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Italy's Fineco warns net financial income could drop in 2024

MILAN (Reuters) - Italian online bank and brokerage Fineco on Tuesday signalled a possible drop in its 2024 net financial income (NFI), sending its shares down 4%, after clients moving cash into government bonds again hurt its deposit base.

Fineco uses NFI as a key profit measure tracking both income from the gap in lending and deposit rates as well as income from its large government bond portfolio.

Fineco, which pays no interest on deposits, has been particularly affected by the competition government bonds pose to bank funding now that they again pay positive returns.

Deposit outflows forced Fineco to cut its outlook for full-year net interest income at the start of 2023.

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It said it expected deposits to stabilise next year, after the offer of a new government bond aimed at small savers in October caused its direct funding to fall by 909 million euros ($970 million) as customers bought 620 million euros of the new retail bond.

To support direct funding, Fineco said it had changed its current account offer to retain or attract customers, hurting banking fees in the third quarter.

Fineco expects banking fees to stagnate in 2024 for a second straight year.

Revenue from its investment services is instead expected to grow by a high single-digit percentage next year, in line with the growth posted in 2023.

Chief Executive Alessandro Foti said investors had been questioning the bank about its sovereign portfolio, as risk premiums on Italian debt have been rising as Europe's economic outlook worsens.

Foti said some investors were considering under-weighing Fineco shares in their portfolios given to its exposure to Italian debt, adding the bank at present had no liquidity to invest and would not add to its sovereign portfolio.

($1 = 0.9369 euros)

(This story has been refiled to add a dropped word in paragraph 6)

(Reporting by Valentina Za and Federica Urso, editing by Alvise Armellini and David Evans)