Commerzbank Ag Ord New

Hello and welcome to the Commerce Bank AG conference call regarding the third quarter results of 2025. Please note that this call is being transmitted as well as recorded by audio webcast and will subsequently be made available for replay in the internet. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following Bettina Orlop's and Carsten Schmidt's presentations. Let me now turn the floor over to our CEO Bettina Orlop.

Good morning everyone and welcome to our earnings call. Our growth story in Commerzbank continues and we have achieved the best nine months operating result in the history of Commerzbank. This strong momentum also drives our outlook. With increased expectations for net interest income, we are very confident to deliver on our targets in 2025. I will present to you the financial overview after nine months of this year and the key strategic topics before Carsten will walk you through the financial performance of the third quarter.

Let me start with our view on the last 12 months.

It was a special journey that we embarked on. Based on an exceptionally good team spirit, we created a very strong momentum for Commerzbank. We developed our momentum strategy with ambitious targets for 2028. 50% cost income ratio, 15% return on tangible equity, and 100% payout each year. In this process, the extremely high commitment of everybody involved was as important as the bare numbers and targets. And this has translated into strong focus on delivery. The success is impressive. 13% loan growth in corporate clients, 8% growth in fee income, and an 11% increase in total revenues are proof of the strength of our team yellow. This is, however, only possible because we have a strong and robust business model that meets the needs of our clients. We further strengthened our client franchise and are proud of the deep relationships, deep client relationships, I have to say, that are underpinned by many awards we have won. The very good performance and positive prospect have also driven our share price, which has almost doubled in the last 12 months. Based on our team spirit, our well-established client relationships, and with some support from macro developments, I see a lot of further potential to be lifted. Our focus on shareholder value will also be further strengthened by the employee share program, which has started in October and aims to make every employee a shareholder of Commons Bank. Now, let us have a closer look at the nine-month financial performance of this year. The material growth in fee income and around 500 million higher revenues in mBank, including less burdens from the provisions of FX loans, have led to the record operating result after nine months. Together, with high cost discipline, this growth is reflected in the cost-income ratio of 56%. which is exactly where we wanted to be on the path towards increasing efficiency going forward. In terms of return on tangible equity, we have achieved 10% after nine months when excluding the restructuring charges. The double-digit return level is our new baseline for growth from 2026 onwards and demonstrates the significantly increased strengths of Comets Bank. The high revenue growth of 11% is based on our significantly increased fee income. But equally important is a very successful management of net interest income in an environment of significantly lower rates compared to last year. The decrease of just 1% in NI provides us with lots of confidence for the next quarter. At the divisional level, the somewhat lower net fair value result in corporate clients has been broadly offset by the strong fee income in PSBC, and the group overall benefited from the strong trajectory in MBAC. So the first nine months have been very successful financially. And this also applies to the implementation of our strategy. Let me highlight five areas in which we have made significant progress. First, on customer focus. Since last month, the new client coverage model in PSPC Germany is live. Key elements are personal one-on-one relationships for affluent clients and more time for high-quality advice in wealth management. Second on growth. Based on our deep client relationships in corporate clients, we are the leading go-to bank. This has led to significant capital accretive loan growth of 13% in the last 12 months. Carsten will further elaborate on this. Important to note is that because this growth is thanks to strong ties with our clients rather than any pricing concessions. Third on AI. We already reported on use cases such as fraud detection and AI-assisted documentation for advisory calls with corporate clients.

One of the latest applications is the AI enhancement of our KYC processes. Fourth, on costs.

The implementation of the restructuring program is fully on track. The latest milestones have been the successful completion of all negotiations with the workers' representatives, and the offering of part-time early retirements to a selective group of people. The acceptance rate of almost 50% is very high. And fifth on capital. In Q3, we have successfully completed our first SRT of the year. The $3 billion notional and $1.6 billion RWA relief came at low costs in the area of 1% of RWA. This is very capital-efficient. And in placing the first loss, we also achieved some risk mitigation.

We plan for further SRTs in the weeks to come.

All these achievements and the financial performance contribute to the confidence of the regulators into ComEd's bank. This is reflected in our improved SREP results with a 10 basis points relief in Pillar 2 requirement. Looking into the next years, our regular planning update has confirmed our strategy. a few topics of special strategic importance have been identified and addressed. First, we stay focused on our growth path and pay special attention to the German stimulus package. This is a meaningful additional catalyst for our financial performance. Second, AI is one of the most important drivers to transform our bank and ensure increasing efficiency levels. What we have seen so far is just the beginning. and we will further invest heavily into AI. One example is the support of our staff in the advisory center. Live transcription of calls, proposals for client solutions, and support for outbound calls will contribute to increasing efficiency and client satisfaction. And third, we strive to optimize the deployment of capital above 13.5%. Besides capital returned by means of dividends and share buybacks, This includes the exploration of further organic growth opportunities as well as inergonic options such as bolt-on acquisitions. In an ongoing screening, all options must meet our investment criteria in terms of business fit and value accretion.

Now back to Marco and the German stimulus.

The German investment package for defense and infrastructure combined with legislative changes such as taxation reliefs and depreciation rules will significantly support our growth ambitions. Within our GDP forecast of 1.2% for 2026, we expect a considerable fiscal stimulus of 0.8% of GDP. The recently weaker German economic data do not contradict the expectation that a more expansionary fiscal policy will boost the economy. The budget for 2025 and the law on the extra budgetary fund only came into force at the beginning of October. Hence, the positive impact will only be visible in future economic data. Furthermore, the federal government has shifted a considerable amount of investment spending from the core budget to the extra budgetary fund in the budget for 2026. This increases the federal government's financial leeway, and it can quickly increase other expenditures. This will help the economy in 2026 and 2027, even if the extra spending is partially directed at consumption instead of investments. The halving of the ECB deposit rates to 2.0% also points to higher economic growth. The positive view into 2026, however, still needs to translate into higher economic activity of corporates and especially the German Mittelstand. In this regard, The highest business expectations since 2022, according to the EFOR survey, are positive. So sentiment has improved. The Mittelstand still remains cautious when it comes to investments in Germany. Bureaucracy, energy prices and shortage of skilled workers still weigh on the business prospects of many corporates. Government-induced reforms to tackle these issues are important to unfold the huge potential of the stimulus package.

Now let's move on with our own capital return program. We are very well on track and plan for a steady increase in capital return.

Our currently active 1 billion buyback program for 2025 is progressing well, and we have applied for a second tranche of up to 600 million euros. Once we have a clear view on the full year results, we will decide on how much we will propose as dividend for 2025 and what the exact size of the second share buyback will be. Both steadily increasing dividends and the flexible use of buybacks will remain integral parts of the capital return program. Returning 100% of net profit after 81 translates into attractive capital return yields of 8% increasing to 11% over the next year.

This is a key element of our strategy and our equity story. Let me now conclude with our outlook for 2025.

Based on the strong performance after nine months, we raise our outlook for net interest income from 8 billion to 8.2 billion euros. Furthermore, we improve our expectation for the risk result to below 850 million euros. We stick to our cost income ratio target of 57% and our target for the net result of 2.5 billion, which translates into 2.9 billion when excluding the restructuring charges. And we consider this to be the floor of our full year expectations. And we maintain our expectations for the CET1 ratio of at least 14.5% at the end of this year. Looking at 2026, our view is also very positive. The strong NII trajectory and the micro-telvent from the German stimulus form significant support for our momentum strategy. With the presentation of our full year results next February, we will provide the full view on our outlook for 2026. Now let me hand over to Carsten for the financial performance of the third quarter.

Over to you, Carsten. Thank you, Bettina, and good morning, everyone.

It is my pleasure to present the results of the quarter. Let's start with a brief overview. Based on strong revenue growth, the operating result is up 18% compared to Q3 last year. The net result is lower, but only due to a one-off tax effect from DTAs, driven by the reduction of the German corporate tax rate from 2028. Net royalty thus came in at 7.8% for the quarter. For the whole financial year, we are on track to reach our ROTI target despite the tax effect thanks to the good underlying performance of the business. The CT1 ratio of 14.7% is 18 basis points higher than in Q2 and fully in line with our target of at least 14.5% by year end. I will now go through the details starting with revenues. In the quarter, we achieved a 7% increase in revenues compared to last year. Net interest income is holding up very well, being on the same level as Q3 last year, despite significantly lower ECB rates. In net commission income, we have maintained our momentum with income growth in line with our target of around 7% year-on-year. While opposing effects are largely canceling out, the net fair value result is marginally negative due to a minus 34 million valuation effect from our holding in eToro. Other income, excluding FX loan provisions, mainly stems from a positive hedge result. Now to in more detail. All customer segments grew their business year on year, with mBank additionally benefiting from a one-off from the cards business. Corporate clients generated good revenues in the generally slower summer quarter. Trade finance has increased revenues despite the ongoing weakness in exports. and capital markets had a very healthy syndication business. The biggest increase came from lending, where fee income linked to loan origination was significantly higher, in line with volume growth. Green energy was especially strong. Private and small business customers in Germany continued to grow their fees from securities business, both from securities volumes and transactions, compared to last year. In payments, the higher account fees that were introduced at the end of Q2 are starting to contribute. We have finished the first round of reach out to customers with a good acceptance rate. It has also resulted in customers increasing volumes. Asset management benefited from higher transaction fees at Commerzreal and growth with wealth management products. With our ongoing initiatives, we have maintained momentum and are on track to reach our growth target for the year. Let's move on to interest income. We again had some headwinds from rates. In Q3, ECB rates were on average 25 basis points and Polish rates 50 basis points lower than in Q2. Nevertheless, net interest income is nearly on the same level as in Q3 last year. This clearly demonstrates the resilience of our business model. In corporate clients, net interest income is up compared with Q2 and Q3 last year. Lower funding costs for trading positions and higher income from the lending business were the main drivers. The lower funding costs linked to lower ECB rates are, however, partly offset in net fair value of trading book positions. In PSBC Germany, net interest income is up year on year and on the same level as in Q2. The effect of lower ECB rates and our investment in promotional offers for new deposits were offset by increased contributions from the replication portfolios and mortgages. In mBank, the lower NII results mainly from the cut in policy rates. The effect has been offset by a higher net fair value from derivatives. In others and consolidation, NII is also lower, mainly due to rate cuts. Again, there is a positive offset in the net fair value result from derivatives. Looking at volumes, we had a very strong quarter. Corporate clients have continued to grow the loan business with all customer groups. The loan volume is now up 13% year on year. The deposit volumes have been stable. PSBC Germany has maintained stable side deposit volumes and increased call money by almost $8 billion with the promotional offers in July. This strong inflow has led to an expected uptick in the average deposit beta to 42%. In the mortgage business, the volume of new contracts has increased further, indicating a recovery in demand as house prices have stabilized. and interest rates have reached a steady level. The outstanding volume is somewhat lower due to seasonally higher early repayments. On the next slide, I will give you more details on the loan growth in corporate clients. As mentioned, corporate clients is well ahead of its 8% annual growth target and achieved this growth based on our diversified franchise. This franchise extends to customers worldwide who have a connection to Germany. It also includes the foreign activities of German companies. As expected, with a sluggish German economy, there has been only moderate growth with corporates in Germany. In contrast, demand from the public sector has picked up over the last quarters. Another area of growth has been green infrastructure, both inside and outside of Germany. We have steadily grown the portfolio over the last years. We expect this to continue despite the changes in the political environment given the economic attractiveness of the projects we are involved in. Also, demand outside of Germany has been healthy. Around 80% of the growth has been equally spread across Europe and the US, and the rest came from Asia. The new business has been diversified by sector with the largest demand from energy, chemicals, and consumption. Finally, in line with our momentum strategy, we expanded our relationship with institutionals especially financial institutions in emerging markets, in loan and trade finance products. All this business has been generated at attractive risk-adjusted margins as we maintain our focus on the RWA efficiency of our client relationships. Looking into 2026, we expect demand in Germany to pick up as the extra spending by the German government should start stimulating the economy. The significant growth we have seen in renewable energy and in financing for the electricity grid, as well as guarantees for the defense projects, are first harbingers. We are therefore confident that we will maintain our profitable growth trajectory. This brings me to the next slide with the outlook for NII. On the back of the successful loan growth and deposit management of the last quarters, we again raise our NII outlook from $8 billion to around $8.2 billion for the year. We believe that we have reached a trough in interest income in the second half of this year. For Q4, we do not expect significant deviations of the main drivers, and net interest income should therefore be on the same level as in Q3. We anticipate an ongoing increase in contributions from the replication portfolio offset by slightly higher deposit beta and continued volume growth. The contribution from mBank will be somewhat lower due to the expected rates development in Poland. 2025 proves that our business model is holding up well even during a rate cut cycle with ECB rates on average around 1.5% lower than in 2024. While lower rates have reduced NII in 2025. We also had a positive effect in the net fair value of around 300 million. For 2026, we expect ECB rates to remain at the current level. We therefore do not anticipate the contribution of positions that are rate sensitive to ECB interest rates to change significantly, neither in interest income nor in the fair value result. With an expected 2 billion NII in the fourth quarter, we therefore start with a baseline of 8 billion NII for 2026. From this starting point, the main drivers of net interest income in 2026 will be rising contributions from the replication portfolios and continued growth partially offset by headwinds from the beta and rate cuts in Poland. In total, these drivers should contribute approximately 400 million resulting in an expected net interest income of around 8.4 billion. This is a good basis to reach our profitability target for 2026 and subsequent years. Now to costs on slide 19. We have continued to manage our operating expenses in accordance with our target cost income ratio of 57% for 2025. The main driver of costs excluding mBank has been personnel expenses. Half of the increase is attributable to planned increases and half to valuation effects of a higher share price on equity-based compensation. Additionally, in H1, we had impaired intangibles of 65 million of Aquila capital, which is reflected in the cost line. mBank has, as planned, a higher cost increase from significant investments in business growth. Additionally, compulsory contributions were higher. For Q4, we expect higher costs than in Q3, as there will be some seasonal effects, further growth in mBank and higher personnel costs as we continue to ramp up shoring and sourcing centers to transfer further tasks currently done in Germany. After booking the momentum restructuring expenses in Germany in the first half of 2025, we booked the majority of the provisions for staff reductions at our international locations in Q3. In Q4, we expect an additional booking of less than 20 million. The next slide covers the risk result. The risk result came in at 215 million. This is fully in line with our expectations. The portfolio continues to be resilient, and while we expect a somewhat higher risk result in the longer fourth quarter, we are very confident that we will end up below 850 million, given the good performance so far. As this has been a topic recently, we have added a slide on our NBFI portfolio in the appendix. This portfolio mainly reflects our well-established institutional business in corporate clients, which we are very comfortable with. Our exposure to private credit is not noteworthy. We have no direct exposure to US private credit markets. This concludes the view on the key line items. I've already covered the main drivers of the excellent operating results and will therefore focus on the tax rate. With 36%, the tax rate was well outside our normal range of 25 to 30%. This is primarily due to a change in the German tax law. From 2028, the corporate tax rate will be reduced in 1% steps from 15 to 10% in 2032. While this will be positive long-term, it reduces the current value of future tax credits. We therefore had to reflect this in the DTAs that we hold and is a one-off event. In case the proposed tax increases in Poland come into law, we will have an opposite effect in Q4 with a write-up of Polish DTAs. Overall, we expect the 2025 tax rate to be rather in the upper half of our expected range of 25 to 30%. The next slides cover the results of the operating segments, starting with corporate clients. As already mentioned, corporate clients had a good performance in the quarter, increasing the operating result by 15% year on year. Revenues benefited from the strong loan growth and the good capital markets business. This is most visible in international corporates with 14% higher revenues and the strongest loan growth. In Mittelstand and institutionals, the business has also performed well. However, the effect of lower rates on deposits could not be fully compensated. And finally, the risk result has remained well contained, supporting the operating results. PSBC Germany has also improved its operating results, both year on year and quarter on quarter. As mentioned, the main revenue drivers have been the securities business, the new account fees, as well as some contribution from loans and deposits. In private customers, the investment and promotional offers had the expected impact in Q3 and will start to pay off in 2026. Asset management held revenues on the level of Q2 in the rather slower summer months. mBank has maintained its profitability nearly at the record level of Q2. As expected, provisions for FX loans have been lower than in the previous quarter, and we expect Q4 to be the last quarter of sizable provisions. In September, MBank published its new strategy until 2030. MBank targets continued growth with the ambition to reach a 10% market share in Poland. With this growth and a target cost-income ratio below 35% before banking tax, MBank will materially contribute to the financials of the group. For 2026, mBank aims to start paying a dividend. This will ultimately benefit Comet's bank shareholders as it supports our capacity to distribute capital. Others in consolidation reported an operating loss of 53 million in the quarter, nearly on the same level as Q3 last year. Year to date, the operating result is plus 56 million, in line with our expectation of a more or less neutral result for the full year. Revenues are slightly higher than Q3 last year, with lower NII compensated by the fair value result. Compared to Q2, there have been some additional valuation effects. Most noteworthy has been our stake in eToro. In Q2, we booked a gain of 63 million following the IPO, while we needed to book a valuation loss of 34 million in Q3 as the share price fell during the quarter. We will also see some effects in Q4, depending on share price performance. On the next slide, I will cover the RWA and capital development. The CT1 ratio stood at 14.7% at the end of the quarter, up 18 basis points from Q2. There were two main drivers. Risk-weighted assets are lower as RWA from loan growth were more than offset by an SRT issuance and model effects. We plan to issue further SRTs in Q4, optimizing the return from the loan book of corporate clients. At the same time, capital has increased as the deductions from prudential valuation were lower due to decreased market volatility after spiking up in spring of this year. In line with our distribution target of 100%, we have not included the quarterly profit for the calculation of the CT1 ratio. In total, we have already dedicated 2.1 billion for distribution to shareholders in the first nine months of the year. The MDA has gone up from 10.2% in Q2 to 10.4%. The reason is the introduction of a counter-cyclical buffer in Poland. A similar impact is expected in Q3 next year when the Polish counter-cyclical buffer is increased further. Finally, we have received the SREP letter from the ECB. Our 2026 capital requirements were lowered by 10 basis points. For us, This is a recognition of our solid business model and our increased resilience in recent years. As we must hold only part of the regulatory capital requirements as CT1, the MDA will be reduced by around six basis points effective from January. The outlook 2025. As already mentioned, We have improved our outlook for NII from 8 to 8.2 billion and for the risk result from around 850 million to below 850 million. We confirm all other targets. We continue to expect growth of the net commission income of around 7% compared to last year, a cost income ratio of 57%, a net result of around 2.5 billion, and a CT1 ratio of at least 14.5%. We will provide our outlook for 2026 alongside the full year results in February. We clearly see upside on NII compared to our original plan that we published in February and expect support from an improving macro environment. Thank you very much for your attention. Bettina and I are now looking forward to taking your questions.

Ladies and gentlemen, if you would like to ask a question now, please press 9 followed by the star key on your telephone keypad. In case you wish to cancel your question, please press 3 followed by the star key. Please press 9 and start now to state that you have a question. The first question at this point comes from Benjamin Goy, Deutsche Bank. Please go ahead.

Yes, hi, good morning. Two questions, please, on net interest incomes. The first, thanks for slide 17, is the breakdown on the corporate client growth, but maybe you can speak a bit more about your growth expectations for corporates in Germany and when this is going to inflect, whether it's early 26 or a bit later. And then secondly, you also mentioned that your 26... NRI is likely impacted by higher deposit beta, which you consistently, I think, conservatively assumed. So just wondering what increase you have expected and how much was actually the Comdirect campaign in July increasing the deposit beta last quarter? Thank you.

Thank you, Benjamin.

So, I mean, what is the outlook for corporates in Germany? You see that The growth is also already now in Germany when it comes to public institutions and also partly green infrastructure. But the majority we expect for 2026, one factor will be clearly the stimulus package of the German government. But then also given the improving business sentiment which we see, there should be also more activity specifically for Mittelstand clients for Germany, and there's apparently also the Med for Germany initiative, which means to have significant investments in Germany in the coming years. And on NRI 2026, I hand over to Carsten.

Yeah. Thanks, Benjamin. Let me start with the increase in the deposit volume that we've seen in the third quarter, as you asked for it. So in July, we increased our deposit volume by around 8 billion from the offers that we had out via Comdirect. This led to an increase in the beta. On the personal customer side, we expected this, which is why you also see the beta coming up in Q3 to 42%. We've now said that we expect a slight increase into Q4, which is not stemming from the personal customer business, but rather from the corporate client side. Given the generally lower rate environment at the moment, it becomes harder to actually fully transmit the rate cuts into the client business. And hence, you have a structural increase of the beta from that side. So for the full year, we're still expecting an average beta of around the 40% mark we indicated beginning of the year, potentially minimally higher. And for 26, as you asked for the development towards the 8.4 billion NII, for 26, we expect that the current rate environment actually will come with the same strain on the corporate client beta. on the personal customer side as mentioned we expect this to come down again in q4 and then manage it as we go in in the quarters of next year thank you the next question comes from tarik el mishad bank of america please go ahead

Good morning. Thanks for taking my questions. Just a couple, please. On cost savings, can you update us a bit on the progress on the different initiatives you've launched with your CMD earlier this year and how you're confident to deliver, especially the trajectory on that? And second one on the capital. So if I understand well, by year end, we will have a pet review on the mix between the cash and buyback. So you say paying 100%, is it possible you pay more than 100% if you are above 14.5% CT1? Because we know the 1.6 billion or so of buyback and then the components on the cash, given where you trade, could that be higher to lead you more than 100% from this year? Because I think that now what we need to look at is the 14.5% CT1. Thank you.

So, Tarek, thank you for your questions. On cost savings, we make very good progress. First, when it comes to the restructuring program itself and the headcount reductions, we concluded all necessary negotiations with the workers' council and we have already announced all structural changes and we are in the process of implementing them. And we also started with one instrument which is kind of a part-time retirement program, which has a benefit that people stay on for the next one to three years. So you can really manage transition and then they will go in their passive retirement phase. And we had a very high acceptance rate, higher than we expected with 50% of the people we addressed that to. And then all other social instruments are also now available. And therefore we are, very much developing according to plan. When it comes to the necessary measures, when it comes to efficiency, streamlining, AI showing, we are also showing exactly the progress we expect. We are delivering AI use cases day by day. One can really say there's a lot of speed in that. And also the sharing activities, are ongoing. We have already hired a number of people in Sofia, in KL, for the different teams. So all well underway and on track. When it comes to capital, actually, I mean, we are paying more than 100% because we have the benefit that we can exclude the restructuring cost from our payout ratio. So if you if you take really the net result after restructuring costs, we will pay out more than 100% this year. But we will stick with 100% net income after 81 before restructuring costs because that is exactly what we aligned also with the regulator as a basis for our share buyback requests. But the... The clear mix between dividend and share buybacks, we will finally decide when we see the results. It's clear that we want to show a very attractive dividend as well. We now had 30 cents, 65 cents, and apparently we want to have further increase also given that share price has nicely improved over the last months. And it will be very attractive and it will be a very attractive mix. And as I said, the $1 billion dividend share buyback program is currently underway. The next one we have just applied for, and then the rest we will update in February.

Okay, thank you very much.

The next question comes from Jeremy Sige, BNP Paribas Exchange. Your line is open.

Brilliant, thank you very much. Good morning. Two questions, both on capital, please. Firstly, is there anything specific coming in Q4 that would bring the 14.7% down to 14.5? Or does the sort of greater than 14.5 mean actually it could stay at 14.7? So anything specific you're expecting in Q4? And then the second question I had was on your slide six, when you talked about sort of future strategy elements, um topics of special strategic importance for the coming quarters you mentioned optimizing deployment of capital above 13.5 target are there any new ideas that you have in mind or any new areas of focus or are you just reflecting something that's already a core plank of your strategy thank you jeremy um i mean on capital we always know that um

0.1% up and down can also be just reflected by currency changes, ethics changes, and stuff like that. But overall, we expect more growth to come in Q4, and that will have an impact. There will be also more SATs to come, but that's the whole story around that. When it comes to future capital deployment, I mean, we're thinking about investments all the time. The whole discussion around AI, specifically agentic AI is accelerating. So we definitely also think to invest more into it to accelerate certain things. And then we explore, as we have said beforehand, we explore different M&A opportunities to make sure that we can strengthen our business model. But again, Problem is they have to meet very strict criteria because we have very clear targets out there when it comes to 2028. So it needs to be value accretive and supporting our growth ambitions, but also our profitability ambitions for the years to come.

That's very helpful. Thank you.

The next question comes from Kian Abouzein, JP Morgan. Please go ahead.

Thanks for taking my questions. The first one is related to loan growth in the corporate clients, where you have given very helpful details on slide 17. Can you talk about the asset spread margin environment in the different areas? And what are you doing differently versus peers, which is driving this very strong growth rate that you see? And the second question is on PSPC deposits, where we've seen also very strong growth, and should we be looking for more flattish growth going forward? How should we look around deposit growth in PSPC? And in this context, you mentioned that the structural hedge could grow from 147 billion, which was flat, wondering, How should we think about the deposit growth and in conversion the structural hedge?

Is there any guidance you can give us? Let me start just with the PFPC deposit growth.

I mean, the deposit growth has been very much supported by the attacker products, which we have seen in July. We now have stopped them. But overall, when you look in our plans, and that has not changed, we plan for an average deposit growth of approximately 2%. And that is also very much coming by what our clients do. But also, we definitely want to grow with our client base. And for the rest, I hand over to Carsten.

Maybe to then also add to your question regarding the structural hedge position, We have an unchanged position regarding the replication portfolio coming from Q2 to Q3. And as you know from the slides, we have 147 billion currently in this portfolio. Given the change deposit structure that we're having now of size of the portfolio, we will of course look at potentially increasing this. So this is something we'll decide during Q4 and then update you on it. I would also like to remind you that we have in total 200 billion plus in deposits that we can model and always sort of remain a distance to what we actually have in the model. So there is room to look at that and we will do this during Q4. Then on your first question regarding loan growth on corporate clients and the margin development, I would like to pull this into two directions a bit. First and foremost, you've seen that we saw healthy loan growth, especially on the international side. We grow the portfolio on that end, as mentioned, as good margins. The business is contributing, so we are actually seeing a healthy increase, and it is mainly coming, quite frankly, Kian, from our point of view, coming from the deep relationships we have with our customers and the international presence that we are offering with our outlets internationally. So that basically allows us to accompany them whenever there's financing needs coming up. And looking a bit more into the domestic part and the growth, especially when it comes to the public sector, to the municipalities, We interpret this as the first pickup of the infrastructure packages that also have been announced by the government. This business is fantastic business when it comes to the risk position of the book. It, of course, also comes at slightly lower margins, but I would also like to say that in this space municipalities are not necessarily only the municipalities, but also municipalities like suppliers, et cetera, and those usually from a margin perspective go a bit more into the Mittelstand territory. So, hence growth in the book at good margins and rather accreting to the RWA efficiency of the book.

Thank you. The next question then comes from Boca Ramirez City. Please go ahead. Hello, good morning.

Thank you very much for taking my questions. I have two. These are on the NII. Firstly, I would like to ask on 2026, could you disclose the deposit beta that you are assuming? Because I think there was some comment on corporate deposit beta rising maybe because of of lower margins, but then also the retail deposit, I think maybe that's improving as your attacker products are repriced at lower rates. So that would be my first question. And then my second question would be if you could kindly provide a bit more color on the moving parts in the 2026 NII, for example. I think there is a new credit for 300 million of benefit from the replication portfolio in 2026. In NII, I have slightly higher, 400, because you steeper your course and also you increase the portfolio.

If you can add more details, please. Thank you. Thank you very much for the questions.

Let me start with the first one on the deposit beta. Again, I would like to start with 2025. You've seen that we came from a low level which was steadily increasing over the year as expected. Q3 is now a bit higher coming in mostly because of the attacker products we had out in July. And as mentioned, we expect actually the private customer beta to come down again in Q4. So the main driver for the slightly higher beta that we expect for the end of the year comes from the corporate client business. All in, the beta, as mentioned earlier, will remain actually at a level of 40%, maybe 40.5% for the year, as we expected. And running into 26, the beta from an expectation perspective will likely be driven by the corporate client side where we see basically an unchanged beta landscape compared to Q4. You mentioned briefly sort of the impact from our attacker products on the personal customer side. I would like to make the point the deposits that we actually got in beginning of July our term deposits, and while that always has a short-term impact on the beta, the longer-term benefit of actually having these deposits in the bank actually will be contributing in 26. Then the second question on the 400 million increase of NII in 26, We will expect for 26 a pretty much unchanged at least ECB rate environment. So expect this to be fetish. The replication portfolio actually will be the driver with the investments and the position we have in the replication portfolio. We do see the stabilization effect. And as you've also seen in the last quarters, we continuously actually increase the average return out of that portfolio. So that will be the main driver. And then, of course, we will see growth effects and a slight negative coming from mBank, given the Polish rate environment, and as expected, a slightly higher beta next year. But that's the main drivers for the 400 million, so that we will see a positive development from 8.2 to 8.4 billion next year.

Okay, then I think the next question comes from Tobias Lukas Kepler-Chevreux. Your line is open.

Yes, good morning. Thank you. Also quickly touching on the NAI again and the outlook for 2016. you guided for this 8.4 billion. I was just wondering what the net fair value expectation is in your old strategy at the CMD at 0.5 billion, but you also had 0.4425, which is now still confirmed at 0.3 billion. So I was just wondering if this still holds up and what your total view on this combined revenue contribution is. And secondly, basically on the cost side. So if I understand your guidance correctly now for 25, we have this 200 million more in NAI at the same time as 70 million tax effect leaves us with 140, which is more or less eaten up by a higher cost on the share price. I mean, One could hope it, but it's rather unrealistic to see the same compensation potentially for next year. So I was just wondering what you see in terms of this kind of cost development, how it will come back, and how you will steer that basically into the future. Thank you.

Thank you very much, Tobias. Starting with the NII 426, and you referred to specifically regarding the net fair value, So for 2025, so for this year, we have a net fair value contribution, which is linked, as we always refer to it, to the NII to the degree of 300 million euros. This is a change coming out of last year. So the reason why we listed this explicitly when going into the year and guiding for the NII was that in the rate declining environment, we wanted to also express it's not only the NII, but also partially contribution from derivatives that help us on the NII side. Now going into 26, we are guiding the NII for 8.4, but we expect a flat rate environment and hence also no significant movements on the net fair value results stemming from the NII position. hence 8.4 and at the moment flat, so no additional contribution from the net fair value for 26. Then towards your second question regarding the cost side, I think you went through that quite nicely. We have some effects that you listed, which we also mentioned in the speeches regarding our 25 development. When we look at the operational, let's say, cost level and development that we're seeing in the bank, We're seeing a very disciplined way the bank is managing its costs at the moment. So looking into 26, we are basically very confident that we are running with a level that we have guided in the capital markets day. As you know, we're steering for cost income ratio. 56% is the target that we set for next year. And at this point, we hold clearly towards that 56%.

Thank you. If I may, again, on this net fair value, I'm a little bit puzzled, to be honest, because with the CMD, you guided for 8 billion NAI in 26 and 0.5 billion net fair value, which makes 8.5. If I understand you correctly, now you're guiding for a combined 8.4 only for next year. And also, again, on the 25, I don't get this unchanged 0.3 billion net fair value result. I mean, we're at a negative minus 60 million if I'm if I'm not wrong, and that would indicate a kind of 350 million contribution in Q4. So how is that to read and to square? Thank you.

Yeah, I think that's a super fair question. So first of all, Tobias, on 26, to be absolutely clear, we have 8.4 billion expected NII and unchanged natural value expectation of 0.5. So that stands. I was referring merely to the net fair value we expect from the NII side. So for 26, no change in the net fair value guidance to be absolutely clear here. Then coming back to 25, the net fair value in essence is made up of multiple positions. One position is the net fair value which we have from interest rate related positions. That is the 300 million that we mentioned. These are included as one portion of the net fair value and they hold. We see them at the moment in the books and given the current rate environment we don't expect them to change towards the end. What's also included in net fair value is then the positions from our capital markets business that is contributing to it and the third position which is contributing to net fair value is general valuation effects and those have to be seen in combination with the other income. And if you combine those positions, so the net fair value that we have as a run rate at the moment, the other income, and if you exclude from that the FX mortgage provisions, which we hold for mBank, then you actually end up with a value around the 250 million mark for 25, and hence we stand with that guidance.

Thank you. The next question comes from Ricardo Rovere, Mediobanca.

Please go ahead.

Thank you. Thank you very much for taking my questions. Again, on an AI, if you look at the loan book, $263 billion at the end of the nine months, this is the average, is 2.5% higher than the average since the start of the year. And then in 2025, 26, you're going to have a support from the fiscal boost in Germany, 1.2% in GDP. This is real. Then you add two percentage points from inflation. So the loan book will continue probably to grow in Germany. I don't know if it's 3.5% or something like that is reasonable or not. And then you have Poland, which is supposed to grow more than that, while EUR and AI is supposed to grow 2%. So you're implicitly plugging in a fairly decent, I would guess, margin compression, while rates are supposed to be stable, at least in Europe, but Europe is 70% to 75% of your business in Poland. And Poland is the residual 25%, 30%. So given that in 2025, your NII guidance went from 7.8, then 8, then 8.2, I'm just wondering whether the approach you have in the nine months, 2025, when you set the 8.4, is with some caution, some prudence, as you have constantly done throughout 2025. This is the first question. The second question I have is on the call money, call deposits in PSBC. As I understand, the promotional offer was in July, if I understood it correctly. So that means that the impact on NII more or less fully be fully visible in this set of numbers more than that why are you gathering this uh this what you're doing this promotional offer still and then the other question i have is on the medium to long term funding the amount has gone up dramatically over the past since the start of the since the start of the year is almost if i'm not mistaken of 20 billions or so 18 point yeah kind of 18.5 billions in debt securities it went from 45 something like that it sounds like 53 to more than 70 billion um what is why It has gone up so much. And what is the spread that you get? Because the feeling I have is that then you invest in debt securities on the opposite side. And I was curious to know what kind of debt securities this amount of money is invested in. That's just to have an idea. Thank you.

Yeah, thank you, Ricardo, for your questions, and specifically the first one, as you know, we like this wording of floor, and yes, we are always conservative, and you know that. So when it comes to next year, what are the driving factors? So first of all, we plan for another 8% loan growth in corporate clients, that's for sure, and that will be also supported by everything we see in the moment when it comes to the stimulus package and We have proven nicely that we are able to organize that given the 13% which we have shown here today. However, what you need to keep in mind is two things. One is clearly Poland, which will also see nice growth on the loan side, but we expect a further decrease in interest rate levels there that will have a negative impact. What Carsten said before on the deposit better, that you need to take the fourth quarter basically as something which will also drive then the full year 2026, and that will be a slightly higher deposit better on every end which we have seen for this year. That is at least our assumption, and that is also the assumption which we have embedded in our plans back at the Capital Markets Day. If you look in this document, We always spoke about 41% for this year. Now it's a 40% most likely, which would then go up to 44% till 2028. And that's just a reflection. It's lower than we thought, but there's still some increase in the deposit better. When it comes to the, so yes, you can say that the 8.4 billion is clearly again for number and nothing else. And when it comes to the call money, we have that in July. We stopped the program actually after three weeks because we had so much inflow. But most of this money runs until January, February. And in the moment, we do only have our normal offers out there and nothing specific. And on funding, I hand over to Carsten.

On the funding side, Ricardo, we had planned in terms of debt instruments, we had planned for around 10 billion a bit plus for the full year and we're currently standing at around 11 billion in terms of funding. In terms of the spread across different instruments, we actually had a wide variety in the market this year from 81 to 82 issuances, etc. Basically, we had the full spread and made use of the market environment to do our regular sort of refunding activities. So actually, the funding plan is pretty much in line with our plan. We extended it a bit in Q4 effectively to make use of the current market environment. And also, I should say, looking a bit back into the first half of the year, we know that the markets are not always there when you want them to be there. So we basically looked a bit into stabilizing the funding position. but pretty much in line with the plan, maybe a bit on the upside. Also, given the current market environment and the spreads that we are seeing, attractive spreads for the reissuances, so generally you can expect that we improved our funding cost position overall in the book throughout this year. And given that we hold the margins actually on the asset side steady, this will be contributing to our business plan.

Thanks. Thanks for that. Very clear. Just maybe a quick follow-up. On the loan growth in PSBC Germany, the book is fairly stable at 125 billions. Do you expect that the leasing by DCB is going to have an impact at some point in 2026 here?

You mean on the private client side?

Yes, exactly. On the retail side in Germany. Yeah.

I mean, what we currently see is already much more activity again. So the mortgage activity has increased. Basically, it's back to the levels which we have seen pre-COVID. And there's just a time effect in there because people start a mortgage, but then until they really take the money, it takes a while because most of the time just pays in construction. So, yes, we expect a loan growth for next year, also on the PSPC side.

Yeah, thank you. Thank you very much. Thanks. The next question comes from Anke Reink in RBC.

Please go ahead.

Yeah, good morning, and thank you for taking my questions. It's two areas, please. The first is just coming back on the very strong corporate loan goals in Q3. Some of this seems to be a bit more short-term in nature, as in working capital and trade finance. And given Q4 is normally a bit weaker, I just wanted to confirm that you expect there shouldn't really be a reversal in Q4 from these levels. And then secondly, you talked at the beginning about your wealth management initiatives. And I just, I'm sorry, I can't really fully remember, but what you mentioned, is this incremental to your plan? And maybe can you just sort of give us an indication of how much it currently contributes to your revenues and what you sort of like size as an opportunity? Thank you.

First, we do not expect any reversal on the loan growth for the fourth quarter. And second, on wealth management, I mean, this is a core element of our momentum strategy. So it's fully embedded in the plans. It's, I mean, one of the factors which should drive our net commission income, the 8% or 7%, the 8% which we have seen here today, but also the 7% we expect for the years to come. And what we have now done is we basically intensified the coverage of clients. So there are more relationship managers to cover these groups of clients. We have wealth management centers. We also have new locations. We opened a number of new locations in Germany this year and they will be a significant driver for the net commission income growth. We do not really say how much percentage wise it is.

Okay, thank you.

The next question comes from . Please go ahead.

Yes, good morning, and thank you for taking my questions. I have two of them, please. The first one would be a follow-up on deposits, specifically the strong call money inflows. Can you talk about the retention rates that you've observed on such attacker products once the high interest period ends in the past one to two years? We would love to know what is your experience on that front. how sticky those new funds are. The second question would be on the risk results or risk costs and specifically your guidance. So in the first nine months, you had $515 million in risk results, and clearly you revised your guidance down for the full year to below $850. I'm just wondering what prevents you from being more specific on the full year risk results? It seems like there is an awful lot of room between the current result and the upper end of the guidance. Would you expect anything sort of inorganic in the fourth quarter, any model changes? Why not, let's say, a somewhat more precise lower guidance? Thank you.

Well, thank you. Yes, on the coal money, the... the influence and now you're asking what do we expect. I mean we can only speak for the past programs because the attacker products which we have laid out in July are running as I said until January, February so we will only see in the new year how sticky it is. You really have to differentiate between the two client groups, Commerzbank clients and Comdirect clients. Commerzbank clients actually whatever we Get there is more sticky than on the contact side in there and at the contact side We also have more of these I call them interest rate hoppers But still we have been pleasantly surprised by the stickiness or how many clients still also keep Their money with us that is also due to the fact that most of the time is a couple that was really our client onboarding We have a very attractive brokerage offering at the Comdirect side and that is clearly something which we combine also with new clients. So overall, so far we have been rather pleasantly surprised on how many call many stays with us after the attacker products. But the risk result, I mean, totally clear, we see it the same. However, it's a long quarter and this is why We as always stay a little bit cautious. We do not see anything specific. We do not expect anything specific, but it is a long quarter which runs until February. So we just leave enough space. There are not specific model changes planned or something like that. I mean, there's always a time there are model updates, but nothing specific here. And that's why they are also very confident. I mean, we wouldn't have changed it to below 850 if we would not believe that it comes lower than the 850 which we originally laid out. But how much in total we really will see in February when the quarter ends.

Got it. Thank you.

So I think we are at the end of this call. Thank you very much for your questions. We are looking forward to further discussions with you and wish you now a great and sunny day. Thank you.

The recording has been stopped.