Poste Italiane SpA

MIL:PST

Earnings Call Transcript 2023-Q2

[Massimiliano Riggi, executive]

Good morning, everyone, and thank you for joining us today. I'm Massimiliano Riggi, head of Investor Relations, on behalf of Poste Italiane's management team, it is my pleasure to welcome you to our second quarter 2023 results. I'm sure you have all had the chance to review the documents, which are available on our IR section of our website. Let me hand over to our CEO, Matteo Del Fante for some opening remarks. Then our CFO, Camillo Greco, will cover the financials. At the end of the presentation, you can ask questions either by phone or via webcast platform. Over to you, Matteo.

[Matteo del Fante, executive]

Good morning, everybody, thank you for joining our second quarter results call. On Slide 3, you can see some of the key messages. We have over delivered into the first half of the year against our strategic plan. Underpinning these results are solid commercial trends, coupled with a continued disciplined cost structure.

In the first half, revenues are up 8% year-on-year to EUR 6.1 billion, and EBIT growth is up 11% to almost EUR 1.6 billion. Total financial assets registered strong positive net flows in insurance and asset management from our loyal customer base outperforming a challenging market environment. Our solid balance sheet and diversified business model has enabled us to deliver ahead of the 2023 guidance.

Let's move to the financials on Slide 4, please. Poste delivered a strong performance in the second quarter and first half of the year. Let's focus on the latter with the top line at EUR 6 billion, total cost of EUR 4.5 billion were better than expected considering investment in business growth and a limited impact from inflation. This leads us to an operating profitability of almost EUR 1.6 billion.

Finally, net profit was up 16% to EUR 1.1 billion.

Moving to Slide 5, where you can see the healthy underlying revenue progression across all business lines. Positive trends, coupled with our commercial efforts have delivered another set of successful results. In Mail, Parcel & Distribution, tariff repricing, an encouraging pickup in parcel volumes contributed to the top line as well as some additional revenue from M&A activities related to sennder that Camillo will go into more detail later.

In Financial Services revenues have increased, supported by NII and other business lines. Insurance Services show solid underlying commercial activities with strong positive net flows outpacing a different -- a difficult market. Our lapse rate is stable and almost half the market rate. Revenues are in line with our plan, notwithstanding a challenging market backdrop and considering that Q2 2022 benefited from volatile components as a result of the sharp interest rate increase.

As such, a year-on-year comparison is not representative of our healthy business progression in this segment. Payment & Mobile continue under expansion trajectory with meaningful contribution from all business and lease consolidation.

Let's go to Slide 6, an EBIT evolution segment by segment. Mail, Parcel & Distribution shows a strong increase in operating profitability, up 84% to EUR 1.59 million in the quarter and up 74% to EUR 247 million in the first half. The top line remained resilient, thanks to increase in parcel volume, Mail refreshing action and supporting commercial trends in distribution revenues.

In this quarter, we booked a EUR 109 million one-off noncash capital gain related to sennder. Just to remind you that sennder offers technology optimizing full truckload operations, boosting the movement of Parcel between our sorting and distribution hubs. We now own a 10.2% share in sennder Tech GmBH. Let me highlight that the positive progression of Mail, Parcel & Distribution EBIT is confirmed also without the sennder capital gain contribution.

In Financial Services, the operating progression is mostly driven by NII increase, supported by higher interest rate and retail deposits. Insurance Services EBIT is in line with our plan, mirroring the revenue dynamics I just described. Payment & Mobile's constant growth is further supported by strong revenue trends and lease consolidation more than compensating Energy business start-up costs.

Let's move to a more detailed review of the financials with the CFO, Camillo Greco. Over to you, Camillo.

[Camillo Greco, executive]

Thank you, Matteo. Good afternoon, everyone. Let's start on Slide 8 with Mail, Parcel & Distribution, where segment revenues grew 11%, reaching EUR 1 billion in Q2. Mail revenues remained resilient, thanks to favorable product mix and ongoing repricing actions. Underlying Parcel revenues are up 2%, supported by increasing volumes mitigating the reduced contribution from the PPE logistics contract. Other revenues were up 67% in the first half on the back of the EUR 109 million sennder noncash cap gain resulting from an M&A transaction, which led to an increase of [ positive ] holding in sennder Tech company to 10.2%. And positive commercial trend in the first half have led to an increase in distribution revenues of over 7%, more than positively offsetting cost inflation resulting in an EBIT increase of 84% to EUR 159 million in Q2. .

These results have been achieved without the contribution for active portfolio management, which last year amounted to EUR 97 million. Let's look at Mail and Parcel volume and tariff on Slide #9. Parcel volumes were up 4% in Q2 and up 3% in H1, supported by healthy B2C growth. Looking at pricing, the average parcel tariff was down 2% in Q2 due to a different product mix, some lower tariff clients had a significant volume increase.

Moving to Mail, as a result of the continuous repricing actions, coupled with favorable product mix, we have offset the structural decline in lower margin recorded items. The tariff increased by 5% in Q2 and by 6% in H1, and we expect a beneficial effect to be visible over the next quarters.

Moving to Financial Services on Slide 10. Gross revenues were up 5% in Q2 and up 7% in H1, reaching EUR 3.1 billion, mostly driven by NII. Let me remind you that revenue growth was achieved without any contribution from active portfolio management in the quarter. Instead, a higher quality revenue stream came from net interest income at EUR 564 million in Q2, up 29% and EUR 1.1 billion in H1, up 30%. This was supported by favorable rate environment and increasing retail deposits.

Postal saving distribution fees amounted to EUR 403 million in Q2 and EUR 828 million in H1, in a difficult market where higher rates led to an increase in postal bond redemptions. On the back of the repricing of the current accounts and other payment services, transaction banking fees grew 8% in the quarter and 10% in H1, helping to mitigate the traditional payments decline.

In Loan & Mortgages, loan volume growth was positive, representing healthy underlying business trends. However, our partners' cost of funding which has reached peak, impacted our net distribution revenues, down 10% in the quarter and 23% in H1. The year-on-year comparison though is not representative as last year, interest rate environment was totally different from today's reality and we expect this phenomenon to have bottomed out.

Asset Management revenues were up 31% in Q2 and up 11% in H1 as we enjoyed firmly positive net flows benefiting from the recent launch of retail target-date fixed income funds. Finally, EBIT grew 15% and 13% in Q2 and H1, respectively.

Let's look at NII evolution on Slide #11, focusing on the yearly progression on the top graph. The Retail & Corporate component, mostly invested in BTPs contributed to the growth by EUR 110 million, supported by favorable rate and volume trends. Moving on to the NII component from Public Administration. We have EUR 10 billion of deposits in those accounts with a remuneration linked for 60% to the near BTPs and 40% to 6 months Italian Govies. The increase in market rates led to a EUR 6 million NII improvement year-on-year. The fair value component has a positive effect year-on-year due to the mark-to-market difference in hedges in place. As mentioned in the last call, the contribution from the treasury component is currently negative EUR 16 million, which will stabilize going forward.

Moving to Slide #12. TFAs reached EUR 580 billion, up just over EUR 4 billion since December, supported by positive market effects. Our customers are increasingly seeking to limit their exposure to market risk. We are well positioned to offer them such security as over 92% of their TFAs are protected. Let's look at each component. In H1, Postal saving outflows were EUR 5.6 billion, significantly improving year-on-year, thanks to the recently revamped postal book Offerta Supersmart, which successfully attracted new customer liquidity. Postal bonds had a strong gross inflows year-on-year. However, impacted by early redemptions due to the high interest rate environment.

A positive market effect mitigated the outflows with EUR 2.5 billion. Insurance net inflows were at EUR 3.1 billion, outpacing a challenging market, with the product mix mirroring customers' increased demand for capital guaranteed policies. Performance, including customer accrued interest is positive for EUR 1.5 billion. Deposits and assets under custody grew by EUR 1.2 billion and mutual funds recorded net inflows of EUR 0.9 billion. Finally, net inflows in savings and investments reached EUR 800 million, supported by distribution of insurance products and newly launched fixed income funds.

Moving to Slide 13. Following the adoption of IFRS 17, we have restated last year's insurance Q2 figures, and this quarter results have confirmed that we are well on track to achieve the full year target, notwithstanding the challenging market. [indiscernible] in the previous quarter, year-on-year revenue comparison is not representative. Since last year, revenues benefited from a positive one-off in Q2 '22 due to the release of an additional portion of the CSM resulting from the mismatch between the expected and the actual market rates. Revenues amounted to EUR 379 million in Q2, down 10% and EUR 772 million, down 3% in H1, though with an increasing recurring component.

From a commercial standpoint, life insurance was supported not only by strong net inflows of EUR 1.1 billion in the quarter, but also by a low lapse rate at 4.2% versus the market average of nearly 8%. Life gross written premium exceeded EUR 4.4 billion in Q2, up 5% year-on-year. In H1, Life gross written premium reached EUR 10.5 billion, increasing EUR 13.8 million versus last year. The product mix between Class 1 and multi-class products mirrors increased customer demand for capital guaranteed policies.

CSM release was at EUR 335 million, down year-on-year. Nevertheless, CSM stock increased by almost EUR 1 billion to EUR 13.9 billion before release, confirming that our insurance business remains both profitable and sustainable. Non-life net revenues were up 40% in the quarter, supported by higher gross written premium in all product lines. We also completed the net insurance acquisition, which represents an enabler to accelerate the growth of our protection business. In fact, protection gross written premium was up 76% year-on-year to EUR 190 million in Q2 and up 62% to EUR 427 million in H1, EUR 67 million of which from net insurance.

Combined ratio was stable at around 88% against increasing volumes in welfare, which is a business with a structurally higher combined ratio. In Q2 '23, EBIT was at EUR 330 million, down 12% compared to Q2, which was impacted by positive one-offs. In H1, EBIT was EUR 664 million, 5% lower year-on-year.

Let's look at the Solvency Ratio evolution on Slide #14. Poste Vita's Group Solvency II ratio further improved by 7 percentage points from the end of last year -- last quarter, reaching 274%, well above the managerial ambition of 200% through the cycle. The Solvency II ratio already embeds impact of 8 percentage points in relation to a foreseeable dividend to the parent Poste Italiane SpA based on the new 75% payout ratio, which was increased from 50% at the end of Q1. Solvency II ration benefited from a lower BTP spread as well as from positive capital generation from new business and in-force portfolio. Solvency II ratio as of yesterday is between 265% and 280%.

Moving to Payment & Mobile on Slide #15. We continue to see a staggering growth in revenues of 49% and reaching EUR 374 million with all business lines providing an outstanding contribution both in Q2 and H1. Card payment revenues grew by 1/3 to EUR 170 million in the quarter and EUR 332 million in the first half. The structural shift to cashless payments in Italy was supportive of this growth with underlying Postepay transaction value increasing 13% since Q2 '22.

Other payments more than doubled both in the quarter and in H1, mainly driven by increased payment transactions directly managed by Postepay as payment service provider. This consolidation contribution continues to be visible both in card and other payment revenues, adding EUR 25 million and EUR 45 million in Q2.

Telco revenues grew 6% in Q2 and 5% in H1, also supported by the fiber offer. Finally, our new Energy business has been successfully growing with about 300,000 contracts signed since launch, bringing EUR 26 million of revenue in Q2. Yet again, EBIT reached a record high level, growing 21% to EUR 111 million, more than compensating Energy business start-up costs.

On Slide #16, we look at our continuous workforce evolution. Since December, the average head count decreased to just over 118,000, excluding M&A but taking into account new hires of 5,800 people. M&A activity added 700 FTEs to the average headcount. HR cost per FTE are up 3% year-on-year to EUR 45,000 related to salary increase and commercial incentives, but the value-added per FTE is growing at a faster rate of over 9% year-on-year at over -- just over EUR 82,000 per FTE.

Moving to group HR costs on Slide #17. Following the adoption of IFRS 17, the majority of costs borne by insurance services to remunerate the network are now spread across HR costs, COGS and D&A. As a result, an accounting adjustment is implemented at the group level, resulting in EUR 251 million lower HR costs on a reported basis in Q2 23. Before the application of IFRS 17, ordinary HR costs were slightly higher year-on-year, with continued FTE reductions mitigating the planned salary increase in variable compensation. Importantly, ordinary HR costs on revenues continue to fall to 43% from 41% in Q2 '23.

Moving to Page 18. Excluding the effect of IFRS 17 and net of M&A, non-HR costs increased by EUR 138 million. In particular, COGS were up EUR 106 million, including EUR 42 million Energy-related costs and EUR 21 million cost inflation.

D&A was up EUR 32 million due to higher CapEx already embedded in our guidance. Finally, as a result of the strategic M&A activity, we incurred additional structural cost of EUR 130 million. Thank you for your time. Let me hand over to Matteo for the wrap-up.

[Matteo del Fante, executive]

Thank you, Camillo. As you have just seen, the year is progressing really well, confirming, if not exceeding the guidance. We are transforming the company into a customer-focused, digital-first operationally efficient business with a clear path for profitable growth. We're extremely well positioned to capture supportive commercial trends, yet our business is built to withstand [indiscernible] headwinds. This is further enhanced by our rigorous cost discipline so that even with the persistent inflationary pressure, our operating profit keeps on growing.

We continue to invest further improving our capabilities across technology, products, people, diversifying our business while preserving our rock-solid balance sheet. Finally, our leadership in Poste Italiane ESG Index recently announced a couple of weeks ago, confirms that our sustainability strategy is delivering value to all our stakeholders. In an environment of change, our commitments have remained constant. Stay tuned. Massi, over to you for the Q&A.

[Massimiliano Riggi, executive]

[Operation Instructions] The first question is from Antonio Reale from Bank of America.

[Antonio Reale, analyst]

It's Antonio from Bank of America. I have 3 questions, please. Starting with the first one on costs. You've shown good cost control this quarter. Can you give us an update on the HR side. How are your early thoughts with trade unions unfolding? And also importantly, if you can talk about non-HR costs, particularly energy-related costs. I understand you had entered into hedging contracts at the peak of the energy crisis, which have had an impact on your cost base. Can you talk about the size of this and what could be the benefit from eventually reducing the costs here going forward? That's my first question.

Secondly, on your full year guidance. You've confirmed your guidance for the full year and slightly changed the language around you being on track to do better. The capital gain, of course, helps. Where would you say within your division, you see the best growth opportunity for the second half and into next year? And what do you think you need to do a bit more work on?

And my last question is on the insurance flows, which have been slower at the system level. Can you give us an update on what you're seeing and on your outlook for the rest of the year on your life insurance business in particular.

[Matteo del Fante, executive]

On cost, on the HR side, clearly, the big topic on the table is the new labor contract. We're starting preliminary discussions with the unions. The feelings are constructive. Clearly, there is work to be done to achieve a result which is sustainable for the company. But I believe that as we have done in the past, we will be able to deliver good contract for our employees and also for, obviously, the bottom line of our company. But this is work that will take place from now to the announcement of the plan that, as you know, is expected in the last quarter of this year. On non-HR cost, maybe Camillo, please?

[Camillo Greco, executive]

Yes. So on non-HR costs, just to sort of set the scene, we had announced back in March that we would have had a total non-HR cost of EUR 4.4 billion. That target is obviously confirmed. And you had a specific question on Energy. So it is true that we had 2 hedges in place, 1 on gas, which ended in the second quarter of 2023 and 1 on electricity, which will end at the end of 2023.

So the first answer is that on electricity, we are completely covered until the end of the year. And on gas, we are being covered for the first 4 months of the year. The impact of the increase of gas prices for the remaining 8 months is a circa EUR 20 million. The other thing that I wanted to share as a sort of preview is that as we have seen some relative weakness in the market, both on electricity or power and on gas, what we have already done and we have started to put in place hedges to be protected also for 2024 and as of now, we have already covered 80% of our needs of gas and circa 50% of our needs of power for 2024 at levels that are, let me say, better than the ones that we had initially considered.

So on that front, I think we are doing well. And to the extent that there are other moments over all the weakness, we will continue to progress with this strategy.

[Matteo del Fante, executive]

On guidance overall and guidance by segment, we stated that we are in line and maybe slightly ahead of our guidance objectives. This is supported by all businesses. But as you can see in today's results, we're not only an insurance-driven platform because the other 3 segments are doing the lift that's carrying the weight in this first half of the year in terms of results.

Where do I think we should do more work, which I think was part of the question, Antonio. I think that we need to keep pushing on the Parcel side, which is clearly the growth space in Mail, Parcel & Distribution. So happy with the results we announced today, but I think there is more focus and more results that we need to deliver in that space for our investor and to complete the transformation we started 5 years ago.

Insurance flows are extremely positive, especially when compared to the rest of the market. We -- in the first half, we have EUR 3.1 billion positive net inflows. Hard to think that we will be delivering the same results in the second half of the year because we have a very significant redemptions in half-2, but we still target positive net inflows for the second half. And I think what is more important is that thanks to our well below market lapse rate. We keep growing our market share in the segment. So very happy with the commercial trends in insurance.

[Massimiliano Riggi, executive]

And the next question is from Manuela Meroni from Banca Imi.

[Manuela Meroni, analyst]

The first one is on the Mail & Parcel business which actually is performing quite well, also thanks to the repricing. We also read that there is a new repricing action starting from July this year. So I'm wondering what is the impact that we should expect in Mail & Parcel business in the second half of this year. And if it is enough to offset the structural decline of volumes in Mail business.

The second question is again on Mail & Parcel. You are generating a positive EBIT even if I exclude the capital gain from sennder and also considering that you are not cashing even the capital gains on your bond portfolio. So I'm wondering if you are confident about the possibility to reach the breakeven in Mail & Parcels starting from next year.

And lastly, a clarification, we may expect an update of the business plan and the guidance in the last quarter this year, is it correct?

[Matteo del Fante, executive]

Okay. I'll start with the last first answer. Yes, that's the target that we're working to provide the next plan before the end of the year. First question, Camillo was mainly...

[Camillo Greco, executive]

Sure. The impact of the repricing on full year is around EUR 75 million. That is a repricing that takes into account all the repricings that have already been put in place. So to the extent that there are going to be further tenders coming out and we might revisit our price and there might be a number that is higher than that. But as of now, we are at EUR 75 million.

With respect to what we target for year-end on May, I'd like to remind that we have a target of EUR 2 billion, which we are clearly on track to deliver on. And with respect to the ability to reach a breakeven, it's true that we have had a first half in a positive territory. It is also true during the second half, and we also put that in the plan back in March. We do intend to take an early determent charge of around EUR 100 million. That's what we had at the time. So it's too early to say whether we will outperform the target we put out of minus 0.1 for the division, but certainly, we are trying to do our best to beat that number.

[Matteo del Fante, executive]

Second question was on the breakeven in Mail, Parcel & Distribution, Yes, so as of now, we are not changing the guidance of negative 0.1, which is the one we have in the plan.

[Massimiliano Riggi, executive]

Thank you, Mara. And the next question is from Gian Luca Ferrari from Mediobanca.

[Gian Ferrari, analyst]

So the first one is on the customers' behavior in BancoPosta in particular, I was noticing EUR 1.5 billion of retail deposit outflows in the first half with almost EUR 3 billion inflows in custody. So I guess BTP Valore played an important role here. At the same time, when it comes to the CDP offer, it seems that there was a revamp in the second quarter. I think they are on air with a marketing campaign offering very attractive deals.

I understood you said in the speech that some of the outflows were linked to the not-very attractive offer of the old products. But I was wondering why with this set of new products, still, we are in net outflows, I think more than EUR 3 billion in Q2. So why this new set of products is not getting traction? And linked to that, what are your expectations regarding retail deposits for full year '23.

The second one is more on the insurance side and more technical. If you can elaborate on the EUR 7 million negative [indiscernible] balance sheet. Is that related to expenses, claims or what is explaining that number?

[Matteo del Fante, executive]

Okay. I'll start. Thank you, Gian Luca. With the first question, there is a peaking amount of redemptions, early redemption of postal bonds with growth inflows in postal bonds that are around EUR 20 billion more or less in the last 5 years. You have to consider that we are coming from a lot of bonds that were placed with 0 interest rates at 5 years, 10 years, even 20 years. So these are bonds that a rational market investor that can put at par should not own.

So that redemption comes to the postal office. We are offering new bonds. We are clearly offering also the BTP Valore, that you spot in our asset under custody increase, that's correct. But more importantly, we are offering the Offerta Supersmart, which is a 3.5% interest rate on a passbook, 270 days minimum period -- holding period that has generated already EUR 3 billion inflows.

So all in all, we are focusing a lot on this space because we have, on one hand, obviously an incentive from our agreement with CDP with specific targets on net inflows negative, but not too negative net inflows; and two, because there are many, many of our clients that own these instruments. So that represents still not far from 50% of our activity in our advisory rooms, so in our advisory large offices, which means great value for us to be able to talk to clients even about the need to have a higher interest rate.

So the instrument that is held by virtually 30 million Italians, it's very, very important also for the goodwill. And for the traffic we are seeing in the office and for expanding the relationship and cross-selling additional products, profiling the clients for P&C, profiling the clients for life and offering utility products to clients that have been investing in postal savings...

[Gian Ferrari, analyst]

Matteo, if I can jump in on this one. We think this year, we are going to be in the low end of the EUR 1.6 million, EUR 1.8 million range or a midpoint could be still achievable given the trend you just described? .

[Matteo del Fante, executive]

It's a very tough environment. And from what we hear -- the government is planning new BTP Valore, I think they probably announced it, if not publicly, but is in the makings in the last quarter. And clearly, those big transactions have taken away deposits and flows. So to answer your question, we will target it. We're putting maximum effort in the last few months of the year. And hopefully, we will reach the mid-end of that range, but it is certainly tough. On your second question on Life maybe...

[Camillo Greco, executive]

There was a technical question on the P&C business. The number you referred to is the result of the difference between expected [indiscernible] and actual numbers ex post.

[Massimiliano Riggi, executive]

And the next question is from Michael Huttner from Berenberg.

[Michael Huttner, analyst]

Thanks for the amazing presentation. So full of lot of detail. I only have 2 kind of topics, 3. So one is cash. The other one is how the regulator, the interaction with the regulator works on the pricing on the Mail? And the third is a really kind of fishing question really, what's the impact of all this change in weather or whatever. So on the cash, in Slide 23 and 24, you showed lots of details, so EUR 1 billion, you showed a cash position on Slide 23. Slide 24, you showed a figure of EUR 810 million. Sorry, it's actually a flow figure, so dividends and other movements.

And I just wondered if you could explain how the cash works, how the outlook works. It's just that I'm normally used positive cash figures and some of these are negative. So I have to get my head around it and I find it really hard. So maybe if you can kind of give an indication where you expect to land or something at the year-end or where your targets would be.

The second is on pricing on Mail, and this is a question from a client. He was wondering whether, and again these [ lovely figures ], EUR 75 million, I think EUR 100 million for next year in terms of pricing impact on revenue in Mail. How does that work with the regulator? Do you go and say, well, I want 1 billion and the regulator says 0 and then you negotiate? Or is there kind of preconception that the regulator says, well, if the volume is down x percent, then the pricing will offset maybe all of it except maybe 1% or 2%.

The final is the weather impact. How does that affect the behavior of your customers, which is like half of Italy? Do they go more to the post office or less to the post office, more card payments? I mean, how -- what's -- anything would be interesting.

[Matteo del Fante, executive]

Okay. On pricing, it's relatively straightforward because the portion of mail products that is subjected to public pricing limit because they belong to the universal service perimeter is relatively small compared to the rest of the revenues. So the repricing really comes from commercial activity, commercial activity that is mainly participating into public and private tenders, and we have started a commercial repricing exercise already 2 years ago coming out of the COVID with clearly an inflation justification. And with the fact that if we reach EUR 2 billion revenues for EUR 2.2 million more or less items we deliver, it means that we cash in terms of revenues, EUR 0.8 per item.

And if you think about our 0.9%, if you think about what it takes to deliver one single item when you get the bulk of all the items to be delivered, you have to shift the boxes into the sorting machine, take the letters from the sorting machine and put them into a truck, travel more or less actually, on average, 300 kilometers, that's the average trip of an [ elector ] and then get into delivery center and have [ elector ] men and somebody helping him preparing the trip and then doing the last mile delivery.

All this process is paid in terms of revenues, EUR 0.009 that if you're delivering every time you stop, Michael, 10 items, then it means EUR 0.09 revenues, you are in the money. But when you are in a country today where you have 1 item delivered per head every 10 days, it starts to be difficult to sustain.

So the pricing going up is market-based, then obviously for the portion of regulated products, we also had interaction with the regulator that is allowing us the increase. I will take the weather behavior and let Camillo expand on our cash flow, cash and financial position.

Not a lot, we look at the more recent data on postal office traffic and we don't see any reduction because of the heat. No particular sign obviously beyond what we have seen with the flood in Emilia Romagna a couple of months ago that clearly affected the region because we had to close a few offices and many roads were closed, and that had a marginal impact. But the general weather is not impacting. We're not seeing any evidence of any impact from the weather. Please Camillo...

[Camillo Greco, executive]

So with respect to our cash position, I mean, what you have rightly pointed to Slide 24, where we basically show what is the flow across the group of cash. And we think we've made Parcel & Distribution as really the holding company which generates free cash flow operations, receives dividends from the subsidiaries and then pays dividends to shareholders and typically also funds CapEx of the group.

So what you can see in the sort of middle part of the slide is that the operating performance of the group have generated in the first in the first 6 months, EUR 429 million of cash after receiving and paying dividend. Remember that these figures are at the end of June, and we paid our 2/3 of the dividend third week in June.

And what this shows you basically is if you exclude the impact of IFRS 16 on leasing and other. You see that the net financial position of Mail, Parcel & Distribution improved from EUR 1.4 billion at the beginning of the year to 993 all negative. So we have reduced that in effect. What we expect for the second part of the year is that the numbers will remain in this neighborhood is going to be around plus 500 on the full year. As you might have seen that we have spent EUR 232 million in the first half of CapEx. And CapEx for the full year are a number that is closer to EUR 700 million, EUR 800 million. So we expect that, that will impact also our cash position as there is some seasonality in the CapEx.

So you should assume for full year around EUR 0.5 billion of capital of positive cash generation to the group after paying also the -- that is important -- after paying also the anticipated dividend that we have in -- as we have every year in November.

[Matteo del Fante, executive]

And yes, just, Michael, -- the most important thing when you look at cash is what Camillo said at the beginning of his answer, we had 4 segments -- reporting segments. But when it comes to cash net financial position, you have to consider Mail, Parcel & Distribution as the holding company, okay? And the other 3 are subsidiaries that are contributing with a dividend and in the past have also benefited from capital support by debt and equity from the holding company.

[Massimiliano Riggi, executive]

And the next question is from Gianmarco Bonacina from Equita.

[Gianmarco Bonacina, analyst]

A few questions, please. So the first one, just a clarification on your guidance on the EUR 2.5 billion EBITDA. So you include or you exclude this now EUR 109 million sennder gain -- and then in the second half, apart from the EUR 100 million provision for the early retirement, shall we expect you will book some other, let's say, provision or negative one-off items given that clearly you are performing much better than the run rate to achieve the guidance, but maybe you are expecting also to have some extra provision or maybe just in terms of cost phasing, if you can comment. Then on EuroVita, if you can comment how is your stance regarding the situation here? And then lastly, on the Parcel because clearly, we have seen some weaker volumes in general in the market, and you were hinting before some specific actions you wanted to take to revive the growth? So if you can maybe give also some color on this topic.

[Matteo del Fante, executive]

Okay. I will answer on EuroVita. On EuroVita, I would say nothing more than what has been announced publicly. So there are 5 insurance companies and maybe the discussion to expand this group at the moment that will take the insurance portfolios from the old EuroVita and run the respective portfolio going forward with the support of distributing banks that are in the game that will provide loans and liquidity to every single insurer that become the manager and the owner of those liabilities. So those insurance contracts and pro rata also, obviously, the owner of the assets that are related. And please, Camillo?

[Camillo Greco, executive]

So with respect to other one-off charges in the second half of the year, at this stage, we have no visibility of any other one-off charge with the exception of the early retirement one, which we'd already mentioned. That was the one question you had. Then you had one question around Parcel performance. I'd say that we expect the second half of the year to be robust. At this stage, we are confirming the target revenue of EUR 1.4 billion for the year. But remember, in the second half, we have obviously greater seasonality as the holiday season approaches.

And we also -- I think there was also some press on that point. We are starting to work with [indiscernible] which will start to perform in second half of the year. So we expect a more dynamic performance on Parcels. Then you had a question on sennder. sennder gain was not in our guidance when we presented the plan in March.

[Massimiliano Riggi, executive]

And the next question is from Ashik Musaddi from Morgan Stanley.

[Ashik Musaddi, analyst]

Just a couple of questions I have is, first of all, if I look at the insurance new business CSM, there was a significant pickup in the CSM that you generated in second quarter versus first quarter. I mean, first quarter was about EUR 300 million second quarter was about EUR 600 million. So any color on what happened, why has the new business CSM so high in second quarter versus first quarter? That's the first one.

And second thing is, I mean, you have been very consistent with respect to the deposit beta that -- given that your average deposits from the retail customer is like EUR 6,000, you don't really see any pressure on increasing interest rates on the deposits, et cetera. But any color -- any additional color or update you can give on that where we are at the moment? Any change to that view would be very helpful.

[Matteo del Fante, executive]

Thank you, Ashik. I'll start with the beta. It's not only the fact that the average size of our deposits is significantly lower than the market average, I think what makes us more resilient and less sensitive to interest rate is that we are actually offering a bit like in the U.S. market, the check-in account and the saving account. So we have, as I mentioned before, the Offerta Supersmart, which is a postal passbook.

We have other offers in postal savings, which are targeted to those clients that have money in the check-in account and that they have interest to see some remuneration of that balance. So we can offer the alternative in-house, and that, I think, reduces the beta. On the CSM increase, which I think is certainly good news, but please, Camillo?

[Camillo Greco, executive]

Well, beyond the operating performance of our sales force, which contribute to this number, there is a perimeter effect as we are consolidating from the first of April net insurance, which brought in EUR 100 million of that EUR 515 million. So there is a consolidation effect that played also to our advantage. .

[Massimiliano Riggi, executive]

And the last question from the call is from Domenico Santoro, HSBC, please.

[Domenico Santoro, analyst]

Thanks for the presentation and all the details. Very simple question on the NII, first ever that nobody has asked. I just wonder from this level of NII in Q3, if you have to imagine rates up by another 50 basis points or whatever, can you give us the probable evolution in the second half of the year. Now you said during the call that part of the portfolio is hedged. So I'm just wondering whether you're talking about swapping securities into floating rates? Or at this moment, there is also a chunk of deposits that might be hedged. So we're talking about macro hedge and on this item, is the sensitivity at this point of the NII to interest rate symmetric, so the same if rates they go up by 50 basis points or they go down with a different sign or the presence of macro edge mix basically the sensitivity, not symmetric, just to understand a little bit what could happen in the case in 2024, we see rates coming down?

And then if you have to assume that you apply a fixed payout ratio to your net profit, I just wonder whether these are one-off items, always have a sign, positive or negative, they go into the attributable net profit.

[Matteo del Fante, executive]

Okay. Thank you. I'll start with the second question. We don't have a payout rule for dividends, though we have a fixed growing dividend. But as I stated in my previous call, part of the work we are doing with the new plan is also on dividend policy. So obviously, the one-off will be considered when we will announce the new plan together with the new dividend policy. There's no much more, sorry, I can say at this point in time on NII and...

[Camillo Greco, executive]

So first of all, we have today, our portfolio, which is around 65% fixed and 35% variable. Out of that based on that figures, an increase of 100 basis points on the base rate would translate on a full year basis of -- in an incremental 5 basis points on the overall return on the portfolio. So 5 basis points, 100 basis points increase, would that number change, i.e., as opposed to being plus EUR 100 go to minus EUR 100 million. The impact of our portfolio would be negative 0.3 basis points -- negative 0.03.

So plus 100 5 basis point incremental, minus 100 3 basis points less. With respect to your question on hedges, we do not have any macro hedge, but the hedges that we have is that we have swapped in forward start from some BTPs to variable, and we are actually in the process of unwinding some of those hedges in place as we see the current rate constructive to closing these hedges and fixing a fixed rate on a greater part of our portfolio compared to the 55%, which we have in 2023.

[Massimiliano Riggi, executive]

Questions from the webcast platform is from Elena Perini from Intesa Sanpaolo. The first one is on Insurance Services. Can we expect under IFRS 17, a more stable and visible trend in quarterly EBIT, as the most relevant contribution comes from Life, mainly driven by CSM release? And the second question is, how has 3Q started in terms of life insurance net inflows?

[Matteo del Fante, executive]

I mean the answer to the first question, Elena, is yes, especially on the back of our growing commercial and distribution focus. In terms of the third quarter, we are basically 1 month into the third quarter, and we see in insurance the trend that we've been seeing in the first 6 months. So above budget, better than last year. So we're still doing relatively well in July. That's all.

So thank you for your time. And let me take finally this opportunity to introduce you to Giuseppe Esposito that is here with us who will be taking over from Massi as Head of Investor Relations from the next quarter. I have to thank Massi that has done a tremendous job and will be moving ahead into the role of Head of Planning and Control.

So a big responsibility for him, he is still going to talk numbers more internally than with you, but he is still around, you'll see him, is always going to be present in the calls, and is also going to be part of our physical road show. Giuseppe Esposito has extensive investment banking experience, has been head of our M&A Department for 4 years and he is the one that's brought to completion the 15 transactions that we have done. So he knows the [ firm ], he knows the space and we wish all the best to Giuseppe as well. And thank you for your time.