUR 6.5 billion to EUR 7.5 billion. Strong market conditions and effective rebalancing strategies have effectively contributed to this growing trust from customers.

Strategic Shifts in Product Offerings

The business strategy centered on offering a mix of products aligning with current market conditions has proven effective. With a significant focus on fixed income funds, the company allowed clients to rebalance their traditionally equity-heavy portfolios. Despite a slight decrease in the equity component within managed assets, which now stands at 59%, the approach has led to healthier margins. The firm's Intelligent Investment Strategy has played a crucial role, contributing to consistent monthly inflows and helping cover potential risks.

Operational Efficiency and Future Guidance

Banca Mediolanum has achieved an impressive operating margin of EUR 848 million, a 16% increase from last year. The cost-to-income ratio improved to 38.3%, aided by a strong increase in top-line growth as a result of higher recurring fees. Looking ahead, the company projects an increase in net interest income of about 8% for 2024, down slightly from earlier guidance of 10%. For 2025, a decrease of approximately 3% in net interest income is anticipated, but the company remains focused on offsetting this through growth in managed assets.

Dividends and Financial Strength

The company announced an interim dividend of EUR 0.37 per share, up from EUR 0.28 last year, reflecting its commitment to returning value to shareholders. The capital strength remains robust, with a Common Equity Tier 1 (CET1) ratio of 23.4% and a leverage ratio of 7.3%, ensuring substantial capacity for growth. The board has indicated a willingness to consider special dividends if performance fees materialize, further enhancing shareholder returns.

Market Presence and Customer Acquisition

Banca Mediolanum has maintained a leading position in Italy's banking sector by securing 51% of all inflows into managed assets. The firm achieved a record acquisition of 149,000 new bank customers by the end of September, reflecting a 7% year-on-year increase. Digital strategies, including the Selfy platform, have substantially contributed to customer growth, underscoring the effectiveness of their outreach efforts.

Spain Operations and Future Outlook

In Spain, the bank has experienced a surge in managed asset inflows, doubling last year's figures. Net inflows of EUR 918 million represent a 46% increase year-on-year, with total assets growing by 15% to EUR 12.2 billion. Looking forward, the bank anticipates that Spanish operations will significantly contribute to group inflows, enhancing overall performance as the market stabilizes.

Conclusion: A Strong Future Ahead

As demonstrated by outstanding results and strategic maneuvers, Banca Mediolanum stands poised for a strong finish in 2024 and beyond. With a solid financial foundation, an impressive growth trajectory in managed assets, and continued focus on customer satisfaction, the landscape appears favorable for both investors and clients alike.

Earnings Call Transcript 2024-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Banca Mediolanum 9 months 2024 Results Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to Alessandra Lanzone, Head of Investor Relations. Please go ahead, Madam.

[Alessandra Lanzone, executive]

Hello, everyone, and welcome to the webcast presenting Banca Mediolanum results for the 9 months. Before we start, please remember to ask your question following the language of the line you're calling from. Regardless answers will be provided in Italian with an English translation. Next, let me introduce you to our CEO, Massimo Doris, who will lead us through the presentation today. Accompanying him is our CFO, Antonio Lietti -- Angelo Lietti, I'm sorry. Massimo, the floor is yours.

[Massimo Doris, executive]

Thank you, Alessandra. Good afternoon, ladies and gentlemen. It's always a pleasure being here with all of you. What I'm about to share today should offer some color to truly outstanding results. In fact, these aren't just numbers on a page. They are a clear reflection of deliberate strategic choices and consistent execution. In short, we've delivered on our strategy and the results speak for themselves.

As we review these 9 months, we find ourselves in a strong position, powered by momentum that sparks growth and uncovers new opportunities, even as we manage the complexities of our market environment. One of the most encouraging trends has been our sustained growth in profit levels fueled by solid commercial strategies and the high responsiveness from our customers. There is no doubt we are seizing the right opportunities at the right time. In fact, our mix of commercial initiatives are effectively bringing in new customers and maintaining both the volume and quality of our net inflows.

And let's talk about inflows. The acceleration we've seen, which fostered the AUM growth showcase the high level of trust our customers give us. And our inflows are gaining strength by leveraging market shifts and providing solutions tailored to changing needs. For example, offering attractive fixed income funds over the past year, allowing our customers to rebalance a little bit their equity heavy portfolios. Favorable market conditions have certainly held out our net inflows into managed assets, which were already strong in H1 and surged in Q3.

Thanks to the positive market moves at the end of the quarter, we have reinforced our competitive edge and are entering the remainder of the year with an extremely positive outlook on inflows. This is our top priority as inflows are core to driving our recurring commission income, which is the foundation and backbone of our revenue stream.

So let's walk through the highlights of the period. As you can see Slide #4, net income reached EUR 674.3 million, exceeding 9 months last year by 18%. And with Q3 coming in at EUR 224.4. By all accounts, record-breaking financial results, driven not only by more than resilient net interest income but notably by a significant double-digit growth in net commission income, up 13% to just over EUR 874 million. As a matter of fact, our recurring fees, combining management and investment management fees hit the record figure of EUR 1.13 billion, indicating a 14.5% increase over the same period last year. On a pre IFRS 17 like-for-like basis, the recurring fees on average assets were 213 basis points over the 9 months, very healthy margins, indeed, only a couple of bps lower than H1, precisely because of the higher bond component and the increased level of intelligent investment strategy, money market funds compared to before.

In fact, with net flows primarily directly into fixed income funds over the past year. The equity component of our customers or our customers managed assets has slightly decreased, yet remains at a notable 59%, as shown on Slide #15. Naturally, net interest income has been a key contributor to our P&L, remaining strong at over EUR 630 million, up 13% and versus the same period last year despite the impact of the initial ECB rate cuts. The slight decrease in Q3 versus Q2 accounts for the weight of all the promotional initiatives which, by the way, brought in EUR 1 billion in net inflows in the quarter and the turnaround in the credit book trend. We've highlighted several times that our net interest income would grow in 2024. And this projection is proving accurate as the year unfolds.

Our guidance for NII in 2024 is now an increase of some 8%, mainly due to the success of our promotional efforts that have far exceeded expectations, which is great news as we are seeing a significant shift towards managed products even faster than last year's especially with BTPs no longer acting as a strong competitor.

Just look at the EUR 2 billion more of inflows into managed assets above and beyond our initial guidance of EUR 5 billion. This means substantially higher commission income over time since recurring fees are structured to provide sustained revenue streams for years to come. The increased commission income will help offset any gap in NII for 2025 due to the latest market expectations in terms of yield curve. In fact, we anticipate a slight decrease of some 3% compared to 2024. In short, by leveraging higher commission income, we aim to fully compensate for the impact of the anticipated NII reduction, ensuring a healthy top line, our overall outlook remains highly positive.

Returning to the P&L, what stands out most is our operating margin, which hit a record EUR 848 million, a 16% increase. The significant growth highlights the effectiveness of our diversified, profitable and scalable business model.

On this note, I want to highlight our reduced cost/income ratio now at 38.3%, an improvement over year-end 2023. This reduction is largely attributable to the top line growth boosted by higher recurring fees. On the other hand, the acquisition costs to gross commission ratio has edged up slightly in Q3 driven by increased bonus provisions linked to exceptionally stronger inflows into managed assets compared to the previous quarter and also year-on-year. Keep in mind that these bonuses on new money don't have an immediate offset in fees. Rather, the fees are earned gradually over the investments.

Finally, market effects also contributed to our healthy net income during the period thanks to overall positive mark-to-market and performance fees totaling EUR 51 million compared to a negligible amount in the same period last year.

As far as costs are concerned, the 11% increase in G&A, we see Slide #8 is largely in line with our indication and slated to go down to 10% by year-end. Just as a reminder, the contributions to the banking industry line item was impacted by a change in scope. There was no contribution to the Single Resolution Fund in the past 9 months as it was fully funded with no further contributions necessary. The final payment to the deposit guarantee scheme was accounted for in Q1. Additionally, the new contribution requested by EVAs on the insurance reserves was allocated quarterly on a prompt basis, on a calculation estimate of around EUR 17 million for the year, plus EUR 13 million for the 9 months. And while we are on the topic of costs, it's important to note that the increase in provisions for risks and charges is because last year, this line item benefited from a significant increase in interest rates, which positively impacted the discount rate.

Now skipping to Slide #5, I'd like to briefly comment on the business results for the first 9 months that you are already familiar with. Total net inflows, which were already solid in the first quarter, had a major boost in Q2 and an extraordinary performance in Q3, ending up at EUR 7.16 billion for the 9 months, a marked increase of 28%. Most notably, managed assets set an exceptionally positive trend, reaching EUR 5.44 billion, almost doubling last year's figure. I'd like to emphasize that each month in the third quarter, July, August and September, all set new records compared to the same months in previous years.

And as you can see, Slide #33, October performed just as strongly with EUR 703 million in managed asset flows bringing the year-to-date total to EUR 6.15 billion. Please note that in October, administered asset flows were also extremely robust bringing total inflows for the month to EUR 1.37 billion, thanks to the significant traction of the latest time deposit promo offer that ended at the end of October. And why we are on the subject to add further clarity, I'd like to recap the status of the promo offers of the past 2 years.

First, the EUR 1.9 billion from the 6 months' time deposit tied to the 2023 4% promo offer generated EUR 1.4 billion in managed assets, 72% of the initial amount. Second, practically all of the EUR 2.2 billion of time deposits from Q1, 2024 at 5% promo offer have now matured and we are actively working on their investment as reflected in the strong months inflows you've observed, achieving a 52% conversion rate in just 3 months. Third, the recently concluded 2 months at 5% promo over this fall is expected to reach a total of EUR 1.5 billion and will start to mature in March 2025.

And not just that, I'd like to highlight that our impressive net inflows into managed assets also showcase the attractiveness of our signature intelligent investment strategy which actually picked up speed in Q3.

Let me reiterate our key point. Flows are the backbone of our business and absolutely fundamental to our growth. Slide #34, you can see that in the first 9 months, we maintained our position at the very top of the Assoreti rankings by net inflows with a substantial lead over the others in the list and most notably in managed asset inflows, even considering the new categorization that includes administered assets under advanced advisory, meaning with advisory fees on top.

Please note, we hardly have any assets in this category. Consistently leading in these rankings is a clear indicator of our growing market share. That said, it is quite clear that our inflows into managed assets are so resounding positive that we are again in the position to adjust our 2024 guidance from EUR 6.5 billion to EUR 7 billion to some EUR 7.5 billion. Driven by these strong net inflows stable deposits and favorable market conditions, our total assets serves to an unprecedented EUR 133 billion at the end of September, a notable 13% increase since the start of the year. And also, our credit book is expanding and has reached EUR 17.2 billion, up 1% since the beginning of the year. In fact, in Q3, we observed a turnaround compared to the weaker previous quarters, driven by a significant reduction in early loans payoffs and our initiatives to support mortgage customers.

Loans granted are still lower year-on-year, however, strongly recovering since the first half. And the NPE ratio of 0.8% reflects the health of our loan portfolio, while the 12-month rolling cost of risk at 21 basis points aligns with our expectations.

General insurance premiums also improved, marking a more solid increase of 6% coming in at EUR 143 million. This includes a 17% growth in the stand-alone premiums effectively offsetting an obvious decline in loan protection policies, which, however, have shown a good recovery since the first half, along with the trend in mortgages.

Shifting focus to the further growth drivers. They are all trending strongly upward as clearly demonstrated on Slide #6, reinforcing our positive momentum. One of the standout achievements this year is our record-breaking acquisition of 149,000 new bank customers by the end of September, a 7% increase over an already substantial number in 2023. This growth reflects the success of our focused marketing efforts to attract primary customers.

Additionally, our digital channel Selfy contributed significantly by bringing in 21,200 new customers, a 5% increase over last year. This accomplishment underscore the effectiveness of our digital strategy in expanding our customer base. This growth brought our total bank customer base to over 1,888,000 a significant 5% increase since the close of last year. The network has shown steady organic growth, underpinned by the ongoing recruitment and development of professionals from diverse fields and the gradual integration of the new banking consultants into the franchise. This deliberate approach brought the total number of family bankers at the group level to 6,352, a 2% increase since the start of the year. With this total 332 banker consultants joined through the project NEXT, actively supporting senior private bankers as of the end of September which reflects our commitment to building a strong foundation for sustained growth.

By the end of October, this figure rose to 354 with an additional 178 banker consultants currently enrolled in the executive master as at Mediolanum Corporate University as they progress toward active roles. At this point, we expect to approach 400 banker consultants by the end of the year, and it's clear we'll reach 500 relatively quickly based on our current numbers.

In closing, I'd like to highlight our automatic investment services, which play a crucial role in fueling our growth and are key to the steady reliability of our net inflows into managed assets. As of the end of September, assets in the money market funds of the intelligent investment strategy service and in the Double Chance deposit accounts reached approximately EUR 3.4 billion showing a prominent increase of nearly 16% since the beginning of the year. This growth was driven primarily by the resurgence of IIS, Intelligent Investment Strategy. As investors after the rush of BTPs are now increasingly looking toward long-term equity investments in a declining rate environment.

As you well know, all these assets are scheduled for systematic monthly transfer into equity funds under IIS and primarily into equity funds for Double Chance over the upcoming years. This unique approach of ours establishes a dependable foundation for continuous inflows, ensuring the steady growth of recurring fees over time. Unlike more volatile and tactical strategies, it offers a reliable source of support that remains resilient, even amidst shifting external conditions. Additionally, our installment plans by now contribute EUR 1.64 billion annually in automatic investments into mutual funds, providing further consistent inflows that support long-term growth and recurring revenue. And you know as they say, small streams make great rivers over time.

Now addressing another important aspect. Let's move on to the balance sheet ratios in Slide #7. Our bank holds an exceptionally strong capital base, providing a solid platform for future growth and a reliable cushion against economic and regulatory changes. This financial strength reinforces our standing as a safe institution for both our customers and investors. Our CET1 ratio remains extremely high at 23.4%, with a leverage ratio of 7.3%, providing substantial capacity for organic growth and allowing the Board plenty of flexibility to continue increasing our attractive dividend distributions. In line with this, the Board of Directors are resolved to pay a higher interim dividend this year namely EUR 0.37 per share compared to EUR 0.28 last year to be paid November 20 and corresponding to a total of EUR 273 million.

Having said that, as already discussed, the implementation of the final Basel III regulations next year is projected to reduce our CET1 ratio by around 2 percentage points based on our preliminary assessment.

Shifting our focus to Spain, let's take a look at our progress in these key markets, as we can see in Slide #31. Spain registered an operating margin of EUR 65.3 million, growing in the period by 2% while net income had a substantial gain of 10% compared to the 9 months last year, reaching EUR 54.4 million. Total assets grew by 15% since the beginning of the year, hitting EUR 12.2 billion, of which nearly EUR 8.9 billion are in managed assets, an increase of as much as 22%. Net inflows totaled EUR 918 million, 46% higher than the same period last year with managed assets inflows actually contributing EUR 930 million, marking an impressive 131% increase largely driven by the success of the Double Chance service. In this regard, you may have noticed that net inflows into managed assets in Spain reached a record of EUR 143 million in October, pushing year-to-date managed flows to over EUR 1 billion, more than the same period in 2022 and '23 together.

This incredible growth was further supported by a record high customer acquisition which surged to 32,000 in the first 10 months. The credit book gained momentum over the past 9 months, exceeding EUR 1.42 billion, a 6% increase since the start of the year, driven largely by a consistent volume of mortgages granted. The number of family bankers held relatively steady showing a slight dip of 2% since the beginning of the year to a total of 1,610. It's worth noting that our recent strategy has shifted toward improving the quality and productivity of our family bankers, aiming to increase average assets per adviser, a similar approach to what we successfully implemented in the domestic market over the past decade. We are especially focused on helping those who joined us in recent years, grow and develop individually.

To wrap up, our customer base in Spain has grown to 248,000, a strong 7% increase from the start of the year.

Now there's something very important I'd like to acknowledge. As we celebrate the growth and success of our operations in Spain, we're also profoundly devastated by the heartbreaking tragedy that has struck the Valencia region. And our thoughts are with those affected their families and the entire community. Through to our tradition, Banca Mediolanum has taken immediate action to support our customers in the area by suspending -- this is Banco Mediolanum, I'm sorry, by suspending mortgage payments and other obligations for the time being on top of providing immediate assistance to guarantee continuity of service, also by implementing dedicated solution to address payment challenges. Once there is more clarity on the extent of the damage, we would set aside funds to assist our customers and family bankers who have suffered losses, whether to property or more tragically family members.

In the meantime, we have created an emergency aid donation fund for the community, open to contribution from the general public. Banco Mediolanum will match the amount collected effectively doubling the total contribution.

Shifting focus and looking ahead, I'd like to recap our guidance for 2024. Net inflows into managed assets around EUR 7.5 billion. In 2025, flows are expected to remain equally strong. Net interest income to grow by about 8% compared to 2023. Based on current interest rate curves, a decrease of approximately 3% is expected in 2025. Cost-income ratio for 2024 below 40%, cost of risk or risk at some 20 basis points, dividend to increase compared to the previous year. Please note that as of November 5, performance fees accrued but not yet crystallized amounted to EUR 230 million.

In closing, I want to convey how proud we are of our 9-month results. Let me reiterate a point I consider essential. Our achievements go far beyond mere figures since they reflect the strength of our strategic choices and disciplined follow-through. Simply put, we've been doing exactly what we set out to do laying down the foundation for what we believe will be our best year yet.

Thank you for your engagement and support today. And Alessandra, I'll pass it back to you.

[Alessandra Lanzone, executive]

Thank you, Massimo. And we can now start the Q&A session.

[Operator]

[Operator Instructions] We can now move on to the first question. From Elena Perini, Intesa Sanpaolo.

[Elena Perini, analyst]

[Interpreted] Hello, everyone I have A question concerning the banking sector in general, we have seen Banco BPM takeover bid for Anima and I would like to know what your considerations, what your views are? Do you think this may have some potential impact on the sector. And also, do you think that in addition to product factories, maybe other banking group may be interested mainly in sales network -- in taking over our sales network. So I just like to have an idea of what you think in general on this subject.

Then I was reflecting on your guidance in concerning inflows into managed assets, which is really quite robust. So you think that in 2025, you think you can achieve EUR 7.5 billion once again, I guess, by converting or switching all of the assets you have gathered, thanks to deposits.

[Massimo Doris, executive]

[Interpreted] Okay. First question first, Banco BPM, Anima. It's a beautiful deal, but we all know that vertical integration generates positive business impact positive impact in terms of performance and does not damage customers in any way. We are already vertically integrated, and we are not the only one in the market. So I really think that this is an absolutely excellent deal by Banco BPM. I really don't see any impact on us really 0 impact on us.

This deal may induce some traditional bank to acquire a network of consultants.

Well, I really don't know. We know how many sales networks are there in the market. The only thing. We heard talking so far was Mediobanca and Banca Generali, that is the only rumor that was circulating. If something happens and materializes, I really have no idea. Guidance as to 2025, net inflows into managed assets. Well, providing such a guidance is always difficult because it is really dependent on market performance. For instance, in 2023, we had provided a guidance for inflows into managed assets of about EUR 6 billion. And instead, we achieved EUR 4 billion only. So actually, you may think that was a disappointing result. Actually, we managed together EUR 4 billion in an Italian banking sector that reported EUR 22 billion outflows as per Assoreti report and Banca Mediolanum managed to account for 51% of all inflows into managed assets in the Italian banking industry once again as per Assoreti report.

So those EUR 4 billion were an extraordinary result. In 2024, we expected EUR 5 billion inflows, 25% more over 2023. And we will probably achieve a EUR 7.5 billion, that's to say 50% more than expected. Why? Because the market behaved in a given way and moved in a given direction. So once again, in absolute terms in the market of sales networks, we are still the #1. In 2025, will we make the same kind -- will we report the same kind of inflows? Well, if markets are stable, please consider that rates may go up BTP may be hypercompetitive once again. Well, if those are the conditions that materialize in 2025, it will be difficult to achieve EUR 7.5 billion inflows. If the conditions are more, I would say, lenient, if they are more positive and the markets permitting, we should actually achieve EUR 7.5 billion. We will see that for this year as well, of course. But we have the potential to achieve that target.

[Elena Perini, analyst]

[Interpreted] Well, and if I may, something came to mind right now. Speaking about the budget law -- the stamp duty payment, the stamp duty will have to be prepaid most likely. So what kind of impact may be -- make this cause? What's your view?

[Massimo Doris, executive]

[Interpreted] Well, let me remind you that the impact would just be financial because like I said, we would simply have to bring forward to prepay a duty that would have to be paid anyway. As far as the bank is concerned, the impact on DTAs, it's really ridiculous. It's really negligible. But we have to consider the insurance branch where the request -- let me remind you that there is a stamp duty of 0.2% a year. And this is a stamp duty that must be paid by customers. Funds would normally -- investment funds would normally debit customers annually, while for unit linked -- for unit-linked business and Class III business essentially, when customers redeem so at redemption or if a claim happens, then you have to pay that 0.2% duty.

So the insurance company knows that every year, this 0.2% will have to be accrued. And at redemption, the customer would pay the stamp duty entirely. Now the government is asking us to prepay the overall amount right now. And once the customer redeem its -- his policy -- his unit-linked policy will pay that duty back to the bank. What has not been established yet is the percent of this stamp duty that insurance companies will have to prepay. Out of the current stock we have, we have accrued stamps that customers, the customers, not the insurance company should pay if they redeem everything today worth EUR 220 million approximately.

So what kind of impact will the company receive in terms of prepayment? It really depends on the percentage that the government will ask to prepay on the accrued stock. If it's EUR 22 million, we'll have to pay, if it's 10%, we'll have to pay EUR 22 million. If it's 20%, we have to pay EUR 44 million. So we'll see how much we'll have to prepay. For sure, as far as the insurance portion is concerned, financially, the impact is really significant. I mean, is sizable. In terms of the bank instead, that is really negligible.

But let me also remind you that this is just a financial impact that is not going to impact our P&L.

[Operator]

Next question, Giovanni Ravanasoli, Deutsche Bank.

[Giovanni Razzoli, analyst]

[Interpreted] I have a number of questions, actually. The first one relates to performance fees, EUR 200 million, if I remember correctly, in August, they were EUR 140 million, so this was a net improvement. I would like to know which percentage of funds is above the high watermark? Just to understand whether from now to the end of the year, everything else remaining the same, whether we still have room to see a further improvement of the performance fees that still have to be booked and to income. Then you announced an interim dividend of EUR 0.37 and the growth guidance based on the 2023 data that was EUR 0.70.

I was wondering whether considering this potential reserve that is tied to performance fees, should they materialize. Would the Board or you consider a further or further extraordinary pickup of the dividend as it occurred in the past?

Last question. I would like to ask about Spain operations. You highlighted that you had a very strong increase in inflows. So in 2025, it's likely that Spain's contribution to group inflows should be much higher.

[Massimo Doris, executive]

[Interpreted] 33% of funds have a 6.4% advantage, 67% of funds have a 7.3% disadvantage. This is the situation that gave rise to the performance data you saw in the handout. With respect to the dividend, we expect to pay more than EUR 0.70 per share. Now whether -- if we have a gross EUR 230 million revenues based on the performance fees. And you're asking whether we might have a special dividend as we actually did in 2021 and 2019, well, yes, possibly or potentially this could happen, but we're going to see this when we close the year, and we have all the data at hand. But as I said, potentially this might happen. This might well happen.

As far as Spain's net inflows if we take a look at today's situation, we have EUR 5.4 billion net inflows into managed assets. Spain accounts for EUR 1.930 billion, so it's really performing well and consider that it's actually doubling the last year's performance, and we hope this is going to be a repeat next year. Let me talk again about performance. 33% of fund corresponds to 56% of assets under management so 44% of assets under management is below 7.3%. The remaining is about 6.4%.

Considering what you just said, this means that potentially and of course, touching wood, if markets are going to grow from now to year-end, there is still a strong upside with respect to performance fees because if you have 44%, if you ask the Marketing Director, he's going to say yes. If you ask the CFO, he's going to be more cautious. One month ago, we were talking about plus EUR 50 million. Maybe in recent days, it might have picked up a bit because there's a lot of volatility with respect to this figure.

[Operator]

Next question, Marco Nicolai, Jefferies.

[Marco Nicolai, analyst]

[Interpreted] A question about your NII guidance. What made you change it? I was actually more amazed surprised by the previous guidance compared to the new one. I'd like to know what changed in the meantime? And again, about NII, what do you expect in terms of deposit costs? I see that this quarter, it's gone down slightly. What do you expect by the end of 2025. As far as assets under management what kind of margins do you expect? And I'd like to know whether margins generated by Spain are more or less in line with Italy or if there are differences?

[Massimo Doris, executive]

[Interpreted] So NII guidance, the very first guidance we provided for 2024 was plus 10%. Currently, we revised it down to plus 8%, but it's really a slight revision, which originates from highly than expected -- highly than expected inflows due to the 5% promo. We have gathered much more than expected. So the cost of funding turned out to be slightly higher than expected, which inevitably led to an increase in NII, which is slightly less high than before. But this is a positive news considering our ability of turning inflows into deposits, into managed assets. Had we gathered EUR 3 billion rather than EUR 1.5 billion. The increase in NII may be would have been lower instead of 8% to 6%. But that would have also meant that in the future, we could have turned even more money into managed assets.

As I said earlier, when we -- the funding we gathered during the time deposits in 2023, the first quarter of 2023. Well, we managed to convert 72% of the assets gathered in the first quarter of 2023, in 18 months only into managed assets. And this year, in the first quarter of 2024, we turned EUR 3 million more. We turned 52% of the money we gathered into managed assets. And I think that the transformation is going to be the next one in line with the one we reported in the first quarter. So we have gathered more money via these promos and these deposits. And so the cost of funding has grown slightly.

But even though NII grew slightly less, we will have EUR 2.5 billion managed assets more than expected. If we could go back to January 1, 2024, I would have immediately signed off lower NII growth, say, a couple of billion less, EUR 8 million rather than EUR 10 million, provided I can receive EUR 2.5 billion assets into managed assets. NII could be sort of flat, maybe plus 1% and that flattish NII is due to the fact that the Euribor curve lowered compared to the forecast we worked out in August. So it used to be EUR 2.55, and it's EUR 2.37 now. So this delta of EUR 0.20 that are missing are the cause of this new lower forecast. But once again, it's a forecast. Then the average Euribor next year maybe won't be EUR 2.37 maybe it goes back to EUR 2.55 or maybe EUR 2.17. As a consequence, interest income will move in tandem with these shifts.

The cost of funding, we expect 20 basis points less on retail funding and 50% less same total funding. These are the data that led us to that guidance. So let me also say that the CEO has a clear explained how we provide these guidances because if you look at the curve in July and today's curve, the reduction, the lowering of the Euribor curve is really significant. So it all depends also on the length of the period you take into account.

As far as margins concerning managed assets. Margins generated by Spain is identical to Italy's because the vast majority of products are identical to ours. That's to say sell Mediolanum International Funds products. Then we in Italy sell also Mediolanum Gestione Fondi which are not sold in Spain. But in Spain, we sell Mediolanum Cessione which is the Spanish version. But let me also remind you that the margin is slightly thinner or it's slightly declining due #1, to the fact that we sold mainly almost exclusively, I would say, bond funds this year, whose recurring commissions are slightly lower than equity funds. But of course, you cannot just sell equity funds exclusively so as to have more fees because the objective is retaining customers.

So for many years, bonds and bond funds were difficult to sell and we're not really quite -- we're not efficient. We're not profitable for customers. But now fixed income is once again an attractive asset class. So we have started selling more bond funds to rebalance our customers' portfolios. But we still sell a lot of equities. And as you can see, we have a 59% equity portfolio. A few years ago, equity went below 50% because of the market conditions. And we went -- we had an average commission of 203 basis points. There was a diminution of the decline of 2 basis points. And that was partly due to the fact that we started selling more bond funds. So equity funds used to account for 61% went down by 2 percentage points to 59%. But what is really impactful in terms of average fees. It's the monetary -- is the money market funds that are combined to the Intelligent Investment Strategy. At the end of 2023, we used to have EUR 1.67 billion in monetary -- in money market funds tied to IIS.

Currently, it's EUR 2.24 billion, so a plus 36%. And this money market fund a recurrent commission or fees of 25 basis points, every million that goes into that basket has a significant impact on average management fees. And one of the reasons why we passed from 203, 204 average basis point fee 214 million or 215 was the year 2022 when the markets collapsed. And so due to Intelligent Investment Strategy, many more assets were switched from money market funds to other types of funds specifically equity funds because this money is moved on a monthly basis. But depending on how deep the decline is, this transfer can be doubled, tripled or quadrupled. And in 2022, there was a very strong passage from money market to funds to equity funds. So money market funds that would pay a recurring fee of 25 basis points was transferred into funds that were paying 250 basis points in terms of fees.

So that was a change of step at quite significant. Next year, we expect, depending on how IIS performs, we expect a couple of cents decline again. But what I really want to underscore is this we have a level of average fee, which is clearly higher than the rest of the market. And please compare these performance, these results to other retail products, not to products for institutional investors. So this high margin isn't really due to our product pricing, but rather the asset mix, 59% equity is something that no one else has the ability to sell. And as you know, equity funds have the recurring fees that are much higher than bond funds.

[Operator]

Next question. Luigi De Bellis Equita SIM.

[Luigi De Bellis, analyst]

[Interpreted] I have 2 very quick questions. First of all, can you give us an update as to bond funds in your clients' portfolios that are going to come due in 2025, what are the funds that are going to come due on the same time period? What is the shift to assets under management and whether you have detected greater risk propensity among your clients?

Second question can you explain what are the drivers of the dynamic that we've seen there has been no further capitalization between the second and the third quarter. So RWA has increased and the ratio declined EUR 159 million worth of earnings of net income remained within the capital. So once the final dividend is going to be distributed, we are going to have a more linear distribution of this value.

[Massimo Doris, executive]

[Interpreted] As to the first question, we have about EUR 1.5 billion worth of 6 months deposits that are going to come due in 2025. And of course, we are going to work on them in order to transform them into assets under management. Then we have EUR 2.2 billion. Let me rephrase this. We still have a portion of the 6-month deposits inflows in the first quarter, 50%, 52% has already been turned into managed assets. At a certain point, we are going to reach the 70% by the end of the year. So there will be little that can be turned into assets under management in 2025.

But between September and October, this slot is going to come due in 2025, and we're going to work on them. As to BTPs, EUR 500 million are going to come due, are going to expire by now and in the end of the year, these are BTPs held by clients. And a big portion is going to be turned into a managed asset in 2025. I do not have the 2025 maturities of bonds held by clients available now, but I will certainly come back to you with this information.

Thank you, Luigi. Or by the way, sorry, generally, in order to turn them into managed assets, we go through the IIS our Double Chance. Of course, this most of the time, but then we also have certificates and other ways to turn them into managed assets.

[Operator]

Next question. There are no other questions on the Italian line. I switch to the English line for questions.

[Operator Instructions]

We have no questions on the English call. I'm now going to hand back to the Italian call. Thank you.

[Operator Instructions]

There are no other question on the Italian line. I hand it over to Ms. Lanzone.

[Alessandra Lanzone, executive]

[Interpreted] Let me thank you all for your time and spending your time with us at the end of the day. I know this was a very, very busy day for all of us. We'll come back in February, and we'll let you know the exact date as soon as possible. But in meanwhile, let me say good evening to everybody, and thank you.

[Operator]

Ladies and gentlemen, the conference call. Now concluded. Thank you for your participation, and you can now disconnect. Thank you, and bye-bye.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]