Good morning, ladies and gentlemen, 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 the internet. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions following Manfred Knof and Bettina Orlopp's presentation. Let me now turn the floor over to our CEO, Manfred Knof.
Good morning, everyone. Welcome to our earnings call for the first quarter of this year. Q1 was my first quarter as CEO of Commerzbank. 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 the future earnings calls. Now let's start with our presentation on page two. We had a very good first quarter. We delivered strong results and successfully started the transformation of Commerzbank. On P&L, we reached a strong operational result of EUR 538 million. 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. We have reached the first important milestones in the execution of our Strategy 2024. 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 three, we have put down the major strategic milestones we have already reached along the four cornerstones of our strategy. Let me start at the customer side and highlight a major achievement in our Corporate Clients division. This week, we signed a cooperation agreement with ODDO BHF 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 Börse 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. First asset classes will be art and real estate. 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 zero 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 this quarter to ensure the proper execution of our cost reduction program. This leads me to slide four and the progress in the implementation of our redundancy program. From the overall targeted FTE reduction of 10,000, around 1,900 FTEs 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 year. The targeted reduction of 1,700 FTEs significantly contributes to our planned cost reductions in 2022.
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 is 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 million, bringing the full restructuring costs for the program to slightly above EUR 2 billion. As of today, we are completely on track to achieve our targeted cost reduction. Let me move on with sustainability. Our sustainability strategy is a very important building block of our Strategy 2024.
Our recent survey in the German Mittelstand tells us that 80% of the companies perceive sustainability as decisive for the future, but only one-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 first major steps into this direction. Our commitments are strong. After joining the TCFD last September, we have also joined the Net-Zero Banking Alliance of the United Nations Environment Programme. We aim to reduce the CO2 balance of our entire lending and investment portfolio to net zero by 2050, the latest. This requires close collaboration with our clients in the German Mittelstand to jointly develop strategic paths 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 billion today to EUR 300 billion by 2025. Main drivers of this 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 third target that we have set is to ensure net zero emissions from our own banking operations by 2040. 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 six. 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 three international locations in 2021. On top, the recently initiated sales process of our Hungarian subsidiary shows significant interest in the market and is currently progressing well. Also on RWA efficiency, we have seen first improvements with clients in the low-yielding bucket being reduced from 34% - 33%. In PSBC, we have increased our loan and securities volumes in Germany by 6% in the first quarter. With EUR 307 billion, we are already close to our year-end target of EUR 310 billion.
The digital adoption of our clients comes faster than expected. With 68% active 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 is well on track. 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 Q4 towards a ratio of 50% decentralized applications on cloud technology. Furthermore, our IT capacity in nearshoring 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 first quarter 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 first quarter.
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&A. 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. Let's start with the overview on slide eight and nine. As Manfred already stated, we had a very good start in the year, exceeding financial targets we had set ourselves for the quarter. The operating result improved to EUR 538 million, more than covering the restructuring charges of EUR 465 million.
The good result is based on three pillars: strong revenue growth of 35% year on year, costs fully in line with targets, and a low risk result of EUR 149 million. We could also further strengthen our capital ratio to 13.4% and have a comfortable buffer of 380 basis points above MDA. Let's briefly look at slide 10 and the positive contribution from the TLTRO in the quarter before moving to group P&L on slide 11. We have fulfilled the requirements of the ECB's TLTRO3 program and have accordingly booked a benefit of EUR 126 million 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 million from TLTRO3, in line with accounting standards. Slide 11 shows the overall group P&L with revenues by line item excluding exceptional revenues.
The fair value result reflects a very good trading quarter and valuation gain. 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 result. 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 carried 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 in 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 on their savings. Corporate Clients benefited from the strong capital markets business in the first quarter, with NCI up 4% year-on-year. For the next quarters, we expect NCI to return to around the levels seen in previous quarters. This leads us to NII on slide 13, where we show the underlying interest income excluding TLTRO benefits of EUR 126 million. 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 volume and correspondingly lower NII.
For the rest of the year, we expect the underlying NII, excluding the TLTRO benefit, to remain roughly at the level of the first quarter. Let's carry on with cost on slide 14. We managed our cost in line with our full-year target, and we already invested around EUR 100 million of the planned EUR 600 million we have earmarked for our digital transformation in 2021. While operating expenses were reduced by EUR 34 million by our cost initiatives, compulsory contributions again increased by EUR 36 million. This has been driven by increased contributions to the German deposit guarantee scheme following the closure of Greensill Bank and the increased European bank levy. Let me move on to the implementation of our strategy and the associated restructuring costs on slide 15. As already communicated, we have booked EUR 465 million in Q1, EUR 447 million 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 Works Council on framework agreements that cover the remaining headcount reductions required to reach our 2024 targets. The additional restructuring charges of around EUR 225 million for further enhancement of the redundancy risk 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 million in Q2. Further occupancy-related charges of around EUR 130 million will need to be spread over the next quarter according to accounting standards. Let's move to slide 16 and the risk result. The third lockdown had only a very limited impact in the first quarter.
With EUR 149 million, the risk result is the lowest since the start of the pandemic, and reflects the resilience of our customers with largely stable ratings and 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 customers. 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 EUR 495 million, leaving it available to cover a potential impact. We will again review the TLA in the next quarter.
Now let's carry on with the operating segments. 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 EUR 15 billion in the quarter. These were not only driven by higher market prices, but also EUR 5 billion net new money invested in securities. More than EUR 2 billion 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 helped to avoid a further increase in overall deposit volumes. In parallel, we have increased the volume of price deposits from EUR 7 billion to EUR 10 billion. We have signed agreements for deposits above EUR 100,000. While we expect further progress throughout the year, deposit pricing will not be enough to fully compensate for the effects from the interest rate environment on deposit-related income. Overall, we expect the contribution from deposit agreements to be up to EUR 50 million 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 or do not fulfill the conditions early in the second half of the year. As you will have read, the German Federal Court has 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 customers, the price change was due to take effect on May 1st. This has been postponed following the ruling. 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 Poland Supreme Court on May 7 also was constructive. A further ruling scheduled for May 11 has been postponed. The Poland 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 250 million. 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 million to reflect slight changes in expectations. Potential further burdens from the Swiss franc mortgages obviously depend 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 excess 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 benefit. 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 TLTRO benefits in that context when appropriate.
In the deposit business, we have kept our focus on disciplined pricing and have further increased the volume of priced deposits. The majority of deposits is priced, and we expect to see the contribution from pricing to increase from around EUR 150 million in 2020 to close to EUR 200 million 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, while Mittelstand and institutionals show 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 EUR 98 million.
Let's move to slide 11 and the development of Others and Consolidation before looking at the overall risk-weighted assets. The operating result of EUR 190 million in Others and Consolidation includes the EUR 126 million benefit from the TLTRO, as well as strong improvement in the fair value result, reflecting the very favorable market environment in this quarter. Compared to the first quarter of last year, the fair 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 in 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 zero for the full year. This is before the TLTRO benefit, but 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, RWA were overall stable, with a small increase in credit risk RWA offset by reductions in operational risk RWA. In the next quarter, we expect an increase of up to 3 billion -5 billion in RWA from, again, higher operational risk charges, as well as regulatory-driven increase in credit risk RWA from TRIM and adjustment of models. While RWA were 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 liability.
The CET1 ratio increased to 13.4% and provides us with a comfortable buffer of 380 basis points to MDA. Due to the expected RWA increases mentioned earlier and the implementation of our transformation program and resulting upfront burdens, we expect to see a reduction of the CET1 ratio in the next quarter. 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 EUR 133 million, despite booking EUR 465 million of restructuring charges. Second, we have seen a very low number of defaults in our portfolio in the quarter and have kept our top-level adjustment largely unchanged at EUR 495 million to cover anticipated effects from the COVID pandemic. Third, our cost management is delivering as planned. Fourth, we are on track in our strategy implementation.
To implement the cross-funding headcount reductions, we have concluded the framework agreements with the Works Council and now have all the required tools in place. Fifth, our CET1 ratio remains strong. With a buffer of 380 basis points above MDA, we are solidly above our medium-term target range of 200-250 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 the transformation, we target a cost base of around EUR 6.5 billion. Given the uncertainty of the further development of the pandemic, we continue to anticipate a risk result in a range of minus EUR 0.8 billion to EUR 1.2 billion.
Based on current observations, a risk result at or below EUR 1 billion is likely. Based on the Q1 result, we expect a CET1 ratio of at least 12.5%. Most importantly, we expect a positive operating result. Thank you very much for your attention. Now Manfred and I are very happy to take your questions. Thank you.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press nine followed by the star key on your telephone keypad. To withdraw your question, please press nine star again. The first question for today comes from Izabel Dobreva, calling from Morgan Stanley.
Hello.
Over to you.
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 wanted to start with net interest income. I think you mentioned earlier in 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 of TLTRO is a run rate for the rest of the year. 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 a EUR 300 million all-in headwind. How has that changed so far this year, given the steepening of the yield curves, and how much would you expect to take this year?
I had a question on deposit repricing, if you could comment a little bit on how you see the recent core ruling having any impact on your initiatives, and ultimately what the impact of this will be. Finally, I wanted to ask you about the Swiss franc loan case situation, which as I understand, has been postponed again in terms of a decision. I know the details are not known yet, 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 and next, or would you prefer to take an approach of letting the cases go through the courts and taking those provisions more slowly? Thank you.
Okay. Thank you, Izabel. I will take the question. Yes, you heard it correctly. You could take Q1 as a run rate, but excludes clearly the TLTRO 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, 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 contract. It's no impact basically on that.
The last question on Swiss franc loans, it clearly depends on how the developments are and the ruling. 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 million. 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. Besides that, we will always book if we have the feeling that cases are increasing, situation is changing.
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 necessary to be booked. At the moment, we feel comfortable with what we have done so far.
Okay, thank you. Moving on to the next question. We now go to Benjamin Goy, who's calling from Deutsche Bank. Over to you.
Yes, hi, good morning. Two questions from my side, please. First, on fee income, 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. I think it was up EUR 50 million roughly in PSBC year-on-year, also EUR 100 million even versus 2019 Q1. Just to understand what is the abnormal growth rates given high transactions and high trading activities. Secondly, on the FTE reduction. First to understand this 1,900 FTEs that are already signed, are these part of the earlier plan, or is it already part of 2024, what you have achieved in the last two, three months? Related to that, how should we see the early retirements?
I think there are up to seven years early retirement possible. Is the first half, will they still be on the payroll, meaning impacting the P&L, thereafter you have the cost benefit, or how could it look like, this program? Thank you.
Let me start with the FTE reductions. You asked for the 1,900. 830 of the 1,900 are coming from the project in spring 2020, 100 from the Spin Program 2020 recording to branch closures and additional 940 from this year's ATZ program. Another 500 will then come this year from the usual fluctuations. Bettina, you want to add on the cost effect?
Yeah, sure. Your question, so it's part of the 10,000. The 1,900 clearly plays into the reduction of the 10,000. You need to differentiate the different early retirement programs we have. The part-time retirement program, which we already have offered twice, is 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 are also part of the P&L. In the moment where they switch to the passive phase, they also leave basically the P&L. On the early retirement program, the program which we have newly introduced with the seven-year of maximum duration. That is something whenever the colleague is signing and then leaving, then the colleague is also off the P&L. Regarding your first question regarding fee income, this is largely due to transactions.
It's very much driven by increased transactions, and a smaller part is due to volume-driven increase.
Understood. Thank you.
Thank you. Moving on now to the next question. We are going to Jeremy Sigee, who is calling from Exane BNP Paribas. Over to you.
Thank you. Good morning. Three questions, please. Two of them are a follow-up on previous ones. Firstly, net interest income. I just wanted to go back onto that and the moving parts. If I understand correctly, you're saying there's an extra EUR 50 million deposit pricing benefit in PSBC and another EUR 50 million in Corporate Clients, those are going to be more than offset by further margin pressure. I just wanted to check that I understood that correctly. Second question is on, again, following up the headcount cuts. Are you saying that the remaining 6,400 cuts to get to the 10,000, those will all be agreed this year? 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. We have a very successful build-up and ramp-up of the clients with the comdirect. 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. You ask for the rest of the 6,400, whether we will all close them this year. It's also part of the fluctuation, and the rest will be partially signed. It's a mixture of signing this year and a mixture of fluctuation. The program is running from 2000 to 2024, not all of them will be signed this year.
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-
Yes.
in the course of this year. Is that correct?
Yes.
Okay.
Yes.
There are actually-
Great.
We have the frame contracts now agreed with the Works Council, and that includes basically also the magnitude of our downsizing. The 10,000 are agreed between the bank and the Works Council representatives. What we now do is agreeing on the details and the split between the different functions, we basically go in the process onto 2024 and doing the signing of agreements with the individuals. Regarding your NII question, you've got it right. On the private client side, we see revenue stemming from the deposit pricing of around EUR 50 million. We have seen EUR 15 million last year, approximately. It's an increase of around EUR 35 million. On the corporate client side, it is from EUR 150- EUR 200, additional EUR 50. The track is specifically, I have to say, on the private client side.
There we basically see that the EUR 50 million cannot compensate from the drag which we see from the net interest rate environment.
Okay. It's very helpful. Thank you.
Next up, we have Stuart Graham, who's calling from Autonomous Research. Over to you.
Hello. Thank you for taking my questions. I have two. I think they're both probably for Knof. 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. 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 have changed one. On the board, minus one. I think Bettina, you need to help me. We have been roughly 45 and we are now, I think we have around 15 new members on the board of management, the board minus one. For the board minus two, this is what we're going to announce and what we're going to select in the next quarter. All jobs will be new and open for everybody, so everybody has to apply for the job. There will be a process for the board minus two level. You asked about the strategy and the steerco. This is basically a twofold system.
On the one hand, I have a strategy department and transformation department under my supervision. Holger Schulze is running this, and he has weekly meetings and calls regarding the timely execution of the initiative. He is in talks with responsible managers, and we will then report on a bi-weekly basis to the Board of Management of the progress of initiatives and whether something is popping up, which is delayed or where there are regular changes and so on. Weekly Holger is doing that, then bi-weekly is coming to the Board if some of the initiatives are popping up. That what we have also new introduced, Bettina and myself have now quarterly performance meetings with the Board minus one business representatives and the Board minus two.
We will see all relevant business managers at least quarterly on their business performance with regard to P&L cost revenues profitability, also with regards to the implementation of the transaction initiatives. Separately, we have QBRs, where the board of management is on a quarterly basis evaluating the progress of the digitization initiatives. We're looking at the application and the end product for customers, also we are reviewing the progress of the digital initiatives of the delivery organization. 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 three 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. 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. 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. I want to know when projects are running off track ahead of all the financial figures are then in the system. This is very important to me to have steering and correction measures. The one where we need further work is on the pricing of each product. Bettina, you can explain on what you're doing there.
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 track down every single cost reduction we have promised out there and have backed that 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. Basically every 10,000 are tracked by us very digitally down to the single function. What we also do is basically we are currently improving our whole steering by introducing customer and product profitability to a more detailed level than we probably have seen beforehand.
Great. Thank you very much for taking my question.
Thank you. Next up, we have Johannes Thormann, who's calling from HSBC. Over to you.
Good morning, everybody. Johannes , HSBC. Two follow-up questions and one general one, please. First of all, sorry to be 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? 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?
Last but not least, just in terms of the revenue bridge you gave with the new strategy to get to EUR 5.4 billion net interest income, I'm a bit struggling to see how you reach that from the current level of call it EUR 4.7 billion, EUR 4.8 billion end of the year, if we take your current run rate plus TLTRO effects. Then we see a total negative other income of EUR 500 million where we have seen a good trading and other income this quarter. Please elaborate what is driving those changes. Thank you.
Lots of questions, Johannes, as I try to take them. Starting with the NCI, more details. Concretely speaking, as we have approximately EUR 50 million increase in Net commission income year on year, then you can assume that 10%, EUR 5 million, are volume-based and the rest is basically transaction-based. Hope that helps. Number one. Number two, number of inflow and incoming court cases is approximately around 400 at the moment. I think we are still searching for the absolute number at the moment. I come back to that later on. The other consolidation, I think I understand the question, why do we guide now instead of minus EUR 150 to zero? That's basically because we had this excellent first quarter with respect to fair value result, et cetera. We have the TLTRO for sure as well, and we book that in as the consolidation.
We assume, I would say normal quarters now for Q2 to Q4. That basically brings us, if you exclude TLTRO, on around zero. The steps, how do we believe we will manage the NII? Clearly we want to grow in PSBC specifically and there specifically mBank, as we also have laid out during the Capital Markets Day, and we should not forget that also in mBank 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. That is, there we are. It's around 7,000 court cases, which we currently have within mBank. A little bit less than 7,000. As I said, average rate is 400 plus.
Management team in mBank is pretty bullish since the last rulings that they hopefully will see a decrease over the summer. We will see whether they're right or not.
Okay, understood. Thank you.
Thank you. The next question comes from Jochen Schmitt who's 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.
The volume stands at around EUR 88 billion at the moment. The increase which you have seen in loan volumes mainly stems from our mortgage business. It's EUR 5 billion up.
This would also be the new business for Q1, the EUR 5 billion which you have just mentioned.
Yes.
Yeah? Okay. Thank you.
Okay, are we ready to move on to the next question?
I think so. Thank you.
Perfect. We'll move on to Nicholas Herman who's calling from Citigroup. Over to you.
Yes. Morning. Thank you for the presentation and for taking my questions. Three, if I may. One, a question around the BGH ruling, secondly on the outlook, thirdly, just a clarification on PSBC repricing. 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 clawbacks. 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? On the fee side, I think there were some planned fee increases that you've now had to stop.
Presumably, you don't expect to see much impact to your ability to meet your medium-term targets because these are mostly volume driven rather than pricing driven. Just to confirm that. On the clawback 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. 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? That's the first part. On the 2020 outlook, probably being a little picky, pernickety here, you've guided the slightly higher revenues. Can I just push you to clarify what you mean by slightly? Would you call 8.825, 8.3 slightly?
It's like a 1% or less, or would it be more than that? I think you also mentioned that it excludes any outsized changes in FX mortgages, but presumably it also excludes any gains or investments that you might recognize. Might potentially recognize. The final question, sorry, I realize there are a few here. I was interested in the disclosure you provided on slide 17 of your deposits, where it says that you have repriced EUR 10 billion of your retail deposits. Just trying to think, just wondering how to think about this. I guess in the past, you've indicated that the pool of deposits with more than EUR 200,000 was about EUR 20 billion.
The EUR 10 billion 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 they'd actually then decided to do more securities transactions with you? I just want to understand how to think about that EUR 10 billion. Yeah. Thank you.
Okay. Thank you. Let me start with the Federal Court ruling. The assumption is right. In the future, the impact is limited. As I said, we anyhow only planned to introduce the new pricing model for Commerzbank on the July 1st, and the teams are working on a new process which is in compliance with the new ruling. On Comdirect, plan was May 1st, but there's also a process in preparation. On the deposit pricing, as I said, as you were 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 carefully will review it, and if there's anything, we will definitely share our insights with you next quarter.
On the outlook, I feared that you would say something like that or ask something like that. I think I got the same question last time when I said slightly below. Now it's slightly above. Slightly above means probably a high double digit or a low triple digit million number. 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. If there is a final verdict.
Overall in for 2020 and 2021, if that is gonna, let's say, is gonna compensate the RWA efficiency that you're having in the Corporate Clients division? Thanks.
Yeah, Ricardo, thank you. Yeah, you got it right. The branch closures and the reduction of the FTEs are fully on plan, and you see them in the columns here. Also there's no risk, and there's no indication that the effects from digitization and processes will not occur as planned. So far, there's no indications. There are hundreds of different initiatives, and we plan them on a year-by-year basis. So far, there's no risk, and they will be also occur as planned, the same as branch closures and FTE reductions.
Yeah. On the FTE arena, it's fully competitive. There are no changes there. On the RWAs, we basically expect EUR 3 billion- EUR 5 billion increase. That comes from also volume increases. Clearly also, we expect the last letter for TRIM on FIs. We expect their impact of less than 10 basis points, which brings us to a total impact of TRIM, if you put all the 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. It shows that we have here a multi-increase slightly our volume, so it's now EUR 36 billion. We expect that we will book another around EUR 95 million of benefits in the fourth quarter, and then the rest for the second program will follow in 2022.
Yeah. 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 more promising now than a couple of weeks ago. Again, thanks for participating, and have a nice day.
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