FinecoBank Banca Fineco SpA

MIL:FBK

Earnings Call Transcript 2021-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the FinecoBank First Quarter 2021 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Alessandro Foti, CEO of Fineco. Please go ahead, sir.

[Alessandro Foti, executive]

Good afternoon, everyone, and thank you for joining our first quarter results conference call.

Before we start going through the details of the presentation, let me please highlight the main strategic developments we are undertaking as we have entered in a new dimension of structural growth given the strong acceleration in the long-term trends.

The first quarter of the year marks the turning point in our story as we have introduced a wide set of initiatives to progressively become more platform fulfilling the financial needs of our clients than a bank. The new dimension of growth is generating, first, an acceleration of the deleveraging of our balance sheet, which will, in turn, progressively increase and improve our revenues mix, boosting fees and commissions. Second, strategic discontinuity in Fineco Asset Management, which is entering in a second wave to take control -- to take more control of the value chain to further accelerate our investing revenues and margins.

Let me highlight that in the first quarter of the year, we recorded a record-high net profit reaching EUR 95 million and increasing by 3% year-on-year despite the full contribution to the single resolution fund equal to EUR 5.8 million paid for the first time in 2021. These results is even more valuable considering that has been achieved in a new normal world and compares with the best quarter of 2020, which was characterized both by low operating cost due to the strict lockdown in place in Italy and by the strong performance of brokerage due to the volatility peak.

Gross operating profit stood at EUR 144 million, increasing by 7% year-on-year, excluding nonrecurring items of 2020, showing the soundness of our industrial growth. Revenues stood at EUR 218 million, increasing by 8% year-on-year excluding nonrecurring items of 2020 and mainly supported by investing in brokerage. Operating costs, well under control and confirming operating leverage as a key strength of the bank, with cost-income ratio at 33.8%.

Also, during the first month of the year, our commercial activity continued to strengthen compared to the impressive growth experienced in 2020. After the record net sales registered in the first quarter, April recorded almost EUR 950 million inflows with an outstanding mix, 95% of assets under management and EUR 622 million outflows in liquidity, confirming again the efforts of the bank in reducing deposits and improving the asset mix.

In April, we also registered strong brokerage revenues, estimated at around EUR 70 million. This is a very good news considering the favorable market conditions due to both low volatility and volumes. Nevertheless, revenues were around 50% higher compared to the average monthly revenues in the period 2017-'19, confirming once again that the floor of the business is now definitely higher compared with the past.

Let's now move on to Slide 5 and start commenting our first quarter results. As announced, we reached very strong industrial results also in a new normal world, with net profit standing at EUR 94.7 million in the quarter, plus 2.7% year-on-year on a like-for-like basis. Gross operating profit stood at EUR 144.5 million, increasing by 7.2% year-on-year, excluding nonrecurring items of 2020. Thanks to very strong revenues, reaching a record high level of EUR 218.2 million, up 8.4% year-on-year as we have been able to catch the strong acceleration of the structural trends in place, mainly thanks to the contribution of investing and brokerage.

Operating costs stood at EUR 73.8 million, increasing by 4.5% year-on-year excluding cost strictly related to the growth of the business. We will deep dive on costs later on during the presentation. Cost income confirmed to be very low, up 33.8% despite the continuous expansion in assets and clients, thanks to our strong operating leverage and to the scalability of our platform.

Let's now move to Slide 6 and start to analyze more in detail the dynamic of our results. In this slide, we are showing our net financial income including net interest income and profits from Treasury Management. This is in order to give a better representation of the overall contribution coming from the way we are managing the investments of our clients' liquidity. Going forward, the more we will be effective in deleveraging the balance sheet and the more we will be able to slow down and possibly even reverse the growth of our financial investments, this will lead to recurring industrially driven profits from treasury management and progressively improve revenues mix within higher components of fees and commissions.

The graph on the left-hand side of the slide, we are representing the first signs of this process as our net financial income reached EUR 75.1 million in the quarter, growing by 4.3% year-on-year and 17.1% quarter-on-quarter. Net interest income remained resilient at EUR 61.8 million despite the worsening of interest rates environment. And profit from treasury management stood at EUR 13.2 million.

Let's now move to Slide 7. Fees and commissions stood at EUR 118.7 million in the first quarter of 2021, growing by 13.1% year-on-year and by 22.8% quarter-on-quarter, thanks to the positive contribution of all product areas, in particular, investing in brokerage. Trading income, net of nonrecurring items and profit from treasury management, reached EUR 23.9 million in the quarter, thanks to the strong performance of brokerage.

Let's jump now on Slide 26 to deep dive on our brokerage business. Brokerage confirmed once again that after the recent events, the floor of the business is structurally higher compared to the past and regardless of the level of volatility. As you can see in the chart on the top of the slide, in the first quarter of 2021, overall brokerage revenues reached a new quarterly record at EUR 65 million, increasing by 2% year-on-year despite a much lower market volatility. As anticipated at the beginning of the call, also revenues in April were very strong, reaching EUR 17 million in a month characterized by low volatility and low volumes. This is very good news for us as revenues were 50% higher than in the period 2017-2019, confirming once again that the flow of the business is now higher compared to the past.

Let me remind you that the growth of the brokerage business is driven by the contribution of 3 structural components. First, the deep reshape of our brokerage business. Let me remind you that we have recently launched a new U.S. options platform, and that in the first half of 2021, we will launch our leverage certificate offer, becoming issuer, market maker and distributor through our platform.

Second, the client base using our platform is widening with active investors that are -- have grown significantly in absolute numbers, standing well above the average level of 2017 and '19. Please note that our active investors have an average of 5 executed orders per month are wealthy people in their 50s with assets above EUR 200,000 on average. And the vast majority of them has a relationship with our financial advisers for the long-term planning of their financial wealth.

Third, we are continuously increasing our market share. For example, our market share in Italy on equity traded volumes increased to 27.8% in December 2020.

Let's now move on Slide 8 for a focus on investing. Let me remind you that over the last few months, we have experienced a strong acceleration towards assets under management as we have been able to catch the structural trends in place in Italy. The acceleration of investing business is better also going forward as we are preparing a strategic discontinuity in Fineco Asset Management that will allow us to improve the efficiency of the value chain, generating higher revenues and margins. We will deep dive on this initiative later on during the presentation.

Investing revenues amounted to EUR 69.4 million in the first quarter 2021, increasing by 13.8% year-on-year and 6% quarter-on-quarter, thanks to the volume effect and strong net sales into asset under management driven by higher contribution by Fineco Asset Management. More in detail, management fees increased by 17.3% year-on-year and by 7.4% quarter-on-quarter. Let me please highlight that the quarter is also showing the first sign of higher risk appetite by clients, resulting in management fees margins slightly increasing to 63 basis points.

Let's now move on Slide 9 for a focus on our cost. This slide confirms once again efficiency to be part of our DNA and core in our bank, representing a clear and unique competitive advantage. Let me please underline that the first quarter of the year was characterized by cost directly related to the strong acceleration of our growth dynamics in the new normal world. On top of this, the yearly comparison is affected by the strict lockdown in the first quarter 2020, driving non-HR cost to their lowest level of the last 10 years.

Operating costs in the first quarter 2021 stood at EUR 73.8 million, growing by 4.5% year-on-year excluding costs related to the growth of the business. Particularly in the quarter, we spent additional EUR 2.4 million in marketing costs, mainly in U.K. and not in place in the same period 2020, EUR 0.7 million additional cost related to our financial advisers as we have higher contribution to FIRR and Enasarco due to the strong net sales recorded at the beginning of the year. Please note that these contributions have a fixed annual limit, and that is mainly filled in the early months of the year.

Additional EUR 1 million cost for Fineco Asset Management that is preparing itself to further expand its business, allowing us to have a higher control of the investing value chain. Finally, additionally -- additional EUR 0.2 million related to cost for the customer care as the new current accounts almost doubled.

Going into the details, non-HR cost stood at EUR 47.5 million excluding the previously mentioned expenses related to the growth of the business. They only grew by 3.8% year-on-year, confirming our strong operating leverage.

Finally, staff expenses stood at EUR 26.2 million in the period, increasing by 5.7% on a yearly basis, net of the cost related to the expansion of the business of Fineco Asset Management.

Let's now move on Slide 12 for a focus on our capital ratio. Fineco confirmed once again a rock-solid capital position on the way of a safe balance sheet. Let me remind you that following the extension of the recommendation by ECB and Bank of Italy on December 2020, we will refrain from paying dividends until September 30, 2021. Let me highlight that our intention is to give back to our shareholders our excess capital at the first window of opportunity.

In this regard, let me please remind you that the core Tier 1 ratio is not a constraint for us. And thanks to all the initiative the bank is undertaking, we expect the leverage ratio to stabilize in the comfortable zoning range between 3.5% and 4%. Common equity Tier 1 ratio stood at 26.5%. Let me please note that the quarterly decrease is mainly explained by temporary increase of risk-weighted assets post Brexit related to our treasury exposure towards U.K. financial counterparties. Going forward, we expect this component to significantly reduce as the regulators should pronounce on the treatment of exposure towards U.K. counterparties, making them equivalent to the European ones. In case of different treatment, we will significantly reduce our existing exposure.

Risk-weighted assets stood at EUR 4,208 million, increasing compared to December mainly due to the previously mentioned temporary effect related to the U.K. counterparties exposure. Total capital ratio stood at 38.4% as of March 2021.

Let's now move on to Slide 14. As you know, 2020 has made it even clear that Fineco is in the sweet spot for growth. And in the first quarter 2021, the bank has been able to deliver even stronger net sales, reaching EUR 3.3 billion with a very strong asset mix. April net sales were only the latest confirmation of this big jump in a new dimension of growth.

Let me now spend a few words on the recruiting. As you can see on Slide 15, starting from last year, we have experienced a strong increase in the interest of financial advisers to join our bank, thanks to our business model, which proved to be the best position to grow in the new landscape; also thanks to our unique fintech D&A. To this regard, please note that we have no need to overpay financial advisers with huge upfront fees and use the aggressive approach historically taken by the industry.

As a matter of fact, in the new environment, Fineco emerged more clearly as the perfect bank for professionals looking to grow their own business in a sustainable way. Those dynamics were confirmed in the first quarter of the year when we recorded a net increase of 69 personal financial advisers in our network and led to net sales generated organically by the bank to a much normal level at 86% in the first quarter of the year.

Let's now skip to Slide 20 and start discussing about our expectations for the business going forward. In this slide, we summarized our guidance for 2021. With regards to our banking revenues, we expect net financial income to be flat year-on-year, thanks to both a resilient net interest income and a higher profit from treasury management coming from our valuable financial portfolio. Going forward, we expect the net financial income to stabilize, thanks to the acceleration of the deleveraging of the balance sheet, to the improvement of the steepening of the curve and to the new initiatives in place like the buying of tax credits. Overall, banking fees in the region between EUR 40 million and EUR 45 million, thanks to the smart repricing launched in 2020 and to the additional fees from the new pricing on the new current accounts.

On investing, we are increasing our guidance on revenues, growing by around 20% with resilient or slightly higher margins compared to 2020. Going forward, we expect a strong acceleration on investing as we expect a further increase in our network productivity leading to our higher volumes. And we will implement the second wave in Fineco Asset Management, which is going to take even more control of the value chain that will give a boost to margins and revenues. Brokerage revenues are expected to remain strong, with a floor that is definitely higher than in the past.

Operating costs are expected to grow in a range between 4.5% and 5%. Please note that there might be additional costs related to Fineco Asset Management as we are introducing the previously mentioned strategic discontinuity to improve the efficiency of the value chain in the investing business. Going forward, we confirm our guidance on a continuous decline in cost income in the long run, thanks to the scalability of our platform and to the strong operating gearing we have.

With regards to systemic charges for 2021, we are expected to stay in a range between EUR 35 million and EUR 37 million booked within provision for risk and charges. Please note that the more we will be effective in deleveraging of the balance sheet, the more we can decrease our contribution to systemic charges.

Our capital ratios, we expect the core Tier 1 ratio to remain above the floor of 17% and leverage ratio above 3.5%. Let me please add thanks to the progressive rollout of our industrial initiatives, we expect the leverage ratio stabilized in a comfortable zone in a range between 3.5% and 4%. Currently, with the combination of both a strong acceleration in growth of the bank and the distribution of generous dividends.

Cost of risk was equal to 9 basis points in the first quarter 2021, thanks to the quality of our lending portfolio that is offered exclusively to our loyal customer base. For 2021, we are confirming the guidance in a range between 10 and 15 basis points even in this environment. Finally, we expect a robust and high-quality net sales with a lower component of deposits thanks to all the initiatives we are undertaking.

Let's now move to Slide 21 to deep dive in all the initiatives the bank is undertaking. The recent events produced strong acceleration structure of trends and have increased the speed at which we are growing. In order to take full advantage from our new dimensional growth and to further build on it, we have recently undertaken a wide set of initiatives that are already delivering higher than expected results as April net sales figures confirm. Let me please remind that the new initiatives will allow us to improve our revenues mix.

As already said, the first quarter marks a turning point in our growth story as we are strategically evolving our business model to a fee and commission-driven model becoming more a platform to fulfill clients' financial needs than a bank. Let me now go briefly through the new initiatives. First, we changed the incentive scheme of the network financial planners that is now only linked to net sales in asset under management. This has produced a strong acceleration in improving the quality of our net sales mix.

Second, we will further increase the productivity of the network through new software developments, leveraging on our deep internal IT know-how. Third, we are introducing a strategic discontinuity in Fineco Asset Management that will allow us to improve the efficiency of the value chain in the investing business. Fourth, we are improving the quality of our client base, focusing our target market on the upper end.

As already anticipated in the previous quarter, in February, we introduced a new pricing for new current accounts to better control the acceleration of new clients from traditional banks and to be more selective in our client acquisition.

Finally, the launch of the new platforms, leveraging on our fintech DNA. First, the platform to distribute third-party savings accounts. It will be live in June with the first provider, while others will follow later on. And we will give clients another alternative for their deposits. This platform can be considered a perfect example of open banking. The second platform is allowing us to manage tax credits towards state, which we are progressively buying. All these certain initiatives will allow us to be more selective in the growth we are pursuing, resulting in a better quality of revenues mix, coupled with the deleveraging of our balance sheet.

Let's now move to Slide 24 to deep dive in our investing business going forward. As anticipated, going forward, we expect an acceleration in our investing revenues and margins, thanks to a further increase in our network productivity leading to growing volumes and to the strategic discontinuity we are undertaking with Fineco Asset Management to further extract additional operational efficiency, which will allow us to take more control of the investing value chain. Fineco Asset Management is confirmed to be key in our move to accelerate the conversion of deposits into assets under management.

Let me please highlight that our Irish company strongly and consistently contributed to the group's net sales. For example, in April, it recorded its best results even in terms of retail net sales equal to more than EUR 0.5 billion inflows, confirming to be on the right path to fully catch its strong growth potential. Let me remind you that the increase in volumes will result in a geometrical growth of its margins contribution and that our Irish company is on its way to developing new product range based on advisory services by third parties, which is going to make the value chain even more efficient.

Finally, during the year, it will be having new solutions focused on equity and sustainability on the back of increasing demand by customers. Finally, please note that we are observing an increase in the risk appetite by clients. And this could translate any improvement on margins going forward.

I now leave the floor to Paolo Di Grazia, our Deputy General Manager, for an update on the development on our U.K. business on Slide 29.

[Paolo Grazia, executive]

Thank you, Alessandro, and good afternoon, everybody. Our one-stop solution offer in the U.K. is proving to be very well welcomed, and our marketing campaign is providing a strong boost to quality client acquisition. In the first 4 months of the year, we have already opened more current accounts than the whole 2020. Thanks to the acceleration of these dynamics, we confirm to reach our first target of 30,000, 35,000 good clients well before the initial time horizon we estimated.

As you can see on the left-hand side of the slide, since the start of our marketing campaign, we have recorded a strong acceleration in our customer acquisition dynamics and in the quality of our client base, in particular, in the last few months. Let me please highlight that the stickiness on our active clients is very high and equal to 90%. This confirms that we are not attracting hit and run, highly speculative and volatile customers, but we are attracting experienced traders loyal and looking for quality offer, a further evidence of the right positioning chosen by the bank.

On the second graph, you can see that we are further improving the penetration of active clients and brokerage, now representing more than 70% on new current accounts in the first quarter of 2021 and confirming once again that we are targeting the right clients with the right offer. This translates in a further boost in our revenue generation. As you can see on the right-hand side of the slide, we are building up on the strong acceleration we experienced in 2020 as revenue in the first quarter 2021 were more than half of the revenues generated in the full year 2020.

On top of this, we are continuing to improve our revenues mix in favor of over-the-counter and listed products, which are now the lion's share of the -- our growth. Together with our huge operating leverage, this has allowed us to be profitable, excluding marketing expenses at the end of the first quarter 2021.

Finally, in Slide 30, we sum up the next steps that are getting us closer to the full launch of our investing offer. In particular, please note that the ISA accounts are now live and already recorded more than 680 subscription in just 2 months. Let me add that we launched new promo to attract clients from traditional banks, and we are step-by-step introducing more fuel in our investing offer. Finally, through the year, we will continue to enlarge our fund offer with a wide pipeline you can see in the slide.

And now thank you for your attention, and I will hand it back to Alessandro.

[Alessandro Foti, executive]

Thank you for your time, and now we can open the call to questions.

[Operator]

[Operator Instructions]The first question is from Azzurra Guelfi with Citi.

[Azzurra Guelfi, analyst]

A couple of questions, mainly on the outlook and on the cost and investing fees. You have improved your guidance for the fee income. And if you could give us some color if this is most mostly linked with the improvement in flows that you are expecting or is it also linked to more resilient margin? And how do you see margin evolving also linked with the changes that you have implemented at FAM?

The other point is that you have given detail on the various P&L line, but you haven't given a bottom line, if you want, guidance. And you've been on the processing that you expect net profit to be resilient year-on-year. Would you expect -- do you confirm this? Or do you expect it to be a little bit better?

And if I may, on efficiency, usually, you have a very strong efficiency. And this quarter, we haven't seen this because of the, if you want, extra growth. But if we strip this out, basically, we implied -- and looking at your guidance, the implied run rate for the next quarter will be below the Q1 excluding extra cost of FAM. Would that be reasonable? And how could we think about these extra costs in FAM?

[Alessandro Foti, executive]

Thank you, Azzurra. So let me start from the outlook on investing fees. So let me split the answer in 2 components. There is -- the first component that is related to the 2021, which clearly we -- the increase of the guidance is driven by a combination of, first of all, we expect that the productivity of the financial plans is better to keep on building up, thanks to the deployment of new solutions, new technology and so on.

And so the second, clearly, we expect an improvement of the margin mix related both to the increased appetite by -- risk appetite by clients. And also clearly, that the more we have a growing contribution by Fineco Asset Management and more clearly is translated in higher revenues and margins. And this is the first component.

Then there is the second component. And because these elements of 2021 is going to stay with us also in the following years.

But on top of that, clearly, the big discontinuity in which we are working is to capture a much bigger slice of the value chain because at the moment, we are leaving on the floor a lot of money. And clearly, we are going to remain consistent with the concept of an open architecture, but we are going to put in place solutions for capturing this absolutely enormous amount of money that was left on the table.

Just I'm trying to give you a practical example in order to give you the flavor what I mean. The most recent product has been launched by Fineco Asset Management. That is the China target, that is the cumulation product on China, in which clearly we are using a tracking index for replicating the exposure to the equity Chinese market. At the same time, we are entering in securities lending transactions for extracting value to give to clients in terms of remuneration of their liquidity. And this product is an example in which, I think, is going to remain completely in our group without sharing nothing externally. But this is just -- and then we have many other initiatives that are going to be put in place.

So going forward, clearly, we can expect a really massive increase of the investing margins in the coming years. It is more or less the same concept when we launched Fineco Asset Management at the beginning. We said that we were expecting a large contribution. And now we are entering the second wave. So this year, clearly, we expect that the guidance has been increased. The increase of the guidance is not fully reflecting the numbers that we are experiencing right now because the numbers are definitely very well above our expectations. But we are -- we prefer to remain -- to still remain -- to remain cautious. And so this is the reason why we are guiding the market in the region of an increase between -- in the region of 20%.

And then clearly, we expect going towards the year-end and particularly next year that the contribution of the new initiatives by Fineco Asset Management is going to play a very important role in making the investing revenues growing in a big way.

Bottom line guidance. The bottom line guidance, clearly, we think we are quite confident that when we look to the consensus of the market, generally speaking, we are quite confident that we can beat this consensus considering putting together the resilience of the financial income, the very strong momentum of investing fees and, clearly, the much higher floor of the brokerage business.

And on cost efficiency, yes, you're right. Clearly, in the first part, in this first quarter, we had some extraordinary components like the higher marketing cost driven mostly by the U.K. The simple fact that in the first quarter of last year that we had no cost on U.K. Also, there is the seasonal impact that in this year has been much stronger, that is the contributions to the retirement of financial planners that as we described during the presentation, is a fixed amount. But clearly, the faster is the growth in the -- at the beginning of the year and the more you're reaching the ceiling. So in this case, considering the absolutely -- the very high results achieved in the first part of the year, this ceiling has been achieved faster than usual. And so these are more or less is the picture.

[Operator]

The next question is from Domenico Santoro with HSBC.

[Domenico Santoro, analyst]

I do have a number of questions. First of all, on the net financial income, I apologize for breaking down again to component. I know that you gave us a guidance for 2021 on the combined contribution of the 2. But I want a little bit more color, if you don't mind. First of all, you benefit from large trading gains in the quarter. Of course, as you said in the presentation, the more you're able to change the balance sheet to move off balance sheet assets and -- the more you can also be more dynamic in the management of your bond portfolio. But I just wonder what should be the revenue stream going forward, if you have an idea. Also, because I guess you have quite significant unrealized gains on your bond portfolio. So this is the first question.

The second on the net interest income instead, so this is EUR 61.8 million, EUR 62 million, shall we consider this is a sort of clean number for the next quarter? And can you also mention, please, if you could give us a bit of color on how this can involve -- can evolve, sorry, in the second part of the year given that you have part of your bond portfolio swapped into variable rates? And if you can give us also a bit of color how the economics attached to the eco bonds can be in the second part of the year?

The other question is on banking fees. I appreciate that you gave us the full number for 2021. Also, what could be the additional revenue stream coming from the distribution of time deposits? So just wonder whether this EUR 40 million, EUR 45 million is a sort of floor, and it can go up over the next years because of all the initiatives that you have in place.

Brokerage, I understand that you say in the -- in your guidance, floor definitely higher than in the past. I'm just wondering whether 2021, it can be better even compared to 2020, which was a very strong year. This is the line of the P&L which is more difficult for us to model, but you have a number of initiatives in place, so I appreciate if you could give us a guidance.

And then you now mentioned -- if we come to dividend, I know everything is up in the air because it's conditional to the ECB removing the ban. But you mentioned now 3.5%, 4%. So my understanding is that you're moving your bar in terms of leverage ratio more close to -- closer to the 4%. So are you starting to think about how you're going to please your shareholders coming back to 2019 dividend? Or is it going to be a distribution of excess capital? In terms of excess, what you have in excess of 4%? Sorry for the very long question.

[Alessandro Foti, executive]

Thank you, Domenico, because you are giving to us the opportunity to deep dive in some very important components. As we said at the beginning of the presentation, this quarter is marking a quite relevant discontinuity with the past. So the reason why we are now showing the net financial income, so putting together net interest income and profits from treasury management, because this is strictly related to the changing strategy by the bank, and that is deleveraging on the balance sheet. So the bank has started some months ago in moving in that direction. And clearly, the more effective we are going to be, and clearly, the more this is going to reduce our dependency on the financial investments. So this is pretty.

And considering that the recent evolution on our deposits is not embedding any impact by the most relevant initiatives we are putting in place because the initiatives related to the introduction of the clause for closing the accounts to clients, characterized by a too high level of liquidity has not started yet because the -- for the -- at the moment, the only result has been the introduction of the clause is ringing as a wake-up call for clients. And this is contributing in accelerating the asset under management business, but the bank has not moved yet in direction of starting on getting rid of the -- of these kind of clients.

Second, clearly, there is no contribution by the time deposits platforms. And so for this reason, we are extremely confident that this process of deleveraging is going to continue. And so clearly, the more we are affecting that direction, clearly, there is a clear correlation between net interest income because in treasury management -- because we are going to become more -- and as you have correctly underlined, we sit on a quite large unrealized potential capital gain on the portfolio, clearly.

And so it's -- and clearly, this is -- and the more we are going to move in direction of deleveraging of the balance sheet and the more we can progressively release a portion of this. The only unless the reason an absolutely gigantic increase in interest rates, but in this case, it's not a problem in any case because the next future reinvestments we are going to make on the remaining part of the liquidity is going to be made at a much higher rate. In any case, if we are looking forward, because for 2021, the -- now that the guidance of a flat financial income is a done deal.

Regarding the following years, clearly, there is -- everything is moving in that direction because the combination of the effectiveness of the -- what we are putting in place for deleveraging the balance sheet. The very clear improvement driven by the steepening of the yield curve because, clearly, another very interesting effect that this year, considering that we are starting on accelerating in slowing down the growth of deposits, we are -- practically, we stop of investing. And so we are postponing our investments on the longer horizon. So the combination of the measures, keeping on -- working for this in the balance sheet -- the steepening of the yield curve.

Also, we expect progressively an interesting contribution from the creditor -- from the fiscal credits we are buying because this is going to play a material impact going towards year-end, but the largest part is going to be next year. If we put these together, we are absolutely fine and confident that the financial income is going to be -- absolutely is going to remain stable. And this is the reason why we are putting together the net interest income with the treasury management because they are absolutely interconnected.

In giving you a separated guidance on net interest income or with respect to the other part, in our opinion, doesn't make a lot of sense considering because they are strictly related for the reasons I was explaining.

On the third -- on the time deposit platforms, clearly, the main goal is not going to bring revenues but to accelerate this process of deleveraging on the balance sheet. And -- but we -- also, we expect going forward also some decent profitability by this, but it's a little bit too early. But again, the main goal we have with this -- the introduction of this platform is to accelerate and to reinforce the process of deleveraging of the balance sheet.

Brokerage. Brokerage, clearly, why we are so interested in capturing the floor of the business? Because, first of all, the fact that we've been able to deliver higher revenues in the first quarter, we expect last year that has been the real big guy, the real big quarter in the brokers. Because if you look to the revenues generated quarter-by-quarter by brokerage, the real big numbers has been achieved in the first quarter, considering that these results have been even higher in a context characterized by much lower volatility.

And for example, the month of April is -- for us has been an absolutely extraordinary months because if we look to the volatility of the month, the volumes has been one of the month characterized by the lowest level of volatility over the last few years. Nevertheless, the EUR 17 million is a big number. So same story.

We -- clearly, we are not in a position to predict the level of volatility in volumes. But if you want to be extremely pessimistic and conservative, you can assume that for all the year-long volatility and volumes are going to remain the same of April. Honestly speaking, I don't think that this is going to be the case because just the most recent days is marking a 180 degrees change in the market conditions. But if you assume that the situation remains multiplied by using this floor for evaluating the -- for estimating the revenues generated by brokerage. And so -- but this is up to you. It depends.

For us, clearly, we are -- we cannot manage volatility and so on. But for us, what is extremely reassuring that in a month like April, that has been absolutely [indiscernible] in terms of conditions of brokerage, the revenues generated has been absolutely amazing.

The question on dividend is very important because, clearly, one of the main results generated by the deleveraging on the balance sheet, that the -- practically, we can say that the constraints of the leverage ratio is definitely over. So it's not anymore existing. Because just slowing down and slowing down at the level where we are now, the leverage ratio is not going to bite anymore. So Fineco is going to become a really completely capital light -- fully capital-light platform that is -- and so clearly, we -- there is -- this is boding well for having much more ammunitions for satisfying our shareholders' appetite.

So clearly, we can clearly think to increase the -- what we are paying in terms of dividends or we can use a portion for increasing dividends, another portion for putting a little bit more money on our expansion abroad. But clearly, practically, Fineco is going -- is becoming a cash machine that is practically not consuming any kind of capital both in terms of core Tier 1 and more importantly, the leverage ratio because leverage ratio has been starting from the listing the most relevant constraints. Now with this brand-new direction of the bank, the leverage ratio is not going to be new.

And clearly, the range -- the target range is embedding clearly and a distribution of the excess of capital that we are -- we have accumulated over the last couple of years following the ECB directions. So clearly, this is absolutely very important, and thank you for raising the point.

[Domenico Santoro, analyst]

Can I ask a very quick one, a follow-up, just to be clear what you mentioned before on the net financial income and to be clear I understood well. Is it correct to assume that from now on, whatever is the impact of all these measures of -- on NII, which are not only, of course, interest rates related, so market related, but also conditional upon the way the balance sheet will move going forward, are going to be compensated from additional revenues -- from profits from treasury?

[Alessandro Foti, executive]

Yes. Yes. So clearly because, clearly, we decided to make the life of our shareholders a little bit easy. So we're putting together -- because you can have different combination because you can -- clearly, the decline in the contribution on the -- from the treasury portfolio can be driven exclusively in the assumption that there is such a massive increase in interest rates that clearly is decreasing the potential capital gain portfolio. But in this case, clearly, the reinvestments of the remaining portfolio is going to be done at a much higher rate.

And in any case is in -- at the moment that is pretty evident that next year, the reinvestment of the running of portfolio is going to be done at level of rates that is definitely higher with respect to the initial expectations. And also, clearly, there is the contribution of the -- on the progressive building up of the platform for the fiscal creditor.

Clearly, it's a little bit time consuming because we are buying client by client these small tickets, and so we are progressing. But clearly, we are extremely confident this is going to bring progressively a very interesting contribution.

So if we put everything together -- because it's very difficult to give you a perfect idea of the combination of net interest income, some because it depends on the speed and the depth of the deleveraging on the balance sheet -- but putting, I think, together a guidance that we think is absolutely sustainable is the -- look to the financial income. This is going to remain absolutely stable and also going forward in the following years.

[Domenico Santoro, analyst]

So the EUR 280 million that you realized in 2020, that's the reference for us for 2021 and 2022 in a way, correct?

[Alessandro Foti, executive]

Yes.

[Operator]

The next question is from Luigi De Bellis with Equita SIM.

[Luigi De Bellis, analyst]

Just one question, clarification on investing. Can you give us more color about your strategies and driver to accelerate the conversion of liquidity, deposits in assets under management? Or better, can you quantify potential impact expected by your actions to speed up the conversion or an expectation of a percentage of conversion do you expect in 12-, 24-month period, for example? How much are the real eligible assets to be converted and if this is already in the guidance?

[Alessandro Foti, executive]

Regard investing, as I was anticipating, we have to split the answer in 2 components. One is the business as usual. So we expect clearly then a continuous acceleration in direction of a better business mix for the reasons we explained because the incentive scheme in the financial plan is just in direction of asset under management. We can afford to that because the growth in terms of net sales is coming by itself because as we were explaining, Fineco is experiencing an absolutely gigantic flight to quality in our direction.

Second, the journey of continuously deploying technology for improving the productivity of financial planners is continuing. So we are just at the beginning of this journey. And so we are extremely confident in the productivity of financial planners.

Third, the client we are acquiring are different from the past now. Our client acquisition is massively skewed in direction of investing clients. So because we're progressing, we moved up in the upper end of the client base. And so the new clients are joining the bank are clients that they are structurally interested in investing. And so by definition, the percentage of liquidity remaining is extremely low. And so our point of attention is much more in direction of the old clients of the past.

And the second component, clearly, is the huge change in the interaction that we are going to have with our platform. So at the moment, we are leaving on the market a huge amount of money that is completely pocketed by third parties. The -- what we are going to introduce in terms of change of interaction with the platform product structures and so on is going to make for us possible to recover a quite sizable component of this amount of money that is left on the market.

I would like to remind that Fineco is still at the very initial phase of taking control of the value chain of our investing process because differently from the industry, that is -- by many decades that has been extremely accurate in capturing the full value chain. We are just at the beginning of this process. Now the timing is the right timing. And so we expect that this is going to bring a quite sizable acceleration in investing revenues on top of what we are doing now.

[Operator]

The next question is from Alberto Villa, Intermonte.

[Alberto Villa, analyst]

Congratulations for the results. Alessandro, just a couple of questions about the foreign operations because on the Italian operations, I think my colleagues have asked you almost everything. First of all, just a general comment, I'm pretty fascinated by the moving towards the platform rather than a bank. And I think the ramification of this change is pretty wide, and you explained to us what you mean. But probably, it's something that we have to digest a little bit over time.

But I was considering if this transformation as a platform also may accelerate your expansion abroad, and so I have a couple of questions on the foreign operations. First of all, on the U.K., maybe you mentioned during the presentation, but I missed it. When you think to get to 30,000, 35,000 good clients. And out of the 15,000 clients you currently have, how much of them are good clients?

And secondly, you also mentioned during some press interviews that you are considering entering new markets, and this is not totally new, but you mentioned Germany as a potential priority. I was wondering if you can share with us if there are any step forward on this direction.

[Alessandro Foti, executive]

Thank you, Alberto, for your question. So regarding the first question, so it's clear that the transformation of Fineco much more in a platform and in respect to be a bank and so through the deleveraging process, clearly, is opening the way for also an acceleration of the expansion abroad. I want to be even clear on the point because the most -- clearly, the most relevant part of deleveraging of the balance sheet is going to have a quite sizable impact on the profitability of the bank. We are not considering everything related to the systemic charges and so on.

But more importantly, it's going to change completely also the capital ratios of the bank because considering that Fineco is running for the most part capital-light business model, and we know everybody that is familiar with our equity story know that the only real point of attention was represented by the leverage ratio.

Now with this strategic change, clearly, these constraints is going to be completely removed but -- immediately. So just also this year, the leverage ratio is not going to be any more a problem for us. And clearly, this is -- what does it mean? This means that we have a much higher level of resources that we are freeing up, that can be -- and so we can move in direction of a blend of an even more generous treatment of our shareholders in terms of dividends and, at the same time, also putting a little bit more money in what we are doing abroad. But this clearly is possible thanks to this transformation.

And this transformation is -- because one question that someone can make is what -- why now and not before. The reason is pretty simple, because the structural trends supporting our business, thanks to the most recent events, they have accelerated in a big way. And so now we can afford the luxury of deciding exactly which kind of clients we want to take on board and which kinds of clients we don't want. And this is a great privilege. And this is the reason why now we can definitely say, come on, we can grow in a big way but in the right direction.

And so the answer is absolutely yes. With this change in strategy is going to -- but it is industrially driven, it's not that we get up in the morning and say, come on, we want to change our strategy. We realized that this was the right timing for definitely freeing up the 100% of the resources of the bank.

And so regarding what's going on, so probably, Paolo, if you want to elaborate a little bit more on the questions raised by Alberto on the expansion abroad, also the next countries and so on. So please, Paolo, if you want to jump in.

[Paolo Grazia, executive]

Yes. Alberto, so the first question when do we think to get to 30,000, 35,000 clients. If we keep on going with this space, probably I would say, at the end of the half for 2022, we will be probably there, maybe even earlier than that time.

And on the question how many good clients we have, so basically, more than 70% of the new current accounts that we acquired are active in trading. And so it's very, very high, the percentage of good clients we have. Just for the reason that we are addressing our marketing campaign, advertising to the right target market, as we said many times, we don't need and we don't want to attract hit and run clients, attractive just because maybe there is a very volatile market that is -- that kind of clients we are not interested in. And so very, very high -- we have good clients, basically acquiring good clients, to answer your question.

And on the next countries, we are working on a plan just to be ready to expand in other countries. Of course, our focus is on Germany as the next country. But also, we think it's very interesting for us also Spain. And so in the next probably few months, we will be able to give you more color also in this direction, but we are working on this plan these days.

[Alessandro Foti, executive]

In any case, Alberto, just for coming back to the transformation, what Fineco is doing is practically is what probably traditional banks, that we realized in several years that this is the right direction because the only -- what is going to make a difference between a relationship with your clients is the experience you are giving to them. And so you don't need to -- and so this is the concept of platform. This is the reason why it's so important.

And clearly, Fineco, we have a gigantic advantage because our real strength is the platform. And so for our clients, what is important is to fulfill their needs. And so we come to the conclusion that it was totally useless to maintain the burden of everything that is connected to being a full-fledged bank because we don't need that, so we don't need to -- and so...

[Operator]

Next question is from Enrico Bolzoni with Crédit Suisse.

[Enrico Bolzoni, analyst]

Just 3 questions, if I may. So the first one is, again, on the combination of net interest income and the impact of treasury activities, is it fair to say that -- I mean, clearly, this quarter, you had these very strong numbers from rebalancing of the portfolio. Is it fair to say whatever that the larger this number is, for example, this quarter it means that actually you rolled down the curve a lot of the existing bonds, at the same time, I should expect for the next quarter quite a bit a drop in NII because clearly, a portion of the portfolio, very high yield has been sold and then possibly rolled over with new bonds as small it is?

So I just want to understand whether I should expect for the next quarter even stronger treasury revenues because clearly now you need to basically keep it going and, at the same time, lower NII. So if the 2 are going to offset each other but also grow in size, respectively.

My second question is on the recruiting of financial advisers. So clearly, there's been a bit of an acceleration, so I see more advisers that want to join Fineco. Can you give just a bit of color in terms of why they want to join? Do you see them coming from some other competitors? What are the things that they don't like from the other players, and then basically, they make you -- they make -- wanted to join Fineco?

And then finally, a question on the international presence. I appreciate that in the U.K. things are still in the early phases. But would you consider in medium term, say, not too far future, also the possibility of offering financial advice also to other country, for example, in the U.K. in a similar way to what you do currently for Italian clients in Italy?

[Alessandro Foti, executive]

Yes. So on the net financial income, it's difficult to give a precise guidance quarter-by-quarter because it depends on the speed of the acceleration of the deleveraging, market conditions and so on. So we think that the best guidance is to -- overall to have a year-end and stable net financial income. But honestly speaking, it's extremely difficult to make such a precise forecast of the evolution quarter-by-quarter for exactly for these reasons because the deleveraging process of the balance sheet is, as you can expect, is not perfectly linear because it's related to execution of some activities and so on.

So it's -- and so we think that the best approach for the evolution of the net financial income is to use the guidance we are giving. So we -- and stable net -- overall and stable net financial income going throughout the year-end and the following years. But clearly, we -- as much as we are going to a deep dive in the process of deleveraging the balance sheet, the more we are going to be -- we are going to deploy the initiatives. And progressively, we are going to give even a higher visibility and granularity in what you can expect on the financial income.

On the recruiting of financial planners, clearly, we have not changed our mind. So we remain convinced that it's a mistake to overpay financial planners for making them joining you. So we didn't change our mind what is changing in the market? What is changing that who is deciding to keep on doing the job of financial planners is realizing that to get a high upfront premium is important. But it's even more important to have in place the right conditions for remaining on the business successfully going forward. Which are the conditions for being successful?

First of all, efficiency technology because now everybody has realized that in this brand-new world, if you want to interact with your clients in an efficient way, you need to have a business partner characterized by a very high level of technological efficiency. Otherwise, you are not able to fulfill your clients' needs. Second, your business partner has to be -- put you in the condition to be efficient because if you are submerged by tons of papers and so on, then it is not going to work. Third, this new world is accelerating in direction of making transparency and fairness more and more important. And so the possibility to have a business part that historically is being characterized by fairness and transparency is growing incredibly important.

Who is joining us? There is -- the largest part is represented by bankers because the real big revolution is happening there because, at the moment, we are observing that everybody is excited on the so-called reflation trade. So the traditional banks are going to experience a comeback. But what is everybody is missing in the story that -- yes, this probably is true. But what is missing in the story, that the world has changed and traditional banks are absolutely ready in terms of service model, business model to comply with the needs -- the new needs of clients and so on.

And who is working in the commercial network traditional banks they're realizing this, that they were characterized by branches and so on is over. And for example, we observed what -- the reason absolutely shocking trends underway with the banks closing branch in a big way but not ready yet in providing the alternative service model to clients. So now we have tons of clients that they are [ confident ] of their physical branches and with -- not really very well-working new service model. And who is working in the banks are realizing this. They understand that probably if their ambition to keep on doing this job in a different way, then to look in another direction. And by definition, Fineco is the perfect landing spot. So this is what's going on.

So for this season, we expect that our -- we expect a continuous growth of our -- of the dimension of the network. And this is absolutely good because we have, on one hand, the increase of the productivity. So the efficiency of the engine is improving, but at the same time, also the dimension of the engine is growing. That's not bad.

Regarding the -- again, I'm changing -- I'm passing the -- Paolo, if you want to make additional comment on the international presence, the financial adviser, like we are doing in Italy, if you want to make some comments on this point.

[Paolo Grazia, executive]

Yes, yes. Of course, we know there is a huge potential also outside in the -- also in the U.K. but in the rest of Europe, been offering consultancy and financial planner connected to our platform. But for us, it's still too early to think about these kind of steps. We have to establish the platform, the online platform, and establish the operations, and then we will see from there. But the first phase for us is to be ready in different countries in Europe as soon as possible. And then from there, we will see. I agree that there is a huge potential also in offering outside the financial planning to clients.

[Enrico Bolzoni, analyst]

And actually, sorry, if I may, a short follow-up question. I know you touched it already. On the margins -- fee margins, so the 63 basis points, clearly with the mix shift for becoming -- and FAM as well productivity. Is there any numbers at all you can give in terms of medium-term guidance? So can this become a 70 basis points? Can it become a 75 basis points? If I look, for example, just the flows you got in the last 3 months, is there an average you can give us in terms of marginality for these new assets going in FAM and/or in products with higher margins?

[Alessandro Foti, executive]

It is not -- we think that it's a little bit complex to give such a precise guidance. What we can say that we are positive on the fact that the margins slowly but still they can go up for a combination of a better mix and continuously growing contribution by Fineco Asset Management. So we think that there are -- there is room for continuous growth in the margins. But it's probably in order to have a discontinuity, a big jump in the margins, we have to expect for the second wave that we are preparing in Fineco Asset Management being deployed.

But this is going to happen more in the -- during the last -- next year than this year. So but in any case, we think that it's -- and considering that Fineco is by far the most convenient player in the market and the fact that we are able to keep on delivering convenience to clients, at the same time, with margins that they are going up, we think that it's an absolute lever.

The example of the target China we recently launched, it's perfect because it's a great product because we -- there is a smart usage of passive funds together with the securities lending. The result is an incredibly efficient product, incredibly profitable for us, at the same time, very convenient for clients. So this is the direction which we are going to move much more aggressively in the coming months.

[Operator]

The next question is from Angeliki Bairaktari with Autonomous Research.

[Angeliki Bairaktari, analyst]

If I may ask, and apologies if you have already answered to that, I'm not sure I fully understand what is changing at Fineco Asset Management? And what does the sort of strategic discontinuity actually entail? And are you sort of making some hires of personnel there that could look to move more products sort of in-house or sort of sub advisory in-house?

And how could this affect the cost guidance that you've given? You've said 4.5% to 5% but there could be some extra costs for FAM there. So I would be interested in understanding sort of what could be the size of those extra costs and also what you are trying to achieve in practical terms in Ireland.

And second question, we have seen recently officially in the U.S. market retail traders moving a little bit away from market -- from capital markets and going a lot into Bitcoin, is that something that is asked, is demanded by your sort of more active traders at the moment? Is that something that you could launch down the line? Or are you still very cautious on that product?

[Alessandro Foti, executive]

What is changing in Fineco Asset Management? What is changing in Fineco Asset Management that at the moment, we are leaving on the table several hundreds of millions of euros of commissions that we are sharing with someone else. And clearly, I'm not saying that we are going to get back the full amount. But clearly, we think that a very interesting component is going to be brought back in our platform -- so in which way, exactly what you were suggesting.

We are going to have a growing component represented by -- a much larger core components represented by passive solutions combined together with smart investing strategies. The example of the China product is extremely. Second, moving -- accelerating and moving from sub-advisory mandates to advisory services and so on. And clearly, and we think it means that we need a little bit more of resources in the company, but we are just talking about a few additional millions of euros.

So what we're going to get in terms of increase of margins and what we are going to spend more in terms of cost, clearly, there is an absolutely amazing cost -- marginal cost-income ratio. So this is the last problem we have. So the real point of attention that the amount of money that we are still leaving on the table is absolutely huge, and we are in the process of bringing back an interesting part of this. Clearly, this is not going to happen tomorrow morning, but this is the direction we are going to take better. And so this is going to have an absolutely sizable impact on the revenues generated by the investing business.

On Bitcoin, on the cryptocurrency, yes, there is demand by clients, but we are fully aware that we are missing some opportunities. But we prefer to remain on the -- still on the sideline because we want -- we think that there are still some tail risk in the cryptocurrency world, that -- and we think that we are not inclined to take the risk. So we prefer to miss some opportunities and waiting. As soon as we realize that these risks are manageable, the tail risks are mainly related to the custodian part of the story and also everything related to the anti-money laundering issues. So regarding this point, the situation is not clear enough. And so we prefer to stay on the -- still on the sideline.

[Angeliki Bairaktari, analyst]

If I may add, I think in 1 of your older presentations, you had mentioned the potential for a CFD with sort of cryptocurrency underlying, so effectively mimicking the performance of cryptocurrencies. Is that something that you could still launch? Or are you now going to wait?

[Alessandro Foti, executive]

As soon as we are going to have an official -- something official. And for example, as soon as -- because there are rumors to have the possibility of introduction of -- on the future contract on cryptocurrency, in the case, there is such a kind of a move. At this point, we are going to introduce CFD on cryptocurrency. But we prefer to wait for having an underlying that is traded on some kind of an officially regulated market.

[Operator]

The next question is from Filippo Prini with Kepler.

[Filippo Prini, analyst]

Three brief question, if I may. The first one is on the ARPU of U.K. client. If you can give the ARPU of the first quarter this year and also the comparison with the ARPU of the past quarter.

The second is just a clarification. Remember that you mentioned in the last presentation that the realized gain of your investment portfolio amounted to EUR 1 billion. Just an update of this figure at the end of the first quarter.

And the third one is on your market share on the guarantee deposit in Italy, that is the reference parameter to the contribution to the systemic fund. If you can share us which is your expectation of reduction of your market share due to the strategies you are implementing and then the saving of contribution to the systemic fund.

[Alessandro Foti, executive]

On the ARPU, on the U.K. clients, just an introduction, we don't think that it's considering that the business is structurally improving with the enlargement of the solutions work to clients. Clearly, it doesn't make -- we think it's not a KPI that we think that it's worth the case to use. But I don't know, Paolo, if you're going to elaborate more on this point. Probably you are in a better position than me.

[Paolo Grazia, executive]

Yes. Basically, the ARPU is still very good. It's clearly lower than the first Q 2020 because, obviously, it was a stellar quarter in terms of volatility and activity of the clients but still in line with what we were expecting. And so I think that probably, yes, I agree with Alessandro that is not the best key indicator to use right now but still very good. We are happy with what we see, and it's stable if we consider the first Q of 2021 as a different Q. And still, the ARPU is quite the same.

[Alessandro Foti, executive]

Regarding capital gain, at the moment, the potential capital gain is in the region of EUR 600 million. This clearly is reflecting the quite important rise in interest rates, the steepening of the yield curve. Clearly -- and this is a perfect -- you're giving to me the opportunity because it's a perfect relationship between the capital gain and what's going on, on net interest income because clearly, this is -- clearly has made the perspective for 2021 definitely better with respect to what we were expecting in terms of reinvestment.

So clearly, there are -- this is the reason why we think that considering the deleveraging of the balance sheet and so on, we have to keep everything tightly together and so on. So at the moment, in any case, we are talking about more or less EUR 600 million of still unrealized capital gain on the portfolio.

The market share on guaranteed deposits is, I think, that is going down because also the -- probably the -- Lorena, our CFO, can be more precise on the point. But the most recent numbers are showing that our market share is starting or going down. I don't know, Lorena, if you want to.

[Lorena Pelliciari, executive]

Yes. Thank you, Alessandro. Yes, we have a market share at the end of September 2020 that is the date in which we have contributed to the deposit guarantee scheme and was -- is in a reduction, and it was 2.9%. We reached also a market share above 3%, 3.5% in the previous period. So I confirm that it is...

[Alessandro Foti, executive]

So it is reasonable to expect considering what's going on that our market share is probably -- is going to keep on going down.

[Lorena Pelliciari, executive]

Yes.

[Operator]

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

[Alessandro Foti, executive]

Thank you for all the questions. And as usual, feel free to make us a call if you need to make some more deep dive in numbers, concepts and so on. And thank you again for attending our presentation.

[Operator]

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