Good morning, ladies and gentlemen, and welcome to the Commerzbank AG Conference Call. Please note that this call is being transmitted as well as recorded by audio webcast and will subsequently be made available for replay on for Internet. At this time, all participants have been placed on a listen only mode and the floor will be open for questions following Randfik Rohlf and Bettina Orlov's presentation. Let me now turn the floor over to our CEO, Manfred Knoll.
Good morning, everyone, and welcome to our earnings call for the Q1 this Q1 was my Q1 as CEO of Commerzbank, and we presented our strategy 2024 in February. Today, I'm looking forward to giving you the first update on the transformation of the bank. Bettina will then walk you through the financials before both of us are happy to answer your questions. We will maintain this setup also in Now let's start with our presentation on Page 2. We had a very good first Quarter, we delivered strong results and successfully started the transformation of Commerzbank.
On P and L, We reached a strong operational result of €538,000,000 It is driven by very good revenues, Well ahead of our internal plans and provides us with some tailwinds going forward. Regarding capital, we could increase our CET1 ratio by 20 basis points to 13.4 Despite the booking of further restructuring costs, this is a very solid foundation of the transformation of the bank. And we have reached the first important milestones in the execution of our strategy 24. Before we take a closer look at the strategic milestones, I would like to highlight That the good start into this year allows us to lift our full year guidance. On Slide 3, We have put down the major strategic milestones we have already reached along the 4 cornerstones of our strategy.
Let me start at the customer side and highlight a major achievement in our Corporate Clients division. This week, we have signed a cooperation agreement with ODDO BIAF regarding our equity brokerage business. In future, ODDO will provide us with equity sales and trading as well as equity research services that we will offer to our clients. This enables us to reduce costs and complexity in our own infrastructure without compromising on client service. On digitalization, I would like to highlight our joint investment with Deutsche Borse and 360x, a provider for blockchain based marketplaces and ecosystems for digital asset classes.
The assets will be made investable and tradable via tokenization and fractionalization. 1st asset classes I'm convinced that there is a Clear potential to actively shape such digital asset ecosystems of the future. By offering investors innovative investment opportunities In new asset classes, we will create added value for the financial sector, for our clients and for Commerzbank. With regards to sustainability, we have developed a clear strategy to become a net 0 bank. This is a strong commitment, and I will get back to the topic in a minute.
On profitability, The signed framework agreement with the employee representatives marks probably the most important milestones for quarter to ensure the proper execution of our cost reduction program. This leads me to Slide 4 and the progress in the Implementation of our redundancy program. From the overall targeted FTE reduction of 10,000, Around 1900 FT feet feet feet feet feet feet feet feet feet feet feet feet Es are already secured by individually signed contracts with employees. On top of that, we have agreed with the Works Council on a voluntary redundancy program. From July this year, we will offer eligible employees attractive termination agreements with an exit latest at the end of this The targeted reduction of 1700 FTEs significantly contributes to our planned cost reduction in 2022.
And finally, as I have promised, We have signed the framework agreements with the employee representatives. With these agreements, we have fixed the major terms and conditions for the whole redundancy program. Though we still need to finalize the details of the segments and functions affected, the execution of strategy 2024 is now explicitly agreed with the Works Council. This It's really a key achievement and significantly reduces any potential execution risk. To ensure the timely and reliable progress of the redundancy program, we have also enhanced The applicable instruments for which we will book another EUR 225,000,000 bringing the full restructuring costs For the program to slightly above €2,000,000,000 So as of Today, we are completely on track to achieve our targeted cost reduction.
Now Let me move on with sustainability. Our sustainability strategy is a very important building block of our strategy 2020 Our recent survey in the German Mittelstand tells us that 80% The company's perceived sustainability as decisive for the future, but only 1 third has a concrete sustainability strategy. In other words, sustainability is key for all businesses and a lot needs to be done to get there. This also holds true for Commerzbank, and we have taken the 1st major steps into this direction. Our commitments are strong.
After joining the TCFD last September, we have also joined the Net 0 Banking Alliance of the United Nations Environment Program. We aim to reduce The CO2 balance of our entire lending and investment portfolio to net 0 by 2,050, the latest. This requires close collaboration with our clients in the German Mittelstand to jointly develop Strategic path to reduce greenhouse gas emissions. Firstly, the focus is on CO2 intensive sectors, And we will regularly report on our progress in accordance with the UN guidelines. The second target in Supporting the client transformation is to increase our volume of sustainable products from around EUR 100,000,000,000 today to EUR 300,000,000,000 by 2025.
Main drivers Of the strong increase are DCM issuance for our corporate clients, asset management products for corporate as well as for private clients, But also green mortgages for retail customers. The 3rd target that we have set It's to ensure net 0 emissions from our own banking operations by 2,040. This means leading by example, which is exemplified by our commitment to compensate remaining carbon emissions with own projects like reforestation rather than buying certificates. To summarize, sustainability is key for future success of corporate and financial institutions, And we are making bold moves into this direction. Let me close my overview on the first strategic transformation steps with a view on our key performance indicators.
We have put together the most relevant KPI developments on Slide 6, and you will find the full table of all 12 KPIs in the appendix of this presentation. In Corporate Clients, We have made good progress to prepare the retreat from 3 international locations in 2021. On top, The recently initiated sales process of our Hungarian subsidiary shows significant interest in the market And it's currently progressing well. And also on RWA efficiency, See, we have seen first improvements with clients in the low yielding bucket being reduced from 34% to 33%. In PSBC, we have increased our loan and securities volumes in Germany by 6% in the Q1.
With €307,000,000,000 We are already close to our year end target of €310,000,000 And the digital adoption of our clients comes faster than expected. With 68% With digital banking users, we have already exceeded our 2021 targets of 67%. Regarding branch closures in PSBC, the preparation for the announced 200 closures in Q4 this year It's well on track. And also the initiative in operations are progressing according to plan. The number of applications in the cloud has further increased to 33%.
As the projects are running at full steam, we expect a strong step up in Towards a ratio of 50% decentralized applications on cloud technology. Furthermore, Our IT capacity in near shoring locations has increased to 15%. This includes the successful ramp up of Sofia, an attractive location that offers a lot of talent. Ladies and gentlemen, the Q1 demonstrates that our strategic transformation has kicked off well and is on track. Let me now hand over to Bettina, who will provide you with a more granular look into the financials of the Q1.
Thank you, Manfred, and also good morning from my side. I will walk you through the financial results of the quarter before we move into Q and Before going into the presentation, I would like to briefly mention that we have changed the format of our disclosure. As already established by most German companies, we will publish shortened interim financial information in Q1 and Q3. And as per H1, we will continue to provide the full interim report. We will certainly continue to maintain The information provided in the quarterly presentation, including the appendix.
Now let's start with the overview on Slide 89. As Manfred already stated, we had a very good start in the year, exceeding financial targets we have set ourselves for the quarter. The operating result improved to €538,000,000 more than covering the restructuring charges of €465,000,000 €465,000,000, sorry. The good result is based on 3 pillars: strong revenue growth of 35% year on year, costs fully in line The target is a low risk result of €149,000,000 We could also further strengthen our capital ratio to 13.4% And have a comfortable buffer of 3 80 basis points above NDA. Let's briefly look at Slide 10 and Positive contribution from the TLTRO in the quarter before moving to group P and L on Slide 11.
We have fulfilled the requirements of the ECB's TRG-three program and have accordingly booked a benefit of EUR126,000,000 for Q1. We have classified this as an exceptional revenue item in others and consolidation to provide full transparency. In Q2, we will book some further EUR 40,000,000 from TLTR 3, in line with accounting standards. Slide 11 shows the overall group P and L with revenues by line item, excluding exceptional revenue. The fair value results reflect a very good trading quarter and valuation gains.
The key driver of the customer business was the commission income, which grew strongly while the interest income declined quarter on quarter. Before I go into some details on NCI and NII, I would like to briefly discuss the tax results. As guided with the Q4 2020 results, We expect a positive contribution from tax this year. Q1 taxes have been driven by the capitalization of DTA on tax losses carry forward. On Slide 12, we show the development of net commission income.
PSBC, including Mbank, Has strongly increased commission income by 11% year on year. This has been driven by the strong securities business in Germany, both from high trading volumes and increased securities and custody. As market volatility is reducing, we expect this to come down somewhat, But the trend seems to be clear. Germans increasingly invest into securities to avoid negative rates Corporate Clients benefited from the strong Capital Markets business in the Q1 with NCI up 4% year on year. For the next quarters, we expect NCI to return to around the level seen in previous quarter.
This leads us To NII on Slide 13, where we show the underlying interest income, excluding TRTRO benefits of EUR 126,000,000. As expected, we have seen a slight decrease quarter on quarter. While the lending business in PSBC has performed well, The ongoing drag from deposits still weighs on NII. As outlined in our strategy, We are optimizing the loan book and corporate clients to increase capital efficiency, and this results in lower volumes and corresponding lower NII. For the rest of the year, we expect the underlying NII, excluding the TLTRO benefit, We managed our costs in line with our full year target.
And we already invested around EUR 100,000,000 of the planned EUR 600,000,000 We have earmarked for our digital transformation in 2021. While operating expenses were reduced by $34,000,000 by our cost initiatives, Compulsory contributions again increased by €36,000,000 This has been driven by increased contributions to the German deposit guarantee Following the closure of Greenville Bank and the increased Eurofim bank levy. Let me move on to Our strategy and the associated restructuring costs on Slide 15. As already communicated, we have booked EUR 4 euros 55,000,000 in Q1, euros 447,000,000 of which are related to headcount reduction. They cover the voluntary programs in Germany as well as reductions in management posts and positions outside of Germany.
As Manfred said, we have agreed with the Workers' Council on framework agreements that cover the remaining headcount reductions required to reach our 2024 targets. The additional restructuring charges of around €225,000,000 The further enhancement of the redundancy instruments are well invested as they increase the reliability of execution. We plan to book the full remaining headcount reduction related restructuring costs of around EUR 550,000,000 in Q2 For the occupancy related charges of around €130,000,000 will need to be spread over the next quarters according to accounting standards. Let's move to Slide 16 and the risk result. The 3rd lockdown had only a very limited impact in the Q1.
With €149,000,000, The risk result is the lowest since the start of the pandemic and reflects the resilience of our customers with largely stable ratings At a relatively low number of defaults in the quarter. In Germany, the remaining waivers of bankruptcy law have expired at the end of April. We will have to see if this has any significant impact. While we see default rates already increasing, We have not yet seen material effects on our portfolio. With increasing vaccination rates, Consumer activity should improve as the lockdown is eased, supporting growth in the economy and correspondingly our customer.
Nevertheless, an impact of increased defaults later in the year is currently still expected. Therefore, we have been cautious and kept our top level adjustment largely unchanged at €495,000,000 Leaving it available to cover a potential impact. We will again review the Now let's carry on with the operating segments, and let me start with Private and Small Business Customers on the next Two slides. As mentioned, we have seen a strong increase in securities volumes by €15,000,000,000 in the quarter. These were not only driven by higher market prices, but also EUR 5,000,000,000 net new money invested in securities And more than SEK 2,000,000,000 thereof resulted from our introduction of deposit pricing.
Loan volumes also increased strongly. In particular, the mortgage business has performed exceptionally well with the highest volume of new mortgages ever. Given the high savings rate in the pandemic, the overall market for consumer finance has shrunk in the last quarter. We have, however, managed to keep the consumer finance book stable and do not expect a significant change in customer behavior in the near term. In the deposit business, we have made good progress in the quarter.
The offer of attractive Securities products help to avoid a further increase in overall deposit volumes. In parallel, we have increased the volume of price deposits From €7,000,000,000 to €10,000,000,000 So far, we have signed agreements for deposits above €100,000 While we expect further progress throughout the year, deposit pricing will not be enough to fully compensate for the effect From the interest rate environment on deposit related income. Overall, we expect the contribution from deposit agreements to be up to €50,000,000 in 2021. We are also changing the pricing of bank accounts. While we still offer a basic account with conditions and Services for which we do not charge a monthly fee, we aim to charge customers that wish to use more services We do not fulfill the conditions early in the second half of the year.
As you will have read, the German Federal Court Have declared the current mechanism used by German banks to adjust pricing as invalid. We'll have to evaluate the final verdict when it will be published. Notwithstanding the ruling, we continue with the implementation of the planned price changes for Commerzbank customers and are working on adjusted processes that take the ruling into account. For Comdirect's customers, the price change was due to take effect on May 1. This has been postponed following the ruling, and we are also working on a suitable process for these accounts.
On the topic of court rulings, there has been an encouraging ruling by the European Court of Justice related to Swiss franc mortgages in Poland. A ruling by the Polish Supreme Court on May 7 also was constructive. A A further ruling scheduled for May 11 has been postponed. The Polish Supreme Court requested additional opinions from institutions like the KNF, the National Bank of Poland and relevant ombudsman before taking a decision. No new date for a resolution has been set so far.
Looking at underlying revenues in PSBC on Page 18. These were up 1% year on year, driven by the strong performance of the Securities business with private customers in Germany. This and the lower risk result have led to the strong increase in the operating result to EUR 2 €50,000,000 Mbank has also performed well with underlying revenues slightly up year on year. Given that there were no significant changes to the outlook for Swiss franc mortgages in Q1, reserves were increased by EUR 14,000,000 to reflect slight changes in expectations. Potential further burdens from the Swiss franc mortgages obviously And on the legal developments in Poland.
Now let's move to Corporate Clients on the next two slides. In Corporate Clients, we have intensified our active portfolio and RWA Efficiency Management. This has led to an overall reduction in volumes and an increase of the average RWA efficiency to 4.7%, helped by the overall good revenues in the quarter. At the same time, we have maintained volumes with European customers that qualify for the TLTRO benefits. In the next quarters, we will continue with our RWA efficiency management.
While this is clearly our priority, we will consider the requirements for future TRTO benefits in that context when appropriate. In the deposit business, we have cut our focus on disciplined pricing and have further increased the volume of price The majority of deposits is priced, and we expect to see the contribution from pricing to increase from around EUR 150,000,000 in 2020 to close to EUR 200,000,000 this year. Revenues from customer business have overall been slightly lower by around 1% year on year. Stronger Capital Markets business could not fully compensate for lower revenues from Commercial Banking. This is reflected in the customer segments.
International Corporates benefited from a better bonds and syndication business, where Mittelstand and Institutions showed slightly lower revenues due to lower volumes in Lending and Trade Finance. With overall higher reported revenues, a significantly improved risk result and lower costs, corporate clients reached an operating result of 90 €8,000,000 Let's move to Slide 11 and the development of others and consolidation before looking at the overall risk weighted The operating result of €119,000,000 in others in consolidation includes the €6,000,000 benefit from the TLTRO as well as strong improvement in the fair value result, reflecting the very favorable market environment in this short. Compared to the Q1 of last year, the value result also improved due to the reduction of foreign currency refinancing transactions that negatively contributed to fair value. These were used to maintain central bank balances Foreign currencies that had contributed to interest income and have been closed, respectively. Based on the Strong Q1 results.
We now expect the operating result of others and consolidation to be around 0 for the full year, and this is before the TLTRO benefits, That could be influenced by changes in valuations in the course of the year. Let's move to Slide 22 and the risk weighted assets. Quarter on quarter RWAs were overall stable with a small increase in credit In the next quarter, we expect an increase of up to EUR 3,000,000,000 to EUR 5,000,000,000 in RWAs from again Higher operational risk charges as well as regulatory driven increase in credit risk RWA from TRIM and adjustment of models. While RWA was stable in the quarter, regulatory capital increased. This was mainly due to accounting gains from our pension funds, driven by higher discount rates for pension liabilities.
The CET1 ratio increased to 13 4% and provides us with a comfortable buffer of 3.80 basis points to MDA. Due to the expected RWA increase As mentioned earlier, at the implementation of our transformation program and resulting upfront burdens, we expect to see a reduction of the CET1 ratio in the next Now let me wrap up the quarter with some key messages and conclude with our improved outlook for 2021.
First,
we had a very successful quarter, posting a net result of €133,000,000 Despite booking EUR 465,000,000 of restructuring charges. 2nd, we have seen a very low number of defaults in our portfolio in the quarter and I have kept our top level adjustment largely unchanged at €495,000,000 to cover anticipated effects from the corona pandemic. 3rd, our cost management is delivering as planned. 4th, We are on track on our strategy implementation. To implement the corresponding headcount reductions, we have concluded the framework agreements with the workers' representatives I now have all the required tools in place.
And 5th, our CET1 ratio remains With a buffer of 3 80 basis points above MDA, we are solidly above our medium term target range 200 to 250 basis points. Now let me conclude with the improved objectives and expectations for 2021 Based on the premise that there will be no extraordinary burden from Swiss franc mortgages in the course of the year. Given the strong Q1 results, revenues should slightly exceed the 2020 figure. With further progress of transformation, we target a cost base of around €6,500,000,000 Given the uncertainty of the further development of the pandemic, we continue to anticipate a risk result in a range of minus €800,000,000 to €1,200,000,000 Based on current observations, a risk result at or below €1,000,000,000 is likely. Based on the Q1 results, we expect a CET1 ratio of at least 12.5%.
And most Importantly, we expect a positive operating result. Thank you very much for your attention. And now Manfred and I are very happy to take your questions. Thank you.
Again.
And the first question for today comes from Isabella Dobreva calling from Morgan Stanley. Hello. Good morning, everybody. Thank you very much for the presentation and for taking my questions, And congratulations on the progress so far in this quarter's results. I had three questions.
Firstly, I want to I think you mentioned earlier on the call you would see Q1 as a run rate. I wanted to make sure that I heard that correctly that the Q1 number, clean activity of Row, is a run rate for the rest of the year. And also related to that, I wanted to ask you if you could give us an update on your guidance regarding modeled deposit pressures. I think in the past, you have given us the €300,000,000 all in headwind. How has that changed so far this year given the steepening of the yield growth?
And how much would you expect to take this year? Then I had a question on deposit repricing. If you could Comment a little bit on how you see the recent court ruling having any impact on your initiatives and ultimately what the impact of this will be? And then finally, I wanted to ask you about the Swiss franc loan case situation, which as I understand has been postponed again in terms of the decision. I know the details are not known yet, but I wanted to ask you what is your preferred approach when it comes to provisioning the risk here?
Would Commerzbank prefer to take an upfront provision and bulk most of the exposure this year next? Or would you prefer to take an approach of letting the cases kind of go through the courts and taking those provisions more slowly. Thank you.
Okay. Thank you, Isabelle. So I will take the question. So yes, you heard it correctly. We you could Take Q1 as a run rate, but excludes clearly the TLTR effects.
On the headwind deposits, that's largely unchanged from our standpoint, Probably slightly better, but we have to see how it develops over the next quarters. On deposit pricing, I mean, on the deposit pricing, the difference to other price model introduction is that we anyhow had To have bilateral agreements in place with respect to the deposit pricing, and that's what we did in the past and what we will do in the future. The only difference are new customers who basically entered the bank after last year because there We basically put in the deposit pricing already in the whole account opening Contracts. And you're so it's no impact basically on that. And the last question on Swiss franc loans.
I mean, it clearly depends on how the developments are and the ruling. I mean, the last two rulings were pretty promising. So we feel pretty much Nicely covered with the current provisioning. We now have provisioned around, I think, EUR 326,000,000 That covers cases we have already seen, but also covers potential new cases incoming. If you talk, and I did that yesterday night with the management team of Mbank, they are based on all the rulings now rather optimistic that you will even See a little decrease in cases coming in.
We will see whether this is true or not. And besides that, I mean, we will always book if we have the Feeling that cases are increasing, situation is changing. And if there is a decision and we get a better feeling on the magnitude, We will be clearly follow then probably the policy everybody else will follow and book whatever is But at the moment, we feel comfortable with what we have done so far.
Okay, thank you. Moving on to the next question then. We now go to Benjamin Goy, who's calling from Deutsche the bank. Over to you.
Yes. Hi, good morning. Two questions from my side, please. First, on fee income and then second on your FTE reduction initiatives. On the fee income, strong performance in the quarter, but I was just wondering whether you can quantify a bit the impact between transactions and the boost from higher custody volume.
So I think it was up €50,000,000 roughly in TFPC year on year And also EUR 100,000,000 even versus 2019 Q1. So just to understand what is, sort of, say, the abnormal growth rates Given high transactions and high trading activities. And then secondly, on the FTE reduction, of 2024, kind of what you have achieved in the last 2, 3 months. And related to that, how should we see the early retirement? I think there are up to 7 years early retirement possible.
Instead of first half, will they still be On the payroll, meaning impacting the P and L and then thereafter, you have the cost benefit? Or how could that how could it look like this program? Thank you.
Let me start with the FTE reductions. You asked For the 1900, 830 of the 1900 are coming from the projects in spring 2020, 100 from the SPIN program 2020 recording to branch closures and additional 9.40 from this year's Program ATZ program. So another EUR 500,000,000 will then come this year from the usual fluctuations. Bettina, you want to add on the cost effect?
Yes, sure. And your question, so it's part of the 10,000. So the EUR1900 clearly pays into the reduction of the EUR 10,000. And You need to differentiate the different early retirement programs we have. The part time retirement program, which we already have offered twice, It's the one where you have an active and a passive phase.
When the colleagues are still in the bank working during the active phase, they're also The P and L in the mail and where they switched to the passive phase, they also leave basically the P and L. And on the early retirement program, the program which we have newly introduced with the 7 year of maximum duration, that is Whenever the colleague is signing and then leaving, then the colleague is off the P and L. Regarding your first question, regarding fee income, this is largely due to transactions. So it's very much Driven by increased transactions and a smaller part is due to volume
Understood. Thank you.
Thank Moving on now to the next question. We are going to Jeremy Zige, who's calling from Exane BNP Paribas. Over to you.
Thank you. Good morning. Three questions, please. 2 of them are a follow-up on previous ones. Firstly, net interest income.
I Just wanted to get back on to that and the moving parts. If I understand correctly, you're saying there's an extra €50,000,000 deposit pricing benefit in PSBC And another €50,000,000 in corporate clients, but those are going to be more than offset by further margin pressure. I just wanted to check if I understood that correctly. 2nd question is on, again, following up the headcount cuts. So are you saying that the remaining 6,400 cuts To get to the 10,000, those will all be agreed this year.
And then my last question, I just wondered if there's any further Observations on the revenue impact of branch closures from what you've done so far? Thank you.
With regard to the branch closures, we do not see anything so far yet. So we have a very successful, Yes, build up and ramp up of the clients with the Comdirect. But with regard to the branch closures, So far, we have no impact what we're seeing, but usually, it takes time, and we need to wait. And you asked For the rest of the 6,400, whether we will all close them this year, so the 2,000 Yes, it's also part of the fluctuation, and the rest will be partially signed. So it's Sure.
Of signing this year and a mixture of fluctuation, the program is running from 2,000 to 2024, So not all of them will be signed this year.
But they're all agreed even if they're not signed?
Pardon, can you just repeat that?
Sorry. They may not all be signed, but all of the 6,400, all of the 10,000 Will be agreed in principle in the course of this year, is that correct?
Yes. Okay.
Yes. There are actually, I We have the frame contracts now agreed with the workers' council, and that includes basically also the magnitude of our downsizing. So the 10,000,000 agreed between the bank and the workers' council representatives. And what we now do is agreeing on the details and split between the different Functions and then we basically go in the process until 2024 and doing the signing of agreements with the individuals. Regarding your NII question, you got it right.
So on the private client side, We see revenues coming from deposit pricing of around €50,000,000 We have seen €15,000,000 last year approximately. So it's an increase of around €35,000,000 And on the corporate client side, it is from EUR 150,000,000 to EUR 200,000,000 so additional EUR 50,000,000. The track is specifically, I have to say, on the And there we basically see that the €50,000,000 cannot compensate from the fact which
Next We have Stuart Graham, who's calling from Autonomous Research. Over to you.
Hello. Thank you for taking my questions. I had 2. I think they're both published in this account. First, can you describe how the strategy steer co works in practice?
Specifically, what are the inputs to the meetings? What management information do you get ahead of time? And what are the outputs? How do you monitor follow-up action? That was the first question.
And then the second question was, can you remind us how many of the top management positions you've changed since you joined Commerzbank? For example, how many of the top 100 managers have you replaced? Thank you.
Okay. Stuart, with regard to the Board, we've Change 1. On the board, minus 1. I think Bettina, you need to help me. We have been roughly 45, and we are now I think we have 15 new around 15 new Members of the Board of Management, the Board minus 1.
And for the Board minus 2, this is What we're going to announce and what we're going to select in the next quarter, so all jobs It will be new and open for everybody. So everybody has to apply for the job, and there will be a process for the board Minus 2 level. You asked about the strategy and the Stereco. So This is basically a twofold system. On the one hand, I have a strategy department and transformation department Under my supervision, and Holger Scholte is running this, and he has weekly meetings and calls regarding The timely execution of the initiatives.
So he is in talks with responsible managers, and We will then report on a biweekly basis to the Board of Management of the progress of initiatives and whether something is Popping up, which is late or has where there are regular changes and so on. So Weekly, Holger is doing that, and then biweekly is coming to the Board as some of the initiatives are popping up. And that's what we have also When you introduced Bettina and myself have now quarterly performance meetings with the Board minus 1 business representatives and Board minus 2. So we will See all relevant business managers at least quarterly on their business performance with regard to P and L cost, revenues, profitability, but also with regards to the implementation of the transaction initiatives. And separately, we have QBRs, where the Board of Management is on a quarterly basis evaluating the Progress of the digitization initiatives.
So we're looking at the application and the end products for customers, But also, we are reviewing the progress of the digital initiatives of the delivery organization. And we will report quarterly To the supervisory board on the progress of the initiatives and in the risk Committees on whatever appearing risks of the transformation.
Could I just ask
a follow-up there? When you joined, you said you were happy enough with the management information. Is that still the case kind of 3 months on, you're still happy with the management information you've got to run this bank with?
We will dig always deeper in that. So also on the pricing, Bettina can explain you more on what we're doing. On the pricing, yes, I'm happy what we can do. So we are but we have now further information On the projects, on the initiatives, and I want to have it on a quantitative basis, but also on a qualitative approach. So I want to know when projects are running off track ahead of all the financial figures So this is very important to me to have a yes, to steering and correction measures.
The one where we need further work is on the pricing of each product. And Bettina, you can Explain on what you're doing there.
Yes. I mean, we have I'm sure we have the normal financial steering in place, but what we also do and that's Probably different also to previous programs. We really packed down every single cost reduction we have promised out there And have a backset up with the different initiatives and track down how things are developing On the cost side, on the revenue side, but also on the FTE side. So basically, every 10,000 are tracked by us Very diligently down to the single function. And what we also do is basically we are currently improving our growth
Great. Thank you very much for taking my questions.
Thank you. Next up, we have Johannes Thormann, who's calling from HSBC. Over to you.
Good morning, everybody. Johannes Thormann, I see 2 follow-up questions and one general one, please. First of all, sorry to read numbers crunching, but could you provide more Details on the net commission income as you have done before to get a better clarity what has been the driver And could you probably revert the decision not to disclose the different sub lines of that net commission income? Secondly, could you update us on the current number of court cases at Mbank? And what are the monthly inflows at Mbank, So we can also see how this is progressing relatively to the market.
And last but not least, Just in terms of the revenue bridge you gave with the new strategy to get to EUR 5,400,000,000 net interest income, I'm a bit struggling to see how you reach that from the current level of, call it, €4,700,000,000 €4,800,000,000 End of the year, if we take your current run rate plus TLTR effects. And then we see a total negative other Income of EUR 500,000,000 where we have seen a good trading and other income this quarter. So please elaborate what is driving those changes? Thank you.
So lots of questions, Johannes. I try to take them. So starting with the NCI, So more details. Concretely speaking, as we have approximately €50,000,000 increase in net commission income year on year, And you can assume that 10% or €5,000,000 are volume based and the rest is basically transaction based, hope that helps, Number 1. Number 2, number of inflow and incoming court Case is approximately around 400 at the moment, and I think we are still searching for the absolute number at the moment.
And I'll come back to that later on. The other unconsolidation, I think I understand the question Why do we guide now that of minus EUR 150,000,000 to 0? That's basically because we have this Excellent first quarter with respect to fair value result, etcetera. We have the TLTRO for sure as well, and we booked that in other So we assume, I would say, normal quarters now for Q2 to Q4, And that basically brings us, if you exclude GLTIO, on around 0. And Then the steps how do we believe we will manage the NII?
I mean clearly, We want to grow in PSBC specifically and there specifically, MBAC as we also have laid out during the Capital Markets Day. And we should not forget that also in Embank or in Poland, Current interest rates are at a very low level, but economists expect a recovery of this interest rate level already 2022, 2023 latest, and that will have a big impact on the NII driving that up. And that is the legal there we are. It's around 7,000 Current cases, which we currently have within Mbank, a little bit less than 7,000. And as I said, Average rate is €400,000,000 but management team in Embark is pretty bullish since the last
Thank you.
Thank you. The next question comes from Jochen Schmidt, who calling from Metzler. Over to you.
Thank you. Good morning. I have one question on your new business In German mortgages, which you have mentioned to have been very strong in Q1, could you also provide a figure here? That's my question. Thank you.
I mean the volume stands at around 80 8 €1,000,000,000 at the moment. And the increase which you have seen in loan volumes mainly stems from our mortgage business, so it's So it's €5,000,000,000
up. And this would also be the new business for Q1, the EUR 5,000,000,000 which you have just mentioned. Because I mean yes? Okay. Thank you.
Okay. Are we ready to move on to the next question?
I think so. Thank you.
Perfect. Then we'll move on to Nicholas Herrmann, who's calling from Citigroup. Over to you.
Yes. Good morning. Thank you for the presentation and for taking my questions. 3, if I may. One I just had a question around the BGH ruling, secondly on the outlook.
And then thirdly, just a clarification on PSBC repricing. So on the BGH ruling, just a couple of questions around this, please. I welcome any thoughts you might have on the recent ruling. But I do have a couple of specific questions around revenue and I guess risks of callbacks. So on the revenue point, I guess, in terms of passing on negative rates via fees, does it limit your ability to pass on negative rates in the future?
And on the fee side, I think there were some planned fee increases that you've now had to stop. Presumably, though, this is still doesn't you don't expect to see Much impacts your ability to meet your medium term targets because these are mostly volume driven rather than pricing driven. So just to confirm that. And then on the callback part, I guess, do you see a risk that customers could seek to claim back any prior increases in fees? Again, my assumption is that it's pretty limited on the negative rate side because you've done that so far on a bilateral basis.
But beyond that, Is there a risk that customers could seek to claw back any fee increases you might have done across accounts, payments, securities and so on? So that's the first part. On the 20 percent outlook, I'm probably a little picky, panicky here, but You've guided for slightly higher revenues. Can I just push you to clarify what you mean by slightly? I mean, would you call 8.825, 8.3 slightly, So it's like a percent or less or would it be more than that?
And I think you also mentioned that it excludes any Outsize changes in FX mortgages, but presumably it also excludes any gains or investments that you might recognize You might potentially recognize. And then the third question final question, sorry, I realize there are a few here. I was interested in the disclosure you provided Slide 17 of your deposits, where it says that you have repriced $10,000,000,000 of your retail deposits. Trying to think how to think about this. So I guess in the past, you've indicated that the pool of deposits with more than €200,000 was about €20,000,000,000 So the $10,000,000,000 that you've now repriced, does that mean that you've only repriced half of them or you've only negotiated half of them Or you've only repriced half of them because the other half you were able to they actually then decided to do more securities Transactions with you.
I just want to understand kind of how to think about that EUR 10,000,000,000 and how can you get? Thank you.
Okay. Thank you. So let me start with the subtle court ruling. So I mean, the assumption is right. In the future, the impact is limited.
I mean, as I said, we anyhow only planned To introduce the new pricing model for Commerzbank on 1st July, and the teams are working on a new process, which is in compliance with the new ruling. On Comdirect's plan was 1st May, but there is also a process in preparation. And on the deposit pricing, as I said, as you had fully also pointed out, there are bilateral agreements and they are basically valid And cannot be argued. Looking back, to be very honest, it's difficult. We still wait for the verdicts to be published, and then we On the outlook, I fear that you would say something like that or ask something like that.
I think I got Same question last time when I said slightly below. Now it's slightly above. And yes, Slightly above means probably a high double digit or a low triple It's a million number. And I mean, it basically includes if we would have to book Some increase on Swiss francs just because, I don't know, cases go up or something like that or ruling is changing that will be covered. But if there is a final verdict
We're all in for 2021. And if that It's going to let's say, it's going to compensate the other BOE efficiency that you're having in the Corporate Clients division? Thanks.
Yes, Ricardo, thank you. Yes, you got it right. The branch closures And the reduction of the FTEs are fully in plan, and you see them in the columns here. But also, there is no risk, and there is no indication that the Effects from digitization and processes will not occur as planned. So far, there's no indications.
And there are hundreds of different initiatives, and we plan them on a year by year basis. And so far, there is no risk, and there will be also occur as planned, the same as branch closures And FTE reductions.
Yes. And on the FTE agreement, it's fully compatible, so no changes there. And on the RWAs, We basically expect €3,000,000,000 to €5,000,000,000 increase. That comes from also volume increases, But clearly also, we expect the last letter for TRIM on FIs. We expect there an impact of less than 10 basis Which brings us to our total impact of TRIM, if you put all things together, of 55 basis points, Which is, by the way, lower than the average of our German competitors, which is, I think, around 70, so it shows That we have here, mostly increased slightly on our volumes, so it's up EUR 36,000,000,000 And we expect that we will book another around €95,000,000 All benefits in the 4th quarter and then the rest for the second program will follow in 2022.
Yes. Thank you very much for the questions and the discussions. Bettina and myself, we are looking forward to the next sessions, and we hope we can also meet again in person soon. It looks It's more promising now than a couple of weeks ago. Again, thanks for participating, and have a nice day.