• Net New Money: EUR2.6 billion, representing 10% of TFA.
• New Loans in Consumer Finance: EUR2.1 billion, up 12% year on year.
• Deals in CIB: 27 deals, up 36% year on year.
• Net Profitability Increase: 6% in wealth management, 20% in CIB, 5% in consumer finance.
• Fee Growth: Up 30% compared to a year ago.
• Cost/Income Ratio: 43%.
• Net Profitability: EUR330 million.
• CET1 Ratio: Approximately 15.4%.
• Share Buyback: EUR385 million authorized.
• RWA Reduction in CIB: Down 18% year on year.
• Consumer Finance NII: Up 8%.
• Loan Book Yield: 7.2% net profitability.
• Asset Quality: CoR at 51 basis points.
• Capital Generation: 70 basis points in the last three months.
• Total Financial Assets (TFA): EUR103 billion, up 16% year on year.
• New Sales Staff Recruitment: 33 new sales staff.
• Consumer Finance New Loans: EUR2.1 billion, up 12%.
• EPS Growth Guidance: 6% to 8%.
• RWA Optimization: Overall RWA decreased by 6%.
• Insurance Contribution: Lower due to normalized results.

• Warning! GuruFocus has detected 3 Warning Sign with MDIBF.

Release Date: November 12, 2024

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

Positive Points

• Mediobanca SpA (MDIBF) reported a strong commercial flow with EUR2.6 billion of net new money, doubling the best industry level at 10% of TFA.
• The company achieved a 6% increase in net profitability in wealth management, 20% in CIB, and 5% in consumer finance.
• Fee growth was significant, up 30% year-over-year, driven by wealth management and CIB.
• Strong capital generation with 70 basis points in the last three months and CET1 at 15.4%.
• The company has initiated a share buyback program for EUR385 million, authorized by the AGM and SSM.

Negative Points

• Net profitability was slightly lower than last year due to fewer extra gains booked in Generali.
• There was a temporary drag in NII in wealth management and CIB due to all-time low credit spreads.
• The cost of risk in consumer finance increased, driven by a higher mix of personal loans.
• The company experienced a decrease in insurance contribution due to normalized results and lower non-operative results.
• NII guidance was lowered due to higher deposit costs and low corporate and mortgage spreads.

Q & A Highlights

Q: Can you provide insights on the Premier deposit gathering campaign and its expected impact on NII and fees? Also, when can we expect a decision on further capital distributions? A: The Premier deposit gathering campaign is expected to convert at least 50% into managed assets or advisory-driven assets, though it will initially pressure NII. We anticipate NII improvement in the second half of the year due to contributions from Compass and new corporate loans. Regarding capital distributions, a decision will be made towards the end of the plan, considering potential M&A activities and SSM recommendations.

Q: What are the reasons behind the lowered NII guidance, and how does this affect your EPS growth target? A: The NII guidance was lowered due to higher deposit costs and low corporate spreads, which led us to focus on increasing TFA and managed assets rather than loan production. Despite this, we maintain our EPS growth target of 6% to 8%, driven by cost control and potential revenue improvements in upcoming quarters.

Q: Could you elaborate on the cost of risk in consumer finance and its recent increase? A: The cost of risk in consumer finance has increased due to a shift towards more personal loans, which have higher profitability but also higher risk. This increase is partly due to a return to pre-COVID levels and a change in loan mix. Despite this, the net profitability of these loans remains strong.

Q: How are you managing costs while maintaining growth, and what is the outlook for wealth management marginality? A: We are maintaining cost efficiency by prioritizing key growth initiatives, such as expanding our physical and digital infrastructure, while trimming less strategic activities. In wealth management, we focus on growing the business and expanding revenue, even if it means a slower improvement in management ROA due to historical asset allocation and market trends.

Q: What is the outlook for CIB in the coming quarters, and how do you view asset management consolidation in the industry? A: We expect improvement in CIB driven by announced deals across various segments and geographies, with a positive trend in M&A and acquisition finance. Regarding asset management, we see consolidation as necessary for liquid solutions, but our focus remains on wealth management distribution rather than production, with potential for organic growth and small M&A opportunities.

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