FinecoBank Banca Fineco SpA

MIL:FBK

Earnings Call Transcript 2018-Q2

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the FinecoBank Second Quarter 2018 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 thanks for joining our first half 2018 results conference call.

Net profit in the first half exceeded EUR 125 million, plus 20.1% year-on-year, and gross operating profit reached EUR 187 million, almost 16% more compared to the first half 2017. These results confirm once again the soundness of our business model, able to deliver industrial growth in every market condition without significant volatility among the different quarters.

We generated over EUR 311 million of revenues in 6 months all recurring, up 10.3% year-on-year, with all product areas positively contributing.

Operating costs at EUR 124.6 million were under control despite the continuous expansion in assets and clients. Cost/income ratio down 3 percentage points year-on-year, up 40%, thanks to our strong operating leverage and the scalability of the platform.

Please now go through the following slides to analyze more in details all the dynamics of our results. Slide 6 on net interest income. So first half 2018, net interest income increased more than 8% compared 1 year ago, supported by double-digit growth in volumes. Both sticky sight deposits and lending. Volume dynamics more than offset the yearly reduction in gross margins.

As you can see at the bottom right of the slide, average gross margin saw interest earning assets lowered from 1.34% in the first half 2017 to 1.32%. Cost of funding remain very low at 4 basis points.

In the following slide, you can find the progression of our government bond portfolio. As anticipated during our full year results conference call, we confirm our intention to finance the diversification of our investment portfolio through the nonrenewal of expiring UniCredit bonds and the increase of European government bonds in addition to the already announced focus on lending activity. Let me remind you that our strategy is always in generating industrial and high-quality results. Therefore, we don't use our portfolio for gaining short-term revenues. This is the reason why in the past, we booked the majority of our government bond portfolio at amortized cost without any volatility on capital ratio and the P&L.

In 2018, we confirm our low single-digit increase in net interest income, supported by lending and volume effect on variable sight deposits that more than offset the declining margins mainly due to the one-off of existing bond portfolio.

Let me also remind our sensitivity to a potential increase in interest rates. The parallel shift of 100 basis points would generate EUR 115 million of additional net interest income.

Moving to commissions and trading income, fees and commissions strongly up year-on-year, a double-digit growth supported by whole product areas and, in particular, by investing. Management fees grew 12.2% year-on-year, thanks to the better asset mix as asset under management increased 11% year-on-year, with a strong contribution of Guided Products & Services, grew by plus 21% year-on-year.

Also, Brokerage performed very well, thanks to the higher volatility compared to the first half 2017 and to the enlargement of the product offer. Core revenues in the first half 2018 ranked as the second-best semester, but we will deep dive on this later on.

Moving to Slide 9, we have a detailed overview on our cost evolution. Efficiency is part of our DNA and core in our bank. Moreover, the relentless improvement in IT and the [ professional ] internal know-how made in our 20 years journey represent a unique competitive advantage for us.

Staff expenses were at EUR 41.5 million in the first half 2018, 6.6% more compared to the same period of 2017, mainly due to the increase in the workforce related to the business development and the setup of Fineco Asset Management.

Other administrative expenses at EUR 78.3 million, plus 1.2% year-on-year, despite the enlargement of assets and clients, confirming the operating leverage as a distinctive competitive advantage for our bank.

In terms of future evolution, we confirm our guidance on a continuously declining cost/income in the long run, thanks to the scalability of our platform and the strong operating gearing we have.

Looking at 2018 year-end dynamics, we are forecasting an increase of total operating cost by around 5% year-on-year, plus EUR 5 million related to Fineco Asset Management. This increased -- this increase mainly includes expenses for business growth with clear returns. For example, cost for look-through implementation, which brought significant benefits to the common equity Tier 1, as we will see in the following slide.

Moving to Slide 10, Fineco confirmed a solid and stable capital position on the wave of a safe balance sheet. Transitional common equity Tier 1 ratio amounted to 20.7%, and common equity Tier 1 ratio fully loaded was at 20.6%. Total capital ratio transitional at 29.3%, including the additional Tier 1 issued at the beginning of 2018.

As announced last quarter, we are very pleased to inform you that we implemented the look-through approach, leveraging on our best-in-class internal operational skills. This approach allows us to drill down the underlying assets provided by clients as collateral to Credit Lombard, reducing, therefore, the risk-weighted asset absorption according with their real underlying assets. The look-through covers around 57% of the collateral, leading to a significant improvement of core Tier 1 ratio by 194 basis points.

On Slide 11, we show an overview of the total financial assets growing trend, supported by the healthy expansion in new inflows. We generated EUR 26.6 billion net sales in the last 5.5 years, leading total financial assets close to EUR 70 billion as of June 2018. This powerful performance confirms Fineco's potential to further consolidate its position and take advantage from structural trends in place in Italy, the increasing demand for advanced advisory services and growing digitalization. Our market share on total financial assets increased at [ 1.63% ] as of March 2018.

Moving to Slide 12, we summarize the breakdown of total financial assets. As you know, we are strongly focused on the quality and the sustainability of assets generated. In congruence with the ongoing initiatives to improve the productivity of the network, the asset mix is constantly moving in the right direction with a better mix.

As of June 2018, total financial assets were at almost EUR 70 billion, 10% more compared to June 2017. Asset under management amounted to EUR 34.5 billion, 49% of total financial assets. Guided Products increased the penetration rate to 64% on total assets under management, 5 percentage points more than 1 year ago.

On the right side of the slide, assets under management grew EUR 10.6 billion since the end of 2014. Leveraging on our cyborg-advisory approach, the lion's share of this growth was represented by Guided Products & Services, which increased by EUR 13.7 billion in the period.

On Slide 13, we can see that we are very satisfied about the solid commercial data released in the first semester despite the more difficult environment compared to last year. We gathered EUR 3.6 billion of net sales, an increase of more than 24% compared to the first half 2017. The recent launch of some brand-new products and services, such as Plus and Core Target, helped in offsetting the higher propensity of clients to remain in a wait-and-see mood. The strong increase of the inflows gathered confirms the continuous improvement in the quality of clients and, therefore, the effectiveness of the brand repositioning of the bank. More than EUR 3.2 billion of net sales were gathered through our financial advisers, plus 22% year-on-year. They are strongly committed in moving clients into added-value solutions, helping clients in managing their wealth with a long-term approach, bearing in mind the clients' investment target.

Moving to Slide 14, as you know, our growth strongly leverages on the organic component, thanks to the unmatched quality of our services. With the first half 2018, out of EUR 3 billion of net sales, 85% was organically generated through the existing financial [ climates ] or directly by the bank, and 15% came from recruits made in the last 24 months. As you know, in our view, this growing strategy is strongly sustainable in the long run also from a future cost sustainability perspective, positioning the bank in a sweet spot to cope with future pressure on margins and potential challenges.

For us, recruitment is exclusively aimed to improve the quality of the network through selected new recruits.

Now I would skip directly to Page 18 of the presentation of the next section before moving to the last part of the presentation. It is worth spending few words on Brokerage, confirmed as a strong contributor to our revenue generation. As you can see in the chart at the bottom, core revenues in the first half 2018 ranked the second best half since 2013, but the best one with this level of volatility, thanks to the continuous enlargement of the client base and market share combined with a broader product offer. The strong potential of this business is also being recently confirmed by the jump in the market share of equity traded volumes in Italy, increased at 24% according with the Assosim ranking, plus 4.4 percentage points compared to December 2017.

Let's now move on to Slide 24. Commercial loans grew 90% year-on-year with the usual strict control on credit quality. Let's remind that our lending is offered exclusively to our loyal customer base and our deep internal IT culture allows us to fully leverage on big data analytics. This translates into commercial cost of risk very well under control, as you can see on the right side. In the first half 2018, it's not fully comparable with the previous periods due to the introduction of new accounting standards. However, for 2018, we expect then the stabilization at June 2018 level.

Let's move now in analyzing lending initiatives more in depth. As you can see on Slide 25, lending offer is very well welcomed by our clients. Mortgages reached 70 -- EUR 723 million in the first half, almost 40% more compared to December 2017, with almost 6,900 mortgages granted, with an average loan-to-value of 52% and an average maturity of 19 years.

For 2018, we expect a yearly new production of around EUR 400 million, as we prefer not to take part of increased competition in the market without entering into red zones characterized by aggressive pricing, high loan-to-value and longer maturities.

Expectations in terms of yield stand at around 80/85 basis points, slightly lower compared to our previous indication given the increased hedging costs due to worsening of market conditions.

Personal loans grew more than 31% year-on-year, and margins remain very attractive. Our expectation in terms of new production is around EUR 200 million per year, which means EUR 100 million net in terms of delta stock with an expected yield in the range of 400, 450 basis points.

Lombard loans at EUR 845 million increased by 140% compared to 1 year ago, thanks to the introduction of new Credit Lombard. In 2018, our expectation is to grow around EUR 500 million, with an average yield of around 110/120 basis points.

Moving on to Slide 27, just a few words on the new asset management company. As announced, Fineco Asset Management is fully operational since July 2, 2018. This initiative represents a big step forward to further improve efficiency in our assets under management business and improving, at the same time, the quality of the services provided to clients.

Let me underline the main stream of revenues of this new company. First of all, Fineco Asset Management already manages EUR 6.7 billion of Core Series, of which EUR 6.55 billion is retail and EUR 0.14 billion is institutional, and already actively working on the improvement of efficiencies and portfolio rationalization.

Then the first 31 sub-advised funds are already under approval by the Central Bank of Ireland. This week, it's expected that the formal approval of the new Irish collective asset management vehicle to make the process of new sub-advised funds more efficient, simpler and faster. This will allow Fineco Asset Management to release the first wave of sub-advised funds this week and the second wave of release is expected in October.

Finally, new funds of funds, complementary to the existing Core Series, are under implementation. The first 9 are expected to be released by year-end.

This initiative represents a clear win-win solution. Improving efficiency will allow us to reduce total expense ratio for clients, producing at the same time higher margins on assets under management. As already anticipated, we confirm to you that relevant and recurring improvement in our profitability is expected. Leveraging on the clear advantages these solutions have, we have a very positive expectation in terms of future volumes managed by Fineco Asset Management. Also, thanks to some initiatives, the bank will put in place to channel a relevant portion of assets under management in Fineco Asset Management. For example, all innovative new solutions will be manufactured in Ireland.

At the bottom of the slide, we summarize the main interaction between Ireland and Italy. Let me just highlight that the cost structure of the new company is expected to be extremely lean, and we are budgeting around EUR 6 million, EUR 7 million of cost per year. This, combined with expected revenue growth, leads to a very attractive single-digit cost/income.

Finally, on Slide 29, a few words on Fineco U.K. and Patent Box. In U.K., we acquired over 2,100 clients with a very interesting mix. 52% is represented by non-Italians, of which 37% is represented by native British. The most recent clients acquired show that our proposition is more and more welcomed not only by Italian expatriates but also by non-Italians, in particular, British natives. As you know, in our estimates, we do not include neither revenues nor costs, but this project represents a concept car for the future evolution of our bank, as we now have the perfect blueprint that could be redeployed in other European countries.

As you know, we applied for the Patent Box in December 2015 both for the intellectual properties as our platform are internally developed; and also for the trademark. Talks with Italian Fiscal Authority have entered in the final phase, and we are very confident about the possible outcome. The closing of the process is now in the hands of the Revenue Agency and fiscal benefit will cover 5 years from 2015 to 2019. Intellectual properties are renewable according to the international guidelines.

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

[Operator]

[Operator Instructions] The first question comes from Gian Luca Ferrari with Mediobanca.

[Gian Ferrari, analyst]

I have 4 questions. The first one is related to Page 18 on Brokerage, and basically, I was looking for your help to reconcile the fact that in Q2, executed orders were down 3%, but then the trading income was down something around 14%. So I just wanted to understand why this drop Q2 versus Q1 in trading income. The second question is on Guided Products. It seems that the second derivative is flattening out a bit. So it now represents 64% of your total assets under management. Do you have any target or guidance for full year '18? Do you think Guided Products will remain in the region of 64%, 65%? Or you are much more ambitious than that and we will see more to come in the coming quarters? The third question is related to Page 9, and it is about your very strong cost control. And in particular, G&A related to development went down from EUR 23.6 million in Q1 to EUR 20 million in Q2. Can you help us in reading a bit better this number? Did you anticipate some costs in Q1 and those costs were not present in Q2, but we should see this normalizing in the next quarters? And last question, I think you already answered, you used the guidance in terms of mortgages from EUR 500 million to EUR 400 million. Is this due to the fact that hedging costs are getting higher so you want to be a bit more prudent with this respect?

[Alessandro Foti, executive]

So first of all, let me start from the Brokerage. So the -- so on the Brokerage, the decrease quarter-on-quarter, so the second quarter versus the first quarter, is related mainly to seasonal effect because it's -- so the first quarter has been for sure, to some extent, the more volatile. In the second quarter, we have -- we had a lower number of open days, an example is Easter. And in any case, for example, the month of June has been characterized by more a wait-and-see mood by the clients and driven by the political uncertainties. In any case, I want to remind that the second quarter 2018 has been the best second quarter ever after the listing. So by word of caution, when you are analyzing the results of Brokerage, making comparison quarter-with-quarter, you have to be extremely prudent because, again, the -- Brokerage is the least predictable part of our business because it's mainly driven by the level of volatility in the market. So the risk is to compare periods. So what is, in our opinion, is very important on the Brokerage that there is a very clear trend that the bank is keeping on enlarging the market share, the client base and the business. Then clearly, the short-term volatility can affect temporarily results. But clearly, we are extremely positive on the long run, development of Brokerage, and this has been, in any case, confirmed by the quite big jump we had in terms of market share in the volumes exchange in -- on the Italian Stock Exchange. But be reminded, Fineco has a market share of retail brokerage that is -- we're estimating is definitely above 50%. And so to keep on growing in terms of market share is something quite outstanding. So moving -- Guided Products. So the Guided Products is -- they are -- we are expecting to help us to remain the main driver of the growth of our assets under management products. It's clear that we have -- the point is that the bank, at the same time, in keeping on growing robustly and so to move the percentage is -- sorry, is more and more difficult. But I can confirm that we don't expect to remain, sit on this 64%, 65%. So this percentage is expected to grow in the coming month. And so -- so the decreased cost in -- quarter-on-quarter is related to the usual seasonality in the first quarter, which include higher personnel -- financial planners' social security contributions, such as Enasarco association and FIRR termination compensation fund. So the [ yield ] increase is mainly linked to higher expenses related to PFA, mainly loyalty; again FIRR and Enasarco costs related to the new management company. So -- and finally, on mortgages, clearly, we confirm that the change in the guidance because we lowered slightly the guidance from EUR 500 million to EUR 400 million, is because as we explained during the presentation, we are not interested in taking part to a market that is starting on becoming a little bit overrated. So we were not interested, for example, in becoming aggressive in terms of loan-to-value and too long maturity. And as well, we are not interested in providing pricing. [ That has is correct ] and we've had a decent and acceptable profitability. And so this is the reason why we reduced by EUR 100 million the guidance.

[Operator]

The next question comes from Elena Perini with Banca IMI.

[Elena Perini, analyst]

I have got some questions. The first one is on the outlook for your net inflows and their mix for the second half of this year. Can we expect a similar level of the first half both in terms of absolute value and mix? Then the second question is about loan loss provisions. I understood that there were some impacts from the new IFRS 9 accounting principle, so if you can elaborate a bit more; and also on the run rate we can expect for the full year and for the coming quarters. Then about the recruiting costs, are you willing to exploit the benefits offered by IFRS 15 in terms of longer amortization period? Or you will stay like now, as you are now? And then if you can provide us with the sensitivity of your common equity Tier 1 today to the BTP-Bund spread. And finally, I don't know if you have already talked about it because I had to disconnect for a few minutes. But about the Patent Box, when do you think that you will obtain the response from the Italian Fiscal Authority?

[Alessandro Foti, executive]

So starting from the guidance on net inflows, as usual, we are not giving a precise guidance on net inflows because we are not obsessed by gathering a few hundreds of millions more or less because we are concentrated on the prevailing structural claims. And so we confirm that we expect the bank remaining on the fast lane of growth in terms of net inflows because, again, the net inflows we are gathering are driven by structural trends, that they are the change of habits by the Italian families in managing their wealth digitalization; and clearly, and the headwinds against the small and medium regional banks. And these trends are structural, are going to stay and Fineco is exactly at the crossroad. So we don't expect -- so we expect the bank keeping -- growing robustly but we don't give a -- clearly such precise guidance. In terms of mix, clearly, the main goal of the bank is to move as much as we can in the direction of assets under management products and clearly, mainly Guided Products. Clearly, we cannot give you the -- we cannot be 100% sure to achieve a perfect asset mix because -- business mix and asset mix because clearly, these can be temporarily affected by the market conditions. So for example, if we enter in a much more volatile situation characterized by corrections on the market, clearly, you can expect net inflows remaining pretty strong. But with a temporary change in the mix moving more in the direction of liquidity and assets under custody. But again, this is not fully in our hands. So what I can confirm to you is that we expect to keep on growing very robustly in terms of net inflows, and all the efforts and activity by the bank is in the direction of -- moving as much as we can in the direction of assets under management products. For the loan loss provision, I leave the floor to Lorena Pelliciari, the CFO. Please, Lorena.

[Lorena Pelliciari, executive]

Yes. So loss loan provision equal to EUR 0.2 million in the second quarter. Let's underline that loss loan provision are not fully comparable with previous periods, as they now include also the impairments related to IFRS 9, and due to exposure to bank and also forward-looking information following the introduction of the new accounting standard. In the second quarter, we had minus EUR 2.2 million of loss loan provision related to loans to customers following the increase in lending exposure. And we had a positive impact of EUR 2.4 million on loans to banks mainly on current account with UniCredit due to the model recalibration and, in particular, to the improvement of UniCredit risk profile, the probability of default.

[Alessandro Foti, executive]

Now there is -- again, I leave the floor again to the CFO for the questions related to the IFRS 15, recruiting costs and so on. So please, Lorena.

[Lorena Pelliciari, executive]

Yes. Regarding IFRS 15, we didn't have any impact. With your reference to recruitment costs, upfront fees are amortized in 5, 6 years accordingly with the lock-in period indicated in each mandate.

[Alessandro Foti, executive]

And finally, on the Patent Box, clearly, as we explained, we -- everything has been -- is finished, so it has been finalized with the Italian Fiscal Authority. So -- and again, we are quite positive regarding the outcome, so there is no doubt that we are going to get, then, a fiscal break from that. Clearly, now, in terms of time horizon, it is completely in the hands of the Italian Fiscal Authority because we received some indication by them but, as you know, we prefer not to be -- because sometimes it's not so precise. So clearly, what in our opinion is important that, for sure, the -- Fineco is going to benefit from this fiscal break. Another very important point to be concentrated, that the largest part is going to be represented by the intellectual properties that is making Fineco a unique case in the banking industry, because this is thanks to the fact that we are running, by ourself, our platforms. And even more importantly, this component is going to be recurrent, differently from the trademark that is the components for which all the banks are applying that is a pure one-off. So we are quite -- we are not absolutely -- we are not in a rush because we know that these are money that they are going to come to us. So we are passionately waiting for the final and official green light by the Italian Fiscal Authority. In terms of sensitivity on the volatility on the BTP-Bund spread, our -- every 100 basis points of widening or tightening of the spread, we expect an impact between 40 and 45 basis points on our common equity Tier 1 ratio.

[Elena Perini, analyst]

Okay. So basically in line, as far as your last answer, with the 45 bps I see on Page 10 on the HTCS reserves.

[Alessandro Foti, executive]

Yes.

[Operator]

The next question comes from Giuseppe Mapelli with Equita.

[Giuseppe Mapelli, analyst]

I have only 1 question. It's related to your core Tier 1 ratio. I would like to understand if you can give us an idea on what kind of projection we should assume in terms of capital absorption related to personal Lombard loans and mortgages going forward. So...

[Alessandro Foti, executive]

Regarding this point, clearly, it's -- we don't expect any significant impact on our core Tier 1 ratio by the new production of lending products for -- the reason is the same. First of all, we have still some room for -- in improving further the effectiveness of the look-through approach because clearly, at the moment, we have 57% of the total assets used as a collateral by clients, that they are -- under this; and this is generating 44% absorption in terms of risk-weighted assets. And what we expect in the following month to increase even more the coverage, so moving up from 57% and reaching, I don't know, probably -- I'm looking to -- what do you think, Lorena, which kind of level we can reach?

[Lorena Pelliciari, executive]

Our expectation is to reach 80%, around 80%.

[Alessandro Foti, executive]

So we -- our idea is to be able to cover 80% of the assets under -- that are used by the clients as a collateral. So this means that we have room for adding a quite interesting amount of core Tier 1 ratio more. So -- and this is going to be definitely -- so every -- so there is -- so every 10% increase on look-through means an -- brings a positive contribution on core Tier 1 ratio by 50 basis points. So clearly, as you can imagine, this is much more that we can expect to consume on the mortgage side and the personal side. So what we expect, that our core Tier 1 ratio is going to remain pretty strong, also considering that our growth in terms of lending business remaining on the same direction we -- perfectly [ coherent ] with the guidance we gave to the market.

[Giuseppe Mapelli, analyst]

Okay. Just a follow-up. Can you share with us what is the breakdown of 125 basis point increase or rather, impact on core Tier 1 relative to risk-weighted assets increase?

[Alessandro Foti, executive]

Yes, there is...

[Lorena Pelliciari, executive]

125 basis points, means EUR 160 million of risk-weighted assets, if this is the question.

[Giuseppe Mapelli, analyst]

Yes, that's -- let's say, is it possible to understand what are the assets underlying this increase? So mortgages, personal loans, whatsoever?

[Lorena Pelliciari, executive]

Yes. Yes, are mortgages, personal loans and partially Credit Lombard.

[Alessandro Foti, executive]

Yes, the portion that is not still covered by the look-through.

[Operator]

[Operator Instructions] The next question comes from Anna Adamo with Autonomous Research.

[Anna Adamo, analyst]

I have 2 questions, actually. One on the Fineco U.K. business. Now that the business is up and running, could you perhaps share with us what you expect in terms of profit contribution from the business in the next couple of years? And related to this point, are you planning to launch any of the ISA and -- pension products which are very popular in the U.K. market? And the second question is related to the EUR 5.4 million gain on investments related to UniCredit. How often are you planning to update the PD assumptions? And should we expect these gains to be recurring on an annual basis?

[Alessandro Foti, executive]

So let me start from the U.K. business first. So on the U.K. business, as we said, it's still too early to give some kind of guidance in terms of the potential -- future potential of the business because we are still in the stage in which, what is our opinion, it's quite rewarding that despite the fact that we are considering this phase as a kind of starting phase, then the welcome that we are receiving is pretty nice. Because without doing any kind of significant marketing, we are keeping systematically on acquiring new clients and we are doing business. And -- but it's still too early to give such a precise guidance in terms of future contribution on the -- by this business. We still need at least some months in order to have the business definitely -- so for example, and I take the opportunity to answer also to the last part -- the other part of the questions. Clearing the next following months, I can confirm that we are going to have as well the ISA products and investing products because clearly, we're perfectly aware that this is a very important component of the business. Probably at that point of time when the proposal is going to be 100% up and running, we are going to be in the position to give, then, more precise guidance in terms of future revenues generation. And regarding the profits on investments and the evolution of the PD and so on, I leave, again, the floor again to Lorena. Please, Lorena?

[Lorena Pelliciari, executive]

Yes. So also, profit on investment are affected by the introduction of the new accounting standards, IFRS 9. This is why the figures are not fully comparable with previous periods. And the impact of EUR 5.2 million in the first half is mainly linked to the impairment on UniCredit bond portfolio accounting and to collect, due to model recalibration for institutional counterparties. And in particular, for the improvement of UniCredit risk profile. So following the introduction of the new standard, IFRS 9, we have to evaluate all our assets that are not evaluated at fair value through profit and loss. And each 6 month, they are subject to impairment. So we don't know if the risk profile of UniCredit will improve or not in the next months, but we have to evaluate each -- every 6 months all our assets.

[Alessandro Foti, executive]

The main reason of the improvement of the risk profile of the parent company is clearly, as you can imagine, has been driven by the fact that these models are usually put in place in the way in which you have a certain set of data that is coming from the past. And so clearly, now there is -- we -- has been -- is like the moving averages. And so now the old data related to the period in which UniCredit was just before the capital increase. So this kind of data has been eliminated by the model. And now we have the new UniCredit that we've fully capitalized. And so clearly, we -- unless we had some absolutely unexpected events, disruption and so on, we can expect a certain kind of stabilization of the risk profile of UniCredit. So that this change has been produced by the fact that now the model is fully incorporating the new situation of UniCredit after the capital increase.

[Operator]

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

[Alessandro Foti, executive]

Thank you again for attending our conference, and talk to you soon.

[Operator]

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