Net profit down 14% for Banca Generali in the first half of 2018, but assets under management and administration up sharply.
The institute led by Gian Maria Mossa closed the first six months of the current year with a net result of 92,6 million euros, down by 14% compared to the same period of 2017, reflecting the "significant reduction of the more variable revenue components depending on the markets (performance fees -70%), which was partly offset by the strong growth of recurring activities and cost containment action”. Net of the first more volatile items, the bank announced in a note, recurring net income grew by 65% to 58,1 million.
Assets managed and administered on behalf of customers grew sharply, reaching a new high of 58,1 billion (+11%), while net new flows reached 3,15 billion. "It should be emphasized that - as in the first quarter - this growth was achieved in the context of contrasted financial markets, both on the equity and bond fronts", continues the note.
The stock exchange seems to appreciate the numbers released by the bank and the share rises by 1,2% to 22,18 euros.
As regards the data relating to the second quarter, net profit stood at 43,5 million from 51,9 million in the same period of 2017. The result beat the consensus of analysts who expected a profit of 41 million. The figure – explains the bank – was affected by valuation adjustments for 3,8 million linked to the application of the new IFRS 9 standard in the context of extraordinary volatility on Italian government bonds. In the same period, consolidated revenues reached 109,3 million, slightly higher than the 107,4 expected. The operating result, equal to 62,2 million, is instead higher than the forecasts of 56,9 million.
Going back to the half year, Banca Generali's intermediation margin fell to 223,4 million against 235,3 million last year. On the other hand, management fees increased (317,9 million, +14%), driven by the growth in assets and the acceleration in bank and entry fees (36,1 million, +25%). The latter "benefited from the new products and services launched by the bank in the last year to complete the offer and favor the diversification of revenues".
On the financial margin, which grew by 18,7% to 48,6 million "mainly due to the decision to increase the defensive profile of the treasury's securities portfolio at the beginning of the year with a consequent increase in trading profits in the period".
The decision to reinvest cash in the second quarter favored a recovery in net interest income (14,8 million, +12% q/q) which the bank expects will continue throughout the year.
Operating costs amounted to €93,6 million (+0,4%) and include €3,8 million paid into bank resolution funds (€1,8 million in the first half of 2017). The reported cost/income ratio stood at 40%. In the second quarter the operating income amounted to 109,3 million from 112,8 million in the previous year. Net recurring commissions increased by 24% to 74,2 million, but variable commissions, linked to the financial markets, fell by 52% to 14,9 million. The CET 1 ratio as at 30 June 2018, inclusive of the impact of Ifrs 9 and Ifrs 15, was 18,2% and the Total Capital ratio was 19,8%. “Both ratios – underlines the bank – are significantly higher than the Srep requirements set by the Bank of Italy for 2018 (Cet1 ratio at 6,5% and Total Capital Ratio at 10,2%)”. The capital surplus with respect to regulatory requirements reached 305 million.
Satisfied and confident in the results for the next quarters, the CEO of Banca Generali, Gian Maria Mostra, underlined how the bank has achieved “a very solid result which demonstrates our ability to attract new customers even in challenging market contexts. At the end of June, our masses reached a new all-time high with a double-digit increase over the last year”, underlines Mossa. The bank “also remains focused on the strategy of strengthening the recurring component of the results to increase their sustainability regardless of the dynamics of the financial markets. The positive response to the new investment solutions and advanced advisory services combined with the implementation of some new strategic projects for the bank make us confident for the coming quarters and for the achievement of the set objectives”, concludes the CEO.
As regards the future, the bank expects that "the commercial growth trend will continue in the second half of the year thanks also to the enrichment of the range of solutions and services".
