Good afternoon, everyone, and welcome to our Commerzbank Capital Markets Day. It's very nice to see lots of you here in Frankfurt because it's been a while since we could really welcome you here in person in this tower. So, the first time, I think, since five years or even six years, if I recall correctly, and also welcome to our audience joining virtually. Good afternoon and good morning to the U.S. The conference, the Capital Markets Day, will be live-streamed and will be made available afterwards on the internet, so whenever you miss anything, you can catch up later on.
Let me take you through the agenda for today. First, our CEO, Bettina Orlopp, will walk you through our upgraded strategy and financial targets for 2028. Then I will have an interview panel with Thomas Schaufler, who is leading our private and small business customer segment, Michael Kotzbauer, who is leading the corporate client segment, and with Bernd Spalt, our Chief Risk Officer. Thereafter, we will have a second panel with Christiane Vorspel, our COO, and with Sabine Mlnarsky, the Chief Human Resources Officer. And then we will have a short coffee break.
Afterwards, our designated Chief Financial Officer, Carsten Schmitt, will walk you through the details of the strategy and the financials of the holistic plan. Finally, Bettina will wrap it all up, and we go to Q&A. Q&A will be with the whole management team on stage, and that is the opportunity for you then to ask all your questions you have. Afterwards, we'll invite everybody who's here in the room to some drinks and snacks over there in the other wing of the tower on the 49th floor, and with that, I'm very happy to hand over to you, Bettina.
Good afternoon, everyone, an d welcome to our Capital Markets Day. It is a pleasure to have you all here, both in person and virtually. I look forward to sharing with you the remarkable journey we have embarked on, our significant achievements, and our strategic plan for the future. Over the past few years, Commerzbank has undergone a profound transformation. Strategically and financially, we have built a solid foundation that positions us strongly in the market. Our business model, deeply rooted in Germany for 155 years, has consistently demonstrated resilience and the ability to adapt. We have achieved a robust product and customer coverage reflected in solid customer ratings and market shares. One of our most notable accomplishments has been the consistent increase in profitability since 2020.
We have seen our return on tangible equity improve from a significantly negative position to over 9%, and our cost-income ratio has improved from over 80% to 59%. The financial turnaround has resulted in a very positive share price development, rising from under EUR 6 to more than EUR 19 as we speak, and attractive capital returns amounting to EUR 3.1 billion over the last three years. These achievements are a testament to the dedication and hard work of our entire organization. Our team's motivation has significantly improved, as evidenced by the employment engagement index rising from 70% to 75% while being in a challenging environment. Hence, we can build our growth strategy on a very strong momentum. Before I continue to discuss our strategy and new targets, just allow me to make three remarks upfront. The first one is about facts.
In each of the last four years, we have achieved and generally over-delivered on our return and cost-income ratio targets. This is a simple fact. The second one is about transparency. Regarding questions on our strategy raised by our Italian competitor and investor the day before yesterday, our presentation today will provide you with full clarity on the relevant points and our approach. And the third one is about style. We prefer to talk about ourselves and our strategy rather than anything else. With that, I would like to draw your attention to the business model we have created, which provides an excellent start for future growth. Our corporate clients' division is a clear number one player for the German Mittelstand. Tailored to the needs of our clients, we are present in more than 40 countries globally and ensure strong support for German trade.
For private and small business customers, we have transformed ourselves to a leading universal bank with 400 branches and a 24/7 multi-channel offering. Our key strengths are our first-class advisory capabilities and Comdirect, which is leading position for digital-savvy customers. With mBank in Poland, we own the most efficient digital bank with an innovative mobile banking offering. Together with a very attractive customer base, this is an extremely valuable asset and an integral part of our group. To capitalize on our business model and our current momentum, we have developed a comprehensive strategy upgrade to create further value for all our stakeholder groups. For our shareholders, our goal is to achieve a competitive return on tangible equity of 15%, coupled with attractive capital distributions.
For our customers, we will support corporate clients by financing growth and transformation and assist private clients in sustainable wealth building through a broad range of products and services with tailored regional coverage. For our employees, we are focused on sharing the company's success through attractive compensation and introducing an employee stock ownership program and creating appealing workplaces with ample opportunities for professional growth and development. The core of our success will continue to be the trust of all our stakeholders in Commerzbank's reliability, security, responsibility, and delivery. This is our strong collective commitment as a management team of Commerzbank, which is reflected in our financial targets for 2028.
Based on a significant growth of revenues by EUR 3.1 billion, we aim to increase our net result by more than 50% to EUR 4.2 billion in 2028. This comes with significantly increased efficiency, targeting a cost-income ratio of 50% and a net return on tangible equity of 15%. Also, our targets for 2027 have been revised upwards. Compared to our planning update back in September, we now forecast a EUR 200 million higher net result of EUR 3.8 billion for 2027. This is driven by higher revenues of EUR 300 million and translates into a net return of 13.6% compared to 12.3% back in September. Regarding cost-income ratio, we now target 53% in 2027, one percentage point better than our former planning.
This may sound like an ambitious set of targets, but it is well supported by clearly defined measures, which we are happy to outline today. Furthermore, the business plan is based on rather prudent assumptions, providing further potential upside. In addition, there is a high degree of flexibility to be able to react quickly to unfavorable developments. The rates assumed for the plan are below forward rates at the end of January in both the Eurozone and Poland. Also, the deposit beta is planned above the current level. For 2025, we plan with 41%, which is higher than our exit rate of 39% in 2024.
We have assumed very low growth for Germany with a GDP growth rate of just 1% from 2026 onwards and even only 0.5% this year. Any potential rebound of the economy would obviously provide us with upside. Our cost planning is prudent as it incorporates all necessary investments for our growth measures. However, if revenues do not materialize as planned, we will cut back the investments and ensure that our planned cost-income ratio is maintained. We have not incorporated any positive contributions from future bolt-on acquisitions.
And lastly, we have been conservative in our RWA planning, especially regarding 2025, and will manage RWA growth in tandem with the usage of SRTs to maximize value. With this overview of our financial targets and the prudent assumptions, let's dive into the strategic measures to provide you with comfort on the solidity of the strategic plan. We called our strategy Momentum because we capitalize on the strong performance of 2024 and the high engagement level of both clients and employees. Our guiding principles for the coming years are growth and transformation. We have defined five main levers to achieve our targets. First, leveraging our proven strengths for profitable growth. Second, enhancing customer orientation by expanding digital sales channels. Third, increasing capital efficiency through portfolio optimization and securitizations. And fourth, boosting operational productivity by modernizing and efficiently using our technology and streamlining our processes through internalization and shoring.
Fifth, enhancing the performance and motivation of our employees. Strategic partnerships and targeted M&A activities will support these efforts, creating a bank that continuously improves its profitability, capital efficiency, cost-income ratio, and return on tangible equity steadily up to 2028. Let me walk you through the different levers. We aim to continue our growth trajectory by scaling proven growth fields and expanding market leadership in key areas. Let me tackle the strongest growth drivers right at the beginning. In PSBC, we will significantly expand our asset and wealth management business with an annual growth of 8% in volumes and 7% in fee income. These are high growth rates, but 2024 has already proven that they are well in reach. In 2024, we have raised assets under management in PSBC by more than 10% and achieved a 7% growth in net commission income already.
Thomas will provide you with further insights later on. The same applies to the growth of our business with the German Mittelstand. In 2024, we achieved a loan growth of 7% and outperformed the market. In the coming years, we aim to exceed the expected market growth again, which is currently at 4.3%. Michael and Bernd will further elaborate on this as his plans come in close alignment with business and the risk management function. As we grow our lending, this will lead to an increase in our market share among corporate clients. Additionally, our clients need to transform their business to further drive the market. Importantly, this expansion will be achieved without compromising our well-defined risk management system. Our growth measures are rounded off by continued growth in mBank, catching up in banking with small business customers and strengthening our retail banking profits, including repricing.
Let me say a few words on mBank. I think it is absolutely outstanding for a bank to achieve a return on equity of 40% in the operational business, excluding the burdens from the FX mortgages. We will support further mBank's growth path, targeting an annual revenue growth of 4% by means of scaling the business success in both retail and corporate banking. On the corporate banking side, there are close links between Poland and Germany, which we can serve perfectly with our offerings in both countries. We expect 2025 to be the last year of potentially meaningful legal costs for the FX topic and look forward to seeing the full potential of the business model materialize. Now to the second lever that is about strengthening our customer focus. Digital and remote sales are the future of retail banking.
More than 55% of our sales are already digital, and Comdirect is growing successfully as digital primary bank. Our well-established advisory center will increase its outbound sales activities, which will be also one of the key measures for the direct bank model for the German Mittelstand. Hence, we increase productivity in our core front office operation, and this will be complemented by ongoing branch capacity management and targeted utilization of distribution partnerships and platform business. Overall, this will lead to an increase of revenues per FTE of 4% per annum. Productivity is also very important when we discuss capital. Value equity of deployment of capital and RWA is on top of our minds when we think about shareholder value. Michael will go deeper into this topic in his session, but let me touch on the main drivers. First, focus on capital-efficient products and customers.
Our key metric to measure capital efficiency is revenue per RWA on a client level, i.e., it's not only about loans but also deposits and fee business. New business needs to meet certain thresholds which ensure value accretion. Existing business is constantly monitored and optimized. Thereby, we plan to increase RWA efficiency from today's 7% to 7.8% in 2028. Second, business-driven growth of risk-weighted assets. The net increase of RWA by EUR 10 billion until 2028 is fully driven by organic growth, reflecting a planned annual loan growth of 5%, including mBank. This projected growth comes with 18 billion in RWA. Two-thirds of this capacity is funded by RWA reductions from securitizations. While the Basel IV impact is already covered by pre-booked RWA, we do expect some increase of market and operational risk RWA, especially due to higher profits, which drive, as we all know, OpRisk RWA.
We will now move on with operational productivity and costs. We are committed to increasing our operational productivity by modernizing our processes and efficiently using technology. This includes optimizing our platform infrastructure and reducing legacy applications. Our efforts in this area will contribute significantly to our cost-income ratio target of 50% by 2028. To enable the funding of our growth initiatives, we also need to improve the cost efficiency of our workforce. This is why we have developed a comprehensive efficiency program that comes with a gross reduction of 3,900 FTE, mainly in Germany, and an increase in offshoring and internalization of 2,200 FTE. Due to the targeted FTE investment in our growth measures, our FTE projection is basically flat but with an increased productivity. This program is already pre-aligned with the Works Council.
It will be implemented in a socially responsible way and come with a restructuring one-off of EUR 700 million. Sabine will certainly provide you with more details later. The overall savings from our efficiency program sum up to EUR 500 million per annum in a steady state and ensure a flat cost development before investing into growth. Strong partnerships are also an important catalyst for the development of our business. We can build on well-established partnerships with Allianz and BHF for insurance and equities, and in the field of payments, we have entered strong and promising partnerships with Global Payments and clearly Worldline. These partnerships will now be complemented by Visa. Last week, we have signed a long-term agreement that will boost our card and wallet offering, as well as support us in achieving our NCI targets in the coming years.
Finally, our tech partnerships with Google and Microsoft will contribute to our targets, a topic that Christiane will touch upon later. Regarding M&A, we do explore selective bolt-on acquisitions. While capital accretive organic growth, as well as capital return to shareholders, will remain our top priorities, targeted add-on acquisitions are within our toolbox to contribute to our strategic targets. Such acquisitions are possible in the field of asset management, banking, and also in the tech space. Thereby, any acquisitions must meet clearly defined criteria financially and operationally when thinking about integration efforts. Within this framework, we actively look for opportunities that come with only a small impact on the CET1 ratio. Let me now finish the deep dive with the fifth lever, which is about our people. Our strategic measures will be only successful when we build them on motivated and skilled staff.
On both, we have seen significant improvements, and there's more to come. We are investing in modern technology-supported workplaces and work processes to empower our employees. We are also committed to enhancing performance-based leadership and recognizing demonstrated performance and ownership. Our goal is to further improve our employee engagement index and to ensure that our employees participate in the success of the bank through a new employee share plan. Sabine will share some details on this later on as well. Now, let me summarize our financial targets and the interim years until 2028. We target a return on tangible equity of 15% and a cost-income ratio of 50% by 2028. These ratios come with a planned net result of EUR 4.2 billion. Looking at the year ahead for 2025, we expect further earnings growth before restructuring charges despite lower interest rates.
Overall, the path from 2024 to 2028 is quite linear and not back-end loaded. We plan for a double-digit return as early as 2026, and by 2027 latest, we aim to earn all cost of capital. This plan builds on a very strong momentum from 2024 and is based on prudent macro assumptions, as well as a very good start in 2025, I have to say. Carsten will further elaborate on this financial plan later in his presentation. Based on the strong financial development, we are committed to substantial capital generation and high capital return potential. For 2024, we decided on a capital distribution of EUR 1.7 billion, EUR 100 million more than planned due to the excellent financial performance in 2024. For 2025, we want to further increase the capital return by distributing the full net result after AT1 coupons but before restructuring charges.
This is reflected in our new capital return policy. This policy allows us to exclude extraordinary non-recurring items from the net profit regarding calculation of the payout ratio. The planned restructuring charges in 2025 have been pre-aligned with ECB for qualification as such a one-off item. In line with the new policy, we plan to distribute 100% of the clean net result, excluding one-offs for all years until 2028, clearly assuming a successful strategy execution and subject to the macroeconomic environment. On reported figures, this translates into a payout ratio above 100% for 2025 due to the restructuring charges. In any case, we target a CET1 ratio of at least 14% for 2025, declining in the years to come to approach our target ratio of 13.5%. This strategy ensures continuous increase in total payout and dividend, reinforcing our commitment to delivering value to our shareholders.
In conclusion, Commerzbank is well positioned for sustainable growth and profitability. Our strategic initiatives and the strong financial performance, as well as our commitment to customer focus, operational productivity, and employee engagement, provide a solid foundation for future success. We are confident in our ability to achieve our financial targets and deliver long-term value to our shareholders. Thank you very much for your attention, and I'm now handing it over to Christoph, who will walk you through the details of our plan together with my management board colleagues.
So, thank you, Bettina. Let's now move on with the panel sessions. Please note, there will be no Q&A directly after the panel sessions. This will be all bundled in the big Q&A towards the end of our Capital Markets Day. The first interview session is with Michael, Thomas, and Bernd, and please join me on stage. Michael, 2024 was an excellent year for Commerzbank and also for your division. Could you elaborate on the key achievements within Strategy 2024 and how these accomplishments have laid the groundwork for future gro wth?
First of all, we're very content with our journey from 2020 to 2024. On the income side, we experienced strong income growth of 55% compared to 2020 and an increase in loan volumes by 12%. The good thing when looking at the income is that it has been very broadly diversified income through clients and products, so across all product and client groups. This, together with high client satisfaction, is, in our eyes, a very good base for future growth.
On the cost side, we managed to bring down our cost by 14% from 2020 to 2024 by streamlining our operations, closing 15 international locations, reducing the number of correspondent banks by 400, and reducing product complexity, for example, the Murex simplification that we achieved successfully. This all led to a satisfactory cost-income ratio of 44%. On the RWA side, second pillar, capital deployment improved substantially with an RWA efficiency increase by almost 80% compared to 2020 and from 3.2 to, in 2022, 5.9 in 2024.
We accomplished, you'll probably remember, a Capital Markets Day in 2020, 2021, in January, when we said we want to reduce our low-yielding RWAs below 3%. We accomplished a 60% reduction in those low-yielding credit RWAs with efficiency below 3%. We started at 34%. We're now at 15%, resulting in a strong RoTE of 20% in 2024, and this compares with a RoTE of minus 4.1 in 2020. I think this demonstrates our strong financial performance and also positions us strongly for future growth. We have successfully built our proposition of being the leading Mittelstandsbank in and for Germany, Austria, and Switzerland.
Yeah, maybe that's a good word, Mittelstand. You have been with Commerzbank for more than 30 years now, and Commerzbank is the most important lender for the German Mittelstand. What are the unique elements of Commerzbank in that business with that client group?
I think, first of all, that what Bettina was referring to, it's our DNA. It's 150 years of clear focus on German corporates, especially SME and trade in our home markets. This becomes evident in the longevity of our relationships. We are a relationship bank, a classical relationship bank, and standing by our corporate clients through tough times and every cycle, right. Our research further supports this, showing that clients prefer a German-based bank, which makes it difficult for foreign banks to compete.
We have a high, as I said, client satisfaction and loyalty. We have a clear focus on DACH connectivity, which places us where our clients need us in more than 40 countries on the globe. Constantly adapting our franchise by, for example, opening new offices, as we did in Lithuania, in Morocco, in Jordan. We continuously adapt and improve our product range from cash management, payment transactions, hedging, currency trading, and trade finance. All these solutions are specifically, very specifically designed to meet our clients' exact needs. This comprehensive approach, I think, ensures that we remain the bank for the German Mittelstand wherever our clients are on the globe.
Thank you. Thank you. The divisional return, actually, in 2024 has already shown a lot of this proposition with a strong RoTE. But looking towards 2028, what exactly are your aspirations, and what are the key levers to achieve the m?
Well, I think similar to our strategy 2024, we have an ambitious, yet, and you said it, Bettina, realistic plan. By 2028, we aim to achieve a divisional return in corporate clients of 22%, and we build on our strengths, so the things we do well. And despite a low GDP growth in Germany, lower rates, a low political stability when it comes to reliable frameworks for investments, we do think that there are opportunities. And we will focus on four key pillars. First of all, it's clients. We enhance our established coverage model by growing our client base in the large corporate segment in Germany and extending our offer to our direct bank clients. We start to do outbound business with our direct bank clients in the Comdirect in Hamburg.
We further focus on international growth, strengthening our business with German clients abroad and our international clients. We are the bridge to and from our home markets, and this we do especially in the U.S. and in Asia. In Asia, we focus on specific sectors that we know very well, like TMT, so technology, media, telecommunications, and infrastructure and energy, where we see sizable growth potential, especially in renewable energies, and we further enhance our non-bank financial institution business by expanding our business with asset managers, with leasing companies, and with financial service companies, so that was clients. Next one is product.
In products, we expand within our proven, again, proven growth areas. We'll further invest in FX and rates to scale our existing, and I'm very proud of this, highly awarded trading platforms. And we leverage advanced data and analytics to analyze and optimize offerings and pricing. We are already implementing deep learning and neural networks into our platforms and optimize and apply for behavioral pricing, so we can really do behavioral-driven pricing on our platforms. We deepen our offering to emerging markets banks, and this will clearly contribute to our fee income. And the second pillar is loan growth. We strive for an annual loan growth of 8% until 2028. And we already grew our book by 10% in 2024, benefiting from our strong ties with Mittelstand and international corporates.
The good news is that we already kicked off January very well in loan growth, so we already picked up on loan growth in the first one and a half months this year on a strong basis in December 2024. I think this is a good foundation for loan growth of 8% annually. Again, we do it with proven growth factors, and those will be complemented by growing our business with structured solutions and investments taken over from Treasury. Actively, here we actively deploy excess cash and capital in value-accretive manner. Capital efficiency, you referred to this earlier. We will scale up our efforts in S&T.
We will continue with our very consistent steering of RWA efficiency, and we further increase cross-sale with RWA-efficient products. Lastly, on the cost side, we will maintain our cost efficiency by strictly managing our costs and leveraging artificial intelligence solutions to boost efficiency. Christiane will come to that later on. This will result in a revenue increase of 12% in 2028 compared to 2024, and a cost-income ratio of 43% and a divisional return of 22% in 2028.
Let's maybe dig a little bit more into the RWA efficiency topic, as this metric is on almost everybody's mind in the community. Can you shed some more light on your optimization approach towards this one?
First of all, our strategy is built on a capital-accretive client franchise with a medium to long-term view, whereas I said we are a relationship bank. And I think our recent success, or the success in Strategy 2024, shows that we are on the right track. And again, we have defined three levers for this one. First is, as I said, growth in products with no or low capital consumption. So we know that the benefit of NII from deposits will decrease, but it will remain of high relevance. So we continue to focus on deposit management.
And this we successfully did in 2024, so we know how to do it. And we are very, very, very, as I said, well, sure that we can continue with this. We will increase our efforts in cross-selling to generate fee income. Enhancement of our capital markets platform, I already referred to this one earlier, right? And we will introduce remote sales force that will support this, especially in financial markets for our direct bank clients. And we will grow RWA like products, loan products such as private ABS, co-investment funds.
We're going to initiate our second co-investment fund this year, PE funds and structured solutions. Second is APM, active RWA portfolio management. So we do this for all client groups in Germany and abroad. We strictly review clients below defined thresholds. And this active management may, as ultimate ratio, include ending relationships with non-value-accretive clients. We did this, as you know, the KPI that I was referring to, below 3%. So we continue doing this not just internationally, but also in Germany. And we will continuously review pricing and manage the delivery and recognition of collateral.
And certainly, we'll continue to adjust open credit lines to, A, better meet client needs, but also that it contributes to our capital position. By active portfolio management, so the APM measures I just was mentioning, we plan a total RWA relief of EUR 4 billion in 2028 compared to 2024. The third pillar is SRT, so we will extend our significant risk transfer. We plan a total RWA management, we plan a total relief from SRTs by securitization of EUR 10 billion in 2028 compared to 2024. And we have three billion more on group level, right? So EUR 10 billion stems from corporate clients. And this will lead to an additional RWA relief of EUR 14 billion from corporate clients and an RWA efficiency then in 2028 of 5.7%.
Thanks a lot, Michael. Bernd, when talking about the corporate clients business, macro development is very important. You joined us just one year ago as Chief Risk Officer and have obviously brought a lot of experience to the team. Could you start by sharing your view on the macro developments?
Sure. Thank you very much. And good afternoon, everybody. It's a real pleasure to meet so many familiar faces in this round, people who really know us and understand us well. Let me take that point up. In terms of everybody understands that a bank like us is nothing else but a leverage play on the local economy, and if our macro economy doesn't work so well, we will feel it, so Germany is now in the second year of a recession. Germany is experiencing something which it hasn't done for very many years, lagging behind sort of the rest of the Eurozone for quite a while. Not producing growth in 2025 will not be much different afterwards.
We will see a mild but steady recovery on which we bank. Now, in this situation, I think it's very clear that the temperature is rising when you look at credit risk. If you look at insolvency rate developments, go back to 2014. For the corporate world, we have seen there 24,000 corporate insolvencies. Today, in 2024, we're at 22,000. So after all these years of economic growth and prosperity, sort of insolvency rates came down, being artificially low in corona times when the states spent money everywhere, and they're now normalizing. But what I'm trying to say is this is not a super crisis scenario.
We have seen that before. And the same thing is true for consumer insolvencies. While today, consumer insolvencies for 2024 are 72,000 for Germany, they have been at 86,000 10 years ago. So what I'm trying to say is, yes, we feel it. And yes, it's sort of across the industries that we see that tension is rising. I will come at the end of my speech also to how strong and how resilient the corporate sector and the consumer sector in Germany is. I do think, yes, we experienced that. It's not getting much better very quickly.
We will see only a mild sort of recovery from the years 2026 forward. If one wants to see in this kind of bleak picture a positive element to it, then this is the combination of rising real wages over the last couple of quarters, falling interest rates, and very low unemployment levels. In this constellation, of course, consumption will grow. This will be a boost to consumption. It will not help much industrial production because we have not done much in terms of changing of the, how shall I say, policy when it comes to economic sort of efforts on the political side.
We need to have impacts there. But yes, consumption will rise and will help to sort of stabilize the picture somewhat. Nevertheless, we need to have a restart of economic policy in this country, and our hope is also on the elections, which are coming up now, 23rd of February. There is an effort which is needed that things change in Germany. Now, when it comes to looking into credit risk, as we see it and as we sort of believe we should run our shop, this is embedded very much in terms of understanding sectors and subsectors, industries. Both the first line of defense with Michael and his guys and second line of defense like my guys are very close when it comes to understanding developments on a sectoral and subsectoral level, and this is how we run our shop.
This is how we also manage our portfolio. And there, yes, there are critical portfolios like commercial real estate. And we have been very, very cautious over the last couple of years already, long before I came. So it's not my sort of responsibility. But we have been very cautious on commercial real estate. We believe that it is a difficult sector to be in. We have avoided development risk on that end. Where we go here is very much that we look into renewable energy projects, so project finance, much rather than going into speculative development offices, buildings, or stuff like that. So I think we are cautious and careful when it comes to touching upon critical industries. Yes, we're also having a very close eye on the automotive industry. And here again, the automotive industry is not one industry.
It's the OEMs, it's the suppliers, it's all of the individual sort of subsectors. And yes, while we see that there is a critical situation of overcapacities, of geopolitical risks, of potentially, how shall I say, technological advancements or not advancements, so we see a compilation of risks. It's also very clear to say that the OEMs over the last years have lived on record years. They have been building very resilient balance sheets, and sort of they will be able to sort of adapt to situations as they come. Yes, also, there is no time to relax as a risk manager.
There is no time to sort of be lenient on all of these things. Suppliers and subsuppliers will become much more vulnerable. And this is what we look upon. So what I'm trying to say is in a relatively fragile trend based on a very strong general balance sheet of the economy. And let us not forget that over the last decades, the German corporate sector has built up huge equity positions, which puts them into a position not only to adapt strategically to new challenges, but also sort of have time to weather some storms. So I think, yes, situation is getting more fragile. It's getting more tough to look at. And we're applying a very sort of detailed look onto the segments.
Well, considering all these developments, Bernd, how do you view Commerzbank's asset quality and balance sheet?
Well, I do think generally, if you look at Commerzbank's balance sheet, the balance sheet of Commerzbank is a fortress. It's very strong. We have been looking at a non-performing loan ratio, non-performing exposure ratio of 1%, give or take, over the last many, many years. We've never seen any kind of surprise, and 1%, now we're at 1.1%. 1% is really good in times like that. I think it shows that we're not up for surprises. I think we're very, very close to what we manage and what we do and what we underwrite, so the balance sheet is strong. If you look also and you see that on this slide, let's look at the composition of stage one, two, three. I think that's also important to understand.
We have 87% in stage one. We have significantly increased stage two allocation in this year to almost 12% in 2024. What does this mean? This means that even if we idiosyncratically, on a name-by-name basis, do not see a deterioration, we sign a significantly increased credit risk flag to certain sort of kind of features of our portfolio. We have put all of our yellow and red traffic lights in the sort of subsector sort of analysis to stage two. We have sort of allocated a lot of sort of exposures in the context of physical and transition risks when it comes to ESG to that kind of portfolio.
So we show a lot of anticipation when it comes to what is significantly increased credit risk, even though the P&L and the balance sheet of the corporate customers are still strong. So what I'm trying to say is we're early when it comes to identifying and showing and being transparent on sort of significantly increased credit risk, and we're still at 1% NPE ratio. I think that is good. Also, let me make one last statement on that. When it comes to risk costs and our guidance on risk costs, I think what we follow is a sort of no surprise policy. We want to sort of be very clear what is our normalized cost of risk. We have been at around 25-30 basis points for the last couple of years, even if crisis came.
We're now at 27 basis points and for 2024, very much inside of our guidance of below EUR 800 million with partial utilization of TLA. We will grow next year. We will have more risk costs next year, so 25-30 basis points next year because the economy is not getting better next year or this year. Then we will get back after a mild recovery, a mild but steady recovery. We will get back to the 25. So what you should remember as our investors and analysts, what should you remember is the attached risk to our business model is through the cycle at 25 basis points with no surprises, which you should expect. And I think that is a good statement to make in a time where a lot of surprises are waiting for us.
Super. Thank you very much, Bernd. Maybe a few more words on the growth that we are projecting and the growth we think of going forward. Michael already told about 8% loan growth in his division. What kind of loans, what kind of businesses, what kind of exposures are those that you really like and that you strongly support?
I don't know even where to start. I think there's a lot of things to like. Inside a non-growing economy, there are sectors which will grow. Travel and aviation, for one. Renewable energy with the context of adjacent technologies and grid and storage will be a very much growing sort of subsector. I also think, and we don't talk about it much and nobody's talking about it much, much to my surprise, is defense. Because I do believe in the American-European constellation when it comes to defense spending and what do we need to do to come up to a hopefully defendable Europe.
This will be a pocket of growth. So I think in the corporate sector, there will be sectors which will grow even if the total economy doesn't grow. And there's one other thing. We are hopefully, luckily, not only present in Germany. We're present also in Asia and we're present in America. And these are countries or sort of continents which will grow. And we're there. We know what we do and we can grow there. So potentially sort of the distribution between our home country, Germany, and the other countries will also change and it will increase our diversification. Lastly, coming to Thomas's portfolios, two elements here. We're sitting on a very large mortgage loan book, which from a risk profile is really great.
It's something which is owner-occupier dominated. It has super zero default rates. It's something which will sort of grow over time as now sort of available income starts to grow. And as also availability of projects are becoming better. So I think here we see pockets of growth. And also when it comes to self-employed sort of professions like doctors and like other sort of self-employed, this will be pockets of growth. And lastly, in the area of wealth management here, yes, we've done a lot on sort of catering to the liability side, but we can do a lot more on the asset side.
Thanks. Very clear, Bernd. And moving from your point around wealth management to Thomas and our business with private and small business customers, you have rebuilt the business model actually towards a lean setup and increased revenues and efficiency. Thomas, where does your business currently stand and what are your growth areas?
Yeah, during the last years, PSBC really delivered successfully a deep and really massive journey restructuring. We were cutting costs by closing down a significant number of branches. We are talking about 60% reduction in the physical footprint. At the same time, we changed the business model towards an omnichannel approach and were able to increase the revenues. One very important point was to simplify the processes during this process and during this transformation. I'll give you one example.
In the past, Bernd was mentioning the SME portfolio. In the past, the onboarding process for an SME client took roughly about 25, 85, 25 days. All the paperwork, you have to come to the branch, the wet signature. We were able to get with the colleagues of Christiane to build a pure online digital onboarding process without paperwork. You can load up the documents. You don't have to come to the branch. You can sign digitally. We were able to, you can see it on the chart, to reduce the time by 90%. Today, within one and a half days, you are up and running.
And this in combination with a really strict cost structure, we were able to bring down the cost-income ratio from 85% in 2020 down to 69% in 2024. Still a way to go to the numbers of Michael, but we are on the way to go there. As I said before, the main topic for this transformation was not cost-based. It was based on the client needs. So it was very well client-focused. And there we realized what the client needs. And there we were able to increase the revenues by 16% and validated the assets under management by 25%, up to EUR 400 billion, including deposits as well as securities. On this way, it was very important to see what the client needs.
We realized that the physical footprint in combination with the Advisory Center, and they were really a big game changer because with the Advisory Center, we were able to bring the same experience, the same knowledge, the same quality from the branches into the living rooms of our clients. They don't have to come to the branch. They don't have just to pick up the phone and get the same quality as in the branch. Delivering the coffee we are still working on, but we will also solve that. That means together with the online mobile, especially the mobile approach, and also we can see here, we were able that 90%, 90% of the customer interaction, customer contacts are digital, and even 50% of the sales approach, the sales activities are conducted digital.
So these end up in a, from my point of view, very successful result in 2024. You saw the numbers from Bettina and from Carsten. And on top of that, during 2024, we were able to increase the client satisfaction and loyalty to new levels, to new high levels, which is very important for the upcoming years. We will continue this transformation. We have to. We will need the help of Christiane's people from the IT side. We will use all this new technology, name it artificial intelligence, new language models. And digitalization in my team, in my segment, means always two ways. First of all, more convenience for the clients. They don't have to show up in the branch. They can do everything by themselves. And more time for our advisors to really add value, qualitative value by advising our clients.
So end up, I think, looking forward, we will deliver the 7% revenue growth. One very important part is, as we said before, the 7% increase in the NCI, the net commission income. And one cornerstone in that NCI is also the payment area. As Bettina said, last year, we had this cooperation with Global Payments, where we have now a state-of-the-art offering for our clients as well as the clients for Michael in the payment area when it comes to point of sales or the digital area when it comes to e-commerce.
And now with the cooperation with Visa, we also have the possibility to offer the state-of-the-art payment service in their wallets with their cards. And just to give you one example, the Girocard, which is very popular in Germany, has one big disadvantage. You cannot pay online. You cannot pay in the e-commerce. And with the cooperation with Visa, we will solve that.
Cool. Maybe a little bit coming back to the 7% growth track going forward for NCI and for your revenues and the wealthy clients that Bernd was touching upon. And the question is, what exactly will make you grow in this very competitive market? And how do you plan to facilitate this growth with wealthy clients?
The beauty of that business in our case is that we can use both sides of the balance sheet. What Bernd said, we are not only planning to do loan business with that wealthy client. We already did. So we were able, with the help of the risk colleagues, with the help of the colleagues from Michael, and with the help of the colleagues from Commerz Real, to structure a big deal in the first quarter 2024. We are talking about EUR 350 million with a project in Munich. And the important part is it's not only about handing out money. Everybody can do it.
But we have the skills to put it together, to have the risk manager here in place, to have the colleagues here in place that we can decide here in Frankfurt to speed it up, to really find added value, to find real services for our clients. And that's the side on the loan side. On the other side, on the investment side, we did exactly the same. We were asking the question, okay, what is the need of wealthy clients? And it's not only to sell them product. You sit together with them. What we did yesterday in Hamburg, we have a big family office. They have real assets. They have new renewable assets worldwide. Now with Aquila, we have the same experience. So now we can team up.
We can make a joint venture. And together, we will get a higher share of wallet from these clients. And this is true for the loan side. This is true for the asset side and for the investment side. And that is also the reason why we brought in Yellowfin. This is a pure team for asset allocation. So the client gives us their guidance. They say, okay, we want to invest this and that. And then we make a tailor-made solution for them. And the beauty of that business is if we found a special fund for a client, EUR 400 million in size, then we can use a usage fund and bring it to private banking. So we can enlarge our value chain by starting in the wealth management, bringing to private banking. We will increase our fee income in the securities area.
Thanks. Your largest book of business, actually, when looking at the balance sheet, is obviously the mortgage lending. In the times in the last years when rates rose, it became a little bit more difficult, actually, to sell mortgages. Now, in the upcoming declining environment again, what are your prospects towards this business?
Very, very happy to show good results for 2024. Yes, you're completely right. We saw a big drop in 2023. In 2024, we are now up 30% from these lows. We are not back in the numbers of 2022. Two things on that. First of all, I'm not only talking about new mortgage business. As Bernd said, we have a large portfolio, EUR 90 billion-plus, existing portfolio. Many of these clients own old houses, old flats. So they have to think about renovation. They have to think about energy efficiency. They have to think about how can I solve that?
And we will do both. On the mass market side, we will have a standard product where they come to the bank and say, I need this. This is packaged. This is fully done for existing clients. But we have also the same topic on the wealth management side. They have big portfolios. In the low-rate environment, it was no problem. Now they try to get higher returns. And we will structure it for them. And that's the reason why I'm very keen to grow in both of these sectors.
Okay, cool. Lastly, another regular topic that we discuss in investor meetings is your two-brand strategy. It's Comdirect on the one hand side and the branch-based Commerzbank on the other side. What is your strategy when it comes to balancing different client approaches and potential synergies from closer integration?
I think if you look at the European market, you see many old banks who try to set up a new brand to also attract young clients. We are in the perfect situation that we have both brands, very well known in Germany, both highly recommended, award-winning brands. I think Comdirect is, the last seven years, the best brokerage business, the best brokerage house, the best online bank, Commerzbank on the other side, the best branch bank. So we have the perfect setup because if you go down to the street and ask 100 people, what is your best way to manage your financial life, your financial health? 50% of them will answer you, I'm completely fine with an online bank. I'm completely fine by doing everything by myself. I'm self-directed.
I can handle it by myself, and 50% will say, I need an advice. I want to talk to somebody either in the branch or in the advisory center, and we have both. We have a clear separation between the offering in Comdirect and the offering in Commerzbank. This will be daily banking, brokerage on the corporate, on the Comdirect side. This will be asset management, mortgage business on the Comdirect side. During the life cycle, and I saw that very often, during the life cycle, there's some point in time the need. Yes, I'm happy with my online banking, but I need advice on the mortgage side, and then you're already in the right bank because then you can just take the tool, mortgage business, add it to your Comdirect universe, and you're completely fine.
I think we have the perfect setup to combine these two brands, to have a very strict definition of what we're offering, in which channel, at which price. Pricing is also a very hot topic. Then I think we are really on the right track to do that. To summarize, I'm very convinced that we will follow our growth path. We will follow our transformation. I'm fully convinced that we will deliver our ambitious targets like we did in 2022, in 2023, and 2024. Thank you for that.
Thank you very much, Thomas. Thank you, Bernd. Thank you, Michael, for this first panel session. It was a pleasure for me. Now, I would like to invite Christiane and Sabine to the stage for the second interview session before afterwards we go into the coffee break. I join you at the bench, if you don't mind. Christiane, you rejoined Commerzbank last summer, having previously been part of our team from 1995 until 2018. You are in charge of the IT infrastructure and operations at Commerzbank, so to speak, of the backbone. What is your view on the current state of IT and ops in Commerzbank?
Yeah, so it was a really long time that I was with Commerzbank. And I have to say in the past, Commerzbank, as other banks with a comparable business model, universal banks with a long-standing IT infrastructure, they had faced some challenges. They had quite a number of legacy systems, which made it difficult to adapt swiftly to changes, be it in the business environment or adapting new technologies, technology innovation. And with a Strategy 2024, Commerzbank has taken this challenge, addressed these challenges through very targeted achievements and targeted investments.
I have to say, rejoining Commerzbank last September, I was truly impressed by the improvements, the progress that has been made over the last couple of years. The objectives of Strategy 2024 have been achieved, and we now have a quite good and excellent foundation, actually, for further development. Forward-looking, I see three major fields for development. That's namely shoring and sourcing. That's artificial intelligence and strategic partnerships.
Why not jumping into each of them and starting with shoring? Christiane, what actually are your plans there and what benefits do you expect for Commerzbank?
Yeah, shoring and sourcing was already a key driver in our former strategy, and that is a real success story. We've built almost from scratch the digital technology centers in our nearshore locations, predominantly in Bulgaria and in Poland, and also expanded our center in the Czech Republic. We now have more than 2,000 engineers, technical engineers, providing us with skilled talent, technological talent, and of course, contributing to cost efficiency. So that's really a success story, and we want to build on that. So we will expand our shoring centers, particularly in overseas, and so attract even more highly skilled technical people, engineers, and do a lot of investment into our internal technology skills.
So to give you a precise number, in 2028, we plan to have more than 3,500 engineers in our nearshore and offshore locations. So that's quite a number. What are the benefits we expect from that? Of course, cost efficiency. We want to increase our cost efficiency, and we'll do that. So by 2028, we will see around about EUR 75 million cost efficiencies per annum. So that's quite an impressive number here. But that's not all. We also will enhance our demographic structure. Just to give you an example, in our nearshore locations today, we have an average age from 36 years, and that's quite a healthy age, I would say, in the mid-30s.
And as the third benefit, we will also further reduce our dependency towards external vendors, making sure that we can drive the technological innovation within Commerzbank. And this ensures that we can invest heavily in technological innovation, in further digitalization without jeopardizing our cost base. Actually, we will decrease our run cost by 2028 by 2%, although we see salary increases, inflation, and these effects from digitalization expanding our digital footprint. So that's really a very important pillar of our strategy.
And pretty precise in terms of numbers. Thank you for this. And I guess most of you guys will join me on numbers. The second topic is on everybody's mind, obviously, AI. And you mentioned AI as a second key focus topic for you and your plan. What is your approach to leverage AI in Commerzbank?
So clearly, artificial intelligence, that's a very, very significant innovation we see. It's impressive how dynamic this innovation is. It's like a wave, actually. It's a clear game changer. And of course, we see tremendous potential for Commerzbank here. However, it's important to have in mind that you need to have a good and modern and flexible infrastructure and a data-driven platform, actually, to really be able to use AI in an effective manner. And here, again, we can build on the foundation we've created in the last couple of years and really apply AI in a way that it benefits Commerzbank.
To be a bit more specific, we plan to apply AI in several business units, and that's in our customer-facing units, but that's also affecting back office units and even in risk and compliance functions where we want to use AI to support our business. And this is not just future dreams. It's actually already happening. That's what I'm really proud of because we already implemented several use cases that are now running in production and really bringing the benefits in a day-to-day operations and increasing our efficiency significantly. And I can give you an example, again, a very specific example. We use it currently in our Corporate Clients segment for the automated documentation of corporate customer meetings and calls that we have to do due to regulatory reasons.
And by leveraging AI, we could reduce the amount of time that is needed to do this documentation by more than two-thirds. So that's a significant amount of time that now is freed up for other essential tasks. And that's just one example. We have bundled our AI initiatives within a strategic AI program, and we will invest about EUR 140 million for the next four years. And that corresponds to EUR 300 million of benefits. And these benefits result from cost savings and revenue loss protection, for example, in the fraud protection area in compliance. So that's quite another very important pillar of our strategy.
And again, very important numbers in there. And finally, the third pillar you were tackling upon is strategic partnerships. How do they support our business and our plan going forward?
Yeah, Bettina already mentioned that we had very well-established partnerships with Google and Microsoft in the past, our cloud providers, and we now want to expand that on a strategic level. What does that mean? Firstly, we will enhance our ability to innovate by really involving our partners in very early stages of our projects and even of our strategic process. So we bring together our banking and customer knowledge together with a specific technological expertise of our partners and then collaboratively develop innovative projects and solutions.
That's one very important part. Additionally, our partners will provide with additional change capacity, allowing us to speed up time to market. Secondly, and that's very important, we also want to use this partnership to upskill our internal employees to enable them to use this innovative technology and to contribute on their own without requiring our dependency towards an external partner. And lastly, obviously, we also get some commercial benefits out of that, so cost savings due to discounts on cloud consumption, etc.
And lastly, having those three pillars, and they all cost some money, and you need to change the bank on a regular basis. Actually, how happy are you with the investment spend you have with your budget?
Happy. I'm very happy to confirm that we have allocated a sufficient budget to achieve all these objectives we just have outlined. And again, to give you some numbers here, we will invest in change over the next four years on average EUR 510 million per year. And this corresponds or equals one-third of our IT total spending per year. And what is even more important, I think, we are very committed to achieve more output with less cost. So we also will decrease the cost per personal day by 6% until 2028 so that the figure EUR 500 million, again, is more actually than it is today.
Thank you very much, Christiane. Sabine, HR is at the heart of every company, also at the heart of Commerzbank, obviously. Without well-trained and highly motivated people, no company can be successful in the markets. From your perspective, how have the mood and the motivation of our employees developed recently?
Thanks, Christoph. So I think we developed extremely well in the past few years. The engagement and the commitment raised up to an index of 75%, and we increased these numbers even against the trend of our benchmarking group, and we increased in all categories. Our people appreciate Commerzbank as an employer. Let me focus on they are also willing to recommend us as an employer to their families and friends. That's what they do. We see that in the numbers and the success of our referral programs. Approximately 30% of our new hires are already attracted via our own employees. High commitment and high motivation is mission-critical for us. We are proud to provide very attractive working conditions. The strategy of new work is pretty easy to explain.
It will be a little bit less of office space, but highly attractive. Our technical skills are crucial, so we will invest in our training programs. This will be new. We will let our people participate in the success of Commerzbank. We will launch an employee share program that will, so our people will become co-owners of the company they are working for. It will be a program that is for everybody in equal terms, no matter of hierarchies or functions, and this will bring skin in the game because we really are convinced that co-owners feel more responsible for their company, and this will drive, again, motivation and engagement.
Thanks. Very clear. But let me ask the following, Sabine. A highly motivated team and at the same time 3,900 job cuts. How does this fit together?
Let me state first that we feel quite comfortable with our current headcount of around 36,700, and we will remain stable. But we need to work against the cost increases, mainly driven by our salary increases, and we'd like to support our business growth. What will we do? We will shift approximately 1,300 functions to our business areas. This will mainly affect the corporate client business, asset management, and mBank. Then we will move 2,200 to our shoring locations. In the previous years, we built up the infrastructure. We developed a very strong employer brand also on those locations, and now we are able to hire the right talents with high expertise and high experience.
And then we will see a downsize. We will see a cost and a staff reduction, and this will mainly affect Germany. Out of the named 3,900, so the main effect we will see in Germany, but we will do that in a very responsible manner. So we will offer early retirement programs, and for sure, we will also use our normal attrition. So both effects together, both instruments on one side, early retirements, but on the other side, hiring new people will bring us to a more balanced demographic structure. We will slightly decrease our average age down to 44. If we would not react, we would increase up to 49 in the year 2028.
Thank you. And what is the Works Council saying to all this?
It goes without saying that we are working together with the Workers' Council. And we already have a joint agreement in place. And let me express my thanks to the Workers' Council. We showed that we are better when we are working together. And just to conclude, I think the motto will be perform while transform. But we will do that together with our yellow hearts, and this will make the difference.
Thank you very much, Sabine. Thank you very much, Christiane, for this very nice panel session. And now, as announced in the very beginning, we will have a coffee break. 15 minutes coffee break for those joining us virtually. Help yourself and all the others. Let's move over to the other wing of the 49th floor and grab some coffee and have some chats before we move on in 15 minutes. Thank you. So, I hope everybody enjoyed the coffee break virtually and obviously, definitely here, and is ready for the second part of the Capital Markets Day. We will now proceed with the presentation of our designated Chief Financial Officer, Carsten Schmitt. Carsten, the floor is yours.
Yeah, welcome back from the short break. I trust you are now ready for the numbers, and I will walk you through the financials of our plan. Let's start with the economic assumptions. We have based the plan on the forward rates at the time of planning. Currently, forward rates are noticeably higher for Polish zloty and in euros slightly higher in 2025. So, from today's point of view, there is a conservative bias in the numbers. Also, for the GDP outlook, we expect only moderate growth in the planning horizon. Our economists are currently even more cautious, expecting 0.2% GDP growth for 2025, but that has no material impact on the plan. Concerning legal provisions for FX loans in Poland, in 2024, these amounted to EUR 1 billion.
While we still expect some burdens this year, 2025 should be the last year with larger provisions. Overall, we have been prudent with our assumptions, which leaves the possibility of upside to the presented plan. We are confident to deliver on our ambitious yet realistic goals with better operating performance year after year. This is reflected in our key targets. The net return on tangible equity is increasing every year before restructuring charges. Latest by 2027, we will clearly exceed our cost of equity. This is based on a steadily improving cost-income ratio. Starting with 57% in 2025, we will reach 53% in 2027 and 50% in 2028. A competitive efficiency level, especially in Germany. Correspondingly, the net result is also growing every year.
With increased profitability and excess capital at a CET1 ratio of currently 15.1%, we will pay out the full net result after AT1 payments and before extraordinary items every year as a mix of buyback and dividend. As long as we trade below book, our preferred instrument is, of course, share buybacks. For 2025, we project a net result before restructuring charges of EUR 2.8 billion. After deduction of around EUR 381 million coupons, this implies a payout of around EUR 2.5 billion. Calculated on the reported net result after restructuring charges, the payout ratio is over 100%. As always, any share buyback needs ECB approval and is subject to the actual performance in the year.
On the next slides, I will go through the numbers line by line, starting with revenues. Let's first look at 2025. Our starting base is EUR 11.1 billion revenues in 2024, and we target an increase to EUR 12 billion in 2025. Net interest income is expected to reduce to approximately EUR 7.7 billion, mainly due to lower interest rates. As explained in detail in the Q4 call this morning, there is a link between interest income and the fair value result. While interest income is expected to be EUR 600 million lower in 2025, we anticipate a compensating effect of around EUR 400 million in fair value. The net reduction in revenues is therefore around EUR 200 million compared to 2024. In case the more optimistic forward rates are realized in 2025, the difference to 2024 would shrink to approximately EUR 100 million.
I'm therefore confident that we will have interest income-related revenues, including the connected net fair value of at least EUR 8.1 billion this year. The lower contribution from the interest rate-related businesses is more than compensated by EUR 300 million better net commission income based on our strategic business initiatives. Other income, including EUR 1 billion legal provisions for FX loans, was -EUR 800 million in 2024. For 2025, we plan with -EUR 100 million as we expect significantly lower legal provisions this year. From 2026, the strong headwind from rates should end, with rates staying at around 2%. Business growth and a steady repricing of the replication portfolio will then be the main drivers of interest income.
The biggest factor is the replication portfolio. If 10-year rates stay at around 2.5%, the replication portfolio will reliably contribute approximately EUR 300 million additional revenues every year. At roughly stable rates, there are no major effects from the offset in net fair value. The moderate growth of the fair value result in subsequent years is therefore mainly coming from the capital markets business of corporate clients. Net commission income will continue growing by 7% per year. My colleagues have presented their diverse initiatives. For me as CFO, the breadth and diverse nature of these initiatives, as well as the impressive results in 2024, give me confidence that this will be achieved. In other income, we have prudently included some potential headwinds in 2027 and 2028.
This is more a precaution than any known effect that will come with certainty. On slide 56, we have summarized the drivers of the net interest income. As just explained, most of the headwinds will be in 2025. Lower ECB rates will have a strong impact of around EUR 600 million minus in 2025. In subsequent years, we expect no material impact. The deposit beta is expected to increase to 41% as rates trend lower in 2025 and then gradually increase further to 44% in 2028. The objective is, of course, to keep the deposit beta as low as possible. On the positive side, we expect a steady revenue increase from loan and deposit growth.
As corporate clients will increase the volume of SRTs in line with loan growth to manage RWAs, we will see a gradual increase of the interest expense for SRTs reaching around EUR 130 million in 2028. The EUR 700 million revenue increase from growth is net of interest expense for SRTs. The replication portfolio will reliably contribute additional revenues every year in total EUR 1.1 billion until 2028. Thereof, around EUR 200 million will materialize in 2025. The current average yield of the replication portfolio is around 1%, and the investment mix roughly one quarter in a two-year model, one quarter in a five-year model, and the rest in 10 years.
The average duration is around 3.3 years. The reinvestment of the two- and five-year models currently doesn't change the P&L much, but the replacement of maturing 10-year model tranches is accretive and will continue to be well beyond 2028. For mBank, we show no growth in NII due to accounting. As explained in some detail in the Q4 presentation this morning, the reported NII in mBank is expected to reduce by around EUR 200 million in 2025 due to lower rates, mostly offset in net fair value. From 2026 to 2028, we expect an increase of EUR 200 million, while the fair value result linked to NII is expected to be stable from 2026.
As mentioned, an important revenue driver is volume growth based on the initiatives of the segments. In corporate clients, we see opportunities to continue growing the loan book by further expanding our product offering for our core customer base. Michael has already given you an overview of his plans. We plan with only modest deposit growth, mainly from our international business. Mittelstand customers are expected to keep their available liquidity roughly stable. In PSBC Germany, the growth is reversed. Here, the main driver is deposit growth. Given our experience over the last years, our strong market position, and our differentiated two-brand offering, growth of 3% each year at good margins is achievable. Loan volumes are expected to grow by only 1% per year. New business should keep the retail mortgage book at roughly the current size, replacing maturities.
Net growth is expected from more loans to wealth management clients to finance their investments. Let's now move on to the fee businesses. The businesses have presented their initiatives earlier today. For some years, Commerzbank has focused on interest income-generating businesses. But last year, we have added the fee businesses as a second motor to our strategy and started to invest. We will clearly continue on this path and plan to maintain the 7% growth achieved in 2024. Both segments have three main focus areas each.
In PSBC Germany, these are: move to the next level in asset management by establishing a dedicated platform to bundle resources and use the combined capabilities to grow. Establish a new advisory model that enables our specialists to focus their time on wealthy clients with the highest potential. And modernize our payments business by optimizing our platform and by doing more joint ventures with strong partners. In corporate clients, the focus areas are: expand our successful transaction banking further. This is leveraging growth initiatives in the loan business, further deepening client relationships. In a world of increasing uncertainty, grow our financial markets businesses.
Expand the digital product offering and use AI and data analytics to increase productivity and further improve the customer experience. We expect continuous progress every year that we will track closely in the finance function. Initiatives are linked to investments, and we will make sure that there is a clear alignment. Bringing it all together, growth from initiatives is expected to be roughly similar for all customer groups. PSBC Germany has a higher total contribution since they additionally benefit the most from the replication portfolio, which adds EUR 1.1 billion in total. As mentioned, for others in consolidation, we've been prudent and assume a slightly negative contribution in 2028, while 2024 revenues were plus EUR 200 million. With this, I conclude the revenue development and move to costs.
Cost management and our commitment to cost income targets are a second cornerstone of our strategy next to the revenue growth. The aim is to keep steady-state costs before investments at the 2024 level. To achieve this, we are implementing efficiency measures. These include the change in our employee structure, where we target a gross reduction of 3,900 staff. At the same time, we are hiring around half of that number at our shoring centers. Sabine has already given you some detail on our EUR 700 million restructuring program, but of course, this is only one part of the story. To realize EUR 500 million in efficiencies by 2028, we have identified several areas where we can improve.
Number one is digitalization and usage of AI. This covers a broad range of areas from making the KYC processes less labor-intensive, dealing with customer orders and requests automatically, and to seamless documentation of customer interactions. Number two is process optimization. There is a linkage to automation, but here the main focus is to change and simplify the processes, cutting out anything that is not strictly required. These two areas will contribute more than half of the savings. Further drivers are internalization and shoring. We continue to build out our shoring locations to which we transfer more and more processes from our high-cost locations. In our IT hubs, we're also building up additional capacity to take over tasks currently done by expensive external providers.
And finally, we're improving our purchasing processes to get better prices from suppliers. Around two-thirds of the cost savings are on personnel costs and one-third in operating expenses. In total, these measures compensate expected inflation. However, we also have additional regulatory requirements to implement and plan with higher compulsory contributions in Poland from 2026. We will not be fully able to compensate the higher regulatory costs in 2025, but target enough efficiencies by 2028 to also cover expected higher regulatory costs and compulsory contributions. On top of this baseline, we have costs stemming from our growth initiatives. To be clear, we intend to make these value-accretive investments.
However, if things change and the initiatives cannot deliver, then we will reduce the costs in line with revenues to reach our committed cost-income ratio targets. Bernd has already covered the risk result and our expectation of a cost of risk of around 25 basis points through the cycle. I will therefore move straight to RWAs. RWA are expected 7 billion higher in 2025 and then to gradually increase further by 3 billion to 183 billion in 2028. From loan growth, we expect 6 billion higher RWA in 2025 and a further 12 billion by 2028. This is primarily driven by corporate clients and mBank. To mitigate this RWA growth, we will make more use of SRTs than in the past. Net of SRTs, the RWA from volume growth are 5 billion by 2028. Usage of SRTs is an ongoing optimization process.
As the loan book grows, we will also increase the volume of SRTs. As a rule of thumb, it costs about 1% of the RWAs to reduce them with SRTs. So they are a good tool to offset the RWA increase from new business while still maintaining a positive P&L contribution. Basel IV is already covered by current RWAs. However, we expect higher operational risk RWAs in line with our improved profitability. We also still have an impact from FRTB in our plan. In case the implementation is shelved, this should lead to slightly lower RWA. For 2025, we have assumed that risk rates and thereby RWA will go up in the current weak economic environment and that there could be some other regulatory effects. For this, we have included 2 billion additional RWA in our plan. These effects, if they materialize, should reverse over the next years.
We will also look at ways to further improve our risk modeling, which should lead to some positive effects by 2028. In total, we expect RWA of EUR 183 billion in 2028. Having gone through the line items, we have the combined bridge for the operating result on the next slide. Overall, we target annual growth in the operating result of 6%. The key driver is revenue growth. Revenue growth is nearly equally split between net commission income and interest-related income consisting of NII and net fair value. The risk result is expected to be slightly higher due to the planned volume growth at stable cost of risk. Expenses will increase with the implementation of the revenue initiatives, but more slowly than revenues, leading to an improvement of the cost-income ratio over time.
To sum it all up, we have a strong set of targets, and we are fully committed to deliver on them. Based on annual growth of 4% and cost management, we will deliver a cost-income ratio of 50%. This is the basis for a competitive RoTE of 15% in 2028. During the implementation of the strategy, we plan to provide investors with a full 100% payout every year, of course subject to successful execution of the strategy and the macroeconomic developments. This is also true for 2025, where we will exclude the one-off restructuring charges when determining the payout. This concludes my presentation, and I will now hand over to Bettina for final remarks before we go into Q&A.
Thank you, Carsten. So before we go into Q&A, let me summarize and look forward. We achieved a lot in the last years, and we constantly delivered on our promises. Commerzbank is back with a team that is highly committed to success and highly committed to tackle the challenges ahead. I'm actually very proud of our team and our joint achievements. Going forward, I'm sure we will again deliver quarter by quarter by quarter. Our customers will support us on our journey as much as our colleagues in the bank, including the Works Council. Together, we know how to successfully execute our strategy. And this strategy is not about an adventure. It is about a reliable value-creating journey that will serve our shareholders, our clients, and our employees. And now we're very happy to take your questions.
Now, this is me again, and I will try to manage through the Q&A. First of all, there's some technical advice for the Q&A session, for which we have roughly one hour time. We will have questions coming in three different ways. For the audience here in the room, it's simple. Just raise your hand and get eye contact with me. I'll put you on the list, and then it will work. When you're asking your question, it's great if you use the microphone in front of you because this makes you be heard by all those joining virtually. Otherwise, they won't hear you, and please also turn it off afterwards.
The second group is our dear analysts in the special setup video streaming, where you can also push a button to ask your question, and you will be live on video here on stage and can pose your question, as you all know, from any kind of Teams sessions and the likes. And the third group of participants are those participating virtually in this Capital Markets Day and can use the chat button, the chat function that you have on your screen to pose your questions, and then it will show up here at my iPad, which I do not yet have on my desk, but will come in a second, and then I will do this in PEX as well.
There is a likelihood that we will not be able to cover all questions in that one hour. In that case, we apologize, first of all, but are ready for your questions to answer them with a full team of my investor relations colleagues. So on that note, who would like to kick it off here? And I need to have my paper ready to make the list. I would start with Mate and then Johannes. I take it from right to left. That's easy. Mate, Johannes, and then it's Chris. And then actually, I can take all of you, right? So Mate, you want to start?
Thank you very much. Can you hear me? Yes, I can hear you very well. Excellent. I'll restrict myself to two questions. The first one would be on the corporate client business. You mentioned you're targeting an 8% loan growth in the business, and obviously in 2024, you had a good turnout already. I was just wondering, could you talk about how much of that 8% loan growth is really driven by business outside of Germany and to what extent that growth is happening in the country?
Any color on that would be helpful. And the second question is on cost-income ratios. If you could talk about the flexibility you have in the cost base in case your revenues end up below projections, to what extent are those, I think, EUR 600 million investments completely discretionary? And what timeframe are we looking at here? What levers can you pull to hit the 50% cost-income ratio no matter what? Thank you.
Do you want to start with corporate clients?
Yes. So thanks for the question. So as you said, right, we already experienced a decent loan growth last year with 10% plus. And also started this year reasonably well with, again, loan in the first one and a half months, a 5% loan growth. Loan growth comes from all client groups, so it comes from large corporates, it's from international corporates, and from our institutional clients. So it's all three client groups, almost a third. When we look at geographies, there are especially we grow in the U.S., we grow in Asia.
In the U.S. and Asia, we grow on the corporate side, but also we grow on the infrastructure side, which is predominantly also renewable energies. This is also growth in Europe. So it's three different client groups. It's in infrastructure, and it's on corporate lending. What we do see also with the recent development in the U.S., we do see a lot of investments of German clients into the U.S. And what we see looking at this year, pipelines are really full, is that a lot of clients that withheld their investments throughout the last two years are now starting to invest.
So when we look to the other corresponding pipeline, which is our M&A pipeline, our M&A pipeline is, I would say, really crowded. This directly translates into, because of corporate clients, clients basically, they hold back investments two to three years, and then basically they need to invest. They invest in optimization, they invest in digitalization, and they invest more into the U.S. And this is what we see. So very broadly based on geographies, on clients, and on products.
So on cost-income ratio, I mean, we're fully committed to the targets, and they come gradually. So we start with the 57% for this year, and then we go steadily down to 50%. And you have seen that in the charts. Carsten has shown that we clearly differentiate what type of cost increases and cost measures we have. So we also invest not everything at once, but also in a stepwise approach.
And basically, it's also a little bit first, we want to see the growth specifically in the foreign locations, and then we also increase the resources. So it's really very much coming hand in hand, and it's really managed in tandem. And then we clearly also have some cost items which you can just cut pretty quickly if you have the feeling that it's not going in the right direction, and we do not see the growth rates we want to have.
Thank you. Next, okay. So Johannes. Johannes Thormann from HSBC.
Yes, thank you. Should say two questions from my side as well in this case. First of all, again, on corporate loans, you talked about behavioral pricing, that you changed your pricing policy in this respect. But if we look at Bundesbank data, there is still a drop in the average margin in the market. Can you help us understand how the margin trajectory is in your business? What is positive, what is negative? That's the first one. And secondly, on the fee income in retail, especially, Q4 press release mentioned the uplift in securities revenues or securities-driven revenues.
We saw also 17 million trades via Comdirect in your presentation. Can you put this into historic context? Because if I remember correctly, years ago, it was basically every month above two million, so above 24 a year. So what has changed in this respect? And also in relation to Commerzbank itself, how important is the fee income from Comdirect for your business in PSBC? And has the initiative to shift the fee model from a transaction-based model to a more recurring fee model? Has there any been success? Can you give us some examples, please? Thank you.
You want to start again? Yes, please.
So first of all, behavioral pricing, behavior-driven pricing, we do implement on our FX platform. So that's on FX rates and commodities. This is what I was referring to with neural networks and deep learning. There we clearly can see that we enhance our pricing. On the loan side, in Germany, we do experience flattish margins. So here we have stable margins. But what we do see is quite attractive territory in the foreign markets, so in the international markets like the U.S. Switzerland is for us a very important market. This is what I didn't mention in the first answer to you. So for us, the Swiss market is a really attractive market due to the special circumstances that we see.
You know that Switzerland is our home market, and this is why we have a lot of clients now looking for a new second corporate bank. And what we also can see is when I look at trade finance, this is very attractive for what we do there, and they are also very attractive margins. So attractive margins abroad. And in the infrastructure segment in Germany, flat, as you just mentioned, right? And this is in Switzerland also, when you compare to Germany, very attractive margins that we see.
Thomas?
Yeah. Just to give you a few numbers about the relevance of Comdirect. So we're talking in combined case about 418 billion assets under management, and out of that, 156 are coming from Comdirect, and they are growing over the last year, so it's quite relevant. About the number of trading, yes, you're right, but we were focusing really on profitable trading. So this offering for free, so we reduced a little bit. But we are looking now for repositioning of Comdirect not only as the brokerage, as they are excellent, but also as a full online bank. That means that this could be the online main bank for all of our clients.
And we saw the last year, especially in Q1 2024, where we got 100,000 new clients, especially over the current account about the offering which we did beside the trading. In trading, we are still among the heavy traders, number one, but now we try also to be a little broader to bring new products, to bring new services, and then to really establish Comdirect as well as an online main bank for new clients. And why they are so important? Many of our clients don't come as a wealth management client directly to us, so they start with Comdirect, then they grow up, and then during the lifecycle, what I said before, then we're able also to take them in the premium segment of Commerzbank.
Super. Thank you, Thomas. For transparency reasons, I just give you the list, so that helps a little bit in preparing. I will have Chris and Bernd in the first place. Then we will switch to video with Tarik. Then we will have Dieter and Stefan, and then we have a chat question, and then we go back to the video with Riccardo. Chris.
Thank you for the presentation today. Just two quick ones from me. Are you able to provide any color on the mix of the distribution between dividends and buybacks costs? And I think in your prepared remarks, you mentioned that below book, buybacks were the preferred instruments. So obviously, valuation a consideration, but I just wonder whether the composition of the shareholder register is as well. Mechanically, a sort of hypothetical 30% stake by the end of your plan will have gone up into the mid-40s on this buyback trajectory.
So I'm just wondering if that plays into your thought process at all. And then the second question is just a mechanical one again on the replication portfolio. I think you said that the two-year, five-year roll was immaterial. I just want to check. Is that a net of the two? The two-year should be, I guess, sort of 150 basis points headwind, but the five-year is a big tailwind. So are they both immaterial or are they just net out? Thank you.
So I'll go for the first question, and then I'll leave the replication portfolio for Carsten. So on the mix of distribution, we always said that we want to have a steadily increasing constant dividend, so no up and downs. That is one driving thing. And on the share buybacks, it's pretty clear that as long as we are below one, it's a very attractive instrument, and we will use that. However, we also know that we have some restrictions on how much we can do, how much the approval is from our AGM. So we now have a very nice, as I said this morning already, Modus Operandi with looking at the half-year results, reviewing where we are, whether we deliver, and then decide on the execution of a potential share buyback program, and then start also the application process with the ECB.
Yeah. On the replication portfolio, the two and five-year tranches do net out. The ten-year tranches, apparently also coming out of the low interest rate environment, are gradually pricing up when rolling them over. Your assumption is right on that end. Super. Benjamin?
Yeah, thank you. Also, two questions from my side, one on revenues, one on cost. Looking at your net interest income bridge, corporate clients and mBank is basically with no growth despite quite significant volume expansion. Maybe one word, why this is not conservative? At the same time, all growth via PSBC Germany, which has hardly any growth in the plan. Why is that not too optimistic? Is it all replication portfolio? And then second, on the costs, obviously EUR 500 million is a significant program, but it feels like it's pretty back-end loaded, which might be driven by a high share of early retirements. Is there anything you can do to accelerate it to have also in 2025, 2026 more buffers against your inflation?
Thank you. So on cost side, I start with that, and then I give it over to you with respect to the NII bridge. I mean, on costs, it's clear that we want to have a steady efficiency gain. So specifically on the procurement side, we also expect already early effects in 2025 and onwards. And also it's a mixture of part-time retirement programs, which one we will start now, and that you will come and see the effects most likely only in 2027. Whereas the early retirement scheme, you basically see an immediate effect. So it will be a mixture plus also the natural attrition, where we will not do then certain replacements, but do the trick on the headcount reduction and to make already some of the cost reduction visible in 2025 and onwards.
Yeah, and on the NII, not entirely sure if I got the full question right there, but we will see benefits from the replication portfolio, as mentioned, starting this year already with EUR 300 million this year and EUR 200 million this year, sorry. And then a continuous increase so that we see a total of EUR 1.1 billion up to 2028. If I understood you correctly, you were asking if this is contributing to most of the increase in mBank and PC. We will, however, also see an increase in the deposits in PC as well as in mBank. So we expect to attract also additional net interest income from the underlying deposits.
And what you should not forget is that we have basically in 2025, we have this adjustment to the different interest rate levels. So we go down. Our assumption in the moment is 2.1%, might be even a little bit conservative if you look on the forward rates. And then we assume a very stable interest rate environment. And then the volume grows, which we will definitely also see in corporate clients on the loan side, but also on the deposit side a little bit. Plus in mBank, we will also see loan growth and deposit growth that will be used to then basically get back on the NII track. So you have this little dip specifically for mBank and corporate clients in the year 2025 due to the interest rate cuts.
Okay, Benjamin? Thank you. And now we switch to video, and we have Tarik El Mejjad from Bank of America. Hi, Tarik. All right, I can't hear you.
Hello, can you hear me? Great, yes. Oh, perfect. Sorry, I can't be with you today. Congratulations for this plan. I think very ambitious, yet realistic in many aspects. However, one area where I thought it was potentially ambitious enough is maybe on the net interest income. And I want to clarify two aspects of it, please. First, on the deposit beta, I mean, a lot of questions have been asked already, but what I want to clarify is you have a deposit beta going down this year and then up in 41% and then accelerating further. Is it because you are not actually allowed to be very transparent about what's deposit beta going to go down, given that you give some indication on price setting on deposits in the country, or this is really actually what you think because of the competition that should continue to go up?
So, to hear you on this, especially on the call money deposits, I think you would, one other pan-European bank in Germany have a kind of leadership on these call money deposits. So, I would have thought that the competition on this category of deposits was not extremely high. And then, on NII if you move to Poland, and why you don't use the forward curve? Because I think the gap is quite significant between the market pricing and 50 basis points cut. I think last time I checked, and you estimate, or mBank, I would say, estimate 175, which makes actually quite a big difference in your outlook for NII. I hope my questions are clear. Thank you.
Yeah, I think both questions can be answered. We are conservative people, so we assumed basically that competition is out there. So we rather think that it's better to plan with an increasing deposit beta and then get positively surprised if it's not coming as we expected. And same holds true actually for mBank. mBank did its planning, and their own research department actually thinks that the swap rates are better than the forward rates the market predicts. So they are also a little bit more conservative, and we will see specifically during this year who's right.
Thank you very much.
Thank you, Tarik. For the list again, to let you know, now it will be Dieter, then Stefan, then Chat, then Ricardo, and then I have Fiona and Dirk on the list. And I have Jochen on the list. All right, so next one is Dieter.
Yeah, thank you very much. I have a question regarding two items to Dr. Orlopp. Firstly, you mentioned that you want to expand asset management business. What is your investment budget to invest in this field? And if you can't find the right company to buy, is it possible that you set up a second Cominvest, which you sold, I think, 17 years ago? And secondly, a more general question. The German government does not welcome an UniCredit offer. How can Germany support you to stay independent? And secondly, have you talked to Mr. Merz, the potential new chancellor? What is his view? If you can share or want to share it with us.
Okay, very well. I mean, on asset management with respect to acquisitions, we always said that we would look into bolt-on acquisitions. We are analyzing a number of potential targets, but it always needs to fit. We also said it's bolt-on, so it's not large. The CET1 impact will be limited, and we definitely also want to do organic growth in asset management. Perhaps Thomas can shed some light on that after me. We definitely do not want to have a second Cominvest. We have very good partners in place with whom we cooperate on the asset management side. It's more about really enhancing our value proposition in specific areas. On organic growth, it's up to you, Thomas.
Yeah, Bettina is completely right. We will never do any kind of mass production for mass market where we have the AGI, we have BlackRock, so they are much more in that scaling game. We will always keep this kind of boutique approach. So Aquila will be a boutique, so we will have the Commerz Real, we will have Yellowfin, we have this Nixdorf Kapital. And there, yeah, we are trying to add some new companies, especially in the private equity, private debt section. But as Bettina said, it had to fit to our business case, and also the pricing is important. So we are very careful doing that. And we will keep definitely this boutique approach and no mass market production like the Cominvest.
And on your second question, I mean, the thing what we do is really concentrating, focusing on our strategy and the implementation of our strategy. I think that is the best value we can create for our stakeholders, starting with the shareholders. And everything else will happen over time. We will see whether there will be a proposal. And if there's a proposal, then we will compare it to our own strategy and make a recommendation. Politicians have clearly stated what they think about the approach, and that is true for all democratic parties. They all have been very explicit on that. And I think that is where we are, and we will take it from there. And we wait at the moment, I would say, all for the election to come in 10 days.
Thank you. Now, Stefan.
Yes, thanks for taking my questions. I try to look in your direction and speak into the microphone, which hopefully works. My first question is a bit big picture. I think you've done a very good job in giving us a bottom-up plan, how to get to 15%. Lots of moving parts, all works perfectly fine, but the top-down picture is one where German banks, most of the time, most of the banks have not run at 15% return on tangible book value. What gives you the confidence that kind of from a top-down perspective, this can actually work in terms of the competitive environment, the market structure, etc., that tends to interfere with the best plans?
Second question is a bit more bottom-up again. You're planning for quite a lot of deposit growth in Germany, not a lot of loans, and in corporate banking and in particular outside of Germany, it's the other way around. So you clearly have a funding issue to solve for. How do you actually want to fund the loan growth outside of Germany in particular, which probably requires a lot more dollars than you may be funding with deposits at the moment? And the third question is simply on the restructuring expenses, the EUR 0.7 billion. Could you give us a rough sense how we actually plan to spend this? What are the rough categories of where this is going to, please? Thank you very much.
Sure. So in the top-down picture, I think we have a journey ahead of us. We had plenty and many, many years where we restructured and we didn't see really the results unfolding. We wanted to see. Lots was blaming on the interest rate environment and the difficult market in Germany. And I think we very much changed as Commerzbank the attitude back in 2020. We said, okay, let's assume it's not getting better. Interest rates will stay negative. We will not see any improvement. Let's find and define a business model which will allow us to earn decent return, and that's how we did Strategy 2024. We transformed the business model, we simplified the business model, and we have now a setup where we think we can grow nicely and invest in the right areas with a big focus on certain areas.
We do not do everything. We really have very clear focus areas, and by that, we are convinced that despite the difficult market environment we clearly have here in Germany, we can handle that, and we handled it on the cost side, apparently also with respect to shoring. That's one of the means we use to really make it happen. But on the revenue side, it's also that we are not relying on one thing, but it's a combination of many, many levers which help us here. But the first step was really done by Strategy 2024 by clearly simplifying the business model. On the funding side, I mean, we have a full funding plan. We have already started to deliver on that for this year. You want to shed some more lights on it?
Yeah, I mean, we have U.S. dollar issuances at the beginning of the year. We also went into the market with one. So I would say we are constantly trying to, of course, balance the funding need that we have for our U.S. dollar-based business. And the rest of the funding usually is then also captured via FX. And what we also do is we just don't work on the loan side. So we beef up our funding, US dollar funding on deposits with FI, NBFIs, and our international corporates. So this is additional what we do in addition to this.
Sabine, on restructuring costs?
So it is EUR 700 million. Roughly EUR 500 million we will spend on early retirements and part-time retirements. And the rest will go in severance payments. So this will be the distribution.
Thank you. Now I have a question from the chat. It comes from Anke Reingen from Royal Bank of Canada. Question on fee growth under the new strategy. How much is based on market growth versus market share expansion? And the second question from her is, what is the cost trajectory with investments usually coming in earlier than efficiency gains? EUR 12 billion revenues in 2025 and a 57% cost-income ratio implies at least about 5% cost growth in 2025. Correct?
On fee growth, probably private clients on Thomas and then on corporate clients, Michael.
Yes, we have positive markets, so the prediction of the markets is positive. Nevertheless, the growth should come from new assets under management. So I would say it's half-half. But definitely, the main focus is really to attract new clients and attract new money because the dependence on the markets, yeah, it can go up or it can go down. So we will do our job to bring in new assets under mana gement.
So with corporate clients, it's both. It's expansion in selected client groups, as outlined. So in Germany, you know that we have 6,000 clients in our direct bank. And here, we now offer financial markets products. So this is a huge group of clients which has not been tapped before for outbound business. We further will expand in our large corporate area. And it's both markets and client expansion in the international area. So that's both there. So it's markets. We see a strong growth momentum in the areas which I've been touching upon in Asia, infrastructure, TMT.
And this is not just loan growth. And basically, same with the U.S. In the U.S., we will increase our capital markets efforts and trade efforts. So here, we have a high degree of high potential in trade, so that's letters of credit and co. And on our FX platform, which is FX rates and commodities. And in Europe, we finally finalized our expansion of our awarded FX platform into all European locations. And this triggers an uplift in NCI.
Yeah, and on the cost trajectory, you're absolutely right. We have basically for 2025, it's more. And after that, it will flatten out. And one reason is really that first, we have some inflationary things which are happening already and which we also take out of 2024. But then we also have the investments. And you should not forget that when you do shoring, you can't just reduce it in one location and then basically after that or simultaneously build up the people in the shoring locations. You always have to have a certain overlap. And that will explicitly have some burden in 2025 and 2026 on our cost base. And this is how we have basically assumed that with a kind of an overlap.
Thanks. And now the next question is from the video. It's Riccardo Rovere from Mediobanca.
I hope you can hear me. Can you hear me?
Yes.
Okay, perfect. Two or three, if I may. The first one is one of the slides in PSBC Germany. You mentioned the establishment of an asset management platform. What does it really mean, that what you are referring to when you because that seems to be one, or at least to me, seems to be the main engine growth in fee income in that division. The second question I have is on headcount reduction. Just wanted to be 100% sure that everything has already been agreed with trade unions. That's a done deal. The number, the 39,900, is a done deal, and everything has already been shared with the unions, and related to that, are all the restructuring charges going to be a burden the 2025 P&L, or is it going to be split throughout the period?
I have imagined 2025. The other question I have is still a little bit on cost. One of the slides showed the compulsory contribution should go up, if I'm not mistaken. I was wondering why is that, if you can clarify. The last question I have is on the credit losses, maybe for Bernd. When you think about the asset quality or the projections of credit losses throughout the period of the plan, is tariff scenario somehow included in that, or would be anything on top? Are the, let's say, internal models somehow incorporating what is happening or might happen over the next weeks or days or hours, God knows?
Riccardo, so two very quick answers. The restructuring cost will be fully booked in 2025. The compulsory contributions is very much stemming from mBank. There is an assumption on that. On PSBC, asset management platform, it's up to you.
Yeah, very good question. Today, we have the Commerz Real, which is a fully fledged investment company in Wiesbaden. We bought over the last one and a half years Yellowfin, Aquila, and Nixdorf Kapital. They are at the moment in the bank. So what we try to do is to build a platform where we can add all these boutiques so that the coworking functions are done once, so we save time and money. In addition on that, we will have a center of competence for salespeople. They support either the people of Michael in the corporate business or my people on the wealth management and private banking side.
So that means the platform means everything under the platform of Commerz Real with the single boutiques. On top of that, a harmonized corporate functions team. On below that, a harmonized sales team, which takes all the different asset classes to the client in relation to the responsible relationship manager. That means, and for the future, what Bettina said, we are looking on the market. Then it's much easier to add a new kind of boutique to this existing model and not always build up from scratch.
Sabine?
Yes, we are absolutely transparent with our workers' council. There is already a transformation agreement in place. We work closely and very transparent with the workers' council as well as the trade unions.
Very well. Then on credit losses.
Yeah, thank you very much. Hi, Riccardo. Pleased to see you after so long time. Very important question. Normally, I don't want to give complicated answers, but it takes a couple of sentences to explain. I want to make sure that everybody understands that when we calculate expected credit losses, macroeconomic sort of indicators are driving expected credit losses. Over and above the individual sort of regulatory models where we calculate PDs and LGDs and EADs, we also factor in GDP growth. We factor in interest rate development. We factor in unemployment levels and a couple of other sort of historically explainable factors into our expected credit loss models.
Pursuant to IFRS sort of requirements, we also sort of build a main scenario, a sort of pessimistic scenario and an optimistic scenario, attach probabilities to them, weigh them, and then we sort of calculate and forecast our credit risk cost. To that extent, of course, geopolitical risks, including potential trade wars, are at the core of what we need to think about, and they drive our macroeconomic assumptions. Now, our probabilities to what extent they will come and to what extent they will hit will change over time. But methodologically, they are part of our calculation.
Super. Thank you. Just to have the list, à jour. Next will be Fiona, then Dirk, then Jochen, and then we go to video with Kian. And then I have a question from Tobias on the chat. Fiona.
Hi. I had two questions. One was on the move of the portfolio, the structured investments and solutions. Sorry, I probably got it the wrong way around. I think it's structured solutions and investments. How's that baked into the plan, as in what do you think that would look like over the next four years in its new position? And the second is on the technology side. So within the plan for the next four years, what are you looking at on infrastructure and integration and obsolescence? How does that all tie together in terms of the future in the next four years? Thank you.
Very well. You want to start with SSI?
SSI, we have an asset growth in SSI. We said that we're going to invest on high-quality assets. Here we do experience an asset growth. It's roughly 5% asset growth here. Legacy portfolio, we run down, but we run it down in a, I would say, value accretive way. Not doing anything which would basically dramatically harm our P&L. This is what we did in the past. We ran it down by EUR 6.8 billion in the past. We continue exactly doing this. The other one is basically, but again, just to reiterate, it's the deployment of excess capital that we invest, which is up then for final destination, for example, share buybacks and co-invests is what we do there.
Christiane?
Yeah. With this very important topic, we already started with our former strategy, have made very good progress, especially in the corporate clients area where we've commissioned, just to give you a number, about 140 applications. And we will go on with that in our new strategy. We will invest approximately EUR 90 million over the next four years in terms of consolidating and streamlining and modernizing our application landscape.
Thank you. And now, Dirk, it's your turn.
Yeah, good afternoon. Two questions from me as well, please. The first on the distributions. So this makes Commerzbank a yield stock, right? It's the first time, as long as I can think, that Commerzbank pays significant returns to shareholders, and it's a double-digit yield now. My question is, in the past, I think you had some difficult discussions with your regulators about payout ratios? Did you already discuss this with your regulator? Is the regulator happy with you to pay out over 100% in the current year and then 100% in the coming years?
What is the current status of that? Then the second question is about these 3,900 staff reductions. Under the previous plan, you already got rid of 10,000 employees. I know most of them were probably in the branches, but also a lot in the headquarters. I'm surprised that you still have 3,900 people in the headquarters at all without going into negative numbers there. Can you maybe give a few examples, one or two, where you can fire several hundred people without affecting the business? Where are the big pots of potential where you can still get rid of people?
Very well. So on the distribution side, it's very clear that, I mean, we discussed year on year our distribution plans with the ECB. And whenever it comes to share buybacks, we also ask for approval. What we have done before the CMD is we have discussed the question about the one-off item. So the restructuring costs, they're fully aware of what we are proposing and that if strategy execution runs as planned, that we will exclude the restructuring costs from our payout. And yes, they are aware of it, and they didn't object to it. For the rest, I would say it's as always delivery first and then execution. And that's how we do it. And we feel comfortable with that. And yes, we think we are a very attractive capital return bank.
So on the staff reductions, I mean, the 10,000 have been really broad-based. One should not forget. We also did some restructuring in the foreign locations. We did a lot of restructuring also on the private client side, actually. And now it's really broad-based. It's staff function, it's central function, it's a risk function. It's everywhere where you basically see really streamlining of processes, taking out duplications, using AI to digitize the processes. So it's basically every function you can think of will be touched, which also makes it actually easier, at least, to execute. I mean, it's always painful, but it's easier to execute because it's very diverse. And we have everywhere an age structure, which helps us in implementing this job reduction program in a very socially responsible way.
Thank you. And the next question would come from Jochen, please.
Thank you, Jochen Schmitt, Metzler. I have one question on your IT strategy in general. Wouldn't you expect any cost savings if applying a higher share of externally purchased and developed software? That's my question.
So actually, you always have to think of the margins, the external vendors' take. And of course, we have a close look whenever we decide whether we do something internally or externally, whether we are within the benchmark. Can we do it more or less expensive, or can the external vendor do it for a better price and value ratio? So that's part of our strategy. What we've seen in the past is that with reducing external dependencies, actually, we are more cost-efficient than relying on everything on external vendors.
Thanks. Next, we are going to have Kian now on video. Then I have the Tobias chat question. Then I add Borja from Citi to the video group. And then I would open it for a second round, if you like, as we still do have some 20 minutes. Kian, good to see you.
Yes, thanks. Good to see you. Can you hear me?
Yes.
Yes, good to see you. Thanks for taking my question. The first question is, if there's an offer from UniCredit on the table, what would you be looking for in that offer as the hurdle rate seems to have gone up given the ambitious target that you have laid out today? And the second question is related, coming back to the discussion around capital return. You talked about potential special payouts later on in the presentation. And I'm wondering what level of tier one would you have to have in order to decide in your forecast if you, let's say, have lower loan growth than expected that you can do special payouts?
How should we think about the dynamic of keeping capital for growth and payout, special payout to come? And if I may ask one quick one, just on the tariffs answer, I didn't fully understand the answer. So what tariffs are actually discounting? Because you mentioned you are discounting something, but it wasn't very clear what you are discounting. And how does your numbers change in different scenarios, which I assume you run? So what's your base case on tariffs?
Very well. So on the potential offer of UniCredit, actually, I mean, I will not reveal anything here now, but you can imagine that, I mean, what we do is definitely increasing our target price by the plans which we have delivered today. And I think with our ongoing execution, target prices will increase. And in order to be able to make a comparison to our standalone plan, we would need some details with respect to structure, with respect to price, with respect to governance, with respect to the decision processes, the international network, many, many things.
On capital return, I mean, we now have a plan, and we have a very concrete plan for 2025, and that will bring us our CET1 ratio most likely down from now 15.1% to something above 14%, dependent on the RWA development. And for the years to come, it's very much dependent on what happens on the RWA side. It also depends on what is decided on Basel and other things. And if there is a significant change and we see that we are continuously far away from our 13.5%, then we will definitely also consider adjusting the payout ratio. But I think at the moment, it's too early to think about it. But at least we have built in this possibility in our capital return policy. On tariffs.
Yeah. When you say you didn't understand what the weight of the individual scenarios was when it comes to trade tariffs, I understand because I didn't disclose it. So far, let me say this. The impact from the tariffs, which have been discussed and decided so far, they are immaterial to our credit risk cost calculation. But yes, we are sort of on an ongoing basis discussing what is the next possible move, what is the next possible sort of impact on German GDP, what is the next possible impact on German steel exporters to America or aluminum exporters to America.
And this would then build into a medium and adverse and an optimistic scenario in our credit risk models. Please sort of have some understanding that I will not at that stage disclose individual weights of scenarios. But we're discussing that, we're building them in, and they have a direct relationship to GDP formation, which then drives directly expected credit risk losses.
But just to understand, right now, you don't have any tariff assumptions in your numbers, or you do have something? I mean, if you're running at 25% tariffs, what are your interest rates? Should we think about the plan totally changing, or I just want to put it in context a little bit? Because interest rate change, I'm less concerned about your GDP forecast, frankly.
We take what we have now as tariffs, which are being discussed or decided, and we let them influence our GDP assumptions. This is all what I can say at that stage, and this will change. Sort of if you think back, one needs to be humble in terms of what one can model and what can one not model. If you think back on Corona, where everybody sort of put in huge kind of credit risk costs because of the economy being switched off, nobody sort of thought at the same time how sort of strong governments' response would be at the same time.
So nobody defaulted at that point in time. So what I'm trying to say is, yes, there are now a couple of strong statements of potential trade wars. You do not know sort of what will be the reaction. Will this be the beginning of new strategic partnerships, or will we have an escalating trade wars? This is something which we need to discuss, and we will approach that as good as we can and as much as we know.
It's not about GDP. It's about your rival rate, where. That will be. But we can take this offline and discuss it. Thank you very much.
Thank you, Kian. Now I do have a question from the chat from Tobias Lukesch from Kepler Cheuvreux. Being the devil's advocate, why should we believe in the full execution of your plans? What has changed? Why is this time different? And then on capital distribution, if asset growth was below plan, would there be payout ratios above 100% on a clean net result? And I guess the latter one, Bettina, we just touched upon, right?
Yeah, I think it was a very similar question as from Kian. So on the first question, Tobias, actually, we have executed over the last four years exactly what we promised. So we deliver it quarter by quarter, and that's something we intend to do also in the future quarters. So no devil's advocate.
And now we go to video again, and we have Borja Ramirez from Citi. Hi, Borja.
Hello. Good afternoon. Thank you very much for taking my questions. I have two. The firstly is, again, on capital distribution. If I start with your capital as of Q4 and I add your net profit and your RWA as per your targets, I assume 100% payout on net profit before the restructuring charges, I get to a CET1 of around 14% in 2028 with a buffer of around EUR 1 billion above your 13.5% target. So it seems there is upside to your payout targets.
And I think this is interesting because even with your current payout targets, you will be one of the banks with the highest distribution in Europe. So this is my first question. And my second question would be, given the excess capital, I would like to ask, how do you think about prioritizing M&A over distribution when deciding the utilization of excess capital? Thank you.
Sorry, the prioritization, I didn't get that correctly. Can you just repeat the second question?
Yes, of course. So let's say that my calculations were correct. You arrive at the year 2028, you have a EUR 1 billion of buffer above 13.5%. I would like to ask, let's say you are deciding whether to use that EUR 1 billion to distribute to shareholders or to do some bolt-on acquisitions. I would like to ask, what are the main metrics in order to prioritize one or another lever?
So on your first question, we probably need to compare notes later on with our investor relations team because apparently we think that what we have laid out, you would come down to something around 13.5%, 13.6%. So let's compare notes after that. But besides that, I mean, there might be surplus capital because RWA growth will be less explicit than we currently think. And we definitely look constantly on potential bolt-on acquisitions. And it's very clear. I mean, bolt-on acquisitions only make sense if they enhance our value proposition, most importantly.
Second, they need to be value accretive, so they need to earn a certain return on tangible equity. They should be most of the things while they're really bolt-on, meaning not a really big impact on our CET1 ratio. And we should be able to integrate. I mean, we have our hands full, to say it like that, with the implementation of our plan. We have a lot of things to be done specifically on the IT side. So therefore, we will be always cautious about difficult system integration and things like that. So it must be feasible from a financial standpoint, but also from an operational standpoint.
To your first question, maybe just to add to this on your capital calculation for 2028, I can follow a calculation. Actually, there is a difference if you actually follow that calculation route, and that is mostly due to a regulatory deduction that we will see in 2028. Most of that is currency reserves, a bit goes into the pension fund, and then we also have revaluation reserves, and the minor part is actually stemming from the 100% capital return assumption over the years. So you can see there's regulatory deductions in it, and you could also see that this is a conservative assumption.
Thank you.
Thank you. I have three more on my list right now, and we have another 10 minutes, so that's great. I will have Roy Adams from Metropole Gestion as next one, and afterwards, two questions from the chat from Krishnendra and from Barclays and from Ilya from Bank of America. So Roy, good to see you.
Thank you so much, Christoph. Bettina, congratulations on your promotion to CEO and the fantastic results for fiscal year 2024. As shareholders for over 12 years at Commerzbank, we feel very confident with you as the leader of an independent Commerzbank for many years to come and look forward to continued results. I have two questions. First, with regards to capital returns, will you allocate more capital returns to dividends and less to share buybacks as the latter become less accretive as the share price moves towards tangible book value? And would you consider interim dividends? And then secondly, can you clarify the bank's stance on sustainability and diversity given the shifting sociopolitical winds on both sides of the geopolitical spectrum?
Sure. Thank you very much, Roy. So on capital return, as we say, we will look at it as we go, to say it like that. So we want to have a constant increase of dividends. Share buybacks are in the moment still a very attractive instrument. And as long as it is like that, we will definitely continue this path and will basically review the split between dividend and share buybacks each year. Interim dividends are not really common in Germany, so we also are not really considering it and are planning for that, actually, because in Germany, the AGM always has to decide on the dividend, and they do that once a year.
So from a practical standpoint, it's smarter to just do it once a year. On diversity and sustainability, I mean, we also follow up what's happening in the U.S. I can only say that we stay fully committed on our sustainability targets. We always said, and this hasn't changed, that we, however, should be aware that our clients need time. So we need to think about transition finance. It's not happening overnight, and industries always follow very different paths, and we need to take that into account, and we shouldn't be blamed or burdened as a bank if we support our clients in this path.
That is one important issue, and this is one important ask we have also towards regulatory authorities to acknowledge that and to accept that. The other thing is clearly about bureaucratic burden. If I look on the amount of different regulations and reporting requirements, I think there is room for improvement, and we would definitely advocate and promote a simplification here in this aspect because it's basically reporting, and we would rather like to concentrate on execution and really delivering our sustainability targets. On diversity, it's the same. We have been already since many, many years, since decades, very much focused on diversity, and that has not changed. We never used a quota, very importantly. We're also not a fan of quotas. We always believe in fair share.
If you have a bank with a 50% share of females, for example, I think it is appropriate to at least have as a target midterm to also achieve 50% in leadership. We have plenty, plenty of measures in place to increase diversity and not only with respect to gender, but overall. We have no reason to change that because we think it is beneficial for also the culture and also the sentiment among our staff. You want to?
Yeah, just from the corporate side. We do strongly believe in the essential transformation of business models of our clients. First of all, as Bettina said, transformational finance is very important, and we are a lot into this transformational finance. Transformational finance, transformational finance takes sometimes longer than we anticipated. So, and as I said before in my speech, we will follow and guide our clients through those transformations. This is the first thing.
And this is why we also newly deploy ESG advisory into the German regions to advise our clients in this business transformation. Second, we think it's essential that we make the most out of our natural resources of energy. So this is now renewable energies, where we basically are right now at a portfolio of EUR 11.4 billion and growing. And this is not also production, so wind and solar, but also adjacent technologies, which is storage and grids. And this is what we also invest to.
Thank you very much. Now, as we move towards the end of the session, I have three quick questions for quick answers to make it in time as we are good Germans over there to the other side of the tower. First one from Krishnendra Dubey from Barclays. Thanks a lot for the updated plan. Question on M&A. Could you please help us understand what the group is looking at in terms of geography and business for acquisition? Do you see bolt-on M&A as an accelerator for growing the fee franchise?
First of all, yes. It is a growth factor. And on geography, it's mainly in Germany, at least if it comes to asset management and wealth management. And we not only look on asset management, but also in the tech space.
Thank you.
Was it short enough?
Sorry?
Was it short enough?
That was great. The next one is from Ilya Novoselsky from Bank of America. Corporate clients' loans should increase from EUR 104 billion-EUR 141 billion by 2028. Does this include loans coming from the reorganization of SSI into corporate clients? And if yes, how much?
No.
Very short.
And number 3 from Stuart Mitchell. Would you expect some deterioration in asset quality as you gain market share in corporate lending?
I'll start maybe, and then Bernd can follow up. No, we don't. As we said, we concentrate on transition financing. This is one growth area for us. This is CapEx investments, including public sector. The other one is that we also foster international expansion, diversification of German corporates in the U.S. and Asia. So here, we don't expect any deterioration in asset quality. The other one is that we also do structured products more than plain vanilla products, which also basically is helping our asset quality.
Just to reconfirm, of course, we have been looking into risk appetite and limitations when it comes to establishing a growth story in a stagnating market. What we do is we try to identify pockets of growth, which we can cater to inside our risk appetite, which we already have established a long time ago. Thomas?
Yeah, just to answer your question before about the trading numbers from Comdirect. I have now the exact numbers. So we are plus 40% pre-COVID. So we have 12 million pre-COVID. During COVID, you are completely right. We were about 24 million, especially with these retail actions, which we no longer offer to that extent.
Super. Thank you, everyone, for the Q&A session and for being part of our Capital Markets Day. A special thank you goes to all our virtual participants for joining us and contributing to the discussion. We wish you a pleasant evening and look forward to seeing you soon. For those all here in the room, you are happily invited over there to the other wing of the tower for some snacks and drinks and some further discussions, if you like, with our board members and, of course, with the investor relations team. Thank you very much.