FinecoBank Banca Fineco SpA

MIL:FBK

Earnings Call Transcript 2024-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the FinecoBank First Quarter 2024 Results Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Alessandro Foti, CEO and General Manager of FinecoBank. Please go ahead, sir.

[Alessandro Foti, executive]

Good afternoon, everyone, and thank you for joining our first quarter 2024 results conference call. Net profit in the first quarter of 2024 is EUR 147 million, up by 12.4% year-on-year, excluding systemic charges due to a different seasonality compared to 2023. Revenues at EUR 327 million, increasing by 11.4% year-on-year and supported by all our product area. Net financial income is increasing by 14.8% year-on-year investing up by 13.5% year-on-year, thanks to the volume effect and the higher control of the value chain by Fineco Asset Management. And the brokerage is up 2.2% year-on-year, thanks to the enlargement of our active investors. Operating costs were under control at EUR 79.3 million, increasing by 6.7% year-on-year by excluding costs related to the growth of the business, cost income ratio was equal to 24.2%, confirming operating leverage as a key strength of the bank. In the first quarter, Fineco confirmed once again outstanding commercial performance, thanks to our organic growth strategy. First of all, we recorded a strong acceleration in our new client acquisition in the first quarter increasing by 24% year-on-year with a further acceleration of 2023 record this year. In April, we recorded the latest confirmation of this powerful underlying trend with new clients growing by 36.6% on the same month of 2022. Second, our net sales confirmed to be very solid at EUR 22.2 billion in April with net sales at EUR 844 million, of which deposits positive for EUR 38 million, assets under management at EUR 195 million despite EUR 250 million plus from insurance business and with [indiscernible] Management recording 29 million retail net sales. Asset under custody was equal to EUR 610 million. Brokerage was very strong with estimated revenues at EUR 17 million, increasing by 50% compared to the average revenues in the period 2017-2019. Our capital position continued to be strong and safe with a common equity Tier 1 ratio at 25.3% and a leverage ratio at 5.16%. On the right-hand side of the slide, you can find a summary of our 2024 guidance more in detail. On revenues, we expect them at a record level with an improvement of the mix in favor of commissions, thanks to investing revenues expected to increase low double digits versus 2023 with a natural market assumption going forward. Banking fees expected stable versus 2023. Brokerage, we confirmed for 2024 expected the revenue is strong with a floor higher versus pre-COVID period. On operating costs, we expect a 6% growth year-on-year in 2024, not including additional costs for both Fineco Asset Management and marketing expenses. We expect our cost of risk in a range between 5 and 10 basis points 2 -- and finally, we expect in 2024, a growing CET1 and the leverage ratio year-on-year. Let's now move on to Slide 5. As announced, net profit in the first quarter of the year stood at EUR 147 million, increasing by 12.4% year-on-year, excluding systemic charges due to the different seasonality compared to 2022. Revenues at EUR 327 million, up by 11.4% year-on-year as we have been able to catch the strong acceleration of the structural trends in place. The strong growth of our net financial income increasing by 14.8% year-on-year, supported by our high-quality and capital-light net interest income. Net commission increased by a sound 6.4%, driven by the solid contribution of the investing up by 13.6% year-on-year and brokerage business, up by 5.3%. Trading profit increased by 15.6% year-on-year, mainly thanks to the higher brokerage activity. Operating costs at EUR 79.3 million, well under control and increasing by 6.7% year-on-year, excluding costs strictly related to the growth of the business, mainly additional cost for Fineco management to further expand its business and have a higher control of the value chain, additional marketing cost to further improve our growth and catch the strong momentum of the business. Let's now move on Slide 6 for a deep dive on the performance of the investing business. Investing revenues reached EUR 84.9 million in the first quarter of 2024, increasing by a solid 13.5% year-on-year. Let me please remind you the great quality of our investing revenues, mirroring our transparent and fair approach towards clients. As a result, our revenues are mostly driven by recurring management fees with no performance fees at all. Please note that the quarterly comparison is characterized by the usual seasonality on financial plan costs related to Peer and [indiscernible] that are higher at the beginning of the year and to other commissions in the fourth quarter of 2023 related to operating efficiencies, reached throughout the year in the value chain on the institutional classes by Fineco Asset Management, which are booked each year in the fourth quarter. Let me please underline that this set of results is particularly remarkable, given the more challenging marketing environment for the asset management industry. Also, let me underline that the bank is going ahead with its plan to deeply reshape its product and service offer to better fit with the new context. This will give more forward to our growth engine in the month ahead and will allow us to keep on living new market shares. Let's move now on Slide 7 for a focus on our asset management company. Fineco Asset Management is progressively delivering in having more control of investing by the chain. The contribution of the company to the group asset under management net sales remained strong at 94% in the first 3 months of 2024. At the end of March, the contribution of Fineco's asset under management, half of the total stock of assets under management of the bank moved from 32.2% in the first quarter of 2023 to 34.9% in the first quarter of 2024 and in April is 35.1%. As shown by the most recent net sales numbers, FAM has been extremely effective in quickly developing the right set of products to catch what clients are currently looking for. and most recently entered in the segment of investment certificates. Let's now move on Slide 8 for a focus on brokerage. Brokerage once again registered an excellent quarter despite the four market conditions. This is confirming a structural increase in the clients' interest to be more active on the financial market, building up a clear bridge between the brokers and investing world. In the quarter, revenues were equal to EUR 44 million, resulting in a monthly average around 60% higher compared to the monthly average revenues in the period 2017, 2019, two confirming a structurally higher flow. As a reminder, April recorded estimated revenues at 17 million, 50% higher versus the average in the period 2017, '19. Let me remind you that the growth of the brokerage business is driven by the contribution of three structural components. First, the continuous process of deep reshape of our brokerage business; second, the widening of our client base using the platform with active investors growing significantly in absolute terms. On this, let me had that in the last few months, we were experiencing a further enlargement of our active investors, which are growing much wider also compared to the post-pandemic period. Third, we are continuously increasing our retail market share. Let's now move on the Slide 9 to further deep dive on the potential of our brokerage business given the most recent developments. Let me spend a few words on the most recent trends in our brokerage business. As you can see in the graph on the top slide on the left, our base of active clients has recently seen a substantial increase around 20% higher compared to 2023 and with a 40% step-up compared to the level recorded with the pandemic. The drivers of such an increase are all structural, namely, we are delivering on a number of new initiatives like the new brokerage-only account and the new platform FinecoX. The new market structure is confirming the bridge between brokerage and investing -- the most recent increase in the rate environment has resulted in a renewed interest in [indiscernible] with Fineco emerging as the platform of choice for clients. In the graph down in the slide, we are showing that the executed orders have been increasing this year compared to 2023 and is back to the pandemic lines despite the poor market environment for brokerage in the last month. Let's now move on Slide 11 for a focus on our capital ratio. Fineco is confirming once again a capital position well above requirement on the wave of a safe balance sheet. Common Equity Tier 1 ratio at 25% to 29% and the leverage ratio at a very sound 5.16%, while risk-weighted assets were equal to EUR 4.69 billion, decreasing both year-on-year and quarter-on-quarter. Total capital ratio at 35.94% as of March 2024. As for the liquidity ratio, liquidity coverage ratio at 864%. A net stable funding ratio at 369%. While the ratio, high-quality liquid assets from deposits is at 71%, well above the average of the industry and positioning Fineco the best positive as the best positive outlier, as you can see on Slide 12. Going forward, we confirm that we will continue to generate capital structurally inorganically, thanks to our capital-light business model. The excess capital we are going to generate will be partly used to further invest in our organic growth opportunities while for the remaining part, which, in any case, will be the most relevant one. By the end of the year, we are going to define the amount and the terms for the distribution of the market. Let's now move to the Slide 14 for a focus on the acceleration of our commercial dynamics. Let me spend a few words on the strong acceleration in our new client acquisition, which is even more remarkable considering the context and both extremely well for our future growth. As you can see from the graph on top of the slide, new clients here, the client year-to-date were 27% higher, indicating a very promising start of 2024 on the 2023 record here. These outstanding results has been achieved keeping our marketing strategy unchanged when it comes to new client acquisition and effectively translates in a quality and sticky client base, key to grow a healthy business in a long-term horizon. As a reminder, let me also underline that we have recently improved the efficiency of our marketing engine, thanks to our innovative and brand-new boarding process. On top of this, we are now leveraging on AI and data-driven marketing, which are allowing the bank to connect with posted clients in a more personalized and efficient way, leading to a further acceleration in our client acquisition, particularly strong through -- throughout the digital channels. Let's now move to Slide 18 for EBITDA on our transactional liquidity. The granularity and stickiness of our deposit base is confirmed quarter-by-quarter. Our clients have an average ticket of around EUR 17,500 in the median ticket of EUR 4,500 billion. On top of this, definitely from other players, mostly focused on brokerage and investing. Our successful one-stop solution relies on a fully fledged banking platform with 50% of our clients' credit in salary and patients with us. Done in the slide, we show our usual breakdown of the deposit net fees, where we once again saw a cost increase in the net new liquidity before investments, as you can see, up to the end of April, the bank effectively collected more than EUR 6 billion of liquidity coming from salary and pension and EUR 3.9 billion from the net bank transfer. After the expenses in CAT, bills and taxes, deposits were up by EUR 2.6 billion once taking into the account investments in assets under management, industrial custody, the final result is minus EUR 0.7 billion of deposits net fees. On the graph on the right, we can see the trend in terms of liquidity flows per cluster of clients, clients with total financial assets up to EUR 100,000, increased the amount of liquidity in the bank, and this is mainly transaction. On the other hand, the cash sorting process has been 100% driven by wealthier clients, which, in the past, accumulated excess liquidity waiting to be invested. For private banking clients, the liquidity as a percentage of total financial assets is at 10% as of April at the lowest level since 2015, suggesting that they are approaching the floor. Finally, please note that the new clients acquired in the year also brought positive liquidity. Let's now move on Slide 20 for a focus on our guidance. Revenues are expected at a record level with an improvement in the mix in favor of commissions, thanks to investing revenues, for which we expect a low double-digit growth versus 2023 with a natural market effect assumption. Banking fees are expected stable compared to 2023. Bulker revenues are expected to remain strong with a floor in relative terms, we expect the market context that is technically higher than in the pre-COVID period. Operating costs are expected to grow at around 6% year-on-year, not including additional costs for both Fineco [indiscernible] management and marketing expenses. Cost income, we expect it comfortably below 30%, thanks to the scalability of our platform and to the strong operating gearing we have. On the capital ratio, we expect a growing CET1 ratio and leverage ratio year-on-year currently with the combination of both and strong acceleration in the growth of the bank and the distribution of generous dividends. On leverage ratio, our goal is to remain above 4.5%. We expect a higher dividend per share for 2024. Cost of Risk was equal to [indiscernible], thanks to the quality of our lending portfolio, and we expect it in a range between 5 and 10 basis points. Finally, we expect a robust and high-quality net sales, keeping our priority in direction of asset under management and the continued strong growth expected for our client acquisition as we are in the sweet spot to keep on adding new market share. Thank you for your time. We can now open the call to questions.

[Operator]

The first question is from Enrico Bolzoni with JP Morgan.

[Enrico Bolzoni, analyst]

Can you -- can hear me now? Okay. Sorry. So, the first one, looking at your April statistics, I saw an uptick in AUM flows over the months. So, I was wondering if you can provide some additional color. At the full year results, you mentioned that you had a few products in the pipeline that you were expecting to launch. So -- it would be interesting to know if you can give us some color on whether some of these new launches contributed to the addition to the uptick in IM flows. What was the contribution of certificates possibly that I think you launched at some point in March. And looking at going ahead, looking at May and in June, is there still a substantial pipeline of new products that you're going to launch over the next couple of months. So, this is my first question. My second question relates to the NII. Can you just give an update, please, in terms of what is the current volume in the Cash Park initiative? And currently, how much are you remunerating these amounts? And then finally, a bit more of a general question. You changed slightly the way you phrase you frame your or phrase your guidance for this year. So, now you're saying that you expect 2024 revenues seem to be at the record level while previously you were indicating to be at a similar level compared to 2023.So, I just want to clarify, does it mean that now you expect an uptick in revenues year-on-year compared to previous guidance. And you haven't changed within that, the guidance for investing revenue. So, you still expect low double digit versus 2023 with neutral market effect, which clearly has not been neutral. So, can you try to give some additional color there on whether you now expect higher investment revenues -- investing revenues compared to your previous guidance at the end of full year '23 results?

[Alessandro Foti, executive]

Thank you for your questions. So let me start by the -- giving you a little bit more color on the asset under management clause. First of all, it's clear that the situation there is improving in terms of momentum. And this is particularly remarkable considering that in the mill because in the past, frequently, we gave the message that in order to have an uptick in the asset under management flows were necessary to expect the decline in the short-term rates. The charter rates remain at a high level until so far. But in the meanwhile, the situation is improving because probably what we are observing that the clients are starting on realizing that it's just looking to Govies not a great idea in terms of diversification of the portfolio. Second, there are our advisory platforms that they are really gaining strong momentum because this is signaling a change in the structure of the market as well. Because now clients are really more and more interested in Govies and ETFs, but they want to get them through an advisory service. And this clearly, we think that is going to emerge as the real future for the industry. And we are really experiencing really good numbers. In the meanwhile, Fineco Asset Management is incredibly effective at the main points of strength Fineco Asset Management is represented by his capability to continuously understand what is really requested by clients and financial planners and they are incredibly efficient in bringing direct to market in a very short period of time. So, this process is going to continue. And so we think and in the case on top of this, we have also in the beginning of decline-rate this can be also even better for the evolution of the asset under management business. Second consideration that we keep on considering the large accumulation that has been made by the clients on Govies as an absolutely gigantic opportunity looking forward. So overall, we think that in any case, what's going on in terms of volumes on the asset under management is definitely promising. On the net interest income, we -- on the park -- cash park, as we said, is not bringing particularly huge contribution to the evolution of the net interest of the deposits is the rational behind is mostly represented by the need of giving to the clients or the full range of the potential product of interest. The running remuneration is at 3%. So, this means that we are able to get a small positive margin on the cash park initiative. Regarding the third question.

[Enrico Bolzoni, analyst]

With the full year results or if you already launched some of this, so what does the pipeline look like?

[Alessandro Foti, executive]

At the moment, the overall stock of the represented by cash parks in the region of EUR 1 billion or less, and we are still on the progress of launching the new products and services. The process has not finished yet.

[Operator]

The next question is from Azzurra Guelfi from Citi.

[Azzurra Guelfi, analyst]

Two quick questions from me. One is on the brokerage, which continue to sustain the brokerage revenue in the future. So, if you can give us some color on that. The other one is on the investing fee again -- sorry, I'm coming back to margin here because when I look at the margin, I get the quarterly seasonality Q4 to Q1, but I'm just trying to understand if the product mix could have affected the margin? And how do you see this to trend over 2024? And if I may, comparing your strategy versus the bank, it's never accurate. But banks are showing very, very strong fee results and refocus on fees. Do you see any change in customer attitude or behavior or competitive landscape?

[Alessandro Foti, executive]

Yes. Thank you. On the brokerage, so let me -- so the brokerage is perfectly current with what we were doing -- we have been repeating over the last recent past. So, the brokerage is doing incredibly well because as we explained -- we were explaining the overall environment for brokerage is not such as great because volatility is remaining pretty low. And so nevertheless, what in the industry that this booming attention by clients for Govies is emerging as a gigantic wake-up call for the Italian fame. And this is contributing in enlarging the number of clients and families that they are more and more interested in interacting with the brokerage platform -- and this is a trend that we are observing very clearly because we have, by far, the largest brokerage platform in Italy. And second, very important point, statistically wise, every time that the client is entering in the platform, starting initially for example, in just buying Govies, there is a quite significant percentage of this client that progressively, they're starting on using also other instruments and trading on other assets. So what's going on at the moment on the Govies is, in my opinion, an absolutely spectacular opportunity that is in coming for a bank like we are both in terms of brokerage evolution and both in terms of the investing evolution of the investing business. Another very important point that this is going to be connected to the -- to your last question, that this rising rate and interest by clients for Govies clearly is also contributing in changing the structure of the market. So just now the clients are more and more interested in using an extremely efficient and fair and transparent approach when they are interacting with the market. And this is connected to the -- when I was previously transferred to the previous questions to the concept of the booming activity on the advisory platform. So, in words, so the structure, the market is clearly changing in terms of enlarging of very, very effective continuously introducing new features, new solutions. We were mentioning the new platform, the new trading account and many other initiatives are on the pipeline. On the investing fees, clearly, the most relevant impact on the margins is, as usual, as you can imagine, represented by the trade-off between -- because the evolution of our investing business is a combination of the big growth of advisory platforms and Fineco Asset Management Solutions, on the other hand, and large these investments that they are continuing on the insurance rates. The insurance [indiscernible] are characterized by very low margins. So overall, the situation is extremely very well balanced. And we don't see any visible and significant pressure on the margins exactly for these reasons because on one end, we are progressively having the clients leaving the products characterized by the lowest margins and entering the new products. Comparing -- our strategy -- So, I agree, I share the point of view of the traditional banks, particularly if there are some banks templates that is continuously repeating that what's going on the Govies and so on is going to emerge as a gigantic opportunity for the investing business, and we totally agree on this point, on which -- the point on which we disagree with traditional bank is that in the meanwhile, the landscape is deeply changing. And I'm referring to the big growing interest by clients for extremely fair and transparent products and services. We are experiencing a booming request by clients for Govies and ETFs in the advisory [indiscernible]. And so, what we expect is that absolutely in volumes potentially and a huge opportunity on the investing business. But at the same time, you have to be prepared in addressing this in the proper way because the market is definitely changing. And sorry, but we remain frontlist at Fineco is by far, the best positioned player for capturing the structural change that they are underway in the market.

[Operator]

The next question is from Giovanni Razzoli with Deutsche Bank.

[Giovanni Razzoli, analyst]

Good afternoon to everybody. I have three questions here. The first one was first again to be the launch of new products that you anticipated with the Q4 conference call in February. My perception was that this launch was imminent. I haven't seen that much of it so far. So can you please share with us what is now the time line for this during the call of the Q4, you mentioned that the targeted products with a higher upfront component, if you can give us an update on this commercial strategy for the rest of the year. The last two questions. One is on the BTP Galore. Can you share with us what was the subscriptions that you had in the previous issued the one in March this year. And the last one is on the comment on your excess capital. You were pretty much clear into saying that at year-end, you will decide what to do with the excess capital that is not going to be allocated to organic growth. So, shall we expect for 2025, some plans of it on it? And what are your priorities there? Would you prefer extra dividend or share buybacks?

[Alessandro Foti, executive]

So let me start by the first question. First of all, the launch of new products is continuously underweight. So, we -- clearly, we don't make announcement -- public announcement to the market, but it is continuing. So, every month, we are launching a brand new solutions for our clients. So, we launched the solutions more focused on exposing clients to credit risk. We are launching solutions that are blending and an exposure to fixed income together with an exposure to equity. So, this is -- for us, it's business as usual. So practically, every month, there is a continuous launch of new solutions. The solutions we are launching are clearly continuously put in currency with the interest that it's emerging by the clients. As I was explaining before, the main point of strength that Fineco [indiscernible] management has that is incredibly fast and effective in transforming in a new solution, what is emerging as a brand-new need by the clients. We never -- we announced a big shift in direction with products on with high upfront fees because this is not part of our DNA. So probably, it's possible that going forward, we can have some kind of increase in the upfront fees, but we are going to remain very well below what is the average of the upfront fee charged by the market. In regarding BTP Valore, there is what we are observing today is the second day of the placement. And there is a very clear evident deceleration of interest by clients. But this is not taken us by surprise. But because as we were explaining, there is, first of all, the genuine cash sorting is, in any case, finishing because the so-called rich clients that hit the bottom of their liquidity. And so also with a high interest rate environment in place, their appetite for buying even more Govies is clearly going down quite rapidly. Second, clearly, there is now the displacement as clearly co-leading with the evidence that a client that wants to get a decent efficient asset allocation cannot put all his ex in one basket. And so this is contributing in decreasing the appetite by clients for these initiatives. And we're not surprised by this. On the excess capital, the bank is expected to keep on structurally, organically generating excess capital because this is part of our business model, capital light, fast growing, fast growing. And in terms of priority, as we explained that we are going to -- part of this excess capital is going to be invested in supporting our organic growth initiatives. Then the remaining part that in any case is going to remain the largest part of this excess of capital. By the year-end, we are going to give more details in terms of amount and technicalities used in order to keep back to the market that is excess of capital. And clearly, in these details, we are going to have an indication in terms of combination between extra dividend, share buyback and so on. So, this is the plan. So we -- and that's all, yes.

[Giovanni Razzoli, analyst]

So, a follow-up on the question on the BTP Valore. I was referring to the last, not the current.

[Alessandro Foti, executive]

Last was more or less EUR 800 million, if I remember correctly.

[Operator]

The next question is from Gian Luca Ferrari with Mediobanca.

[Gian Ferrari, analyst]

My first question is on the net provision for risk and charges, the equivalent of the EUR 63.6 million last year, if you can guide us on '24 and '25 on that specific line. The other question I have is again on BTPs. If I recall correctly, you have EUR 5 billion of BTPs maturing in 2024, if you can confirm this amount? And if you have any idea on how much you will retain and switch into asset management solutions. And the last one is on banking fees. I was wondering why they declined to EUR 12 million in Q1 '24 against EUR 14.6 million in Q1 last year.

[Alessandro Foti, executive]

On provisions for risk and charges, I'm going to leave the floor to Lorena, our CFO. So -- please Lorena, if you want to give more color.

[Lorena Pelliciari, executive]

Thank you, Alessandro. Good afternoon to everybody. So, in this line, as you know, we account the contribution to the systemic charges. In 2024, the deposit guarantee scheme has reached the target that is equal to 0.8% of Italian guaranteed deposits. And this is related to the government period deposit at the end of March 2024, and the final contribution will be communicated by Fondo Interbank to Tradepoint. So, deposit Italian deposit artist in June, but we have accounted EUR 35 million in this -- for 2024. We don't expect significant changes in this number. And this is the last strong contribution to the deposit guarantee scheme. Going forward, what we expect for the following years is that the deposit guarantee scheme and also the single solutions fund that has reached the target at the end of last year. additional contribution could be happened in demand of bank's phase or in case of increase of guarantee upon both system level or individual 11. So, for [indiscernible].Yes, but we can say that after this last contribution, we don't expect any significant impact because we do not expect any major failure by banks, and we don't see any -- the growth of our deposits is going to remain definitely very well under control. So, we don't expect any significant additional contribution after this last one.

[Alessandro Foti, executive]

Exactly.

[Gian Ferrari, analyst]

Sorry, Lorena, can you remind us the contribution of provisions linked to recruitment last year was around EUR 13 million, EUR 15 million. Is that correct? So, I presume next year, we will only have those kind of provision, right?

[Lorena Pelliciari, executive]

Yes, exactly.

[Gian Ferrari, analyst]

And should be to the tune of $15 million-ish?

[Lorena Pelliciari, executive]

Would be. It would be, yes.

[Alessandro Foti, executive]

Regarding BTPs, yes, we expect more or less, yes, EUR 5 billion of BTP maturing during the year. And what is going to happen here, there is, on one hand, clearly, there is a very important correlation with the evolution of rates. So, the more you have repeating the short-term rates starting on going down and the more this is going to be -- and the more successful we are going to be in moving this expiring BTPs in assets under management. Second very important trend that is a trend that is definitely building up that more and more clients are interested in putting their Govies or buying the new goes into the advisory platform. So practically is okay, fine. And in the same store and the more you have short-term rates going down and the more you're going to have growing the pet by clients for receiving an assistance in order to get and more efficient allocation. But the biggest driver, for sure, is going to be represented by the evolution of short-term rates. But in any case, this massify by clients of Govies is -- has built an absolutely gigantic opportunity for the future evolution of the investing business. This is the story repeating. Regarding the banking fees decline, if you don't -- Loren, if you were to get again the floor.

[Lorena Pelliciari, executive]

Yes. Yes. The decrease is mainly related to the repricing on current account as we came back on the 2019 repricing, which was reducing the interim interest rate.

[Alessandro Foti, executive]

Yes, because when the interest rates were negative, we introduced a fee on the current account in order to compensate the negative rates, part with the agreement to roll back to the old pricing as soon as interest rate as soon as -- we are going to return positive [indiscernible] because this has been the more or less the indication also received by Bank of Italy. We know we are aware that many banks, they didn't do that. But clearly, we prefer to be perfectly compliant with the indication received by Bank of Italy.

[Operator]

The next question is from Elena Perini with Intesa Sanpaolo.

[Elena Perini, analyst]

Yes, thank you for taking my questions. I was wondering about insurance outflows as they seem to have stabilized around EUR 200 million per month. Do you see any improvements going ahead? Or do you think that you will continue in trying to recapture those flows through FAM. Then if we look at the first 4 months brokerage revenues, well, if multiplied by 3, but I know that probably it is not correct to do that, but we would go very, very close to the 2021 level. So do you expect a significant improvement compared to last to last year, at least in line with the improvement that you have in the first 4 months. And then I was wondering about your tax rate because it was slightly below the 30% in the first quarter. So, I don't know if you can give us some guidance or a range for our models.

[Alessandro Foti, executive]

For your question. Let me start by the first question. So, as we explained, for us, this investment by the clients of insurance wrapper is not a great point of concern regarding the margins and revenues because this product is catered by extremely very low profitability for us because Fineco differently by the most part of the players. We don't have an internal factory on insurance. We don't have in place any binding agreements. And so overall, our margins are pretty low. The -- so this investment is not a big issue. At the same time, going forward, the evolution of the disinvestment from the issuance brakes going to be mostly driven again by the level of rates. The more you have short-term rates going down and the more you can expect that this process stabilizing. In any case, everything what's going on there, Fineco expected to keep on playing the lion's share in capturing what it is invested by clients on the insurance market. On the brokerage revenues, as you are familiar, brokerage is characterized by some level of -- is not so predictable for a very simple reason because you have elements you are not controlling like the volatility, the volumes of the market. But overall, looking to the last few months, what is pretty evident that the pace of the business is definitely stronger than in the past because the last few months has been characterized by an absolutely normal, if not below the average level of volatility. And the brokerage is growing for structural reasons. And so, on one side, we cannot give you a precise indication on the evolution of the revenues of brokers, but at the same time, we remain extremely positive for the -- on the long run through the evolution of brokerage because the growth is driven by structural the structural components. And what is still sometimes perceived as a problem in the market. So, this big appetite by the Italian families in directly buying Govies, this is emerging as an absolutely guarantee opportunity for the brokerage world as well because it's just waking up clients is enlarging the pie. And so the number of fames that now have become -- starting on becoming familiar in interacting with the market has grown up significantly over the last few years. And so sorry, if I'm a little bit boring about this rise of rates and big jump by clients and direction of Govies is going to -- is emerging as an absolutely great, great opportunity brokerage, but and investing as well. And on tax rate, Lorena.

[Lorena Pelliciari, executive]

So, the decrease quarter-on-quarter, so the decrease in the first quarter of this year compared to the last quarter 2023, is due to the recurring effect at the end of the year due to the dividend distribution of Fineco Asset Management in the fourth quarter 2023 because the consolidated tax rate increased at the end of last year because of the Italian taxation of the dividend. For 2024, we expect a slightly higher tax rate, around 31%, considering both the introduction of the global minimum tax that will lead FAM tax rate at 15% from 12.5% and the appreciation of the fiscal benefit that is called Ace or notional interest deduction, and that was appreciated and this is the reason why we expect a slight increase.

[Operator]

The next question is from Panayiotis Ellinas with Morgan Stanley.

[Panayiotis Ellinas, analyst]

I have two questions, if I may. Firstly, on the financial advisers, what are you targeting for this year in terms of onboarding. And then on the private banking initiatives, you mentioned the launch of the new tools. Are these mostly focused on the productivity of the advisers or is it more for the end client to use directly? And then my second question is on the customer growth, obviously, positive trends. You mentioned the data and drive marketing and opportunities from AI to drive lower client acquisition costs. Do you see any opportunities for cost savings from -- arising from AI in client support or servicing of these clients or any other areas that can drive further cost savings. Maybe if I may add one third, just on the brokerage on Slide 8, at the bottom chart, you show the number of brokerage clients increasing year-on-year. but the share of the active investors is steady at 92%. So does it mean you see both active investors and also traders coming on the platform. Is that something you are seeing just to check as well.

[Alessandro Foti, executive]

So, on the financial advisers, as we -- what we are targeting, so clearly, we are not giving to us any specific target in terms of number of recruiting because for us, what is important is the -- which kind of pencil planes we are recruiting. So, we remain focused on recruiting mostly panacea planes coming from banks or banking employees and young people that we are preparing for the profession. We are not interested in, for example, in taking part of the game of overpaying financial planners for making you joining the bank because -- at the moment, we have a kind of a return on the market of some of the best practice of the past. So, there are some players that are back again on the market in overpaying financial plans for convincing them in joining the partner. But clearly, we know that this is not a sustainable strategy, but we are extremely satisfied by what's going on because we are taking on board exactly the kind of financial planners we want to get. Regarding the new tools on private banking and I would leave the floor to Paul, if you want to give a little bit of color on what you are doing on that side.

[Paolo Grazia, executive]

Yes, basically, in the product banking side, we are improving the platform with products. We are -- we're going to introduce, for example, more private funds, equity funds and credit funds. We are connecting the platform to a multi-brand platform in that sense. And this is something that is going to come in the next -- soon after the summer. We are connecting right now the platform. We think it is something that's going -- it's not going to be massive in terms of numbers, but it's going to be quite useful to better position the bank -- in the private banking segment. Of course, on the -- also the next question on the AI, I can give you some color. We started a new team internally in the bank totally focused on artificial intelligence. And we are planning to basically attach AI pretty much everywhere in the next years. So, we -- of course, we have to prepare first the platform and then plug the artificial intelligence inside. But there are many, many opportunities outside, and we are talking to many counter parties to see what are the best strategies to basically develop AI services, both to direct to our financial planner. We think they're going to use massively in the next years, and we're preparing the platform just to do this and also for the direct clients, especially in the brokerage platform. And on the marketing side, we are using already artificial intelligence. It's something, I would say, quite basic, but quite powerful also. And we use AI basically to better profile the customer we want, so the prospects and to pay less -- basically the contact that we buy outside based on the propulsion profiling of the clients. So also, this is very promising. A good part of the increase in customer acquisition in the last few months is due to the use of the artificial intelligence inside our marketing platforms. And yes, of course, this is the first usage of AI. But again, we believe that is going to be much, much more used in the next few months and years.

[Alessandro Foti, executive]

Paul, if you want also to make a final comment on the last questions on the brokerage, so Slide 8 on brokerage.

[Paolo Grazia, executive]

So. Yes, we are -- yes, we are seeing incoming clients. First of all, because right now, we are pretty much the only platform in Italy to offer a service, not just an execution services, but it's a full service. So, it's the whole things that our clients buy and the level of the service is very, very high and at the moment, unmatched in the brokerage arena in the Italian market. So, we keep on acquiring new clients, as Alessandro said before, because we developed a lot of new clients -- new services platform. We improved the platform almost every day, releasing small pieces of the platform, making usability even easier, adding new products, features in the platforms. FinecoX, for example, we released every week some new features. And this is probably the best marketing you can do because clients, they feel they're -- we follow them, we follow their requests, and it's probably the best marketing to push them to the world of mouth. And also, the brokerage account is the 100% brokerage account released almost probably 8, 9 months ago after the summer. -- before the summer, it's going very well and attracting young generation of investors, putting a lot of attention on the new financial products. We're very strong, as you know, in ETS, accumulation services in ETS and new generation are mostly concentrated in this kind of product that we are best in the market also in this kind of offering.

[Alessandro Foti, executive]

So, Paul, you -- if I may, just going back to a very basic concept, if you are -- but many of you, you are perfectly aware of this, if you are an Italian clients and you are really interested in moving in the direction of very efficient and fair way we're investing, referring, presented yes, gods and soon, there are not many places around in which you can do that. So, because if you go, for example, a traditional bank frequently, this is just they're not offering the service or is hopefully with conditions that are absolutely not current with the expectation of the client. So, what we are trying to transfer that there is also in Italy, there are underway some massive changes by the clients, and we are definitely the best position of place, thanks to the combination of an absolutely amazing platform and the remaining part of our one stop solution.

[Paolo Grazia, executive]

Yes, I would say, just to close that it's not just the pricing or the execution that we give. It's the whole thing. So, it's basically the journey that the clients are experiencing with the platform, Fineco platform before buying, during buying, and after buying the stocks, EPS, bonds, mutual funds or whatever.

[Alessandro Foti, executive]

And because during the first 4 months, everybody is just focused on the Govies. But for example, the clients both near more or less EUR 1 billion of ETF and the large part of this is moving into the advisory platforms we are provided to clients.

[Operator]

The next question is from Isobel Hettrick with Autonomous Research.

[Isobel Hettrick, analyst]

I have two, please. So first, you've guided you now expect revenues to be higher this year than in full year '23. So, could you just try and quantify that? Do you expect it to be like low single-digit percentage higher, mid- to high digit, that would be useful, please. And within that, do you expect the investment revenue to drive most of the increase? Or do you now expect NII to be greater than where you're expecting full year results given the higher longer rate environment? And then secondly, on the brokerage side of the business, a number of your peers who were really reported had quite strong brokerage revenue numbers due to increased engagement from clients with U.S. equities, which are a more profitable trade for them. So, if you can provide any color with the U.S. engagement from your client base? And if this is a benefit at all to the brokerage revenue you report?

[Alessandro Foti, executive]

So, regarding the first question, it's clear that, as you know better than me, the combination of revenues is strictly dependent by for example evolution of rates because if you have rates remaining as the market is seeing higher for longer, probably you can expect a higher contribution by the financial income and the lower contribution by the other by investing brokerages moving from by its phone. If rates are going to go lower, it's going to be the opposite. What is clear that thanks to our business model that is extremely diversified and so on, we can -- there is a clear compensating effect. And so, this is making us together with the support generated by brokers that as I was saying, is growing by itself, is making us decently confident that revenues can be -- if they are going to be higher this year than last year. And going forward, as much as we have more visibility, probably we are going to start on giving a little bit more precise indication of the range of this -- and on the brokerage, yes. So is -- I don't know, I'm just looking to Paolo. So also in our case, we had the clients, again, the interest by our clients on U.S. stocks is not just a trend that has emerged recently is a continuously growing trend. So, the intend this is particularly strong here in Italy because in Italy, the overall dimension of the Italian Stock Exchange is not current with the total amount of wealth of the Italian family. So, by definition, the Italian clients has been historically extremely attracted by trading on the U.S. market and the trend is clearly continuing. I don't know, Paul, if you.

[Paolo Grazia, executive]

Yes, it's a very -- for us, it's a very important market. We have a big chunk of execution every day that comes from the U.S. market and it's a very profitable business also because there is the effect involved in the execution even though we are very, very fair on FX, but still we are making money also on this leg. And yes, we do marketing. We try to enlarge the market -- the U.S. markets also among our clients and is a very promising a good trend.

[Operator]

The next question is from Alberto Villa with Intermonte.

[Alberto Villa, analyst]

Just one question from my side. I was wondering if you can give us some idea what's your ambition in terms of certificates business volumes and profitability going forward? And what is the reception of these kind of products by, I guess, the advisers and the clients both of them? And also, same kind of question for the advisory activity.

[Alessandro Foti, executive]

First of all, as you are probably are familiar, Fineco is a relatively brand new player in this arena. And so clearly, we think that the certificate business is going to progressively become a quite interesting business for us. But clearly, it takes time because we have to -- there is our financial plan, they have to understand, they have to familiarize with these products because our network never has been a network, particularly active and certificate. And so exactly like Rome has not been built in one day. Also in this case, we have to have to be patient, but it's not a brand-new story. -- in the same point on the clients, but we remain absolutely very positive. Every time that you are launching a brand new initiatives, you have to be decently patient. So, but it's going to become a great business for us.

[Alberto Villa, analyst]

Okay. And on the advisory, what -- I mean what kind of potential, let's say, share of the assets you think you can.

[Alessandro Foti, executive]

Yes, the advisory business is going to become, in our opinion, the real game changer in the investing industry in Italy because this is pretty heavy in the trend. So, it's -- and what is making me a little bit surprised that still the industry is reluctant in understanding what's going on. Probably in our case, it's easier to spot the trend because we are managing such a large brokerage platform. And so, we are observing the way the clients are changing their behaviors. So, I'm not just referring to the smart young clients. I'm referring to traditional clients that more and more are overlapping with the brokerage world. And the advisory platform is becoming the real only way of capturing the attention particularly of the big clients. And so, this is going to become a real game changer in the industry. For us, this is absolutely by far the best news because Fineco, we started as a first mover in 2008. It's a business we have now more than EUR 28 billion of assets on which clients are real now you correctly -- Lorena is corrected me. Now we are very close to EUR 30 billion. So, EUR 30 billion of assets out of EUR 55 billion of overall assets under management are represented by assets on which clients are paying a fee and advisory fee. This is absolutely unique and amazing. But again, in my opinion, in our opinion, what is the most relevant message, this is a [ gigatic ] trend that is underway. And this is going to change very rapidly the shape of the industry.

[Operator]

The next question is from Luigi De Bellis with Equita.

[Luigi De Bellis, analyst]

Just a follow-up on the advanced advisory services. So, can you give us an idea on profitability compared to your average margin for investing? And how much of these assets in advisory business are now assets under custody?

[Alessandro Foti, executive]

So, the profitability, it depends on which clients you are in front of you because clearly, on the very rich clients, the profitability tends to be lower -- but on the other clients is not too much different from what we are experiencing. Clearly, our case is quite unique because Fineco is characterized by being always charging far commissions and fees. So, if your question is what does it mean for us? This is not going to make such a gigantic difference. If your question is, what does it mean for the industry, this is going to be a big shock because the industry is used to charge to clients and much higher fees. And at the moment, we have the asset under custody that is under the advisory is close to EUR 6 billion. Yes, fast growing is on the fast lane of growth. This is the fastest-growing trend.

[Operator]

[Operator Instructions. Mister Foti, there are no more questions registered at this time.

[Alessandro Foti, executive]

Thank you to all of you for the very interesting and stimulating questions. As usual, then if you have the need for some more deep diving, please make us a call for having a follow-up. Thank you again for participating to our call.

[Operator]

Ladies and Gentlemen, thank you for joining the conference is now over. You may disconnect your telephones.