Commerzbank AG

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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 the listen-only mode. The floor will be open for questions following Bettina Orloff's and Carsten Schmidt's presentations. Let me now turn the floor over to our CEO, Bettina Orloff.

Good morning, everyone, and welcome to our earnings call. Carsten and I are pleased to present the results of a very good start to the year for Commerzbank. we have delivered a record quarterly profit, which gives us the confidence to raise our outlook for 2026 and to present an even more ambitious strategic path towards 2030. Our message today is clear. With momentum, we are delivering on our promises. And with momentum 2030, we are accelerating our transformation to deliver higher profitability faster. Let's start with a summary of the key figures for the quarter. we increased our revenues to 3.2 billion euros and delivered a record net result of 913 million euros. The 5% year-on-year growth in our total revenues was broad-based, demonstrating the health of our underlying client business. This top-line growth, combined with our strict cost discipline, translated into an even stronger 11% increase in our operating results, which reached 1.4 billion euros. highlights the enhanced operating leverage we have successfully built into our business model. The bottom line figures translate into an excellent return on tangible equity of 12.7%, underpinned by a very strong cost income ratio of 53%. Carving out compulsory contributions, our cost income ratio is already at 50%. Our CT1 ratio stands at a very solid 14.5%, well above our targeted ratio of 13.5%. This excellent start to the year gives us the conviction and the confidence to raise our guidance for the full year 2026. Against the backdrop of a German economy that is still expected to grow by 0.6% and an average ECB rate of 2.2%, we now target a net result of at least 3.4 billion euros. we are tightening our cost-income ratio target to 53%. Consequently, we are raising our RTE target to 12%. What remains unchanged and what is the cornerstone of our equity story is our commitment to a total payout of 100% of the net result after 81 coupon payments and before extraordinary non-recurring items. This upgraded guidance confirms the powerful traction of our momentum strategy which has proven to be highly successful for Comets Bank. The guiding principle of our momentum strategy is delivery for all key stakeholders. And this remains front and center also with our upgraded strategy, Momentum 2030. For investors, we will deliver what we promise, continuously improving profitability and ensuring reliable, attractive capital return. For our clients, we are a very strong and dependable partner, investing in our products and services to provide them with attractive solutions tailored to their specific needs, which ultimately drives our growth. And for our employees, we are fostering an attractive work environment and a culture of ownership, for instance, through our successful employee share program. It allows them to participate directly in the long-term success of our company. Today, we have started the subscription period for the next offering of Commerzbank shares to all our colleagues. With Momentum 2030, we are accelerating our strategy with a simple and powerful goal. Delivering higher profitability faster. We will achieve this through further profitable growth and an accelerated transformation of the bank towards higher efficiency. On growth. We are scaling up our proven and well-established business models in both our private and corporate client segments. On transformation, we are fundamentally transforming how we operate by leveraging the power of AI and driving further efficiency throughout the organization. By combining growth and transformation, we will achieve significant scaling effects, including a well-contained cost base and a step change in productivity. This will create a clear and tangible path towards our new targets for 2030. A ROTE of 21%, a net result of 5.9 billion, a cost income ratio of 43%, and a revenue CAGR of 6%. Adjusted for compulsory contributions, our targeted cost income ratio is planned to reach even 41%. And let me point out that Momentum 2030 is not an Excel spreadsheet exercise but the result of a diligent strategy process. It involved the entire management team who reviewed all business levers to identify tangible transformation and growth cases for their respective areas. And this strategy comes to life in our client segments. In our corporate client business, we will continue our profitable growth by supporting the backbone of the German economy, the Mittelstand, and by leveraging our unique global network. In our private and small business customer business, we will increase the growth via our digital channels and expand our high-valued advisory services for our wealth and premium clients. mBank pursues its highly successful strategy full speed ahead and will significantly contribute to our group targets. Let me deep dive a few important cornerstones of our business model and our strategy towards 2030 and start with corporate clients. A crucial driver of our strengths is our international franchise, anchored in Germany and connected globally. With our strategy 2024, we right-sized the international network and realigned the business to full connectivity with our home markets. In Germany, relationship managers and product specialists support the Mittelstand with their domestic business across our entire product range. Internationally, we provide a complete corporate banking offering to support our clients in their cross-border needs with local expertise in important markets. And through web offices and corresponding bank relationships, we combine local presence with flexibility along key trade corridors in a very efficient way. I want to be very clear on this point. Our international business is an integral and highly valuable part of our DNA. Our bank was founded 156 years ago with a mission to support German trade globally. This mission is as relevant today as it was then. Let me make this tangible with a typical example that perfectly illustrates the value of our integrated network. Consider a German engineering firm with a subsidiary in China. They are a longstanding client of Commerzbank in Germany, and work closely with our international network. The subsidiary in China wanted to bid on a 10 million euro contract to supply a plant to an importer in Africa. The process began with a bidding phase. To even participate, our client needed to provide a bid bond. They instructed our branch in China to issue this guarantee. Thanks to our established network of several banks in the importer's country, we were able to negotiate the best possible terms for our client, who ultimately won the contract. The next step was the export financing. The contract stipulated payment via a confirmed letter of credit to mitigate the non-payment risk for our German exporter. The importers bank in Africa was tasked with opening the LLC. Crucially, this bank is one of our correspondents, meaning we were perfectly positioned to handle the transaction. Our web officer in that African country provided us with up-to-the-minute political and financial data on the country and the bank. This on-the-ground intelligence justified the necessary credit lines. After confirmation of the ELC, our client started the delivery of the plant and ultimately received the money. This single transaction shows a profitable full chain in action and demonstrates that our international franchise is a unique, core asset that strengthen our entire business. The international franchise contributes around 1.8 billion euros in revenues. Importantly, this franchise is tightly connected to our core corporate client base in Germany and DACH. It strengthens our ability to support German multinationals, subsidiaries of the German Mittelstand abroad, and international corporates with DACH connectivity. We hold a leading market share of 30% in German trade finance and a remarkable 58% of our corporate clients' revenues are generated with clients who are anchored in this international network. This is a truly unique value proposition and we will continuously adjust our footprint to meet the needs of our Mittelstand. Serving the Mittelstand only means corporate banking, but also wealth management for the families owning these companies. And this is the perfect bridge over to private clients. Investable assets in the wealth management segment in Germany are expected to grow by almost 1 trillion euros by 2028. Equally important, Germany is facing a decade of generational transitions in the Mittelstand. And we are in the best position to benefit from this potential as we have the strongest access to the family-owned businesses. With our holistic approach as one-stop shops, we have significant growth opportunities. Our well-balanced product and service offering as well as AI will support us on our journey to become the family office of the Mittelstand. Comdirect, on the other hand, is well-established a digital primary bank and performance broker. It is our successful answer to new brokers. We are investing in the further development of the digital user experience and the value proposition, including the expansion of trading functionalities and AI-based order triggers. We are developing our app further into a content hub, including financial education, while consistently driving efficiency gains and AI support for customer service. The vision for 2030 is very clear. A fully digital banking and brokerage experience that simply works and gives customers maximum autonomy. This is a strong strategic fit with our Momentum 2030 agenda because it combines growth with scalability. The growth strategies in our customer-facing businesses are complemented by efficiency measures on the transformation path of the bank. We are targeting a net cost reduction and higher capital efficiency in Commerzbank XM Bank. On cost, we will make further use of our well-established showing and sourcing locations, e.g. in Sofia, and in Kuala Lumpur. Furthermore, we will reduce external resources and the use of AI. This comes in sync with the ongoing effort to reduce complexity and optimize processes. On the capital side, we keep steering for RWA efficiency to increase the value accretion of our business. SRTs will further contribute to capital efficiency by freeing up risk-rated assets. Now, let me talk about AI at CommonsBank. AI is already well established in our banking operations. It is a core driver of efficiency and a creator of new revenue opportunities. We are already applying AI across customer experience, operational excellence, and risk management. Let me highlight three recent examples. First, in retail banking, the implementation of an end-to-end process redesign for an optimized complaint management has started by applying agentic AI. Second, in risk management, we have successfully introduced Hawk AI, an AI model that significantly improves the efficiency and effectiveness in generating transaction monitoring alerts. And third, on operational excellence, we start integrating AI into the credit analysis. Very promising examples are the AI-based screening of annual reports and the origination of early warning messages. These are all practical applications with practical impact to drive our transformation. We are backing the AI value realization with a substantial financial commitment, planning for approximately 600 million euros in cumulative AI investments through 2030. We are driving efficiency with three key approaches. First, we increase workplace productivity using tools such as MS Copilot and Gemini, and we have established an AI Academy to upskill employees. Second, we will use agentic AI to increase product and process efficiency, including the setup of an agentic AI factory. And third, we will make use of agentic software development, which will accelerate the modernization of our application landscape. By those means, we will free up around 10% of capacity, which will be partially redeployed to customer interactions. Overall, we will create a tangible value of 500 million euros per annum, of which 70% is assigned to cost reduction. This is what we can quantify today, but the technology and its capabilities are evolving exponentially, and we believe that we will see further upside to these numbers as we progress. In short, AI is a key driver of our Momentum 2030 strategy and supports our confidence in upgrading our targets for 2028. We have a transparent and credible roadmap to a return on tangible equity of 17% in 2028, to percentage points more than envisaged one year ago. Starting from our expected ROTE of 12% in 2026, the journey is driven by clear, quantifiable levers. We anticipate strong contributions from both net interest income and net commission income. NII will benefit from the revocation portfolio as well as from growth in loans and deposits. NCI should sustain the strong growth path of 7% each year. Critically, the impact of our efficiency measures will largely offset inflationary pressures and necessary investments. This is the operating leverage of momentum 2030 translated into financial outcomes. And we will not stop there. We see a clear path to an even higher return of 21% by 2030, which comes with a competitive cost income ratio of 41% when excluding the compulsory contributions. Furthermore, we will continue to distribute our full earnings until our targeted CET1 ratio of 13.5% is reached. The replication portfolio remains a key driver and will still significantly contribute to NRI even beyond 2030. Carsten will elaborate on this later in the presentation. On the cost side, the broad-based deployment of AI will drive efficiency. Hence, we will reduce our cost base in Commerzbank X M-Bank until 2030 despite significant growth in revenues. This comes with a group-wide FTE reduction of gross 3,000 FTEs by 2030, of which almost 50% will be reduced on a net basis. The program will come with around €450 million cost to achieve. The reduction will be largely achieved by applying early retirement schemes as well as making use of natural attrition. With the transformation agreement we signed yesterday, the employee representatives generally support our continued transformation.

The new targets are the next logical step in a long and successful journey of transformation. The evidence.

We have consistently met or exceeded the targets we set for ourselves from our strategy 2024 to our momentum goals in 2025. We deliver what we promise. The steady delivery is the foundation of our credibility and provides confidence in our ability to also achieve our new, more ambitious goals. And this leads me to Unicredit's offer. After completing a comprehensive review of the offer document, the management board and supervisory board will issue their full reason statement, including a recommendation. Separately, we have published a presentation today highlighting selected preliminary observations on Unicredit's proposal, including the presentation of April 20. I would like to briefly draw your attention to the most significant aspects from our perspective. First, Unicredit is using misleading credit comments to talk down our evaluation. Second, Unicredit's proposition for Commerzbank shareholders is vague and feels a considerable execution risk. Our shareholders are asked to give up the upside we just spoke about and control for no premium. And fourth, Commerzbank shareholders who remain invested retain material upside potential and optionality. I would like to address a few points in particular. Our analysis shows that the claims and assumptions of Unicredit do not pass a reality check. We have improved profitability substantially over the last years, and we have exceeded ambitious financial targets. Within our robust and stable business model, we have a prudent risk profile with strong asset quality. We don't need additional overlays. The risks in our book are well covered. We are investing in platform and technology. We are significantly scaling AI adoption. We are the leading bank for the German Mittelstand and have a market share of more than 10% across all products with German corporate clients. And I think I made it very clear that our international franchise is a value-accretive, unique business proposition. Against that reality, Unicredit's assumption on cost-cutting, revenue effects, and investment requirements are not plausible in terms of scale and timing. The claimed cost-deficiency potential of $1.3 billion standalone for Commerzbank until 2028 is extremely aggressive and would come with significant execution risk and revenue attrition. In our view, the negative revenue impact would be significantly above 1 billion euros, which you can derive from the revenues attached to our international franchise, leaving aside any revenue attrition due to climate overlap, which would come on top. Timing prior improvements and changes for thousands of employees, shutting down parts of the international network, off-boarding clients, returning licenses, and stopping large growth and transformation projects all at the same time to become effective in 2028. That is not credible in a highly regulated sector and does not reflect the operational reality of a bank. The same applies to the assumptions around RWAs and investments. The implied reductions and the implied cost to achieve do not align with what is realistically feasible without destroying revenues and client relationships. This is exactly why execution risk is so central in our assessment. In essence, the presented case lacks the necessary willingness to appreciate and reflect our business model. This is all the more puzzling given that we provided the opportunity in more than 10 meetings in the past 20 months to discuss any ideas and answer all questions regarding our business model and our financials. Only in the two meetings after the announcement of the offer, we verbally learned about the cornerstones of Unicredit's plan. It became clear that we have fundamentally different views on the business model that are hard to reconcile. We were clearly told that there was no room for any adjustment of the proposed model to reflect our core value proposition, especially when it comes to our international franchise. If you're dealing with a counterparty that tells you upfront that it will not adopt the plan, to find common ground, what's the merit of doing any deep dives or workshops, in particular if there is no preparedness to offer a premium either? And this leads me to valuation, as this was the second important topic in our conversations with Unicredit. No matter which metric you pick, Unicredits offer a fundamentally undervalued commerce bank. Our standalone strategy has proven to be successful. our tangible and credible path to increasing returns every year as well regarded by the market. It fully justifies our valuation and a low ball offer without a significant premium is just inadequate. And with that, I would like to share my key takeaways. First, we achieved a record Q1 results and have raised our 2026 guidance. Second, With Momentum 2030, we build on a proven strategy. We are committed to our upgraded targets delivering reliable shareholder value with low execution risk. Let me add to this that by 2030, we will return around 50% of our current market cap to our shareholders. Third, we stay open for discussions in case there is a real willingness to discuss the issues we flagged. With a clear intention of an attractive premium for our shareholders, and that takes the success factors of our business model and our momentum strategy into account, we remain open to sit down again. To conclude, we have a very strong momentum in our business. We have the strategy, the team, and the determination to create significant value at limited execution risks. And with that, I will now hand over to Carsten.

Thank you, Bettina, and a warm welcome also from my side. Given the focus on strategy today and to have sufficient time for Q&A, I will keep the presentation of the Q1 numbers short and will not go through all the slides in detail. Bettina has already given you a summary of the Q1 financials. To start, there's one key point I would like to stress. We have again improved our operating leverage with higher revenues and slightly falling operating expenses. positive jaws the core of our momentum strategy and our number one priority. And I will now go through the line items starting with revenues. Revenues have developed very well. The highlight is the record net commission income that is up 9% year on year with strong contributions from all customer segments. Corporate clients increased by 8% with the biggest driver being bond origination. Private and small business customers Germany grew by 9%, mainly with the securities business and from higher account fees. mBank increased by 12% across products. This growth is a clear testament to our client centric strategy and our ability to successfully leverage our market position across all key areas. Net interest income is broadly stable as underlying growth in PSBC Germany and corporate clients was offset by day count effects and rate cuts in Poland. I will now jump directly to slide 30 on the very strong loan growth in corporate clients. In the last 12 months, corporate clients achieved a remarkable loan growth of almost 17 billion, or 16%, with 5 billion stemming from the first quarter. This growth is broad-based. Year on year, we saw a 2 billion euro increase from corporates in Germany, driven by investments and working capital needs. The public sector in Germany contributed another 2 billion capital accretive business. We saw strong demand for green infrastructure financing, adding another 2 billion. The largest driver was our business with German and Germany connected corporates outside Germany. It grew by 7 billion Euro as we continue to support our clients international activities, particularly in Europe, the US and Asia. Finally, our business with financial institutions also added 3 billion Euro, mainly from trade finance and lending. This performance underscores our strategy to grow profitably with our customer base to see attractive risk-adjusted opportunities. This brings me to our NII outlook for 2026. We raise our outlook to around 8.6 billion. The main reason for this is the more favorable rates outlook compared to our assumptions in February, as well as the successful margin management of deposits in Q1. This has made us confident that the beta should increase to 41% on average for 2026, one percentage point less than our original assumption. We have also slightly increased the size of the replication portfolio, which will further stabilize the NII in the next years. Next, I will give you a longer dated outlook for the replication portfolio. As you know, The replication portfolio is a very important and very reliable contributor to our revenues with an additional benefit of 600 million in 2026. This will continue for many years. Based on the current size and structure and applying the current forward rates for the scheduled rollovers, we will have additional revenues in the range from 400 to 600 million every single year until 2032. This leads to cumulative 1.6 billion in 2028 and 2.7 billion in 2030. By 2032, this increases to 3.7 billion. And even beyond 2032, 200 million per year are to be expected. As you know, we have added to the size of the portfolio over the last quarters, and depending on volume growth and customer behavior, we could potentially grow the portfolio further over the years, amplifying the effect. When looking at the current average yield of the portfolio, you can clearly see where the incremental interest income is coming from. For 2026, we have an average yield of only 1.3%. The current yield level is mainly attributable to the very low yield on all tranches of the 10-year models. When reinvesting a maturing tranche at the current yield of around 3%, this leads to a strong pickup every year. The replication portfolio is therefore a very dependable revenue contributor for many years. to come and a core component of our plan to sustainably increase profitability. Now very briefly to costs on slide 34. We have maintained our strict cost discipline. Overall costs are slightly below Q1 last year, although we increased our investments further. Higher compulsory contributions in mBank were offset by lower operating expenses on group level. Within the group excluding mBank, costs even decreased supported by a lower valuation effect from equity-based compensation. The combination of strong revenue growth and disciplined cost management resulted in an excellent cost income ratio of 53% for the quarter, or 50% when excluding compulsory contributions. The risk results came in at 142 million. This is in line with Q1 last year, and our outlook as the portfolio remains highly resilient, with a non-performing exposure ratio of only 1.1%. We have maintained our approach to overlays and there has been no material change in the outstanding amounts. While there are headwinds from the conflict in the Middle East, we maintain our guidance of around 850 million for the risk result for the year.

This concludes the video.

28% in the quarter. For 2026, we expect a tax rate closer to 30% due to a higher tax rate in Poland. I will now jump straight to the outlook on slide 42. We expect total revenues of approximately $13.2 billion. As already mentioned, we have raised our outlook for NRI further to $8.6 billion. For NCI, we expect $4.3 billion based on 7% growth. We maintain our outlook for the risk result of around 850 million. Based on costs of around 7 billion, we improve our cost income ratio target again to now approximately 53%. This translates to raised net results target of at least 3.4 billion, leading to a return on tangible equity of around 12%. We confirm our plan for a payout ratio of 100% after 81 coupon payments and expect our CET1 ratio to be above 14% at the end. After this review of our record first quarter, I will now guide you through the financials of our strategy Momentum 2030 before going into a Q&A. Our plan figures are based on the current forward rates and our economists outlook for GDP growth in Germany. We assume an uptick of GDP in 2027 and a moderate positive impact from the fiscal stimulus. If reforms should gather steam, there could be an upside, but we have prudently remained conservative. The revenue trajectory is set for a steady increase in both interest income and fee income, while we conservatively plan for only modest contributions from fair value and other income, as these are hard to forecast. Total revenues are expected to increase from 13.2 billion euro in 2026 to 16.8 billion euro by 2030. This translates into a compound annual growth rate of 6%. Looking at the interest income in more detail, the picture is very similar to what we have seen last year and expect for 2026. The most significant driver is the predictable portfolio which will contribute an additional 2.1 billion euro by 2030 as we reinvest maturing assets at higher yields. On top of that we plan for a 300 million euro contribution from disciplined loan and deposit growth in PSBC Germany and corporate clients. These positive effects will comfortably outweigh the anticipated headwind of close to 600 million from a steadily increasing deposit beta and due to anticipated deposit competition. Expected increases in the ECB rate will add around 100 million. mBank will resume its growth path and add around 600 million overall. This structural, predictable growth in NII is a cornerstone of our increasing profitability. Slide 47 details our strategy in the corporate client segment. Crucially, the focus is on capital efficiency. Building on our already established initiatives, we will continue our strong loan growth, further leveraging the capabilities of our franchise. While growing our loan book, we will be selective and focus on RWA efficiency of the growth. This might also mean selective reductions in the existing portfolio where targets cannot be met. In addition, more contributions from relatively RWA-light areas like the bond business or trade finance are in focus, further contributing to RWA efficiency. All this will be supported by our digital product offering that is convenient for clients and frees up time that our staff can instead use for value-added sales and advisory. The sales activities are furthermore augmented by AI-based models and advanced data analytics. AI data analytics also helps to price our products competitively. Finally, we intend to further increase the use of significant risk transfers. We have broadened our issue by extending SRTs to further client portfolios and asset classes. We are thereby freeing up capital to fuel further profitable growth and increase the RWA efficiency to 6.4%. In our private and small business customer segment in Germany, the focus is clearly on growing our high-margin net commission income. We will scale the securities business of Comdirect and expand our relationship-driven initiatives with wealthy clients supported by AI. This will result in 7% annual growth in net commission income until 2028, keeping up with a strong expansion of interest income that is boosted by the replication portfolio. For 2029 and 2030, we prudently plan with 5% to 6% growth. Let's now look at costs on slide 49. Our plan is to slightly reduce costs in the group, excluding mBank. While we account for inflation, salary adjustments, and compulsive these increases will be offset by significant efficiency gains. These efficiencies are driven by our ongoing transformation program and increasingly by the smart implementation of AI across our processes. In addition to the already committed restructuring, we will implement a further reduction of around 3,000 gross FTE planned to be achieved in a socially responsible manner, contributing to the efficiency gains. We have already reached a transformation agreement with our workers' representatives. Detailed agreements will be reached in due course and expenses then be booked step by step. In total, the cost to achieve for the FTE reduction is expected to be around 450 million. While maintaining our strict cost discipline and increasing our efficiency, we will continue to invest. In 2026, we have allocated a 600 million change to bank budget, nearly 50 million higher than in 2025. will maintain the level of delivery that we plan for in 2026, also in subsequent years. However, the cost to get this output will decrease over time as we increase efficiency. The three biggest drivers are shoring, internalization, and AI. The effects combine as we relocate activities into our shoring centers while at the same time deploying AI to raise efficiency at these shoring locations. Overall, we expect 30% efficiency gains until 2030. Looking briefly at the risk results. Based on our high quality loan book, we expect to maintain a cost of risk of around 25 basis points throughout the cycle. For 2026, we plan with around 850 million risk result, which translates to a slightly elevated cost of risk of around 28 basis points. Moving on to risk-weighted assets. We plan with nearly 2026 to 2028. Credit risk RWA should decline slightly as we plan to compensate higher RWA from volume growth with securitizations and improvements in the portfolio. From 2029 to 2030, we expect a net increase of credit risk RWA by around 7 billion. Thereof, a substantial contribution will come from mBank. Operational risk RWA will rise in sync with our profitability. Our RWA efficiency measured as revenues over RWA will improve from 7% last year to 9% in 2030. Let me conclude with the expected trajectory of our net results and the capital return. As you can see on slide 53, our capital return plan is as clear as it is attractive. We will distribute 100% of our growing net profit until we reach our target CET1 ratio of 13.5%. We project a payout of 3.2 billion in 2026 and then increasing steadily every year. This translates into an attractive total yield starting from 7% in 2025 and reaching double digits latest in 2028. We will deliver this through a combination of steadily increasing dividends and a substantial share buybacks returning around 50% of our current market cap by 2030. With that, I conclude the financial presentation. Thank you for attention. Bettina and I are now looking forward to your questions.

Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press star 9 and pound key on your telephone If you would like to cancel your question, press star, three, and pound key. The first question comes from Benjamin Gold from Deutsche Bank. This stage is yours.

Yes, hi, good morning. A couple of questions, please. So the first is on your net interest income bridge. Just trying to understand why the contribution from volume growth is relatively low, in particular considering the growth rates you have shown over the last quarters and years. And then secondly, on the new cost program, the 3K FTEs, will the positive impact be mainly 29 and 2030 or already some benefits before that? And then lastly, just quickly on the ROTI definition, why you have adjusted it.

Thank you.

ROTI definition, I think we have not adjusted.

It's just the same. And on the cost program, it will come in 2029 and 2030. You should not forget that we have the momentum reduction that comes into play first, and the 3,000 other ones which are meant for 2029, 2030, and for the NII, which I hand over to Carsten.

Hi, Benjamin. On the NII bridge and your question there, The increase from loan and deposit volumes, if we're looking, for example, towards 2028, is actually based on the growth of our underlying portfolios. Not to be too detailed on this, but if we consider PSBC being largely stable and corporate clients growing at around 8%, this gives you sort of a volume uptick which taken with our average margin then needs to be reduced a bit by the SRTs that we are conducting. If you're then considering also that we are optimizing the portfolio and reduce a few low yielding RWA assets, then you are actually ending up with an amount that's added to the revenue uplift from deposits actually ends up with two to 300 million to 28. And then in a similar fashion, beyond 28, as we are being prudent with the growth towards 2030, declines a bit. The rest you see in the uptick coming from the replication portfolio.

Thank you.

Thank you very much.

And the next questioner is Tarek Emechat from Bank of America. Please go ahead.

Hi. Hi, good morning. Just a follow-up on the NII and long road. Can you share with us what's the expectation for long road and more the timing between now and 28 and then 28 and 2030 and how much of the potential fiscal stimulus you've embedded in your numbers? And then on costs, I mean, I hear you about preserving revenues and being realistic about taking out costs, but don't you think you can actually would have pushed the boat a bit further and do more or you suggest that there is actually, it's very conservative and you probably could beat that. And lastly, just on the SRTs, can you update us on how much has been done of the 13 billion of the momentum plan? And I see you have 5 billion of securitization from 2028. And is that on top or what remains to be done from the previous package?

Thank you.

Tarek, let me go through the questions one by one. First of all, your question on the loan growth. Until 28, we continue with the expected loan growth in terms of volume of around 8% per year and then trail off a bit after that. Regarding the fiscal stimulus that you mentioned, we have included the current expectation of our chief economist, which also means that for this year, we will see a rather ample GDP growth of 0.6%. For next year, we will see the GDP growth in Germany recovering to 1.2%, and that is also fueled by fiscal stimulus. But clearly, we are hoping and expecting for more of an impact to come later on. On the cost side, fully understood that you are seeing us to be able to do a bit more, but let me also point you at the fact that on group level, excluding mBank, we will actually decline in our operational cost base over the next years with all the efficiency measures, therefore countering all of the usual updrift in terms of inflation, compulsory contribution, etc. And the investments in mBank clearly are linked towards the announced strategy and their business growth plan that they are having, also with a low cost income ratio, adding clearly to the KPIs of the group. And then lastly, on SRTs, out of the 13 billion that we have announced with the momentum strategy beginning of last year, we did transact around 4 billion of RWA relief in last year. expect this year to be in the region of 4 to 5 billion as well in terms of execution distributed across the quarters, and then likely another 4 billion to come in 28. We will then add another 3, not 5 billion, from 28 to 30, mostly to also start replenishing the maturing previous tranches in SRTs.

Thank you.

Q. And the next question comes from Jeremy from BNP.

Morning. Thanks very much. One detailed question and one bigger picture question, please. The first one on the NII improvement this year. So very short term, you know, you're aiming to you've upgraded the guidance for the full year. Is that a linear progression from where we are today? You were flat in one Q quarter on quarter, do we start to see NII picking up already in 2Q and then building through the year or is it more back end loaded? So just the timing as we go through this year, please. And then my second question, it's very useful and interesting that you picked up on the international activities because that does seem to be a point of contention with Unicredit. Your previous business plan back in 2022, talked about refocusing your international activities to purely focus on German clients and their overseas needs. Where are we in that process? I mean, how much of your international activities are linked to German clients? Or are there still significant bits of business that are done for local or other international clients in that international network?

Thank you, Jeremy. So on the first one, it is indeed, NII will increase quarter by quarter. So you can see already in Q2, we expect higher NII. It's very much linked to the increase also of the revocation portfolios, which we have done in the past quarters. When it comes to the international activity, we did indeed decide it in 2020, back in 2020, to streamline our international network. closed a number of branches sold, for example, also Hungary to Erste Bank and did some more steps. And we also significantly reduced the business, which has no connectivity to Germany, Austria, Switzerland, to the maximum extent. And you see that also on the numbers of page nine, where you see what are the revenues stemming or which are linked to the international business, which is 37%. But you also see on the left-hand side that there's very, very few revenues linked to clients who do not have a DACH connectivity. It's basically only the ones, 100 million approximately, which are linked to selected future-oriented sectors like TMT, and others, and so it's a very, very low number.

That's brilliant. Thanks very much.

Thank you. And the next question comes from Chris Hallam from Goldman Sachs.

Yeah, good. Yeah, good morning, everybody. Just two from my side. So maybe a bit of a long-dated question, but just on distribution, how are you thinking about the right payout ratio in 29 and 2030? So if I look at the RWA growth you've given us, hopefully, on slide 52, I think you're going to need to be increasing CT1 in 2019 and 2030 to stay at or above 13 and 1 half. You said you'll stay at 100% payout until you get to 13 and 1 half. So can we assume that after that point, you'll distribute any excess above 13 and 1 half, i.e., you'll just pull back the payout ratio slightly to, say, 80% plus in 2019 and 2030? And then secondly, on efficiency, Maybe I missed it in the comments, but just any comments on the timing of the gross reduction, the 3,000 and the 450, the phasing of that. And a few of your peers have commented on AI enabling them to use attrition to work down headcount. And I guess we can see that in the 50% net reduction of the 3,000 FTs. But is there any scope for that 50% replacement to move lower, i.e. like a higher net reduction if AI improvements in workflows become a bit more tangible? or is that 3,000 gross reduction basically contingent on a 50% rehiring commitment maybe?

Thank you.

On distribution, you're right and the math's right, but you can assume that our distribution will be something shortly above 90% in 2021 and 2030. And when it comes to efficiency, I mean, natural nutrition is one of the key levers which we use for both programs. For the first program coming from Momentum, which we are in the moment implementing as we speak, and then the additional 3,000, which we assume will happen in the years 29 and 2030. And natural nutrition is one mean which we use. We will also use re-skilling, which means that we will try to basically redirect people on other jobs and upskill them. And we have a demographic situation where we can use a lot of age instruments. We're very socially responsible to do the headcount reduction. And it's however clear that we see such a speed in the AI technology and the development that we will definitely review the situation basically year by year, quarter by quarter, because we have already seen within a year, and that's also one of the reasons for the update, that so many things have happened that have changed our attitude to certain things, and that I assume will continue also in the next quarters.

Okay. Thank you very much. Thank you.

And the next question comes from Riccardo Rovere from Mediobanca.

Thanks. Thanks a lot for taking my questions, two or three, if I may. The first one, I've just seen some headlines from Bloomberg. They say that, if I understand it correctly, we have agreed already with trade unions around job cuts. I just wanted to have a confirmation around that. This is the first question. The second question I have is for Carson, I guess. You have deposit beta again going up in your bridging NII. ECB rates have been 100 million. Deposit beta taking out a couple of hundred million, if I'm not mistaken. How can this be possible? I mean, your NII, when rates went up, and the deposit beta is 40, 45, 50%, whatever it is. It's not 100%. How can it be 200 versus 100? That's not clear to me. The second question, the last very question I have is, your target net profit for 2028 is 4.6 billion which is not too far away from the consensus you have uploaded on your on your website so the question here is is there any kind of prudence in the 4.6 billion target for 2028 and if there is what's the point of being prudent

at this stage. Thank you.

Thank you, Ricardo.

So on your first question, yes, we signed a transformation agreement with workers' council yesterday where we agreed also already on what type of social plan we will apply. And then it is, as always, there will be subsequent negotiations about the details where exactly the reduction will happen, but overall we have an alignment and the support, and that's very important, the support of our colleagues from the Workers' Council. On the second point, you know we are conservative people, so when it comes to the deposit better, we just take into account that there is a lot of deposit competition ongoing, and therefore we are staying cautious on that, and that's clearly also some upside, Carsten will probably reflect on that in a minute even more. And then on the last point, on the 4.6 billion, first of all, I mean, you see it also in the difference in the consensus. The consensus has 15%. We have a 17%. One reason for that is that we clearly have a little bit higher net income that's rounding. So consensus comes from the lower end. We come from the upper end of the 4.6. because we have indeed much higher operating results in our calculations and that is one reason why we end up with a 17% plus capital is a little bit lower in our calculation given that we took into account already the 450 million restructuring cost and also we never assume any cost capital allocation during the year. That are the key reasons. I mean, there is upside as always, but you also know us that we will only put something out where we now, from this perspective, think that this is achievable, that we can deliver what we promise. And I think it has been a good strategy and it's also a good strategy for the future.

Yeah, and Ricardo, adding to what Bettina already said on beta, which is basically the ongoing positioning that we're having, we're cautious about beta. You cited explicitly the bridge that we're having. We currently have a negative 100 for the full year in it. And please bear in mind that this is always the movement from last year's NII. So it's a delta view towards end of this year's NII. So last year, we had an average beta of 40%. We are now calculating with around 41 that used to be 42 beginning of the year. So we're now coming down within the year, but we're still having a slight increase in beta expectation from last year to this year. So that is basically why we have a slight decline in this. Why are we now more optimistic? A, it is our deposit management and the margin management that we're seeing. And we also had runoffs of high beta tranches on the personal customer side. So that in essence is moving our view on this end. And towards 28 and 30, as you know, we do yield the market and the competition landscape and hence expect a slightly increasing .

Okay. Okay, Carsten. Thank you very much. Thanks.

Thank you very much. And the next question comes from Flora Bocahut from Barclays. The floor is yours.

Yes. Thank you for taking my question. Good morning. I have two, one on NII, one on risk-weighted assets. On the NII, obviously a lot of, if not all of the NII increase to 2030 is coming from the replicating portfolio, given I think you're considering volume growth would be largely offset by the deposit competition. Can we just talk about the potential risk if the rate curve would move in there? Because looking at the slide 33, where you show the detailed evolution of your replicating portfolio, I can see that only 15% is invested in two years or less. I can see that 55% is invested in 10 years or more. So would it be fair to say that even if the rate curve would move versus your expectations, it wouldn't lead to a significant deviation for your replicating portfolio contribution towards 2030? And then the question on RWA, I'm just trying to understand how aggressive or not the securitization targets that you present are. Can you just give us maybe something like how much of your RWA relief you already have today in euro billion from securitization or how much of your CET1 ratio relief in basis funds from securitization that would be helpful? And just on the portfolio management, what do you mean there?

Thank you.

Let me start with the NII. I think your interpretation of the NII and the functioning, the mechanics of the portfolio are absolutely correct. The portfolio is a long-standing portfolio and we have different tranches in it. The split is exactly on page 33 and you can expect that with every monthly role in the portfolio we adjust to the current yield curve. For the long-standing tranches, that means we have a relatively high pickup every single month if we're rolling, especially coming from the older tranches that come out of the negative or low interest rate environment. And that also means that if the yield curve changes, clearly the whole portfolio is moving very slowly. To put it differently, it also, you can see that on that page, takes us quite some time to bring the current average yield of 1.23% up to market level so to the upside it's also dampening but the positive is if there's a change in the yield environment this is also going to be dampening and stabilizing so we have a really reliable and structurally sound contribution over the next years as you can see then secondly on the rwa and the srts on that As per end of last year, we had a total relief in the group of around 9 billion in RWA, 2 billion coming from mBank, 7 billion coming from Commerzbank AG. And then together with the reliefs that I've cited earlier in Chris's question, I think that was, we will see another 4 to 5 billion this year and another 4 next year. mBank is going to be relatively stable, and then we're mostly working against roll-offs in the following years. Okay, and you had another question on portfolio optimization. In terms of portfolio optimization, what we're looking at when growing our business, clearly we're also constantly reviewing our portfolio in terms of efficiency of the underlying business. And when we're talking optimization, we're mostly looking into also exiting engagements where we have a lower efficiency business

including connected business that we can actually achieve with it.

So that's the major part of the portfolio optimization. So it's business oriented much more than model oriented.

Thank you. Can I just follow up on the question on the SRT contribution? Basically, what was the stock of SRTs you already had before, you know, the contribution that you described on this call? Was it a zero or did you already have some contribution from that?

Yeah, we did indeed actually already have contributions. So SRTs are means that we've been using for years. I think we had around five or six transactions ongoing already before we started with Momentum beginning of last year. And we had around three and a half billion, if I'm right in remembering this, from Relief already before we started into Momentum. So we started picking up the pace a bit. how we see this in light of the overall portfolio and we think we have a prudently small amount that we're looking at and what's important to mention we use SRTs exclusively to also free up capacity that we're having in order to redeploy these resources so we started with that before and and have now pretty much doubled it since starts of momentum okay that's clear thank you

Thank you.

And the next question comes from from Citigroup.

Hello. Good morning. Thank you so much for your time and for taking my questions. I have two. Firstly, I would like to ask a high level on the strategy. I saw that you showed a very strong growth in corporate loans. I think it's plus 16% year over year. I would like to ask, how do you prioritize organic market share growth? Could you consider any bolt-on M&A? you still have a bit of excess capital by 2028 above the 3.5%, so maybe that could be an option. And then my second question would be on the deposit growth. So I see you have a conservative assumption on the toxic beta, 44% in 2028 and higher in 2030. I would like to ask, how do you see the growth in the deposit volumes going forward. If you could provide some color on the overall market dynamics in the German deposit market, please.

The corporate loan growth is clearly a crucial part of our momentum 2030 strategy when it comes specifically to corporate clients. I mean, the growth on a year-on-year basis was 16%. If you compare a quarter-on-quarter basis, it's still 5%, which is also very important. And what we expect for the coming quarters is probably a little bit of shift again towards Germany, given that our expectation is that investments in Germany will start, as hopefully also the reform exercises of the government will progress. And we have, as you rightfully say, we have enough space for growth, and we are absolutely determined to use it. However, it must be RWA-efficient growth that is one of the requirements which we have. When it comes to the deposit growth, it's a conservative assumption, so it's just a 2 percent growth, which is very much in line with the market.

All right, thank you very much.

And the next question comes from Anke Feinke from RBC.

Yeah, good morning and thank you for taking my questions. I just wanted to ask about the cost slide 49 and your confidence about delivering this absolute cost level. I think the inflation salary adjustments in the past probably was an area that provided some volatility versus guidance. And I think this is like maybe like 1.4%, although I think your embedded inflation in the plan is more like 2%. And so if inflation comes in higher, I think in the past year also at higher costs from employee plans, should we have the confidence that you'll be able to offset those headwinds with additional efficiency gains? And then just a question on Q1 in terms of the corporate bank. I understand that Q4 NII was obviously very strong. But if you think about the Q1 level, is this one rate you expect to jump off on? And should it be improving? Or is it more given the uncertain economic environment? Would you think that's something that sees some near-term headwinds? Thank you very much.

So, Anke, thank you very much for your question. So, our confidence is very high. If we can do something, then we can manage costs. And we took into account clearly the inflationary effects, both in Germany, but also in our locations abroad. And it's also very clear if you see If you see differences, then we will manage against that. So high confidence in delivery on that. And you have seen it also in the past. I mean, the only thing that we can't really control, and which is a good thing, is if our share price is increasing further because then our variable long-term compensation will increase. That is something which is hard to predict, but that I think is a good signal because it just means that we are over-delivering also. on all our other targets. When it comes to Q1 and NRI for the corporate bank, yes, it's a structural increase, which you can assume, and that is also true for corporate clients.

Okay. Thank you.

Thank you.

And the next question comes from Stefan Stalemann from Autonomous Research.

Good morning. Thank you very much for taking my questions. I have one numbers question and one big picture question. So on the numbers, and I apologize if I missed that already, the 450 million cost to achieve, are you planning to spend that in 2029 and or 2030, or could it already happen earlier than that? And the big picture question, you mentioned earlier that the 12.7% vote in the first quarter was excellent. And I think that's true. But you almost plan to double that return to 21% in coming years. And you assume that basically most, if not all of your AI efficiency gains are flowing to the bottom line. And the only competitive impact that you explicitly allow for is on the deposit beta. It looks like you are assuming that neither your clients nor your competitors are reacting in any way to the efficiency gains that they will probably also achieve from AI. So I guess the question is, how do you think about the competitive threat to your medium term targets given these aspects?

Thank you. So first, on restructuring costs, I mean, it very much depends on the speed and progress and how we do the negotiations with the workers' council. So at the moment, there might be an assumption that it could happen in 2027, but it might be also that it's spread across years. So that's very much dependent on the negotiation. When it comes to your second question and the RTE and how do we get from 12.7 first quarter to the 28 and the 2030 numbers. First of all, I think it's very important to say that this is not hockey stick and we have a miracle happening in the last year, but it's a step wise year on year improvement, which we assume. And it's broad based. It's on the one side, it's clearly revenues and we basically see growth in our net commission income, and that is true for mBank, it's true for corporate clients and private clients, and we see a lot of upside here. I talked about the wealth management business as one example, but it's the same when it comes to our brokerage business, when it comes to capital markets business, and so on. We have not assumed that competition will lighten. We did not assume any improvement of margins, not at all. On the contrary, when you think about the deposit better, And on the NII side, I think it's pretty clear that given what we have done with the replication portfolio, we just see a year-on-year improvement on the NII coupled with the growth rates, which we expect specifically on the corporate side. And if you just think about the investment programs all necessary in Europe, and I mean, we have so many reports about it, be it the Draghi report or others. And we also see what is needed, for example, in Germany. We think that there is a lot of growth in the system, and we intend to participate in that despite all the competition we are fully aware of. And this is coupled with lots of cost discipline. And it will help us on the customer experience side. It will help us on the revenue side. But more importantly, it will help us on the operational excellence side. And we see it. already today with all the use cases which we have in place that it's freeing up capacity, it's freeing up capacity for doing even more client meetings, but it's also freeing up capacity in the back office function to organize the growth. So one of the assumptions also that we have more growth, more business, more clients to serve, but still we can do that with a very similar amount of people. And therefore, we think it's a very viable way and a very reliable path. It's aspirational, but absolutely achievable.

Great. Thank you very much.

Thank you. And the next question comes from Tobias Lukas from Kepler Schrieveröhe.

Yes, good morning. Also, three questions on my side, one on the SRTs, one on the ROTI drivers, and one on the efficiency gains again. On the SRTs, Carsten, I think we talked about that over the last quarters. Could you remind me, if you say 16.5% in RWA benefits against then the potential 210 base that makes 7.5% to 8%? Again, with the developments, where would you see a potential threshold in terms of or ceiling in terms of RWA gains from these SRTs. Is it 10 percent? Is it a 15 or 20 percent? Secondly, on the ROTI drivers, page 16, I was wondering what the one percentage point other slash capital means. If I look at the RWA growth and understand that it might be from the RWA growth, it would explain, let's say, 50, 60 percent of that. That would be interesting. And secondly, thirdly, on the efficiency gains on page 49, the 0.5 billion between 26, 28, and the additional 0.3 billion of 28 to 30. Could you maybe put a bit more flesh on the bone here, where this is coming from, how we could expect that? Thank you.

So yes, let's start with the SRTs. The question which level we're comfortable with and how far we could go sort of RWA relief, I would answer with we're probably fine and comfortable with the level that we're at at the moment. We think we can extend that a bit further, but there's two aspects playing into this. One is the absolute amount that we are having, and I think there could be a bit more room above what we're having, but we're also keeping a clear eye on the rollover of maturing tranches. So we are looking into the full sort of maturity range over the next years, which is also why we said we're going to extend the SRT issuance beyond 28, but to a slightly lower degree than what you see today in order to replenish what is becoming maturing at that point. So current level, we're very comfortable with slight room to grow beyond that. Then you asked on the ROTI and the 1% in the bridge towards the longer end. I mean, first of all, we are now into a few extra charges that we will be seeing by restructuring expenses, which also means that we might be returning more than the 100% level technically, given that we are excluding this according to our capital return policy. And that in turn would mean that we are actually having slightly lower roti on that end. Then last point on the efficiency gains in the bridge again, in the corporate client portfolio and the portfolio overall. When we're talking about efficiency gains, I mean, there's always two ways to look at this. One is efficiencies in the RWA by model adjustments. This is what we're doing only sort of on a prudent level, according to the general updates of the models, also in full accordance with what the regulator discusses with us. But most importantly, we are constantly looking into optimizing the portfolio when it comes to flushing out, let's say, lower-yielding and lower-efficient business and exchanging that with higher-yielding business. So I think this is the questions that you had.

Yeah, a question for me. On the efficiency question, it was a bit more on the bridge, on page 49 on the cost bridge, all these 0.5 billion and 0.3 billion efficiencies are being reached.

Well, this is a combination of shoring efforts. It's headcount, and therefore headcount reduction. the reduction in external costs, specifically on the IT side, and that's very much driven also by AI and the replacement of, take for example, external software developers in the application environment and things like that. So multiple levers, and specifically, on the external side, we expect already some steps pretty early. Take, for example, our call center capabilities. We have a lot of call center, external call center capacities, and through the introduction of agent assist last year, we expect quite some impact short-term at this end. And let me just add on the 1%. I think one point Karsten did mention, and that is prudence. So we really wanted to make sure that we have a reliable RWE-TE target out there. So there's also some prudent assumptions which are embedded in the 1%.

Well understood. Thank you.

Thank you very much. And the last questioner for today is Once again, Riccardo Olvera from Mediobanca.

Thanks for taking my quick follow-up. When it comes to the Common Equity Tier 1 target, the 13.5 in the previous strategy was supposed to be achieved in 2028. Now I see that that has been moved to 2030 for 2028. Now you're set at 13.7, if I'm not mistaken. I was just wondering what is the reason why the 13 and a half has been moved by further two years? And what is the reason of having 14, 14 and a half, or whatever the number is, you know, throughout such a long period of time? So it's like saying that 13 and a half, again, has been moved by a couple of years. I was wondering why. Thanks.

Ricardo, great question. I mean, first of all, on the target of 13.5%, I mean, we just simply do not have another number yet. So it is clear that there could be a rightful expectation that with this increasing profitability, our MDA might come down. But for the time being, we just plan with our actual MDA. And therefore, I think it's prudent to also assume that for the timeframe, but I would also share the view that at a certain point in time that could come down given the strong profitability we are currently showing and will show in the future. And when it comes to 2028, yes, I mean, it has also to do with our increasing profitability and the fact that we have restricted that to the 100% payout before extra ordinaries and we will see it's a dialogue which we have to have with our regulator and before we haven't had a dialogue we stay very much to our capital return policy which we have put into an interaction.

So Bettina sorry if I understand it correctly it's like saying that your property is kind of 400, maybe a million higher in respect to the previous targets, but that should be paid out completely by your RWAs, maybe, and I haven't checked, I admit it, maybe with the SRTs will be a bit lower than initially foreseen in the previous capital markets rate. Is that the case? Why the 13.5 go to 13.7?

Yeah, it's just, I mean, it's an equation out of many things, including also RWA growth expectations and stuff like that. And with the increased profitability, the capital generation on the one side, but also the RWA development and our RWA efficient growth, that's basically what's happening. But I can assure you, we understand the expectation from the market. And I think if you just sum it up, what we have returned already, but what we will also return in the coming years, I think it's a good story.

Thank you. Thanks, Bettina. Thanks.

Thank you so much. And we received one final question, which will conclude the Q&A session from Tarek and Neha from Bank of America.

Just a last question, please. So now you presented your plan and your vision for the bank by 2030. You answered to Unicredit's comments and statements. So you mentioned that you stay open for discussions and you publish your reasoning statement in due course. But I just want to understand if you are now in a mindset of let's extract maximum value, the trade will happen because it's up to shareholders, but your job is to extract the maximum value or you are more in the camp of we still have a chance to stay independent and in this case, what tools you can actually bring beyond those you presented today. Thank you.

Thank you, Tarek. So, I mean, first of all, our job is to present a strategy and to present alternatives for our shareholder. I think you have seen that we are very convinced of our momentum 2030 strategy, which produces very good results for our shareholders. But it is at the very end the decision of our shareholders to decide what they want to do. Our job is to, first of all, keep the business model stable to create value for our shareholders, but also for our clients. to move forward and to not let us or our staff get distracted by anything. But it's also very clear, and we said that, that we always stay open for discussions with Unicredit. We, however, have two key requests, and one is that one should take into account the strengths of our business model and of our franchise, and second is that there's no sense that our shareholders give up their shares of Commerzbank and the upside attached to it without a premium. And that are the two things. But besides that, we are always willing to sit down again.

Thank you. Thank you very much. So.

I'm sorry. I wanted to hand over to Ms. Orloff. Yes.

Okay. Thank you very much. So, yes, thank you very much for your attention. We are delighted to ask or to answer any questions after this call. Again, our investor relations team is ready for you. And otherwise, I wish you a beautiful weekend later on. Thank you.