FinecoBank Banca Fineco SpA

MIL:FBK

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the FinecoBank Third 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 third quarter 2024 Results Conference Call, where we will also deep dive on the expectations for a further acceleration of our growth.

Net profit in the first 9 months of 2024 was equal to EUR 490 million, up by 7.9% year-on-year, revenues at EUR 984.1 million, increasing by 7.3% year-on-year and supported by all our product areas. Net financial income is increasing by 6.4% year-on-year, investing up by 11.7% 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 11.4% year-on-year, thanks to the enlargement of our active investors. Operating costs were under control at EUR 239.1 million, increasing by 6.7% year-on-year by excluding costs related to the growth of the business. Cost/income ratio was equal to 24.3%, confirming operating leverage as a key strength of the bank.

Moving to our commercial dynamics. Let me share that we are expecting a step-up in our growth dynamics with higher assets under management and deposits. This is underpinned by the positive tailwinds from the structural trends and we are leveraging on this solid momentum through a more efficient marketing activity. The results of this acceleration is already visible in our most recent commercial results. First, as you know, we recorded a further acceleration in our new client acquisition in the first 9 months of 2024, increasing by around 26.5% on 2023 record year. In October, we recorded a further improvement with our best results since the inception of the bank in terms of new clients, equal to more than 15,000. Let me highlight that we are not just growing faster on the overall number of new clients, but we are coupling this with an improvement of the underlying quality on which we will come back later.

Second, our net sales confirmed to be very solid with EUR 6.9 billion inflows in the first 9 months of this year. Estimated net sales for October are even stronger as they doubled year-on-year at around EUR 1 billion, of which assets under management at around EUR 430 million despite around EUR 100 million outflows from insurance. And with Fineco Asset Management retail net sales at around EUR 460 million, deposit at around EUR 0 million with brokerage clients buying on the dips. Asset under custody equals to around EUR 550 million net sales and leading to very solid brokerage revenues estimated at EUR 18 million.

Our capital position continued to be very strong and safe with a common equity Tier 1 ratio at 27.3% and a leverage ratio at 5.35%. On the right-hand side of the slide, you can find the summary of our 2024 guidance with the outlook that has improved even more, and we are expecting another record year for our net profit. More in detail. On revenues, we expect them at a record level in 2024 with an improvement of the mix in favor of commissions, thanks to investing revenues expected to increase low double digits in 2024 versus 2023 with a natural market assumption going forward. For 2025, we expect investing revenues to increase low double digit year-on-year with a natural market assumption going forward. Banking fees expected stable in 2024 and the slight decrease in 2025 due to the new regulation on instant payment. Brokerage, we confirmed for 2024 and 2025, expected revenues strong with a continuously growing floor, thanks to the enlargement of our active investors.

On operating costs, we expect a 6% growth year-on-year in 2024, not including additional costs mainly for Fineco Asset Management and marketing expenses. For 2025, we expect operating costs to grow around 6% year-on-year, not including additional cost for growth initiatives. We expect a higher dividend per share for full year 2024. On excess capital distribution, we are going to take more time as the probability of higher-than-expected growth of deposit base is increasing.

Let's now move on Slide 5. As announced net profit in the first 9 months of this year stood at EUR 490 million in a very challenging macro scenario increasing by 7.9% year-on-year. Revenues at EUR 984.1 million, up by 7.3% year-on-year as we have been able to catch the strong acceleration of the structural trends in place. The growth of our net financial income increased by 6.4% year-on-year, supported by our high-quality and capital-light net interest income. Net commissions increased by 6.9% year-on-year, mainly thanks to the contribution of investing, up by 11.8% year-on-year and brokerage business up by 9.5%. Trading profit increased by 21% year-on-year, mainly thanks to higher brokerage activity.

Operating costs EUR 239.1 million, well under control and increasing by 6.7% year-on-year, excluding costs strictly related to the growth of the business, mainly additional costs for Fineco Asset Management to further expand its business and having a higher control of the value chain, additional marketing costs to catch the strong momentum of the business.

Let's now move to the Slide 6 for a deep dive on the performance of the investing business. Investing revenues equal to EUR 268.6 million in the first 9 months, increasing by 11% year-on-year on the back of both growing volumes, thanks to our best-in-class market positioning and of the higher efficiency of the value chain through Fineco Asset Management. Let me please remind you the credit 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. Our set of results is particularly remarkable given the more challenging market environment for the asset management industry. Also, the bank is going ahead with its plan to deeply shape its products and services offer to better fit with the new context. This will give more fuel to our growth engine in the months ahead and will allow us to keep on adding new market shares.

Let's now move on Slide 7 for a focus on our asset under management company and our advanced advisory services. In this slide, we are representing the 2 main sources of growth for our investing business going forward. On one hand, as you know, Fineco Asset Management is progressively delivering in increasing the control of the investing value chain. Its contribution to the group net sales has been consistent over the cycle, thanks to its incredible time to market in delivering new investment solutions perfectly aligned with what clients are looking for. As a result, the contribution of Fineco Asset Management out of the total stock of assets under management has been steadily growing and it's now equal to 36.6%.

On the other hand, being a platform, Fineco is the best place to catch the latest trends in terms of clients' investment behaviors. There is a clear change underway in the structure of the market with clients increasingly looking for quality, efficiency and fair solutions. And all this is channeling a strong demand towards advanced advisory services with an explicit fees where Fineco is by far the best positioned in Italy, as you can see down in the slide. Thanks to our operating efficiency, we are fully catching this powerful trend in a way that is keeping our margin pretty much stable, allowing us to be very positive on the sustainability and the quality of our growth going forward.

Let's now move on to Slide 8 for a focus on brokerage. Brokerage once again registered excellent results with EUR 160.5 million revenues in the first 9 months of this year. This is confirming a structural increase in client interest to be more active in the financial market and building up a clear bridge between the brokerage and investing world. Let me remind you that the growth of the brokerage business is driven by the contribution of 3 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 add that the last few quarters, we are experiencing 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 to 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 of the 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 during the pandemic. The drivers of such an increase are all structured, namely, we are delivering on a number of new initiatives like the new brokerage-only accounts and the new platform, Fineco X, the new market structure is confirming the bridge between brokerage and investing. The most recent increase in the rates environment has resulted in a renewed interest in govies, with Fineco emerging as the platform of choice for clients.

In the graph down in the slide, we are showing that executed orders has been increasing this year compared to 2023, and is back at the pandemic levels despite the poor market environment for brokerage overall in this year.

Let's now move on Slide 11 for a focus on our capital ratio. Fineco confirmed once again a capital position well above requirement on the wave of a safe balance sheet. Common equity Tier 1 ratio at 27.29%, leverage ratio at 5.35% and total capital ratio at 37.96% as of September 2024. Our risk-weighted assets are equal to EUR 4.69 billion. As for the liquidity ratio, liquidity coverage ratio is at 897%, and net stable funding ratio is at 369%. While the ratio, high-quality liquid assets on deposits is at 75%, well above the average of the industry. Going forward, we confirm that we will continue to generate capital structurally and organically, thanks to our capital-light business model.

On the excess capital distribution, we are going to take more time as the probability of a higher growth of the base of deposit is clearly increasing, considering the strong acceleration of commercial dynamics. Over the recent months, we are starting to see the results of the accumulated growth of the new clients over the past 2 years, and we expect a further acceleration of our net sales going forward. We will come back later on our growth opportunities. But before, let's move to Slide 18 for a focus on our guidance.

Let's now focus on our 2024 guidance, with the outlook that has improved even more and we are expecting another record year for our net profit. Revenues are expected to a record level in 2024 with an improvement of the mix in favor of commissions, thanks to investing revenues for which we expect a low double-digit growth in 2024 versus 2023 with a neutral market effect assumption going forward. For 2025, we expect investing revenues to grow low double digits year-on-year, again, with a neutral market effect assumption. Banking fees are expected stable in full year 2024 and with a slight decline in full year 2025 due to the new regulation on instant payments. Brokerage revenues are expected to remain strong with a continuously growing floor, thanks to the enlargement of our active investors.

Operating costs in 2024 are expected to grow at around 6% year-on-year, not including additional costs mainly for Fineco Asset Management and marketing expenses. For 2025, operating costs are expected to grow at around 6% year-on-year, not including additional cost for growth initiatives. Cost/income, we expect it comfortably below 30% in 2024 and 2025, thanks to the scalability of our platform and to the strong operating gearing we have. On capital ratio, we expect growing CET1 ratio and leverage ratio in 2024, currently with the combination of both a strong acceleration in the growth of the bank and the distribution of [indiscernible] dividend. Our leverage ratio, our goal is to remain above 4.5%. We expect higher dividend per share for the full year 2024. On excess capital distribution, we are going to take more time as the probability of higher-than-expected base of deposits is clearly increasing. Cost of risk was equal to 7 basis points, thanks to the quality of our lending portfolio, and we expect to hit in a range between 5 and 10 basis points in 2024.

Finally, we expect robust and high-quality net sales with increasing assets under management and deposits flows. And the continued strong growth expected for our client acquisition as we are in the sweet spot to keep on adding new market share.

Let's now move to Slide 19 for a deep dive on our growth opportunities. As you know, Fineco enjoys a unique market positioning to capture the long-term growth opportunity resulting by the huge Italian household wealth and fast-changing client behaviors. In the graph down in the slide, we have represented the stock of financial wealth of the Italian families. As you can see, our market share is still pretty small, and the room for growing is huge. We are particularly positive on our outlook going forward, and we see structural tailwinds in our direction. As previously discussed, the most recent market trends are leading to a sweet change in clients' investment behaviors. And Fineco is the only big player with a service model truly based on transparency, efficiency and fair pricing.

Moving now to Slide 20, the acceleration of structural trends over the last couple of years is translating into stronger metrics on our side, creating the routes for our current and future growth. On the top of the slide, you can see the impressive acceleration of new clients, where we are on track to set the second record year in a row, and we recorded our best results ever in October. The box down on the left, you can see that it's not just about the quantity, but we are also seeing a strong increase in the underlying quality of our new clients. For example, private banking clients are up more than 40% year-on-year, and we are catching the fast-growing long-term trends of the generational handover.

And thanks to our very successful brokerage-only current account, we are now targeting a very promising new cluster of clients from which we got the relevant contribution in terms of first trades equal to around 35%. The accumulated growth of high-quality new clients over the last 2 years is now starting on translating into better net sales dynamics, as shown in our most recent monthly updates, allowing us to be particularly positive on our growth trajectory going forward.

Finally, let me remind you that we see a sizable mix shift opportunity coming from the stock of govies our clients booked over the last couple of years, given that a large percentage of this has a short-term maturity, this will give our financial planners and unprecedented opportunity to improve client mix into assets under management. Thank you for your time. We can now open the call to questions.

[Operator]

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

[Azzurra Guelfi, analyst]

Two questions from me. One is on the last point that you touched upon your significant customer growth that you have experienced recently. And I just wanted to know if you can give us a little bit more color on the dynamics of these new customers into the platform, how do they interact with it, how many have become active, how quickly they become? And if you expect any -- like if you can give us some color on the new clients coming into the platform in terms of operation and when they become if you want profitable for the group because this could significantly drive profitability going forward.

The second point is on your guidance because the group is growing the customer assets. It's improving the generation of inflows but your outlook, if you want to remain more -- a bit more on the conservative side. So can you help me to square the 2? Is it due because of the NII that you are a bit more careful for the evolution in 2025. And if so, when I look at Slide 31, it seems that your actual bond portfolio is increasing. The average yield on the fixed income securities is actually higher and you have put more action on 2025. So if you can give us some color on that moving part that would be great.

[Alessandro Foti, executive]

Thank you. Let me start by the first question. So first of all, just because -- and we think that this is very important, the client acquisition is incredibly efficient because now considering the absolutely great consistency of the banking, delivering -- keeping on delivering a great experience to clients. The word of mouth is working incredibly well together with an extremely efficient marketing campaign. The results that we have an acquisition cost per client that is now structurally below EUR 100 per client. This means that the -- also the least theoretical interesting clients are rapidly profitable for us, so just as an evidence.

So a client with -- our clients, they have median deposits of EUR 4,500 and also the just clients using the transactional banking platform and EUR 4,500 on annual basis considering terminal rate on rates at 2% means a generation of EUR 90 commissions per client. That means that also these very small and really not particularly rich clients are rapidly profitable for the bank with a little bit more than [indiscernible] this is the payback of the clients. At the same time, we are -- as we described in the numbers, we are growing very, very nicely in the upper end of the market because on the private banking clients, we are up 40% year-on-year.

And these clients, as you can imagine, they're -- the payback period is incredibly fast because usually, within 3/6 months, these clients are immediately profitable. And then we have also the clients that are -- this strong client acquisition is helping in increasing the interaction of new clients with the broker's platform. So the reason of the very robust results of the brokerage are also driven by the very strong acquisition because as we are continuously explaining, there is a very clear overlapping between the clients that are now contributing to brokerage are active investors, not French traders. And so this more or less is the picture.

So just in few words, the more clients we get on board and higher is building up the expected profitability of the bank. And clearly, all these clients, small clients, private banking clients and brokerage clients, all of them, they are using quite actively the transactional banking platform. And this, by definition, is driving the extremely precious transactional liquidity. And this is the reason why we are starting on giving the message that probably the evolution of our base of deposits is going to be significantly higher than embedded in the latest estimate.

On the guidance outlook is the -- it's not -- we don't -- only speaking, I will not describe this as a conservative because on the investing side, we think that a guidance that is driving direction of a double-digit growth without considering market effect and so on. It's -- we think that is extremely solid. On the -- regarding the net interest income, it's clear that the decline of interest rates are going to cause a reduction of the financial income generated by the existing stock of deposits. By the same time, as we said, we are progressively improving what we expect in terms of base of deposits. And this base is going to be quite positive for the evolution of net interest income.

It's impossible to give exactly a precise guidance because we don't know the sizing of the decline of rates and the timing. And this clearly is very important. But we think that our guidance is extremely robust regarding this point. Yes, the bond portfolio is increasing because this is moving accordingly with the evolution of the base of deposits. And you are absolutely right that considering that investment policy is going to be keep on investing on fixed rate with an average maturity of 3 years, we expect a progressive rise of the yield of the portfolio.

[Operator]

The next question is from Domenico Santoro of HSBC.

[Domenico Santoro, analyst]

Thanks for the presentation. I do have a number of questions. First of all, on the statements about the distribution of the excess capital, what does it mean in terms of P&L implication for 2025? First of all, you say that you will take a decision later, what does it mean later? Does it mean that in February, when the results are out, you might be able already to give us more details about this or you might expect a bit more to give us some decision during 2025. Then you have an ample leverage ratio. So there is a lot of room so you can do either. You can basically grow in terms of deposits and pay and also implement a share buyback.

But I'm more curious about the deposit growth that you have in mind because for 2025, given that everything is going into the right direction because that's extremely important, of course, to model the NII for 2025. I know that you don't move rates, but of course, you might have a little bit more visibility on the inflows given the acquisition rate of clients important for 2025 because consensus does have a cliff edge in terms of revenues. So I wonder if being more positive on deposit growth, you might probably be more positive on revenues for 2025, even tell us maybe the numbers in absolute number for 2024, it can be repeated in terms of revenues, why consensus does have quite a significant cliff edge?

The other question is on the investing -- excuse me, the guidance on the investing fees. You say low double digits without market effect. This is exactly the running rate at this point. So I wonder what will be significantly the running rate of it now, including a market performance. So the question is what will be better in 2025? Is it [ sales ] or also margin? And then a follow-up to the question of the colleague that was rightly pointed out that your banking book is increasing and also the yield on the fixed part of the book. Is there any room -- additional room to do even better in terms of increasing the fixed part and protect a little bit the NII. Sorry for the long questions, but I think they are important.

[Alessandro Foti, executive]

Let me start by the first question, excess capital distribution. First of all, with the fact that we are taking more time doesn't mean that we are not going to -- in the future, go in that direction because the bank is characterized by extremely efficient capital as business model, fast growing. And so we think that we can roll out, we can do both keeping on growing quite big in the future base of deposits at the same time going through a share buyback process. But considering that we -- the reason why we are taking more time because we want to understand exactly the dimension because the signals that they are emerging are incredibly positive.

And this, as we explained, is the result of the quite significant growth in the base of clients that again, this significant growth is driven by structural trends because the client behaviors are changing, and Fineco is absolutely by far the best position of players for capturing that. And by definition, every single new client we are taking on board, this is translating in more expected deposits going forward. And considering that when you are submitting your filing with ACB for launching a share buyback program, you have to give to them a plan. So a plan means that we have to give to them the picture, so not just 2025. And considering what's going on, the position of the bank, commercial results and so on, clearly, at the moment, the evidence is for quite a significant going forward increase of deposit base in the next few years, and this has to be taken into account.

And so it's before deciding, for example, the sizing of the possible share buyback to submit to the ACB, we had to have a little bit more evidence and so. But the direction is pretty clear evident, is -- the point is how strong it's going to be -- clearly, we are -- in any case, if you want to have an idea of the -- of what we're talking about, there is in our presentation, a very interesting -- in the annexure, there is a very interesting table, a chart that is showing the evolution of our leverage ratio currently with what went on in terms of distribution of capital and the evolution of deposits.

If you go to that chart, you can get some very interesting numbers that are going to help you a lot in modeling the future evolution of what you can expect. And regarding, yes, by definition, being more positive on deposits, but this is going to be translated in more revenues because on an annual basis, if you are just considering a terminal rate of 2%, every EUR 1 billion more is more or less EUR 20 million of more revenues. And -- but clearly, it's -- and so this is clear.

And regarding the revenues in 2025, probably the market is a little bit just focusing on the impact generated by the decline of rates on the base of deposits in the stock of deposits and is completely ignoring the trajectory of growth of the bank that, by definition, is implied in a much better picture for the evolution of the base of the positive sales. So this is the only comment.

Investing what is going to be why -- what is going to be better, for sure, the volumes because with lower rates, the definition, we are going to be back to volumes that are more aligned with the usual path of the bank. And -- but also the margins are expected to improve for a very simple reason because with a lower rate, the FinecoBank will be driven more in direction of more interesting products. So lower interest for short-term fixed income solution and more interest for longer duration, credit risk, equity component. And also we're working for improving and making efficiency in our insurance business that is characterized by extremely low margins.

And on the banking book, we don't -- we are not planning to put in place any hedging strategy. So we are going to just keep on investing the liquidity that we're going to have on the table on maturity of 3 years because we remain on track for lowering down even more the duration of the portfolio. The reason why we are not putting in place the hedging strategies on the portfolio because putting in place hedging strategies means taking risk because we have to make bet on the market. And we don't think that this is going to generate a significant value for our shareholders if we are generating revenues just taking bets on the market.

[Domenico Santoro, analyst]

Can you tell us just another detail about the P&L, I think, it's important for next year. In terms of regulatory charges and other provision, how much overall you expect this line to be placed, from [ 2025 ]?

[Alessandro Foti, executive]

The charges are going to be -- Lorena, I want you to make a few comments on this.

[Lorena Pelliciari, executive]

Yes. So we don't expect any significant amount for this, but from -- potentially, we consider around EUR 10 million of probable provision -- possible provision.

[Domenico Santoro, analyst]

And overall, considering also the other line of charging provision, how much overall can be this?

No worries, if it is too complicated, I will follow up later.

[Operator]

The next question is from Enrico Bolzoni of JPMorgan.

[Enrico Bolzoni, analyst]

So the first one, I just wanted to go back on your statement that you expect faster growth and hence, you are delaying the decision on distribution. Can you just give us some extra color in terms of what has changed relative to the 3 months ago, the interim results? Or is it just the uptick in customer acquisition you've seen because I'm trying to marry that with the fact that in October, actually, there was no deposit growth. So to some extent, maybe I would have expected some sort of maybe inconsistency message. So just curious to know if you have any insight, and you can tell us what really has changed for you to change your mind on the time line of that. That's my first question.

My second question is on the investment margin. I just came down a bit quarter-on-quarter, although you had very strong flows in some products and continuous outflows in insurance, which is margin dilutive. So thanks for the color you just said that you expect some improvement from next year. But can you just remind us what sort of differential in margins there is between different type of products? Because still, I would expect that outlooks from insurance, good flows into FUM should at least prevent margin from coming down, which seems instead is what has happened over the quarter. And then finally, just a general question on your new initiatives such as the trade is only account where you're growing nicely, your 15,000 customers. Have you done some internal work to assess the addressable market there in terms of revenue pool that you might capture. Can you -- in a way, can you comfortably maybe give us some guidance or targets in terms of what sort of customer growth you expect from this cohort of customers, what sort of revenues you expect over the next 12 months, that would be helpful.

[Alessandro Foti, executive]

Yes. So on the -- let me give you a little bit more color on your question because your point is that we are changing -- we are becoming more vocal in driving the market in direction of a higher base of deposits. But at the same time, in October, there is a flat -- and the month of October has been absolutely extraordinary month for the deposit base for a very simple reason because there is -- on the deposits, there is -- can be a huge impact caused by the brokerage platform as we are continuously trying to repeat our broker, Fineco, by far, is the largest brokerage platform in Italy, we are controlling more than 50% of the retail brokerage market. And the clients are typically acting as a contrarian. So when the market is going down, they are buying and the same story when the yields are going up, so that means that the bonds are going down, they're buying.

And for example, last year, in October, that has been a month that has been relatively similar to what we experienced in this month. I'd like to remind that we had an outflows decline of deposits by EUR 900 million. This time, in the month of October, we had a quite relative terms, significant jump in yields. And so this has offered a gigantic opportunity for clients interested in trading on bonds, which they booked in a big way.

And the same story on equities because in the second half of the month, there has been some very interesting correction. So the clients have booked big. And the fact that the deposit has remained absolutely stable despite this incredibly strong activity by clients in buying the dips. This is the result of massively higher inflows of fresh new liquidity experienced by the banks. And clearly, this is reflected by absolutely amazing jump in the net sales because nearly EUR 1 billion in the month of October is really absolutely huge number.

And so what we are observing in order to -- there's the reason why we are now becoming more vocal because now it's becoming evident that the continuous piling up of new clients clearly is progressively driving an increase of the base of deposit. So usually, the client before being decently active with the bank, it takes between 3 and 6 months. And so now there is a kind of a compounding that -- the bank is now nearly 2 years that is growing the base of clients in a very robust way structurally. And considering that the underlying structural trends behind are building up in a very robust way and referring to interest for convenience, fairness, transparency, the huge interest, for example, ETFs, govies and everything put together really is -- and so this is the reason why it's clear now, there is the evidence is pretty clear that the evolution of the deposits is going to be definitely stronger than we were modeling before.

The investing margins are -- when we are talking about investing margins, we have to remind that we are in the world, which the margins are structurally under pressure for -- I think that everybody that is involved in the asset under management industry and the fact that Fineco is emerging as probably the most resilient player in maintaining the -- practically the margins stable. And this is the result of the huge contribution offered by Fineco Asset Management, the substitution of the fact that the insurance -- where the outflow is in the insurance products that are still, for the time being, characterized by extremely low margins. And so we put together the negative debt, but this is not a problem of Fineco, it's a problem of the industry. There is a structural continuous pressure on margins that, in any case for us, is less important considering that our margins are usually fairer than the industry.

And on the other hand, there is the continuous -- the great effectiveness of Fineco Asset Management delivering great services and capture and helping us being more efficient on the value chain. And second, the outflows are mostly represented by the insurance wrapper that are still categorized by low margins. And so this is the picture of that.

On an internal work on addressable market for brokerage-only current account, we think that it's -- this is a kind of -- is a moving addressable market because it's continuously growing. But for the very simple reason, there is -- when we are explaining that there is a continuous overlapping between investing in the brokerage world, means that the pie is becoming much bigger because there is a continuously growing number of people that they are interested in the brokerage activity. And the brokerage on current account is incredibly helpful because it's extremely simple, straightforward, can be of interest also for clients that are not interested in taking all the other services is more convenient also for the clients and also -- and so this, as we presented in the numbers, 35% of the first trades made by new clients is represented by the brokerage-only current account. So practically, Fineco now is expanding in a brand-new cluster of clients.

[Enrico Bolzoni, analyst]

Can I just confirm you said that 35% of the first trade made by new clients is from trading only. In other terms, 35% of the new clients' trade are trade-only.

[Alessandro Foti, executive]

Yes.

[Operator]

The next question is from Giovanni Razzoli of Deutsche Bank.

[Giovanni Razzoli, analyst]

Three questions on my side. The first one is on Slide 20. Can you share with us how many govies have you switched into asset management products year-to-date? And you are highlighting here that there are EUR 20 billion of them in your clients' portfolio with a short duration -- with a short maturity. So can we assume that most of them will come due, I don't know, in 2, 3 years' time? Just to have an idea of what could be the potential switch of those asset class into a richer one for you?

The second question is on the deposits. The interest rates environment is structurally different and the outlook when compared with the 2023. Can we assume that the cash sorting effect, which has penalized in 2023 is now over. So in other words, can we assume that with the current level of rates, apart from some monthly volatility, you have resumed to turn what were last year outflows into structural deposit inflows for the next, I would say, 12 months.

And the final clarification on the postponement of the decision on excess capital, if I'm not mistaken, in the previous conference call, you were mentioning that, I mean, year-end 2024, you have taken a decision or you have well explained why you have postponed the decision, so shall we assume that the term is now 2025 rather than 2024 year-end?

[Alessandro Foti, executive]

Yes. On the Slide 20, it's very difficult to give you such precise numbers because in the meanwhile, the bank is keeping on growing. So the clients are transferring other govies. So there is -- and in any case, regarding the transformation of govies in assets under management, the process is just at the beginning because the decline in rates is just a few months that is underway.

But it's pretty clear that what has been perceived in the past as a point of weakness for us. So the efficiency of the platform, giving the flexibility to our clients to buy quite a significant amount of govies now going forward is going to be reversed as a clearly gigantic opportunity because if the market is right in what is expected in terms of the direction of rates, clearly. But I prefer to be very honest, to give you a precise run rate, it's extremely difficult. But we don't need to be -- it's not difficult to forecast that this amount booked by clients of govies is going to represent an absolutely huge opportunity for our financial planners.

Yes, the cash sorting clearly is completely over because now we are talking about exactly the opposite. So -- and the decision of delaying the final decision of the distribution of excess capital is strictly related to that, we expect definitely much stronger growth on the base of deposits going forward in respect to the past. So yes, clearly, there is -- and on the decision of distribution of excess capital, yes, this is a matter for 2025, not for today because at that time, we're going to have a clear picture regarding the strength and the dimension of the increase of the base of deposits.

[Operator]

The next question is from Gian Luca Ferrari of Mediobanca.

[Gian Ferrari, analyst]

Sorry to come back to Giovanni's question. About the EUR 20.5 billion govies, how many will expire in 2025? And how many of them you expect to convert into asset management? So just to understand if your decision to postpone on the excess capital distribution is also due to the fact that you expect many maturities on BTPs to be sitting on deposits. Linked to that, if you can give us an update on the unrealized capital gains or losses on this EUR 20 billion. And finally, you mentioned an increasing interest for long-term fixed income products, credit risk and some equities as well. Can you share with us new product launch you are having this quarter? And what kind of product strategy you are pursuing on -- in the context of the current forward rates?

[Alessandro Foti, executive]

So regarding what is important to consider that what is important is not just what is exactly expiring, but also everything that is close to expiring and also the bonds that they are [indiscernible] if your expectations for additional potential capital gain are over, there is no efficiency in maintaining the bonds in the portfolio. So what is going to expire precisely during 2025 is in the region of EUR 4 billion. But clearly, considering that more or less nearly 70% of the govies bought by clients and short-term maturities means that there are much more than they are characterized by the remaining time horizon that is pretty short.

And usually, this typically is a playground for the financial planners. Yes, when you have -- the more you have rates going down and the more you can expect some kind of delay by clients in reinvesting the expiring bonds. So there is a certain percentage of these that are going to remain in any case on the deposit. So -- but this is because the sense of urgency by clients for reinvesting immediately what is expiring is clearly declining or disappearing at all because if you have rates going down at a certain level, by definition, the opportunity cost for the clients start to be perceived as so small that the clients are leaving the liquidity there. And I don't have the precise numbers on the gain and losses on the EUR 20 billion govies, but we can return later on, on the point.

On the new product launch, there is -- yes, we have products that are focused on credit risk. There are products they are combining, that there are strategies that are combining together fixed income with equity. We have the evergreen on the accumulation product that is combined together with the passive solutions provided by FUM, is growing quite constantly the interest of our clients for the passive funds manufactured by FUM. Yes, so these are more or less the developing stories on the product side.

[Operator]

The next question is from Marco Nicolai of Jefferies.

[Marco Nicolai, analyst]

So given the very positive message on client acquisition, I was wondering what are the implications for the brokerage. So in brokerage revenues, clearly at peak in 2020, 2021 post COVID. But obviously, you had much less clients doing a lot of trades. So now going forward, maybe not in 2025, but do you expect in 2, 3 years down the line given the higher number of clients to be reaching those peaks or I think even in 2026 to be already almost there where you were essentially in 2020 in terms of brokerage revenues. So do you think, let's say, 2, 3 years, you could again, overtake those peaks just thanks to the higher number of customers doing a lower number of trades?

And then sorry, I've got another one, still linked to client acquisition and deposits. I understand sometimes it's hard for you to guide on the deposit flows also because you have these topics around the traders that makes deposit volatile. But if you only think about your new customers, given the higher number of customer acquisition you've got and given the average customer -- deposit per new customer, are you able to tell us what you expect in terms of deposit inflows from the new customers going forward?

And then sorry, last question. If you have an update on the insurance front in terms of product offering, are you planning to revamp somehow your -- the products you offer on the insurance, maybe striking a new JV with an insurance company or maybe building on internal capabilities? What's your plan on the insurance products?

[Alessandro Foti, executive]

Yes. On the first question regarding the implication for client acquisition of brokerage, yes, your point is fair. So it's clear that the more is -- so one of the main rationale behind the growing floor of the business, it's clear that the pie is becoming bigger and bigger because there is a continuous growing interest by prospect clients in dealing directly with the market. And Fineco is playing and is capturing the lion's share of what's going on. And these clients, as we said, are characterized by being more, let me say, less volatile because they're active investors, are clients that tends to trade continuously, not too many trades in a month, but continuously.

And clearly, also, we are, by definition, the more we keep on broadening the base of clients and more at a certain point and the [ flow ] is going to keep on growing. And if this is coming together with, let me say, a little bit more interesting conditions in the market because what's going on in brokerage is happening within an environment that is not exactly the perfect environment for brokers because volumes are, yes, they have been a little bit higher than the historical lows, but they are not such as high. And the volatility is not so consistent. So overall, the business is growing quite nicely in absolutely an environment that, let me say, is not the either one.

So being consistent in hedging clients, it's clear that at a certain point, we are going to reach -- we are going to start on closing the gap with the peak that has been reached in the past years, this is kind of a mathematical trajectory, so more clients. And this is the reason why we remain extremely positive on brokerage considering that Fineco remains without a significant natural competitor in the market. We have just only vertical competitors, but not a real big one. On client acquisition and deposits, so as we were saying, all the clients we are taking on board ranging from the very small clients just interested in transactional banking and private banking clients interested on investing brokerage clients and so on.

The most part of them, they are also quite actively interacting with the transactional banking platform because Fineco is keeping on delivering an absolutely unique experience to clients. And so every single client we are taking on board is bringing together an expected additional transactional liquidity. And this is the reason why now we are becoming more confident on the fact that the evolution of the deposit base is going to be definitely stronger than we were expecting. So we were positive also in the past, but now is what we are observing that there is -- so the combination of great services, building up tailwinds and a great and a very efficient marketing campaign are producing absolutely great results. But clearly, we win.

And again, as I suggested to Domenico is if you want to have an idea of -- because what is guiding us on the -- regarding the capital distribution and so on, as you can imagine, the leverage ratio. If you go throughout the annexure, there is the table that is continuously updated that is a table that is putting together the evolution of deposits with the capital retention. So that is practically the dividend payout and you can find some interesting number crossing the numbers you can have an idea.

And regarding, yes, on the insurance business, we are working on that because the plan is to come out with a solution that is going to put the insurance business in the right place. So right place with decent margins because at the moment the margins we have are not the right ones.

[Operator]

The next question is from Elena Perini of Intesa Sanpaolo.

[Elena Perini, analyst]

Actually, I've only 2 residual questions. The first one is on your cost guidance because you had a growth -- a double-digit growth in the first 9 months of the year versus your guidance of plus 6%, which, however, does not consider marketing expenses and FUM. So I believe that those ones were the ones that impacted the third quarter. So I was wondering whether in the fourth quarter, you are coming back compared with the fourth quarter of 2023 coming back to a plus 6% or something like that?

And then, well, actually, in the first 9 months of the year, your tax rate was 30.3%, which was, if I remember correctly, below your guidance. So I was wondering if you can give us some indications on tax rate level potentially for the full year and for next year?

[Alessandro Foti, executive]

Yes. On -- when we are giving the guidance, we are clearly giving the guidance on the operational running cost in order to keep the market the flavor of the operational leverage of the bank. And then there is what is invested for the growth. Clearly, this year, the cost on top of the 6% guidance have been represented by mostly marketing because as we were saying, the situation is incredibly favorable. The acquisition cost per client is incredibly low, thanks to the great experience we are giving to clients, the word of mouth combined together with market is working incredibly well. And so when you have an acquisition cost per client, that is below EUR 100 clearly, not trying to do as much as you can, we think would be an absolutely mistake because when there is an opportunity, you have to get the opportunity. And so our position on this point as much as the opportunity is going to be to stay there, we're going to keep on taking opportunities. So there's no -- this is a growth story, and there is no reason for not doing that.

And the same story for Fineco Asset Management. Fineco Asset Management is emerging as incredibly efficient in delivering with a great time to market, exactly the perfect products for the clients and the numbers are clearly very -- because Fineco Asset Management is not used by our financial planners because they are forced to do that is because Fineco Asset Management is able to bring to the client solutions that are not available in the market. And so we think that is another good reason for keeping on investing in Fineco Asset Management because the contribution, the payoff is absolutely great. On the tax rate, I'm leaving the floor to the CFO for giving more details.

[Lorena Pelliciari, executive]

Thank you, Alessandro. So for 2024, we expect the tax rate around 31%, considering both the introduction of the global minimum tax that led the tax rate of Fineco Asset Management at 15% from 12.5% and considering also the appropriation of the fiscal benefit from the so-called [indiscernible] allowance for corporate equity, we expect the same tax rate also for 2025 around 31%.

[Operator]

Next question is from Alberto Villa of Intermonte.

[Alberto Villa, analyst]

Just a couple from my side. I wanted to go back to the investment margins, which are stable or declining. This -- if we compare when you launched the Fineco Asset Management, you were [ landing ] quite mechanical, if you want, improvement in margins, thanks to the switch of the assets into Fineco Asset Management, you are doing well in terms of increasing the assets invested through Fineco Asset Management. So I was wondering, is this delay in the improvement in margins mostly due to the mix? Is that something that you expect already in 2025 to go back to where you planned originally in terms of margin expansion? Just some clarification on that just to model how we should expect the margins to evolve in the future?

The second question is on the general environment. In terms of recruitment, we have seen some players are pretty, let's say, aggressive or active in terms of recruitment. I was wondering if you are seeing the same and if that is a concern for you?

[Alessandro Foti, executive]

On the investment margins, clearly, we actually -- yes, by definition, we are -- there is -- we entered in the last couple of years in a landscape that has been characterized by completely different conditions. And so clearly, now the interest of clients has moved quite in a big way in direction of fixed income solutions throughout this year and part of last year, also fixed income solutions on the short term. And so this clearly has an impact on the markets. We -- going forward, we expect a combination of growing volumes, improvement in the mix and so clearly in the margins, yes, because the situation now is moving there. And this is the reason why we are guiding the market on the investment -- on the revenues generated by investing for growth of low double digits without considering the market effect that we think it's quite a significant improvement.

On the environment for recruiting, yes, we confirm that there are some players quite aggressive on the market. And so quite aggressive means that they are clearly quite -- they are what we think overpaying financial planners for convincing them joining. We are not concerned because this is not a brand-new story. And we have been always convinced that this is not a sustainable strategy. This was true in the past and is even more true now considering that the behaviors of clients is dramatically changing. And so the possibility to keep on overcharging clients is clearly diminishing in a big way. But in this case, we are now -- we are very happy to say that finally, we moved through the mark of the 3,000 financial planners. So we are keeping on growing quite nicely, remaining absolutely stacked consistent with our strategy. So keep taking on board new financial planners, but paying what is the fair price, making the business -- leaving the business sustainable.

[Operator]

The next question is from Enrico Bolzoni of JPMorgan.

[Enrico Bolzoni, analyst]

Sorry, just one follow-up on NII and deposit flows. Can you give us what sort of deposit flows would you expect for next year? Consensus, I think, still has less than EUR 1 billion, does it seem soft to you? And then related to that, again, if you look at consensus figures for NII next year versus '24, does this seem adequate? Does it seem too low, too high? Just any color there would help.

[Alessandro Foti, executive]

On the -- if the consensus is less than EUR 1 billion, clearly, we think that it's too low. Yes, yes. But we are not going to give you the precise number, but clearly, the consensus is clearly too low. And by definition, the more -- the higher is the base deposits, and clearly, the more this is going to drive up the NII evolution.

[Operator]

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

[Alessandro Foti, executive]

Thank you to all of you for attending our conference call. And as usual, we are available for any follow-up. Thank you again.

[Operator]

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