Mediobanca Banca di Credito Finanziario SpA

MIL:MB

Earnings Call Analysis

Mediobanca Sees Strong Growth Amid Strategic Investments

In the first quarter, Mediobanca reported a 16% increase in total funds administered, reaching EUR 103 billion. New loan originations in Consumer Finance rose by 12% to EUR 2.1 billion. While the bank maintained a cost/income ratio of 43%, it expects an EPS growth of 6-8% for the year, driven by efficient cost management. The bank anticipates flat net interest income for 2025 but anticipates substantial double-digit growth in fees. Additionally, they have initiated a EUR 385 million share buyback to enhance shareholder returns amid a strategy focused on strengthening digital and physical platforms.

Strong Investment for Future Growth

In the latest earnings call, Mediobanca CEO Alberto Nagel emphasized significant investments in both physical and digital platforms aimed at driving growth across Wealth Management, CIB (Corporate and Investment Banking), and Consumer Finance. This strategy has been coupled with robust commercial activities, leading to a record EUR 2.6 billion in net new money—representing a growth rate of 10% of Total Financial Assets (TFA). New loan origination in Consumer Finance reached EUR 2.1 billion, an increase of 12%, while the pipeline in CIB expanded to 27 announced deals, marking a 36% year-on-year increase.

Revenue and Profitability Trends

Mediobanca demonstrated solid profitability across its divisions: Wealth Management saw a net profit increase of 6%, CIB achieved a 20% rise in profitability, and Consumer Finance posted a 5% increase. The overall fees surged by 30% year-over-year, with Wealth Management and CIB being the primary drivers of this growth. Although the net interest income (NII) witnessed some fluctuations, the strategy to prioritize high-quality assets and deposit growth is expected to enhance long-term profitability.

Guidance: Flat NII and Solid EPS Growth Expected

Moving forward, Mediobanca provided cautious guidance concerning its NII, projecting it to remain flat in 2025, with stability expected in 2026. However, they reaffirmed an expected growth of EPS between 6% to 8% for the year, underscoring the company's focus on managing costs effectively and achieving a cost-income ratio around 44%. The proactive approach towards investments while containing costs should help Mediobanca achieve its longer-term targets.

Asset Quality and Risk Management

Mediobanca's asset quality appears stable, with a cost of risk (CoR) maintained at 51 basis points, well within their guidance of 55 basis points. This level of risk management is attributed to the company's careful strategy in increasing personal loans, which, while slightly increasing the CoR, are also generating higher profitability.

Capital Generation and Shareholder Returns

The bank reported a capital generation increase of 70 basis points over the quarter, with a Common Equity Tier 1 (CET1) ratio of approximately 15.4%. Mediobanca has initiated a share buyback program worth EUR 385 million, in alignment with an overall distribution plan consisting of cash payouts and potential additional buybacks, reinforcing their commitment to returning value to shareholders.

Market Position and Strategic Initiatives

Mediobanca's TFA grew to EUR 103 billion, marking a 16% annual increase. The bank is well-positioned among its competitors in Italy, further enhanced by initiatives such as a partnership with ADIA aimed at increasing assets under management (AUM) significantly. The evolution of their CIB division includes shifting focus towards advisory-driven services, which together with ongoing recruitment in the Wealth Management segment, are expected to support future growth.

Future of Consumer Finance

In Consumer Finance, Mediobanca continues to record strong results driven by strategic investments in personal loans, with Compass registering EUR 2.1 billion in new loans in the recent quarter, reflecting a significant year-on-year increase. The division is also expanding its digital distribution, reinforcing its commitment to innovative financial solutions like the 'buy now, pay later' scheme.

Outlook and Market Conditions

Overall, while the immediate environment presents challenges, particularly with NII amidst low interest rates and tight margins, Mediobanca's strategic investments and well-managed risk profile position it favorably for the future. The management is optimistic about capturing more business through technological enhancements and increased market share, particularly in Wealth Management and Consumer Finance, which should enhance profitability long-term.

Earnings Call Transcript 2025-Q1

[Operator]

Good day, and thank you for standing by. Welcome to Mediobanca First Quarter 2024-2025 Results Conference Call. [Operator Instructions]

Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Mr. Alberto Nagel, CEO. Please go ahead.

[Alberto Nagel, executive]

Good morning. Thank you for joining the call.

Commenting the first quarter of this start of the year, I would like to highlight 2 main features. The first one has been accelerating investment in our physical and digital distribution platform. This is across the different business where we have accelerated recruiting, accelerated transformation in the digitalization of the group, both in Wealth Management, in CIB and in Consumer Finance. This important investment that are going to underpin the growth in revenue beyond the actual 3 years plan were coupled with very strong commercial flow, a record for summer quarters, where we have had EUR 2.6 billion of net new money, which is, again, doubled at the best industry level at 10% of TFA; EUR 2.1 billion of new loans in Consumer Finance, up 12%; and increased activity in CIB where we have announced 27 deals in the quarter, which is plus 36% year-on-year.

So basically, revenue and profitability of all banking business went up again after 1 year where we have record revenue and results for each of the business. So basically, we have had an increase of 6% in net profitability in Wealth Management, 20% in CIB and 5% in Consumer Finance.

The main feature was also the growth in fee, which is 30% up compared to a year ago, and these were driven by Wealth Management and CIB.

We have had a spike in consumer finance NII, and this was the positive trend in NII while the negative trend in NII, which is also was intended because we have taken an industrial view about the need to invest and have more TFA, was a temporary drag in NII in Wealth Management and in CIB because of all-time low credit spread. We didn't want to stack up with loans for 2 or 3 years with very, I would say, low profitability in corporate lending and wait for better margin trends in the second half of the year.

Efficiency was preserved with the cost/income at 43%. And as I said, this, notwithstanding, heavy investment in recruitment, in opening up new branches in Germany in mid-cap advisory, in digital channels empowerment in Consumer Finance. So this was, as I said, would be a year of important investment.

Asset quality confirmed and preserved very strong with 51 basis points within -- well within our guidance of 55 basis points of CoR.

And net profitability at EUR 330 million, which is slightly lower than last year because of some extra gains booked in Generali, and hence, this year with a more normalized insurance contribution.

Very strong capital generation with 70 basis points in the last 3 months and CET1, which is in the region of 15.4%.

We have just started today the share buyback for EUR 385 million, having been authorized by our AGM and SSM.

So if we look at the business, we have had an affirmation of the model of PIB where EUR 600 million of liquidity events were gathered in the last 3 months. Recruitment was very strong with 33 new sales staff and ongoing repositioning in terms of larger portfolio and higher-end customer base.

Deposit promotion at EUR 750 million was fueled by also the promo that we launched.

And very important, this mix is improving fast. We have had 50% of the inflow of TFA in AUM with a very important and steep increase in-house product.

Last, we did a very important agreement with ADIA in Polus, which is going to underpin the next growth of a special situation fund of Polus.

In CIB, we continued to work at, on one hand, make it more diversified, more international, more advisory-driven and you see here important results in terms of growing fees driven by advisory. 63% of fee in the quarter were advisory-driven, much higher than a year ago, and this is coupled with the steady decrease of RWA absorption. We went down in density to 37% and we have reduced by 18%, 20% the capital -- RWA intensity of CIB in just 1 year.

Consumer Finance, super solid print in terms of new business, EUR 2.1 billion of -- up 12%. And this is on the back of very important reinforcement in personal loan distribution, now 80% distributed by our direct network and 36% of the direct personal loans are now distributed digitally.

So Compass continued to print an important increase in contribution in NII, up 8%. Marginality was up and also net profit was up.

So going to Slide 8, we are working heavily as this was the main target of our plan to have a stronger industrial footprint, which is feeding high and sustainable growth. This is why we are investing so much in terms of recruitment and digital. This will create the opportunity with lower RWA intensity of important capital creation, and hence, higher distribution to our shareholders.

So we confirm our guidance of having in the region of EUR 9 billion to EUR 10 billion of net new money with strong enhancement in physical and digital platform.

We see RWA decreasing slightly with more selective profitable loan growth, offset by optimization.

We see basically moderate growth in banking business revenue with NII flat and with fees up double digit in Wealth Management and CIB.

Cost/income to stay at 44% on an annual basis.

And CoR to stay within the 55 basis points of guidance that we have, leveraging in part of the overlays -- abundant overlay rotation that we have.

Growth in EPS between 6% and 8%.

Material capital generation, so higher than what we said previously to the market, so in the region of 15.5% and 16%.

And with the growth in -- parallel growth in shareholder remuneration, cash payout plus any share buyback that will be considered at the end of the year.

If we go to Slide 10, we see the steep increase we are having in terms of TFA. Now imagine that a year ago, just a year ago, we were at EUR 90 billion. Now we are at EUR 103 billion, so plus 16% and plus 4% in a quarter. So this is plus EUR 4 billion.

If you look on the right side of the slide, we see how fast Mediobanca Group is growing and it's growing at a level that few groups in Italy are doing. Comparison stack up very well with 10% of TFA. We rank among the best, if not the best, gatherer in Italy notwithstanding our, I would say, young life in this sector, in this business and gives you the potential, the opportunity potential we have in front of us.

Loan book was basically flat. In 1 year, we grew 2%. This quarter, we went down opportunistically 1%. This is on the back of stronger, I would say, trajectory of Consumer Finance, a more moderate and selective origination in the rest of the business.

RWA optimization is ongoing. You see that we have had another decrease of 1% Q-on-Q and we are now at EUR 47.4 billion in terms of overall RWA as opposed to EUR 50.3 billion of a year ago.

So the kind of revenue we are generating are more diversified, more fee-driven and more international if we look at also what is happening in CIB. Every single business improved its revenue contribution, Wealth Management, CIB and Consumer. We have had insurance going down EUR 20 million because of nonrecurrent item of Generali. And we have had a lower contribution of Holding Function because of a decrease in interest rates.

Overall, fee went up 29%. So the component of fee within the revenue is more important than a year ago.

If we look at the fee, we look at basically quarter-to-quarter comparisons, so first quarter normally is more seasonal. So we have had an important increase in fee in Wealth Management from EUR 108 million to EUR 124 million. This was spread among different components, for sure, compared to 1-year management fee, but also advisory fee and upfront fee were important while performance fee in our network is a minimal component -- much less important component.

Important trend also in increase in fees in CIB where, compared to a year ago, we have had a jump even excluding Arma consolidation and we see this as a continuing trend of supporting elements from CIB.

Consumer Finance was even positive in fee because thanks to the buy now, pay later, we are substituting fees from insurance product from fee from buy, now pay later. Altogether, they were up 7% year-on-year.

As I said, we decided on NII to basically push on the profitable value-generated lending, which is the consumer one and to invest money to get more TFA in Wealth Management. So having more deposits, which naturally have a cost, and on the other hand, to pause in the new loan production in CIB because, as I said, low demand and very -- and all-time low marginality are not there to push for important growth and generate poor return.

So the breakdown of the different components, so we have something like EUR 7 million, EUR 8 million less than a year ago. So this is spread between the increase in volume and spread in Consumer Finance, Page 13, then lower contribution from Wealth Management and CIB. We have higher CoF that is EUR 10 million and other minor effect is giving us the trend divided in 2 pieces, as I said, Consumer Finance, pretty good and basically Wealth Management supporting TFA; on the other hand, CIB waiting for better production in terms of marginality.

If you see loan yield when -- are basically aligned to the last quarter in the region of 6%.

Funding cost is not that different.

Deposit cost went up. Here, we -- in the past, we have forecasted a lower deposit cost. But as I said, we took profit of very important money motion event and TFA increase to fund this kind of trajectory.

Costs, as I said, these are spread in growth business and regulatory. We are doing in the last 2 years much more on grow the business. You see consolidation of new entity like Arma Partners. This quarter is the first quarter of consolidation. At least last year, we didn't have the consolidation, so started second quarter. So this is the comparison with last year.

EUR 3 million to start Germany subsidiary in mid-corporate activity advisory.

The rest is addition of new colleagues to expand the business. And then, of course, there are also digital and regulatory item within this kind of trend.

Cost of risk remained well within our guidance, 15 basis points. We are seeing a trend that we have expected both in terms of increase, a slight increase, in Consumer Finance driven mainly by the mix. In the mix, we are producing much more personal loan. This personal loan have quite nicer and better profitability, but also they have an associated higher cost compared to other -- cost of risk compared to other products. Net-net, the profitability, as you have seen, is going up.

We have used a very low level overlay, so EUR 7 million, and hence, we reached this level of 51 basis points of CoR.

Gross NPL stays within where it was. We have a slightly less loan in this quarter. So you see this 2.5% -- 2.6% . Net NPL is 0.8%. The coverage is staying where it used to be so quite high.

It's very important the trajectory in terms of capital release that the bank is doing. On Page 18, you see that overall we have had a decrease of 6% of RWA trend, which is more notable is what is happening, as I told you, in CIB where from EUR 17.3 billion, we went down to EUR 14.2 billion. So steep decrease aligned to the new vision of CIB, which is consuming much less capital and is producing better results.

So divisional return on RWA is quite good. We have had only one decrease, which is generally driven by, on one hand, exceptional gain of last year, an increase in book value of the participation.

Robust capital generation, better than expected. So basically, we have generated 70 bps. So then we have had some RWA savings, in particular, in Consumer and then the 70% cash payout. So this is underpinning our capital distribution and is leaving still a large buffer over requirement of MDA.

We have progressed also in our sustainability activity in environment, in social, in governance with all NZBA target and transition plan published and product development.

We have also had a publication of 2024 PRB Report and CSR Initiative, where we have renewed our partnership with Cometa.

And lately, we have had our shareholder general meeting, which have approved a number of items which were on the agenda, even including, of course, the share buyback.

If we go to the divisional results and basically we say -- what I can add compared to the start of the presentation, I think the overall EUR 2.6 billion were pretty amazing in terms of net new money, divided in 3 pieces. Private Banking, EUR 0.9 billion, this is on the back of liquidity events.

EUR 0.6 billion, a very important initiative in Private Markets. We continued to have partnership with the most important operator to distribute liquid product. We are also reinforcing the liquid product with new management account format with advisory service. This will be available for clients in 2025.

In Premier, we have had a strong recruitment, 30 professional and repositioning, adding new private clients upper end, and on the other hand, cutting exposure to mass market, which is not anymore the mission of Mediobanca Premier is going fast.

You see that basically, we have increased in Mediobanca Premier, you see on Page 26, the quality of our network. We have up to 90 advisers compared to June '23, 60 bankers and 40 financial advisers. And this senior component of the distribution network now is 29% as opposed to 23% of more than a year ago. TFA, the same. So the TFA related to the senior adviser went up from 34% of June '23 up to 42% of last year. Mediobanca Premier has had very important and interesting net new money also in terms of managed assets, so with great productivity in terms of net new money per banker and also a level of market share in terms of net new money, which is pretty high. So 10% of total net new money was raised by Mediobanca Premier.

As I said, the important agreement with ADIA for Polus with a commitment, which is now giving the possibility for Polus to reach approximately $11 billion of AUM, $11 billion, including commitment of which $5 billion is special sits strategy. And this is a partnership which will lead to further growth even in new initiative of Polus and will give us the possibility to expand TFA further.

So overall, the progression of Wealth Management is going as expected, even after more important investment in hiring and also in digitalization. And I think this is important because if we continue to invest heavily, as I said, we will have the possibility to grow faster in the future.

CIB. Here, again, we are having the initiative of the new plan now ready to contribute -- already contributing to the numbers. We see a different profile, as I said, of CIB. It's more advisory-driven. It's more centered on, on one hand, sponsor-driven activity; on the other on 2 main verticals, one is tech, Arma contributing heavily and having a quite robust trend also for the future and energy transition, which is printing a number of transactions and will continue to do.

This is also coupled with stronger mid-cap franchise in Italy, even stronger and now also having the possibility to have cross-border activity and capturing interesting market share in Germany.

Markets activity now are almost, I would say, up and running all of them, I would say, BTP specialist, CO2 trading and certificate distribution in Switzerland. So basically, these are initiatives that are contributing to the revenue, which are up 30% year-on-year.

Profit is up 20% year-on-year, while RWA is down 18% year-on-year.

In, last but not least, Consumer Finance. Here, again, Compass surprised us in terms of ability to print very profitable loan, mainly done through their own -- its own network. So having a different and much better profitability, thanks to the ongoing investment. Again, if we keep on investing, if we keep on doing initiative in like buy now, pay later, buying fintech, investing in system and in IT, we will have a stronger, as we have Compass in the future, which will be more able to print directly loans with different profitability.

And hence, basically, you see that between what we have done in the traditional network and the new network and the new initiative of HeyLight, which is the new international buy now, pay later ecosystem for credit solution, we are getting the benefit of important new customer acquisition, as I said already in other call, is 40% of total Compass monthly new client.

We are enlarging distribution at variable cost. Today, we have 29,000 physical and online POS, which is 50,000 -- 15,000 more than June '23.

And basically, the partnership with Nexi and the access to the Swiss market are also other options of growth that we are exploiting.

So if you see the number, in terms of new loans, are quite interesting. Page 34 is the sense of making plus 12% in a quarter, which is normally seasonal. And in fact, we have had, last year, EUR 1.9 million (sic) [ EUR 1.9 billion ] of new loans. This year, we had EUR 2.1 billion.

And this was coupled with average loan book yield up 80 basis points and this gives you the sense of ability and strength of Compass to price the loan. So Compass was able to shift higher cost of funding to customers over the last, I would say, 18 months. And now we have reached 7.2% of loan book net profitability.

So as I said, asset quality confirmed as healthy as expected. We knew that going up in terms of personal loan would have meant also higher CoR. Net-net, as you see on Page 36, this is yielding a much better profitability because the, I would say, the new loan net of cost and cost of risk is giving a record quarter, first quarter record in terms of overall profitability of Compass with EUR 102 million of net profitability.

As I said, insurance contributed always solidly, albeit with a less important contribution because of normalized results due to lower nonoperative results, driven by less capital gain and FV valuation and some decrease in P&C operating income. Nonetheless, it's still quite a positive contribution.

Holding Function, nothing to add, but the fact that, of course, having lower interest rate environment, we did lower NII. We had lower NII and results.

And so basically reiterating the guidance that I've given at the start of the presentation, I think Mediobanca enjoy a quite interesting position in the new interest rate environment because having -- even having an NII flat for '25 and '26 , we enjoy quite a positive trend in fees, which we see having a double-digit increase in '25 and '26.

And this should lead, as we know, to the EPS guidance of up 6% to 8% this year and targeting the EPS target of the plan, so the business plan at '26 at EUR 1.8, which is also a good trend in terms of EPS compared to the system where we could see a decrease in EPS and/or in revenue driven by lower interest rates.

Thank you very much. And now it's time for your questions.

[Operator]

[Operator Instructions] And the first question comes from the line of Pamela Zuluaga from Morgan Stanley.

[Pamela Zuluaga, analyst]

I have a first question around your campaign for the Premier deposit gathering. When should we start seeing the payback of this? Can you give us some color on the benefit that you expect on NII and/or fees? And what reassurances can you give us this pressure on NII is indeed only a temporary effect?

And the second question is on capital. You are expecting capital to close around 200 to 250 basis points above your 13.5% target. And you have said before that you might explore further distributions above the EUR 1 billion buyback that's in the plan. I was wondering if we can have an idea of when we should expect you'll make a decision on this.

[Alberto Nagel, executive]

Thank you, Pamela. Campaign of Mediobanca Premier, campaign on Mediobanca Premier are campaign you can see also done by other -- many other competitors. I would say, most of the competitors that compete with Mediobanca Premier, they do it. We have seen that basically, we have a conversion of at least 50% of each campaign into managed assets or into, of course, sort of advisory-driven asset.

So this is a very powerful tool, and of course, having a cost is having cost of NII. So the cost of NII and the NII in Wealth Management is not going to improve much in the coming quarter because we want to go on with possible campaign, while the NII of the group is going to improve in the second half of the year, thanks to the basically more important contribution relative basis of Compass and some new print of loans in corporate. So the rest -- so as I said, 50% is converted into managed assets, 20% stays in liquidity.

The pressure on fees in Wealth Management, and in general, in Wealth Management, what we can say here is that we have to look at all the fee. For a bank like Mediobanca, which is also dealing with sophisticated clients, we have to see the overall spectrum of fees. As you know, upfront fee became very important and became very important for 2 reasons: because of the demand of the market, the client of Mediobanca and the fact that Mediobanca is manufacturing those kind of certificates. So we retain profitability in Wealth Management, and we retain profitability in also CIB.

When we look at management fee, we have to think that, basically, we have had -- we are having a journey to improve this management fee. This journey starts from a situation of asset allocation of Mediobanca Premier, which is more driven by its history. Its history is more of a bank, which we're selling at the start more deposits and basically insurance. So the penetration of equity, more rich product, was lower and it takes a bit of time to get back to certain other industry, I would say, benchmark, taking into consideration, Pamela, that we have had the BTP Valore campaign in the last 2 years.

So why if you look at all revenue and all fees we are going in the right direction. It takes a bit more time to bring the management ROA to the level we want because of basically histories, if you want, a starting point and trend of the BTP Valore in 2023, 2024. For the rest, fee, we see positive improvement in the year -- in the quarter to come compared to this quarter that has more seasonality.

In terms of capital, we want to take a decision at the last part of the plan because we are still growing in terms of not only organically, but every single year we normally do or consider a transaction in terms of M&A. So we will take a definitive decision on capital, extra capital, taking also into consideration SSM recommendation in the last year of the plan.

[Operator]

And the next question comes from the line of Antonio Reale from Bank of America.

[Antonio Reale, analyst]

It's Antonio from Bank of America. I have 3 questions, if I may. The first one is to do with the NII outlook for this year, which you've lowered guidance for. So can you just talk us through what are the drivers behind the change in NII guidance? You're normally quite good at budgeting and giving us a target. So I wonder to what extent -- what's driven the change? You've talked about higher cost of deposits. I suppose some of these campaigns were known. An important -- an interesting comment was on the lowest ever levels in corporate and mortgage spreads. So I'm interested in understanding the moving parts on the NII.

The second question relates to your guidance for EPS growth this year, which was confirmed that 6% to 8% growth for the year. And I wonder if this confirmation of the EPS guide, despite the lower NII, was driven by cost control or by the prospects for more share buybacks given that you've increased the CET1 ratio guidance. So that's my second question.

And lastly, on cost of risk in Consumer Finance, now that's gone up to nearly 200 basis points in the quarter. And if I adjust that for the overlays you utilized in the division, and that's the first time since 2021. So I'd like to hear what you're seeing on the ground from clients and what's driving this normalization in cost of risk. Is it higher defaults, lower collections? I mean, you've talked about early risk indicators. So I'm interested in your view.

[Alberto Nagel, executive]

Thank you, Antonio. NII, as I said, here, the components are, I would say, three. The first quite positive that is going to stay and becoming stronger is NII in consumer for 2 reasons. If we continue to print this kind of loan and we add like EUR 200 million, EUR 300 million every quarter of outstanding loan, and in the meantime, we refinance the liability of Compass, which are at -- were done at higher cost because they were done when interest rates were higher, over the next quarter, 2025 and 2026, we will have a better contribution as compass NII is much bigger than the other. This is a very important driving force.

Then there are 2 that are tactical. Why we lower the guidance? Because tactically we saw that industrially and financially it didn't make sense to do the opposite. So to basically not profit from a situation where we can increase TFA and then transform them into basically managed assets, which is our main target today.

The second is that, as you know, corporate spreads are -- were and still are at the lowest marginality. Now as we don't need to basically to add -- instead of having plus 1% or plus 2% in NII, we are flat. But on the other hand, if you look at the profitability and the return on the ROAC, the return on allocated capital, to this kind of corporate loan or even mortgage, you arrive to the conclusion that this kind of return, not only for us, but also for most of the banks, are having a ROAC below cost of equity.

So why shouldn't -- should we persist in doing extra production or increased production of loan if the returns are poor? We don't need. We prefer to pause it and to wait tactically for better quarters with better marginality also because, as you know, we are not mainly a lending bank in terms of corporate activity at least.

So the third element is, as I said, deposits and attracting deposit and waiting for NII -- sorry, interest rates to go down will give us, I would say, the ammunition to convert easier this kind of deposits when interest rates are going down into Mediobanca homemade products that are more sophisticated and giving better return. So it was a tactical decision given by the situation of spreads and the possibility to grow AUM.

Now we forecast a flat NII in 2025. In 2026, we said flat. We need to see if Compass is so good, we can also revise better the guidance. But today, we are cautious because we don't want to sort out the guidance that we have to revise in 2026 for NII.

Yes, you are right, 6% to 8% EPS is mainly done with more, I would say, attention or more efficient management of cost. Then we hope that some other revenue in the next few quarters, apart from fees and NII, can be better compared to this first quarter. For instance, Generali this quarter has had quite low compared to last year contribution. If we see only the guidance of Generali, we see that the coming quarter can be better.

CoR in Consumer, we already guided on the fact that we should have been basically been equal all the rest to the pre-COVID level sooner or later. What happened is that as we have printed more personal loan, this is a different mix. So I would say that today we are having the increase of cost of risk to the level that you mentioned, which is driven 2/3 by the mix, 1/3 by going back to normality to the pre-COVID, which is very important is that, net-net, so net of cost of risk, net of general costs, we continue to have a return on this loan, which is in the region of 30%. And this is why we are doing this kind of production as opposed to other production like CIB in terms of -- which the yield in terms of return on allocated capital much lower return.

[Operator]

And the next question comes from the line of Azzurra Guelfi from Citi.

[Azzurra Guelfi, analyst]

Two questions for me, one is on cost. Can you give us a little bit more color on the initiatives that you are taking up to have a little bit more efficiency on cost while still maintaining the growth of the company?

The other one is on the marginality in Wealth Management. When we look just at the management fee, the marginality is more or less flattish quarter-on-quarter. And can you give us an idea on how do you think this will develop over time? And also, if you can, some color on the marginality of the different lines like Private Banking versus Wealth Management and trend in there versus also your peers if you can compare it because you are in a different phase versus the majority of the other listed companies that we look at.

[Alberto Nagel, executive]

In terms of cost, as we are looking to maintain the same cost to income, we are having more discipline in all the basically items. But this doesn't mean that we are pausing in terms of recruitment or in terms of upgrade in grow the business because we will do a bit less in terms of number of initiatives, but the most important will be confirmed in terms of, as I said, expanding the physical and the digital infrastructure of the group.

Then there can be other, I would say, element of cost, which we can trim and we are planning to trim. We have also some level of pruning of certain activities that are less, I would say, strategic compared to the one that I mentioned. This will lead to maintain this guidance of 44%.

I think it's important to look management ROA. But on the other hand, we have to grow the business and we have to expand in terms of revenue. Then I think we were a bit optimistic when we forecasted 90 basis points. It's more likely we stay in 83, 85, but not having -- I would say, less buoyant growth in terms of revenue and in terms of expansion of network.

Now it's like if we -- I shouldn't say we have to basically do a swap between growth and profitability because it's not as good as this one. But as we have this opportunity to grow more or to grow fast, as you have seen, we need to press on this and grow rather than look at maximizing the P&L of single quarter of a growing Wealth Management unit.

This is, today, more important to capture. Now we are repositioning, a lot of financial adviser bankers wants to join us. We need to continue to grow rather than, I would say, maximize a single quarter bottom line, knowing that management ROA, as I said, is also a journey because we need to have our network and our customers, in particular, in Premier, more keen to take more sophisticated product or less simple product as opposed to the past. So this is not something that is happening 1 or 2 years. It requires, at the end, a bit more time.

[Operator]

And the next question comes from the line of Giovanni Razzoli from Deutsche Bank.

[Giovanni Razzoli, analyst]

Three questions on my side. The first one is on the NII. Because as you mentioned, the performance of the NII was quite resilient across the business divisions and most of the decrease was reflected into the Holding Function on the banking book, which seems to me it's a trend that is different from what we have seen other banks, which are actually, in the context of lower rates, increasing the contribution of the Holding Function.

Is it due because you don't have any macro hedging in place, so basically you do not benefit from this facility, which basically sees a higher contribution to NII when rates go down because the banks receive a fixed and [ a pay ] floater? So that's my first question.

The second one is on the cost of risk guidance of 55 basis points for the full year. If you can share with us what amount of overlays do you think to release this guidance?

And the last one on the 2026, you said that you will consider at the time the potential allocation of the excess capital. If I'm not mistaken, during the plan, you've mentioned 14.5% as a target of CET1. Is that -- is my understanding correct?

[Alberto Nagel, executive]

So thank you for your question. In terms of NII, maybe one reason is that we can do not much macro edge because of our situation of the bank. And in general, the Holding Functions are making the ILM of the group, and hence, when interest rates are going up, they make more NII. When the interest rates are going down, they make less NII. So we see more on Holding Function rather than on the business.

In CoR, our assumption is to use EUR 85 million of overlays, staying with an important -- anyhow an important amount also for the last year as opposed to the -- as the last question is -- was on capital. I reiterate that, yes, we are adding more capital. We need to see how much of this capital we will use in terms of organic growth. How much, if any, we will use in extra organic growth in the last, I would say, 18 months of the plan. Any decision on extra distribution we'll take at the end of the plan, having in mind also the new plan because, as you know, basically, the bank will not stop in 3 years or in 2026. So we'll have to have a rotation of capital even for the next year. And hence, we reiterate that a decision will be taken at the end of the plan.

[Operator]

And the next question comes from the line of Luigi De Bellis from Equita SIM.

[Luigi De Bellis, analyst]

Two quick questions for me. The first one is on the CIB, so what do you expect for the next quarters in terms of pipeline for the different segments and fees trend?

And the second question, more a general one on the industry. So how do you see the evolution of asset management consolidation in Italy and abroad after the BAMI move on Anima and if this will change something in your Wealth Management strategy?

[Alberto Nagel, executive]

Thank you, Luigi. For CIB, we see improvement in next quarter driven by the number of deals we have announced. This is coming from, I would say, different sources. So I would say, large mid, Arma, and hence, is spread across the different geographies and I would say bucket of revenues.

And in general, we continue to see a positive trend in M&A. I would say also we expect a better acquisition finance in the second part of the year. Debt activity, as I said, debt capital market and advisory in that is pretty good. Today, margins of new loan origination are all-time low. So as I said, there is no point in growing the book with this condition.

IPO, and in general, equity capital market and particularly primary, remains still subdued. We don't see a big recovery in IPO. But IPO always had very, very small impact or limited impact, as you know, in our number.

In terms of asset management -- if we speak about asset management, for sure, the latest transaction we have seen in Europe, which is the one announced in France during the summer and the last one in Italy, are clearly indicating that asset management, in particular, when it comes to liquid solution, require very big size. The small operator in liquid are going to be under more, I would say, pressure and pressure on margin, pressure on ability to sell product. So name of the game in liquid solution is becoming much bigger.

In alternative, it's also a matter of size, but you can have a place in the market if you have a specific tailor-made product. And this is something that, honestly, we are not going for because our main driver is wealth management distribution, it's not production. In production, we have our internal Mediobanca SGR, which is working like other asset management company, manufacturing product and assembling third-party products. And we have, in Polus and in other like, I would say, boutiques that are covering a specific asset class.

So we don't plan to grow in asset management doing an acquisition in something that is in liquid solution. While in Wealth Management, we continue to grow organically and we always look at opportunities if they can accelerate our rhythm of growth, which is already very big in net new money.

So if we can add more distribution also through small team uplift of M&A, we will look for that. But I think these are 2 different -- quite different, I would say, activity, asset management as opposed to wealth management.

[Operator]

And the next question comes from the line of Britta Schmidt from Autonomous Research.

[Britta Schmidt, analyst]

Just a clarification on the capital and share buybacks, please. I mean, the capital guidance is going better, but it seems that you indicate that no new share buyback will be announced until the end of the business plan.

So does that mean that possibly the EUR 1 billion of the overall business plan is going to be dependent then on growth versus M&A? Should we read into this that you're perhaps leaning a little bit more towards M&A and wanting to keep the options open? And how would that impact the business plan target of the EUR 1.80 EPS?

[Alberto Nagel, executive]

Sorry, Britta, maybe I was not precise, but what I wanted to -- we have to separate the last buyback contemplated by the plan as opposed to what is in -- what exceeds the 14.5%, which is a different chapter. I would say that for the last tranche of buyback, we will decide most likely at the end of the fourth quarter of this year while basically on what is exceeding 14.4% at the end of the plan, so basically 1 year after.

So -- but I mean, are 2 different decisions and the last buyback of the plan today is something that is coherent with our number, but the formal decision and the decision has to be taken in the last quarter of this plan -- of this, sorry, of this financial year.

[Operator]

As there are no further questions, I would like to hand back to Mr. Alberto Nagel, CEO, for any closing remarks.

[Alberto Nagel, executive]

Thank you very much for your attention, your questions. Let's hope to have you all in the next call on February 2025. Bye. Bye-bye.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.