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Banca Generali Earnings Release 2019
4184_10-q_2019-05-08_9e412928-d06b-4499-ade3-c3e90d008ab2.pdf
Earnings Release
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| Informazione Regolamentata n. 0856-22-2019 |
Data/Ora Ricezione 08 Maggio 2019 13:02:19 |
MTA | |
|---|---|---|---|
| Societa' | : | BANCA GENERALI | |
| Identificativo Informazione Regolamentata |
: | 118057 | |
| Nome utilizzatore | : | BCAGENERALIN03 - Pastore | |
| Tipologia | : | 1.2 | |
| Data/Ora Ricezione | : | 08 Maggio 2019 13:02:19 | |
| Data/Ora Inizio Diffusione presunta |
: | 08 Maggio 2019 13:02:20 | |
| Oggetto | : | PR: 1Q19 Results | |
| Testo del comunicato |
Vedi allegato.
PRESS RELEASE
Results at 31 March 2019
Growth acceleration in Q1 2019: business expansion, revenue diversification and market recovery.
- Net profit at €66.6 million (+36%)
- Total revenues at €133.6 million (+17%)
- Operating expenses at €50 million (+7.5%)
Sharp growth of assets and net inflows
- Total assets at €61.1 billion (+8%)
- Pro-forma total assets1 at over €63.0 billion
- 1Q 2019 net inflows at €1.4 billion YTD
- April net inflows at €545 million
Solid capital ratios (including charges related to IFRS 16 first-time adoption)
- IFRS 16: one-off impact of 87 bps on TCR
- CET1 ratio at 16.6% and TCR ratio at 18%
CONTACTS:
www.bancagenerali.com
Media Relations Michele Seghizzi Tel. +39 02 408 26683
Investor Relations Giuliana Pagliari Tel: +39 02 408 26548
Milan, 8 May 2019 – The Board of Directors of Banca Generali, chaired by Giancarlo Fancel, approved the consolidated results at 31 March 2019.
Chief Executive Officer and General Manager Gian Maria Mossa stated: "We are very satisfied with our growth in these first three months of the year, not only for our strong business expansion, which is leading our assets to hit a new record, with very positive signs from net inflows and the acquisition of new clients, but above all in terms of the quality of these numbers, which reflect increasing revenue diversification. We are reaping the benefits of the hard work carried out in recent months, when we laid the foundation for a new model of sustainable growth with a focus on quality and maximum transparency in the financial advisor-client relationship, for which we are being rewarded, as also shown by the existing network's contribution to net inflows, the response to advanced
advisory service and the new diversification solutions, in addition to the new sub-funds of the LUX IM Sicav. We have a series of very interesting new developments in the pipeline in terms of both managed solution and digital dialogue with households, as in the case of the recent launch of an innovative new mobile banking app. In light of the above, we are looking at Bank's prospects for the coming months with great confidence and optimism."
P&L RESULTS AT 31 MARCH 2019
In Q1 2019, the Bank reported a significant business and income expansion, driven by a quality and flexible offer that allowed private bankers to seize the opportunities opened up by market recovery. Managed assets and AUC grew to €61.1 billion (+8%) with net inflows amounting to €1.4 billion (9.7% of initial assets on an annualised basis). Taking into account April net inflows, the figure neared €2 billion.
Pro-forma assets, i.e., including those of the recently acquired Valeur and Nextam, were well above €63 billion at the end of March.
Net profit rose by 36% to €66.6 million, thus recording the second best quarter ever. This result was attributable to the growing recurring business, more diversified revenue sources and the recovery of investments on the markets. Q1 2019 net profit also included a net positive impact of €1.7 million from the application of the new IFRS 15 and IFRS 16.
In further detail:
Net banking income increased by 17% to €133.6 million (+15% net of the adjustment for the new accounting Standards). This performance was driven by the increase in net interest income and net fees — the latter including a €35.2 million rise in variable fees (performance fees) due to changed stock prices.
Management fees amounted to €155.0 million, in line with the Q4 2018 results (-2% compared to the previous year). This figure reflects the overall decline in customer portfolios' risk exposure and the parallel increase in deposits reported in 2018 as a consequence of market volatility. This trend — a typical phenomenon in times of uncertainty — is about to gradually normalise.
Banking and entry fees (€17.8 million; +7.1%) grew thanks to the increasing contribution of new initiatives that strengthened diversification, such as the advanced advisory service (BGPA), certificate distribution and private placement.
CONTACTS:
www.bancagenerali.com
Media Relations Michele Seghizzi Tel. +39 02 408 26683
Investor Relations Giuliana Pagliari Tel: +39 02 408 26548
Net financial income totalled €19.9 million compared to €28.5 million for the previous year. The change is chiefly due to the Q1 2019 different contribution of the most volatile items, namely trading activities (€4 million compared to €15.2 million for the previous year). By contrast, net interest income increased sharply to €15.9 million (+19.9%); this result is even more positive in light of the €0.85 million negative impact arising from the application of the new IFRS 16 (on a like-for-like basis, net interest income was €16.7 million; +26.3%).
The increase in net interest income was attributable to the gradual reinvestment of liquidity at yearend 2018 and the expiring securities. This positive trend is expected to continue throughout 2019.
At the end of March, the treasury portfolio (99% in bonds) rose to €6.5 billion (+14% YTD), due to both the gradual reinvestment of liquidity and the further acquisition of new assets during the period
(deposits: +3.1%). The portfolio profile continued to be prudent, with total duration of 1.8 years and maturity of 3.4 years.
Operating expenses stood at €50 million (+7.5% YoY) as a result of business expansion, M&As and the acceleration of the strategic projects underway. This item includes the impact of some oneoff components such as the relocation of the administrative offices to the Hadid Tower in the Milan Citylife district and part of the recent acquisitions (€1.2 million one-off charges, partially offset by the a application of the new IFRS 16, which contributed €0.4 million).
Net of these effects, the Bank's operating expenses showed a 5.8% change, essentially in line with the guidance, which calls for an increase of core expenses in the range of 3-5% at operating level2 .
The ratio of costs to total assets further improved to 33 bps (34 bps at year-end 2018), whereas the adjusted cost/income ratio3 , particularly with regard to performance fees, declined to 40.2% (42.3% at year-end 2018), thus confirming the Bank's operating efficiency.
Net adjustments and provisions for Q1 2019 totalled €2.1 million, significantly decreasing compared to the same period of the previous year (€4.6 million) as a result of the improved risk profile of the Italian government bonds in portfolio arising from the application of IFRS 9.
IFRS 16: FIRST-TIME ADOPTION
The new IFRS 16, which entered into effect on 1 January 2019, governs the accounting treatment of all lease contracts. In detail, the Standard requires that in the balance sheet a liability be recognised at the present value of the future lease payments, as offsetting entry of the right of use (RoU) of the asset being leased.
After initial recognition, the right of use (RoU) asset is depreciated over the term of the contract or the useful life of the leased asset, while the liability is progressively reduced as a result of the lease payments and the interest on the liability is recognised in the statement of profit or loss. Banca Generali's RoU was defined in the amount of €136 million to be depreciated over an eight-year period. The rate curve to be used to determine the interest expense was calculated on the basis of the swap rate curve as at 1 January 2019 increased by a spread equal to the Assicurazioni Generali Group's credit risk — as derived from the CDS performance — and applied based on the expected residual term of the lease.
CONTACTS:
www.bancagenerali.com
Media Relations Michele Seghizzi Tel. +39 02 408 26683
Investor Relations Giuliana Pagliari Tel: +39 02 408 26548
Accordingly, compared to the previous accounting treatment in profit or loss, Banca Generali's general and administrative expense declined (-€4.7 million) due to the decrease in lease payments, offset by an increase in depreciation (+€4.4 million) and in interest expense (-€0.85 million) on the financial liabilities recognised.
3 Cost/Income ratio net of one-off items (performance fees, BRRD bank rescue funds, one-off components)
2 Total operating expenses net of sales staff expenses.
CAPITAL RATIOS AT 31 MARCH 2019
IFRS 16 first-time adoption resulted in a one-off impact 80 bps and 87bps on CET1 ratio and on Total Capital Ratio (TCR), respectively. The impact refers to RoU assets included among credit risks at 100% risk weighting, similar to the treatment for tangible assets.
At 31 March 2019, CET 1 ratio was 16.6%, Total Capital ratio (TCR) was 18.0%.
BUSINESS RESULTS
Total assets at 31 March 2019 grew reaching a new all-time high at €61.1 billion (+8% YoY; +6% YTD). Pro-forma total assets — i.e., including the recent acquisitions, which are about to be finalised, of Nextam and Valeur — exceeded €63 billion.
In Q1 2019, total assets showed a significant increase in deposits and AUC (€16.1 billion; +22% YoY; +9% YTD), reflecting customers' strong risk aversion in the last 12 months.
Managed solutions rose to €29 billion (+3% YoY; +6% YTD), confirming a good performance for the year and a sharp acceleration in the last quarter that reflected the market recovery. Among managed solutions, worth of mentioned is the new LUX IM Sicav, which led to the Group's SICAVs that reached €5.9 billion assets overall. Wrapper solutions totalled €14.6 billion, with a constant increase particularly in insurance products (BG Stile Libero: €8.1 billion; +9%).
Traditional life policies also continued to report a solid performance with assets at €16.0 billion (+6% YoY; +3.5% YTD).
Assets under Advisory (BGPA) reached €3.0 billion at the end of March, up by €700 million in Q1 2019 and accounting for 5.0% of total assets.
Net inflows for Q1 2019 were €1,411 million, of which €0.6 billion generated by managed and insurance solutions, and €0.8 billion by current accounts and AUC. Net inflows breakdown in Q1 2019 reflects a gradual increase in clients' interest towards medium-to-long term investment planning solutions.
CONTACTS:
www.bancagenerali.com
Media Relations Michele Seghizzi Tel. +39 02 408 26683
[email protected] Investor Relations
Giuliana Pagliari Tel: +39 02 408 26548
Business expansion continued at a robust pace in April: net inflows amounted to €545 million, bringing the total for the four months to nearly €2.0 billion. Clients' renewed interest toward managed solutions heightened in April. The Group's new Sicav, LUX IM, was particularly appreciated for the innovative and flexible solutions it offers. It reported €204 million net inflows in April and €590 million YTD.
Despite the recovery of demand for managed and insurance solutions, a good performance in terms of net inflows was also recorded by banking products (deposits and AUC) with €339 million in April (€1,140 million YTD), thus confirming the strong commitment to acquiring new clients who will be gradually supported in planning long-term investment choices.
BUSINESS OUTLOOK
The market recovery, driven by reassurance of ongoing support from central banks for the coming months, solid economic fundamentals in the United States and less critical ones in China than expected, drove down volatility, allowing investors to reconsider opportunities for diversification in asset management. The high level of deposits in this early part of 2019 is a sign of the growth potential of financial advisory guiding households through careful planning and wealth protection. Thanks to its versatile, diversified range, combined with the professional profile of its private bankers, Banca Generali is ideally positioned to grasp the opportunities this challenge presents. Business expansion continues at rates above the market average and the Bank's competitive position in bespoke solutions and innovative investment products have granted it an increasingly central role with private-banking customers as well, who now account for over 70% of the Bank's assets. This trend towards a rapid increase in net inflows continued in the first few weeks of April, and the interest in wealth management and advanced advisory is driving the development of new revenue sources. The market and geopolitical uncertainties that continue to dominate financial markets demand caution, but there are prospects for progressive growth of the Bank's key indicators.
* * *
PRESENTATION TO THE FINANCIAL COMMUNITY
The First Quarter financial results will be presented to the financial community during a conference call scheduled today at 2:00 p.m. CET.
It will be possible to follow the event by dialling the following telephone numbers: from Italy and other non-specified countries: +39 02 805 88 11; from the United Kingdom +44 121 281 8003; from the USA +1 718 705 8794 (toll-free +1 855 265 6959)
CONTACTS:
www.bancagenerali.com
Media Relations Michele Seghizzi Tel. +39 02 408 26683
Investor Relations Giuliana Pagliari Tel: +39 02 408 26548
The Manager responsible for preparing the company's financial reports (Tommaso di Russo) declares, pursuant to Paragraph 2 of Art. 154-bis of the Italian Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the documentary results, books and accounting records. Tommaso di Russo (CFO of Banca Generali)
* * *
1) BANCA GENERALI – CONSOLIDATED PROFIT AND LOSS STATEMENT AT 31 MARCH 2019
| (€ mil.) | 1Q 2018 | 1Q 2019 | % Chg |
|---|---|---|---|
| Net Interest Income | 13.2 | 15.9 | 19.9% |
| Net income (loss) from trading activities and Dividends | 15.2 | 4.0 | -73.7% |
| Net Financial Income | 28.5 | 19.9 | -30.2% |
| Gross fees | 182.4 | 208.0 | 14.0% |
| Fee expenses | -96.7 | -94.3 | -2.6% |
| Net Fees | 85.6 | 113.7 | 32.8% |
| Net Banking Income | 114.1 | 133.6 | 17.1% |
| Staff expenses | -21.1 | -21.8 | 3.1% |
| Other general and administrative expense | -37.3 | -35.2 | -5.7% |
| Depreciation and amortisation | -2.0 | -6.8 | 232.0% |
| Other net operating income (expense) | 13.9 | 13.7 | -1.6% |
| Net Operating Expenses | -46.5 | -50.0 | 7.5% |
| Operating Profit | 67.6 | 83.5 | 23.7% |
| Net adjustments for impair.loans and other assets | 0.2 | 4.0 | n.m. |
| Net provisions for liabilities and contingencies | -4.8 | -6.1 | 28.0% |
| Gain (loss) from disposal of equity investments | -0.1 | -0.1 | -33,2% |
| Profit Before Taxation | 62.9 | 81.4 | 29.4% |
| Direct income taxes | -13.8 | -14.7 | 6.5% |
| Net Profit | 49.0 | 66.6 | 35.8% |
| Cost/Income Ratio | 39.0% | 32.4% | -6.6 p.p. |
| EBITDA | 69.6 | 90.3 | 29.8% |
| Tax rate | 22.0% | 18.1% | -3.9 p.p. |
CONTACTS:
www.bancagenerali.com
Media Relations Michele Seghizzi Tel. +39 02 408 26683
Investor Relations Giuliana Pagliari Tel: +39 02 408 26548
2) BANCA GENERALI – RECLASSIFIED CONSOLIDATED BALANCE SHEET AT 31 MARCH 2019 (€M)
(€ millions)
| Assets | Dec 31, 2018 March 31, 2019 | Change | % Change | |
|---|---|---|---|---|
| Financial assets at fair value through P&L (FVPL) | 90.6 | 103.9 | 13.3 | 14.7% |
| Financial assets at fair value through other comprehensive income (FVOCI) | 1,987.3 | 2,224.6 | 237.3 | 11.9% |
| Financial assets at amortised cost | 7,166.2 | 7,057.5 | -108.7 | -1.5% |
| a) Loans to banks | 1,434.5 | 849.5 | -585.0 | -40.8% |
| b) Loans to customers | 5,731.6 | 6,208.0 | 476.3 | 8.3% |
| Equity investments | 1.7 | 1.6 | 0.0 | -1.9% |
| Property equipment and intangible assets | 101.8 | 235.4 | 133.5 | 131.1% |
| Tax receivables | 52.8 | 48.8 | -4.0 | -7.5% |
| Other assets | 335.5 | 356.5 | 21.1 | 6.3% |
| Total Assets | 9,735.9 | 10,028.4 | 292.5 | 3.0% |
| Liabilities and Shareholders' Equity | Dec 31, 2018 March 31, 2019 | Change | % Change | |
|---|---|---|---|---|
| Financial liabilities at amortised cost | 8,675.6 | 8,879.3 | 203.7 | 2.3% |
| a) Due to banks | 128.7 | 100.3 | -28.4 | -22.1% |
| b) Direct inflows | 8,546.9 | 8,779.1 | 232.2 | 2.7% |
| Financial liabilities held for trading | 0.4 | 0.5 | 0.1 | 31.8% |
| Tax payables | 18.0 | 22.6 | 4.6 | 25.4% |
| Other liabilities | 142.2 | 154.9 | 12.7 | 9.0% |
| Special purpose provisions | 164.8 | 162.7 | -2.1 | -1.3% |
| Valuation reserves | -11.6 | -6.0 | 5.7 | -48.7% |
| Reserves | 414.4 | 595.6 | 181.3 | 43.7% |
| Additional paid-in capital | 57.9 | 57.8 | -0.1 | -0.1% |
| Share capital | 116.9 | 116.9 | 0.0 | 0.0% |
| Treasury shares (-) | -22.7 | -22.7 | 0.1 | -0.3% |
| Net income (loss) for the period (+/-) | 180.1 | 66.6 | -113.5 | -63.0% |
| Total Liabilities and Shareholders' Equity | 9,735.9 | 10,028.4 | 292.5 | 3.0% |
CONTACTS:
www.bancagenerali.com
Media Relations Michele Seghizzi Tel. +39 02 408 26683
Investor Relations Giuliana Pagliari Tel: +39 02 408 26548
3) TOTAL ASSETS AT 31 MARCH 2019
| Milion of Euros | Mar 2019 | Dec 2018 | Abs. Chg | Chg. |
|---|---|---|---|---|
| Mutual Funds | 14,365 | 13,219 | 1,146 | 8.7% |
| Portfolio Management | 6,518 | 6,426 | 92 | 1.4% |
| Managed Assets | 20,883 | 19,645 | 1,238 | 6.3% |
| Life Insurance of which BG STILE LIBERO |
24,051 8,102 |
23,098 7,693 |
953 409 |
4.1% 5.3% |
| Non Managed Assets of which: Securities |
16,116 8,615 |
14,791 7,647 |
1,325 968 |
9.0% 12.7% |
| Total | 61,051 | 57,534 | 3,517 | 6.1% |
| Assets Under Management (YoY) | ||||
| Billion of Euros | Mar 2019 | Mar 2018 | Abs. Chg | Chg. |
| Mutual Funds | 14,365 | 13,571 | 794 | 5.9% |
| Portfolio Management | 6,518 | 7,143 | -625 | -8.8% |
| Managed Assets | 20,883 | 20,714 | 169 | 0.8% |
| Life Insurance of which BG STILE LIBERO |
24,051 8,102 |
22,462 7,428 |
1,590 674 |
7.1% 9.1% |
| Non Managed Assets of which: Securities |
16,116 8,615 |
13,239 6,906 |
2,878 1,708 |
21.7% 24.7% |
CONTACTS:
www.bancagenerali.com
Media Relations Michele Seghizzi Tel. +39 02 408 26683
Investor Relations Giuliana Pagliari Tel: +39 02 408 26548
4) APRIL 2019 NET INFLOWS
| Million of Euros | Apr 2019 | Mar 2019 | Abs. Chg |
|---|---|---|---|
| Mutual Funds of which LUX IM |
143 204 |
114 220 |
29 -16 |
| Managed Portfolio | -39 | -65 | 26 |
| Mutual Funds and Managed Portfolio | 104 | 49 | 55 |
| Life Insurance | 102 | 149 | -47 |
| Managed Assets | 206 | 198 | 8 |
| Non Managed Assets | 411 | 338 | 73 |
| of which: Securities | 150 | 160 | -10 |
| Total | 617 | 536 | 81 |
| Jan - Apr 2019 | Jan - Apr 2018 | Abs. Chg | |
| Mutual Funds | 400 | 404 | -4 |
| of which LUX IM | 590 | 47 | 543 |
| Managed Portfolio | -254 | 275 | -529 |
| Mutual Funds and Managed Portfolio | 146 | 679 | -533 |
| Life Insurance | 670 | 603 | 67 |
| Managed Assets | 816 | 1,282 | -466 |
| Non Managed Assets | 1,212 | 766 | 446 |
| of which: Securities | 629 | 203 | 426 |
| Total | 2,028 | 2,048 | -20 |
| Life New Business | |||
| Apr 2019 | Mar 2019 | Abs. Chg | |
| Life New Business | 231 | 294 | -63 |
| Jan - Apr 2019 | Jan - Apr 2018 | Abs. Chg | |
| Life New Business | 1,197 | 1,017 | 180 |
www.bancagenerali.com
CONTACTS:
Media Relations Michele Seghizzi Tel. +39 02 408 26683
Investor Relations Giuliana Pagliari Tel: +39 02 408 26548