Good morning, ladies and gentlemen, and welcome to the Commerzbank Management 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. The floor will be open for questions following the presentation. Let me now turn the floor over to Bettina Orlopp.
Good morning, ladies and gentlemen. Welcome to our earnings call on the Q3 2020. Overall, the financials of the Q3 came in quite well with no surprises. Most important in the current crisis, we support our customers, our capital ratio remains strong, and the business with our customers shows a stable development.
Before I walk you through the financials, I would like to highlight some of our business achievements of the last month, demonstrating that we are clearly making progress in the transformation of Commerzbank. Let me start with Private and Small-Business Customers . Just last Monday, we have concluded the legal merger with Comdirect. From now on, we can further accelerate the integration of Comdirect as we no longer face Chinese walls due to the legal entity setup.
This is an important milestone to lift the envisaged cost synergies of EUR 150 million, but also provides us with additional sales opportunities across the customer base. Furthermore, we are pleased with the development in our securities business. This year, the number of digital transactions has almost doubled, and in July, we integrated the securities brokerage function into our Commerzbank mobile app.
This comes at a time when Germans increasingly invest into securities, many of them as first-time investors. Good evidence for this is the 50% increase in securities savings plans and the transfer of more than EUR 2 billion deposits into securities within the first nine months of the year. Whether this is finally the move from a savings culture to an investment culture in Germany remains to be seen, but it is at least a step in the right direction.
In Corporate Clients, we could confirm our leading position in DCM with top rankings in the league tables for German Euro issuers and also in syndicated loans, where we remained number one bookrunner in Germany. As a landmark transaction, we have been lead manager for the inaugural green bond of the Federal Republic of Germany.
Regarding trade finance, the business has obviously suffered a lot from the pandemic, but in the course of Q3, we have seen a recovery in numbers of transactions, which will show up in P&L with a time lag of up to six months and at the client interface, we have completely overhauled and relaunched our cash management app. We meet our clients' demands with additional functionalities for state-of-the-art, convenient mobile payments.
On group level, let me start with key highlights on sustainability as one of the mega trends, not only in society, but also in the financial industry. Since the beginning of September, we are an official supporter of the Task Force on Climate-related Financial Disclosures, which you all know as TCFD. For our clients, we supported them in the first nine months of this year in over 27 green and social bond mandates with a total issuance volume of EUR 31 billion, and only this week,
Commerz Real has launched klimaVest, an impact fund for private investors combining positive ecological impact with financial return. Furthermore, we have successfully issued our own second green bond on September 16th based on our existing renewable portfolio. In Q2, I have reported on valuation gains from Commerz Ventures . In Q3, we again had net valuation gains of EUR 43 million from investments in this portfolio.
As said with Q2, these valuation gains are good proof of our successful approach to the fintech area, but let me reiterate that I obviously can't rule out some failures or impairment in the future. Last but not least, we have agreed with the Works Council on the permanent closure of 200 branches and a further FTE reduction program. This resulted in the booking of a restructuring charge of EUR 201 million in Q3.
Let me provide you with some details on the restructuring on Slide 2. On branches, we currently operate from 600 open branches, while 400 branches are closed due to Corona. Based on the current restructuring, 200 of these 400 branches will be permanently closed. The respective restructuring charge of EUR 62 million covers administrative costs as well as the cost of a voluntary severance offer to the staff affected.
These costs should amortize over two to three years. To reduce headcount, we have also agreed on the second wave of a voluntary offering for staff at the age of at least 55 years. They are being offered an attractive early part-time retirement program, which is explained on the Slide. In the first wave, we successfully contracted with around 800 FTEs last quarter. Now, we target about 1,000 additional employees to accept the offer and booked a restructuring charge of EUR 139 million.
The savings will kick in step by step until the end of 2024 when the respective employees actually retire. Together with the EUR 101 million restructuring charges in Q4 2019, we have now booked EUR 302 million under our current strategy. Taking into account that we planned for overall EUR 850 million in the program last September, I can well imagine to book further restructuring charges in Q4.
Further cost savings on top of the current program are a very important part of our new strategy going forward. In January, our new CEO, Manfred Knof, will take over and review the strategy. I'm confident that we can update you with the key cornerstones of the new strategy in the Q1 of 2021. Now, let me walk you through the financials of Q3.
They are characterized by a strong capital ratio, good customer business, strict cost discipline, and a healthy risk profile. Through the summer season, our business with customers showed a stable performance. Underlying revenues in PSBC and Corporate Clients came in at the same level as Q2. While loan volumes in Corporate Clients normalized after larger credit line drawings in H1, loan volumes in PSBC Germany again increased by EUR 2 billion, driven by mortgages.
On P&L, we achieved a clean pre-provision profit of EUR 503 million, including the burden of EUR 71 million from legal provisions for the FX mortgage portfolio of mBank. This compares well to the EUR 550 million one year ago. With exceptional revenue items of minus EUR 63 million and EUR 272 million Corona-driven reserves for loan losses, this translates into an operating result of EUR 168 million. And please note that we have not yet booked any contribution from TLTRO III.
Expenses in Q3 have been managed EUR 37 million lower than last year without compromising on investment output. All in all, and including the EUR 201 million restructuring charges, we report a net result of minus EUR 69 million in Q3 of 2020. On capital, we further increased our CET1 ratio to 13.5%, which translates into a large buffer to MDA of around 370 basis points.
The capital ratio benefits from EUR 4 billion lower RWAs in the Q3, as precautionary drawings of credit lines from corporates have been reduced. The overall healthy risk profile of Commerzbank is underpinned by the very low NPE ratio of only 0.9%. Slide 4 highlights the key financial figures in a quarter-on-quarter as well as on a year-on-year comparison. On Slide 5 , regarding exceptional revenue items, it is worthwhile mentioning that they include a EUR 36 million valuation loss from our Athene.
Thi s FX sensitivity is economically hedged over the lifetime of the instrument, but leads to temporary valuation effects in P&L, as with the weaker dollar in Q3. Slide 6 shows revenues and results of the divisions. Both customer divisions show almost stable, clean revenues over the summer. As said, revenues in PSBC suffer from additional provisions of EUR 71 million for our FX portfolio in mBank.
They reflect our prudent approach based on the current ruling of courts in Poland. Whether there is more to come on this issue remains to be seen. Revenues in Corporate Clients show quite stable development. With our client-centric business model for corporates, we benefited only very moderately from improved IB trading activities in the equity and fixed income markets in the last quarter. While others in consolidation in Q2 benefited from the strong valuation-driven revenue rebound, Q3 shows a more normalized picture with an operating result of EUR 12 million.
This includes the aforementioned EUR 43 million gain from Commerzbank shares and leads to a nine-month result of minus EUR 121 million. We're uncertain with regards to further valuation swings. We stick to our guidance of around minus EUR 150 million for the full year. Now, let's move on with Slide 7 and some drill down into group P&L.
As said, our customer business is holding up well. With 6% growth, NCI is compensating the 4% decline in clean NII year on year, which experienced additional pressure from lower U.S. dollar rates. On a nine-month basis, both key line items are on the positive side with 9% growth in NCI and a flattish plus 1% in NII. Let me give some additional comments on NII. Back in Q2, I guided for a stable underlying NII in H2 compared to H1, including a quarterly potential contribution of TLTRO of EUR 40 million, offsetting the ongoing drag from rates.
Now, as we most likely book TLTRO contributions in 2021, we need to deduct potential EUR 80 million from this guidance. This leaves us with around EUR 1.3 billion for Q4 to meet the last guidance. From today's perspective, it will be a stretch, as I don't expect a large increase compared to Q3.
One of the key measures to safeguard NII is the pricing of deposits. In 2020, we have again intensified our efforts with corporate customers by further increasing the coverage level of clients paying respective fees from 73% at the end of last year to 95% at the end of Q3. The positive impact on P&L from corporate customers is expected to be around EUR 150 million in 2020, after roughly EUR 100 million in 2019.
For private customers, the positive contribution for 2020 is rather in the lower double-digit area. In the last weeks, we have started to increase the burden sharing by reducing individual thresholds for Corporate Clients and by reducing the general threshold for private customers to EUR 100,000. All in all, the operating result of Q3 came in at EUR 168 million.
Due to the restructuring charges, discontinued operations, minorities, and a tax expense of EUR 12 million, the net result stood at - EUR 69 million. Let's carry on with costs on Slide 8 . The overall picture has not changed too much compared to last quarter. 3.3% cost reduction on a nine-month basis underpins our strict cost management.
Key drivers of roughly EUR 100 million savings on a nine-month basis in administrative expenses are advertising, travel, and lower depreciations. On the personal cost side, the EUR 50 million savings benefit from a net FTE reduction of roughly 750 FTEs. 1,100 FTE reduction of domestic staff stood against 350 additional FTEs, primarily in subsidiaries and nearshoring locations.
Regarding compulsory contributions, it is worthwhile noting that roughly half of the increase of 57 million stems from purely external developments, be it a higher target volume for the Single Resolution Fund, higher deposits overall in the system that need to be covered, or higher banking tax in Poland for mBank. Let me now move on with a few Slides on risk. Slide 9 provides you with the update on guaranteed loans and deferrals.
The drawn amount of KfW loans has increased in the Q3, but remains at an overall modest level. Around two-thirds of the approved corporate loan volume has still not been drawn. On loan deferrals, you can see on the right-hand side that most of the deferrals ended according to schedule within Q3. Most of those deferrals have been for principal only, while interest has been orderly paid.
Going forward, we will closely monitor, especially those loans that have been under moratoria to detect whether there are any delays in payment that could lead to defaults. For the time being, more than 96% of customers have resumed scheduled payments after their moratorium ended, and we have set aside some provisions for potential cases on top of actual defaults. A second trigger for potential future defaults is the planned full reinstatement of the currently suspended insolvency law in Germany as of January 1st, 2021.
Until then, there might still be a certain number of small business customers legally performing and then filing for insolvency in early 2021. Also, for those potential cases, we have set aside provisions as of today. Such provisions are part of our top-level adjustments that are booked on top of actual cases and lead into Slide 10.
Our risk result of minus EUR 272 million is basically split into three buckets. First, our base risk result of minus EUR 91 million. This covers all cases which would have probably happened also without the crisis. Second, minus EUR 111 million from Corona-related single cases. More than three quarters of this number stem from new defaults in Q3, while the remainder is due to additions to existing default cases. Third, we have booked an additional EUR 70 million top-level adjustment to cover expected future requirements.
This leads now to a stock of EUR 170 million TLA as of Q3. I would like to point out that these top-level adjustments are again based on an in-depth portfolio review for corporates. For smaller business customers, we also reviewed the rating structure taken into account, the aforementioned potential impact from deferrals, and from the insolvency law.
The resulting numbers are mainly based on Q2 ECB scenario, which includes a GDP expectation for Germany in 2020 of -7.1%. Let me carry on with Slide 11 and some more specific insights on risk provisioning on segmental level. From EUR 272 million LLPs in Q3, EUR 120 million stem from Corporate Clients, clearly driven by Corona effects of EUR 95 million. Further, EUR 130 million stem from PSBC, with mBank contributing EUR 57 million.
The EUR 170 million TLA after nine months split into EUR 65 million for Corporate Clients, EUR 103 million for PSBC, and EUR two million for others in consolidation. Within PSBC, we have allocated EUR 79 million from the EUR 103 million TLA to small business customers based on the expectation that it will be hard for quite a few of them to survive the crisis.
At group level, it is important to note that we operate with an NPE ratio of 0.9% only, clearly benchmark level in Europe. Please note that we have also added a Slide on the development of the different stages. You can find it in the appendix on Page 23. Net net, we have not yet seen significant movements within and between stage 1 and stage 2. Volumes and expected losses remain in the same ballpark as pre-crisis.
As some inputs into the respective models require a bit of time to crystallize, this is another strong rationale for having additional provisions in the form of a TLA in place. With 1.07 billion LLPs after nine months, we stick to our guidance of EUR 1.3 billion-EUR 1.5 billion for the full year 2020, which translates into 48-55 basis points cost of risk.
However, and against the backdrop of an ongoing uncertainty about the trajectory of economic development, this guidance is subject to the further development of the crisis. Now, let's carry on with the operating segments, and let me start with Private and Small-Business Customers on the next two Slides. Firstly, I would like to share some insights on our net new customer growth. When we set our targets last year, we basically aimed for a run rate in net new customers of more than 50,000 per quarter, leading us to a target of above 12.1 million in Germany by 2023. As a consequence, we calibrated our efforts and resources, including marketing spend, to this growth rate.
With this background, it is quite impressive, at least to me, that we exceed the targeted run rate now for the sixth consecutive quarter, and to me, this is a good indicator for the attractiveness of our offering. Business volumes have also moved up further in the Q3. Eur 2 billion growth in loan volumes are driven by our mortgage business that operates at a high 7% annual growth rate, while Consumer Finance has seen a flattish development.
On the securities side, markets in Q3 have added more than EUR 5 billion to net inflow of almost EUR 2 billion. The latter provides some evidence for an increased willingness of Germans to invest in securities. Clean revenues in Germany, as you can see in the table on Page 13, have developed largely stable compared to last quarter and also last year.
Loan growth at stable margins in mortgage and good fee business compensate for the ongoing burden from the negative rates environment. All in all, and including the burden from additional legal reserves for FX loans in mBank, the Q3 operating result of the segment came in at EUR 83 million. Now, let's move on to Corporate Clients on the next two Slides.
As I already mentioned in the beginning of my presentation, loan volumes and credit line drawings have largely normalized. This is also reflected in the development of overall loan volumes with corporates. The increase in March and the respective decline afterwards have been pronounced, in particular in International Corporates. The latter has also been supported by some active management measures to reduce capital inefficient business.
With much lower additional credit provisions in the Q3, Corporate Clients achieved a positive operating result of EUR 74 million with a stable pre-provision profit. Compared to Q2, Mittelstand has benefited from higher demand for FX hedging and advisory business, while International Corporates faced a lighter quarter after a rather strong Q2. The usually somewhat slower summer season has had also its impact on the institutional business.
Overall, the segment faced lower drawings of high-yielding credit lines on top of the ongoing drag from negative rates, as already mentioned. Please note that with lower credit line drawdowns and some management actions, RWAs in the segment have been reduced over summer by 5% to EUR 95 billion. And that leads me to Slide 16 and to risk-weighted assets. Overall, RWAs came in EUR 4 billion lower at EUR 183 billion.
Let me focus on credit risk, as we have not seen too much change in market and operational risk. As already mentioned, lower drawdowns have led to lower credit RWAs. Please note that besides some management action in International Corporates, this reduction has been driven by our clients and their reduced need for additional liquidity. The volume of credit facilities available to our customers has not been cut, but was rather extended.
Predominantly, rating migration effects on the backdrop of the crisis have led to an increase of EUR 2 billion in credit RWA. Towards the end of the year, we expect further rating migrations and other Corona-related effects to burden RWAs. The relief from the SME factor amounts to EUR 1.6 billion RWAs. For Q4, we expect additional RWAs from the TRIM letters.
For the CET1 ratio, those TRIM effects should be more than offset by the expected positive impact from software intangibles of 25 basis points on CET1. Finally, the remaining RWA reduction of EUR 1.1 billion was mainly driven by the weakened US dollar. With rating migrations in Q4, the impact from software and TRIM and some securitizations, we expect slightly higher RWAs toward the end of the year.
Lower RWAs and slightly lower capital have overall led to an increased CET1 ratio of 13.5%, as you can see on Page 17. With a reduced MDA of 9.8%, mainly due to the successful issuance of AT1, we now operate with a buffer of around 370 basis points. This provides us with plenty of headroom for further impact from the crisis and also potential future restructurings. Midterm, we feel comfortable with a buffer of 200 basis points over MDA.
Now, let me wrap up the quarter with some key messages and conclude with our outlook on 2020. First, the impact of the crisis has developed as expected, though with a higher degree of uncertainty due to the recent Corona numbers and government actions. Our basic view on risk provisioning is unchanged. Second, customer revenues in PSBC and CC held up well over summer. Third, NII ex-TLTRO came in slightly lower, while NCI has been strong.
Fourth, our effective cost management continues, and we have booked restructuring charges for 200 branch closures and additional FTE reductions. Fifth, the CET1 ratio remains strong and provides us with plenty of headroom for further impacts of the crisis and future restructuring. Now, let me conclude with the objectives and expectations for 2020. Compared to last year, we expect largely stable customer revenues in PSBC, while Corporate Clients are more strongly impacted by Corona.
We continue our cost management and targeted cost base, including IT investments, slightly below the level of last year. We expect a risk result in a range of minus EUR 1.3 billion to EUR 1.5 billion, however, subject to the further development of the crisis. We now expect a CET1 ratio of at least 13.0%, and we anticipate a negative net result in light of the expected risk result and restructuring charges. Thank you very much for your attention, and I'm now very happy to take your questions.
Ladies and gentlemen, if you'd like to ask a question, please press 9 star on your telephone keypad. Please press 9 star if you'd like to ask a question. And the first question comes from Mr. Johannes Thormann. Your line is open.
Good morning, everybody. Johannes Thormann, HSBC, three questions, if I may. First of all, on your risk provisions, you just elaborated that the German insolvency law is still suspended, but you say also you booked EUR 111 million for a few new defaults. Can you bridge the gap between that the law is suspended and what's behind this? And secondly, the additional provisions for defaulted exposures, are those old cases or also more Corona-related?
Secondly, on the corporate business, what's your view on the future margin? Several banks have stated now to be more RWA conscious, and they want to exit unprofitable business, as you want to do as well. Is the market getting better, or do you think still, due to the high liquidity, we should not expect a margin tick up there? And last but not least, on your tax guidance, you expected a low single-digit number this year, and with the losses, this seems to be relatively impossible. Could you update as well? Thank you.
Yep. Thank you. So let me start with the LLPs. So let me just reiterate again what the LLPs are this quarter. So it's EUR 270 million, and out of that one, we have EUR 91, which we define as base LLPs. So that is our defaults, etc., which have nothing to do with the Corona crisis itself. And then we have the EUR 181, which we relate to Corona.
And out of this one, we booked EUR 70 as a top-level adjustment, so for the future, and EUR 111 are real cases. And half of it is concerning international clients. So that's probably one of the reasons it's single cases. Plus, you should not forget that there are still some obligations out. So yes, there are some reliefs towards the insolvency law, but not full relief.
So we also do not expect a tsunami of insolvencies in January, but there might be some to follow in January. This is also the reason for the TLA. On corporates, you asked with respect to the margins. I mean, we strongly concentrate on RWA efficiency, and that's also one of the reasons why you have seen a decline in the credit volumes. Some of it is client-driven, but some is also bank management-driven.
Margins have been pretty stable so far, with a very slight increase where I think we need to wait and see whether this is sustainable or whether it will be reduced again in the next quarter. And on tax guidance, we assume a low tax rate, not much for Q4, most likely. I mean, our tax burden comes from the positive results of our subsidiaries. And since Monday, Comdirect is now part of Commerzbank, and so a low tax rate for the year is probably a good guidance.
Okay. Thank you.
And the next question comes from Mr. Stuart Graham. Your line is open.
Hello. Hi. Thank you for taking my questions. I had two, please. First, you gave some figures for the NII benefit in 2020 from charging customers negative rates. Can you say what you expect for 2021 in corporates and also private clients, please? And then the second question was on Slide 23, your new disclosures on stages one to three. I'm trying to reconcile that data with what you showed in the H1 Pillar 3 report. So you show 18 billion of stage 2 exposures at Q2 ex-mBank, whereas the Pillar 3 showed 14.8, so a lower number with mBank. So what's the difference between those figures on Slide 23 and your Pillar 3 report figures, please? Thank you.
So let me start with the first question regarding NII benefit from the deposit fees. So as set, this year, we expect for Corporate Clients around EUR 150 million, and that will be pretty stable for next year, I would assume. And on private clients, we expect now a low double-digit number this year, and that should be increased next year, given that we
have just started our efforts with respect to the private clients this year and have even paused that during the first lockdown. So there, we should probably see more in 2021. Your question on the Stage 1 and Stage 2, that's a pretty detailed question. So I would probably need to get back to you on that after this call because that's a rather complicated question.
That's fine. Just back on the private client end for 2021, is it a meaningful increase we're looking at? I mean, what's the opportunity set in charging private clients in NII?
Can you just repeat the first part of your question? Sorry.
On the private clients, you said it will increase somewhat in 2021, the negative rate. What's the opportunity set? I mean, if we're talking about EUR 20-30 million, can it go to EUR 100 million, or is it just EUR 10 or 20 million more?
Well, I mean, that's tough to say because, I mean, what we now do is the following. I mean, we have introduced the threshold for new clients, new private clients, with EUR 100,000. So every new client coming in, having deposits above EUR 100,000, gets a charge of 0.5%. That is a rather automatic process happening.
The thing with our existing clients is that we should not forget that we really need to find bilateral agreement with each and every client, and there we basically started with the clients with the larger deposits, and we are now in the ballpark of the clients above EUR 1 million deposits, so that will take time, so it's very tough to predict on how much we will already then see in addition to what we will see this year.
O kay. That's great. Thank you for taking my questions. Thank you.
And the next question comes from Ms. Izabel Dobreva.
Good morning. Thank you for the presentation and for taking my questions. I have three questions, and the first one is on net interest income. I wanted to follow up on the decision not to book TLTRO this quarter because the German loan growth trends appear supportive. So I was wondering, could you tell us why you decided not to book it? And also, just to confirm regarding the benefits for next year, should we expect that you will be booking the full benefit?
So in other words, EUR 160 million next year, and it's just a timing difference rather than you not expecting to accrue the benefit at all. Then related to the NII, also, if you could elaborate what happened in the Corporate Center this quarter because if I look at the NII development, that appears to be the weaker point sequentially. So if you could explain why the NII in the Corporate Center dropped about 30% quarter on quarter, that would be helpful. Then my second question was around the cost, and I think you mentioned that there are 200 incremental branch closures related to Coronavirus.
Could you give us a sense of the incremental cost savings related to those 200 extra branch closures? And then the final question is on your international corporate business. If I look at the revenue performance there, it looks to me that you are lagging the peer group a little bit in capital markets activity. So I wanted to get your thoughts on to what extent does that reflect any change in your risk appetite? I mean, you mentioned that you are taking some active measures to reduce the capital inefficient business. So should we expect a further scaling back in the international corporate business from here, please?
Okay. So lots of questions. I start with the first one. NII, yes, we made the decision not to book TLTRO. What's the reason for that? It's just being very cautious and also following advice from auditor, etc., because at the very end, the decision is or the money is really there when you meet the requirements of the ECB in March 2021, so we decided to wait for that, but we are very confident that we will see the benefit of EUR 160 million in 2021, and then we will book the full amount in 2021. It's just a cautious action to say like that.
Second, on NII corporate center, that's basically a risk normalization. We had a very strong Q2 from Treasury, was also a rebound, etc., and just what you just see here in the corporate center and others in consideration is a normalization effect in Q3.
On the third question with respect to the closure of 200 branches, they finally closed, and I mean, we said that you would see an amortization within two to three years. If we say that the cost for it are EUR 63 million, you can probably calculate pretty good what we see as the benefit out of it, something around EUR 40-45 million. And on International Corporates,
I mean, we have seen already the decline in credit volume stem from international corporate business, partly because international large clients have also reached out to capital markets to get capital and liquidity, but also because we intensified our measures towards reducing capital inefficient business, and we will definitely continue this path in the coming months.
Thank you. That's very useful.
And the next question comes from Mr. Jeremy Sigee.
Morning. Thank you. Two questions, please. So first, can you just come back to the topic of capital and just sort of talk us through the moving parts that you're expecting for Q 4 and in 2021? I think you mentioned slight RWA increases in Q4, but if you could just talk us through any specific moving parts that you see, either regulatory changes or anything else that would affect your capital ratios as it's in Q4 and in 2021? And then my second question was just whether you expect any further restructuring charges in Q or whether we're done for the year on that front. Thank you.
Yeah. I mean, on RWA development, what are the expectations? So we definitely will receive the TRIM letters that will have an impact. And as I said in my speech, we are pretty confident that this will be offset by the positive effects which we will have which we will see on the CET1 ratio because of the software intangible ruling, which leads to a benefit of plus 25 basis points in CET1 ratio.
That is one thing which we expect. The other thing which we expect is rating migrations due to the Corona crisis. There will be some in the Q4, but we are also pretty convinced that you will see more to come in 2021, and we are preparing for that. And there are also still TRIM letters out for large clients and banks, so we definitely also will see something there again. That's basically it, I would say, on the RWA changes.
On the restructuring, I mean, we still need to come with our strategy update, our new strategy, which will definitely only happen when the new CEO is on board, meaning in the Q1 next year. And then you can very likely expect further restructuring costs to be booked. But you should not forget that we have an outstanding or we have a communicated strategy back from September 2019,
and there we announced restructuring costs of EUR 850 million approximately, and we now have booked EUR 300 million, and we really need to make progress on the cost reduction. So I would not exclude that we will book further restructuring costs also in the Q4, as I already said in the speech.
Okay. Thank you. And sorry, just on the RWA movements, so you're saying that the Q4, the TRIM letters, and the software intangibles roughly offset each other, I think you said. So if I see that correct, and could you quantify any of the effects that you expect in 2021 in terms of further TRIM and rating migrations? Can you put any numbers around that for us or just order of magnitude?
Well, on TRIM, we do not expect a very high impact. So that will be really a rather low number, to be very honest. And on the rating migrations, I mean, that is something where it clearly is linked to the development of the LLPs, and that is the thing where we all need definitely a crystal ball at the moment. So it's very much dependent on the development of the economy, of the Corona situation, etc.
In the moment, I would say we expect more rating migrations to come, but absolutely manageable. Again, very much dependent on how overall the situation is developing, but I can tell you that we are prepared also for a stress scenario on that.
Okay. Thank you.
And the next question comes from Nicholas Herman.
Thank you, Liz. Thank you for taking my questions. Good morning. I have three questions, please. One on asset quality, one on NII, and one on capital. So on the first question on asset quality, look, I understand that at this point, the outlook is fairly uncertain, but is there anything you can say on how you could potentially see an impact of the second lockdown or COVID restrictions? And as part of that, particularly consensus model is already quite high impairments for 2021, albeit below 2020.
What sort of scenario would we need to see in 2021 for the risk result to be anywhere close to 2020 level? That's question number one. Question number two on NII, if I remember correctly, I think the drag on your model deposits right now is a high double-digit number. Is that correct? And am I also correct in saying that that should fall to a mid-double-digit number next year.
And then the final question on restructuring. Oh, sorry, on capital. You clearly have a 9.8% MDA, and you intend to maintain a buffer of at least 200 basis points through the cycle. I mean, could you envisage a scenario? Would you consider going within this buffer temporarily, such as for restructuring purposes? Thank you.
Yeah. The impact on the second lockdown, I mean, we are closely monitoring the situation, and this lockdown is clearly different to the first lockdown because business up, the borders are open, and we see export and import still continuing. But I mean, it clearly has an impact on specifically SMEs, but also there, we need to see how the government actions which they have launched, how this will help the SMEs.
It's really tough to say. In the moment, we feel comfortable with the 1.3-1.5, but it's a view for the complete year 2020, but it's a long quarter, and we definitely will wait and see how January is developing after the full reintroduction of the insolvency law, and then we should know more.
And therefore, it's also very hard to predict what's happening in 2021 and how the LLP will look like in 2021 because it's also very much dependent on how things are developing in the Q4 and how the overall situation is developing and what the numbers are doing. So multiple factors which make it very, very difficult to predict and give any guidance on 2021 LLPs, at least at this point in time.
On NII, I mean, the drag on NII is, yeah, I would still expect a middle double-digit drag on NII. That's at least what we can assume from now. I mean, it also depends a little bit on what's happening on the overall rate situation and what the ECB will do in the next couple of weeks and months. So today, I would predict a middle double-digit number.
And on the last one was on capital, I definitely do not want to get into any buffers. I can absolutely ensure you that. And with a capital ratio of 13.5% today, I feel that we have lots of headroom for, on the one side, restructuring costs and on the other side, potential rating migrations stemming from the Corona crisis. So I feel pretty comfortable with our today's capital ratio.
That's very helpful. Can I just follow up on the first question? I think I completely understand that it's very difficult to make any comments on 2021 impairments, but is it also fair to say that it would have to be a pretty drastic deterioration in economic activity for the risk results to get anywhere close to 2020?
Again, I mean, there are so many measures still out there. I n Germany, we still have this concept of the Kurzarbeit and stuff like that. We really don't know yet how things will develop. So I really do not want to give any guidance on 2021 in the moment.
Fair enough. Okay. Thank you anyway.
And the next question comes from Mr. Jochen Schmitt. T
Thank you. Good morning. I have one question on new loan margins in nine months 2020. Could you please comment on new loan margins in Germany in the private and small business client segment? T hat's my question.
Simple answer is pretty stable.
Oh, sorry. Just one follow-up. So stable also in light of competition?
Yes. Yeah. That I can confirm.
Thank you.
And the next question comes from Mr. Tobias Lukesch. The line is open.
Yes. Thank you. Two questions for me as well, please. Firstly, on asset quality again and the rating migration issue you already touched on, could you please give us potentially a number, kind of percentage term? What kind of or how big a part of your portfolio have you already assessed? So is that one-third, is it half? Just to get an idea how that migration could further look like.
And secondly, could you distinguish between your international corporate portfolio and your German book or your DACH book? Is there a significant difference in terms of either PDs, LGDs that you see and you apply? And secondly, on the capital side, you still have a slight shortfall on the AT1. Is there anything to expect to fill that gap? Potentially not since you're very comfortable, but confirmation would be good.
And potentially, again, thirdly, on the restructuring, you just mentioned that you would, if I understood you correctly, that you would further book some restructuring costs in Q4 to make further progress. Could you please A, quantify that? And lastly, maybe give a bit more detail about the new strategy plan. When exactly do you expect that to be out? Of course, you will be in discussions with the new CEO first, starting on 1st of January, but is that rather a Q4 thing, a Q1 thing, or some bit more light on that would be helpful. Thank you.
So let me start with the asset quality rating migrations. I mean, what we have seen so far is rating migrations in the low number. So this quarter, we have seen EUR 2 billion. I think so far, we have seen something around EUR 4 billion of rating migrations.
And at least today, I would expect this trend to be continued until the end of the year. We do always do a full review of our portfolio. So we are not looking at parts of it in Corporate Clients, but we always do a full review of the portfolio, and that is then what you basically see reflected then also in either rating migrations or LLPs booked. That's for the first question.
The second question, the question was, are there any key differences between the international corporate portfolio and the domestic corporate portfolio here in Germany? And I can say there are not a lot of differences. I mean, clearly, we face very different situations in the different countries, etc. But all in all, I would say no big differences. The shortfall on AT1 was your third question. It's a very tiny one, luckily.
I can confirm that we have finalized our funding for this year, so closing the shortfall will be clearly something on the agenda for 2021. With respect to the restructuring costs, I mean, I said that we want to book further restructuring costs if possible. We are currently testing it, discussing it also with Works Council. I mean, we have plans. There are a number of,
I would say, no-regret moves in there, which we should implement definitely regardless of the strategy update, and the strategy update will come in Q1, I'm pretty confident, but you have to keep in mind that the new CEO starts 1st of January, and he is still on the payroll of Deutsche Bank until the end of the year, so therefore, an exchange can only happen really after January 1st.
and the last questions come from Mr. Riccardo Rovere .
Good morning to everybody. Actually, my questions have already been asked, but thanks for that.
Okay. Thank you. I think we are finished. Thank you very much for your questions, and talk to you next quarter, I would say.