• Net Profit: EUR320.3 million in the first half of 2024, up by 9.8% year on year.

• Revenue: EUR658.3 million, increasing by 9.6% year on year.

• Net Financial Income: Increased by 10.7% year on year.

• Operating Costs: EUR160.3 million, up by 6.7% year on year.

• Cost-to-Income Ratio: 24.4%.

• Net Sales: EUR5 billion.

• Common Equity Tier 1 Ratio: 25.8%.

• Leverage Ratio: 5.35%.

• Investing Revenues: EUR174.7 million, up by 11.9% year on year.

• Brokerage Revenues: EUR111.6 million in the first half, with a monthly average 65% higher than 2017-2019.

• Total Capital Ratio: 36.24% as of June 2024.

• Liquidity Coverage Ratio: 882%.

• Net Stable Funding Ratio: 369%.

• New Client Acquisition: Increased by 22.5% year on year.

• Private Banking Clients Growth: 30% year on year.

• Warning! GuruFocus has detected 4 Warning Sign with FRA:6UY.

Release Date: July 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• FinecoBank SpA (FCBBF) reported a net profit of EUR320.3 million for the first half of 2024, marking a 9.8% increase year on year.

• Revenues increased by 9.6% year on year to EUR658.3 million, supported by growth across all product areas.

• The bank's cost-to-income ratio was maintained at a low 24.4%, highlighting strong operating leverage.

• FinecoBank SpA (FCBBF) achieved a 22.5% year-on-year increase in new client acquisition, indicating strong organic growth.

• The bank's capital position remains robust with a common equity tier 1 ratio of 25.8% and a leverage ratio of 5.35%.

Negative Points

• Operating costs increased by 6.7% year on year, driven by business growth-related expenses.

• The bank expects operating costs to grow by 10% year on year in 2024, excluding additional costs for Fineco Asset Management and marketing.

• There is a potential risk of margin pressure due to the growing demand for ETFs, which could cannibalize traditional fund products.

• FinecoBank SpA (FCBBF) faces challenges in maintaining stable margins amidst a market environment characterized by pressure on margins.

• The bank's brokerage revenues, while strong, are subject to volatility due to market conditions, making it difficult to establish a precise revenue floor.

Q & A Highlights

Q: What is driving the improved outlook and record net profit expectations for FinecoBank? A: Alessandro Foti, CEO, explained that the improved outlook is due to the strong performance of the bank's three main engines: financial income, investing, and brokerage. Financial income is benefiting from higher rates, investing is gaining momentum despite high rates, and brokerage is performing well. All these factors combined are expected to lead to a record net profit for the year.

Q: How does FinecoBank plan to manage the mix of variable and fixed-rate components in its financial investments? A: Lorena Pelliciari, CFO, stated that the bank has increased the fixed-rate component to 63% while decreasing the duration and maturity by investing in European bonds with maturities up to three years. This strategy aims to protect net interest income from falling rates.

Q: What is FinecoBank's strategy regarding the growing demand for ETFs and its impact on fund products? A: Alessandro Foti, CEO, mentioned that Fineco Asset Management does not compete directly with ETFs. Instead, it focuses on offering unique investment solutions that meet client needs, which are not available in the market. This approach ensures that the demand for ETFs does not cannibalize Fineco's fund products.

Q: Can you provide an update on FinecoBank's recruitment strategy and market competition? A: Alessandro Foti, CEO, emphasized that recruitment is focused on improving network quality and ensuring future growth. The bank recruits mainly from traditional banks and young talent, avoiding overpaying for financial planners. This strategy aims to maintain high productivity and avoid the pitfalls of aggressive recruitment practices.

Q: What are FinecoBank's plans for capital distribution to shareholders, considering its strong capital position? A: Alessandro Foti, CEO, indicated that the bank prefers share buybacks over increasing dividends as a method of returning excess capital to shareholders. However, no final decision has been made yet, and further details will be communicated by year-end.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.