Okay. Good afternoon, everyone. My name is Dirk Lievens. I co-chair our global financial institutions business for Goldman Sachs. It is my pleasure to welcome to the stage this afternoon, Bettina Orlopp, CEO of Commerzbank, and Christoph Wortig, Head of IR at Commerzbank. Thank you for being here with us and for making time for this discussion. It's been a busy three days. As this discussion is also being webcasted, we are also welcoming the people who are online. Just a few housekeeping points before we open. As a reminder, there should be no discussion of confidential or non-public information in particular, due to the ongoing takeover offer by UniCredit. Discussion about the offer should be limited to the formal public statements and documents published by the parties.
Secondly, although Goldman Sachs Investment Banking is hosting this meeting, we will not be sharing any confidential information or views of Goldman Sachs. Please respect these rules. With that, I hand it over to Bettina and Christoph. Thank you.
Thank you very much, Dirk. Welcome everyone also from my side, Christoph. I'm moderating the session today with Bettina. Very much looking forward to this, Bettina. We thought it's a good idea to kick it off a little bit around our strategy. A little bit about touching on the most relevant macro points I believe you're all interested in, before we then move over to the topic of the current takeover offer by UniCredit. Throughout all the time, we're happy to take questions. We have a mic over there, and Alex will be happy to move it around so that everybody also in the webcast can listen to it. With that, Bettina, I'd like to start to kick it off and put it very easily for beginners.
Our strategy, Momentum 2030, comes with a 17% return on tangible in 2028, and it comes with 21% in 2030. Would you like to summarize a little bit around this quite high numbers for Commerzbank in the German market?
Thank you both for the introduction. Thank you for being here. Interesting times indeed. Let me start with this strategy, which we have presented the update in May 8. Reason was a very successful year, 2025, you are all aware of, which is the continuation of the improvement of profitability at Commerzbank. We had quite a development over the past years, based on a very robust business model and with the experience which we have seen, specifically last year, we decided that an upgrading of our numbers is important. We base that on the one side, very strong growth which we see, and based on the strength of our business model and growth comes on the NII side, but also on the NCI side, coupled with a very strong trajectory when it comes to transformation, and the improvement of our cost base.
You can also see that when you look at our cost-income ratio, which is now at 56%, it is projected for this year for 53%. It will come down until 2028 to 48%, and then 43% for 2030. That is due to the fact that we see a lot of positive momentum. Not only our strategy is called Momentum, but we see a lot of momentum. One of the key drivers is, on the efficiency side, clearly AI, which is probably the hot topic also of this conference, because we have seen in the past year that the impact is higher than we originally thought back last year. It comes with improved customer experience and therefore also increased revenues, but it comes specifically also with increased efficiency, which we will see and will organize for 2028, but more importantly for 2030.
Because our cost base will shrink in absolute terms when you exclude mBank, which is already today at a very attractive cost-income ratio and shows a lot of growth. We see just that workplace efficiency, but also the improvement of processes, the acceleration of processes, with AI is very powerful. It's really the combination of growth and transformation, and that does the trick. You also see there's no hockey stick in our plans. Very important. It's a continuous improvement as we speak. For this year, 12%, next year, 14%, the year after, the 17%, 19%, 21%. It's indeed pretty good numbers for the German market, but they come with very limited execution risk from our perspective.
Yeah. Thank you, Bettina. Maybe talking about execution risk and about the different components of the plan. NII obviously stands out as a contributor to the increased revenue and profitability going forward. Would you like to shed some more light on what you see on the deposit side when it comes to pass-through rates with customers, competition with Chase entering the stage, but also with our famous replicating portfolio?
Yeah. You will have seen that also in the May presentation that NII is driven on the one side by loan growth, which we have shown also in the past years, also this quarter, very much driven also by our international network, and by a very solid deposit development. We do not assume a lot of deposit growth also for the future. That's important to state. We just assume that it will increase like what we see, which is basically driven by inflation. It's a 2%-3%, very modest growth of the deposits. On the other side, we have been super conservative by still assuming that deposit beta, which is already at a very high level in Germany, with a 41%, that this will go further up to 45%. That is very much driven by the competition we see.
Chase, at the day of our AGM, wonder why, started its deposit program, its call money account. What we currently see, given it's not a current account, it's just a call money account thing, that they attract exactly the same crowd which we see already the last one and a half years flying around between the different players. That includes comdirect, that includes ING, N26, BBVA since last year, and some other specifically direct banks. What you see is basically that the same number of interest rate hoppers are just jumping on the best offer. The best offer in the moment is clearly Chase 4%. We are also out there currently with an attractive offer of 5%. It just has a little side condition that the German team needs to win the World Soccer Championship. I have to say inflow is not great.
You can imagine that we hedged it and hedge costs were now really high. That is the bad thing on it. Joking aside, we see it. It got attraction. They have done a slow start. They will definitely increase it. I think for them in the moment, what they're doing is just marketing spend to become a little bit more popular. We observe it. We do not have the feeling that this is also, given it's only a call money account, that this is really a threat for us in the moment because they're just picking up the same crowd we have seen all the time. We carefully analyze the situation because we are aware of the fact that there could be a current account coming next and probably some more marketing spend. What we do is what we always have done with competition in Germany.
We try to have a better offer. We also invest a lot in our mobile app to get the onboarding even quicker to increase also the value proposition. One has to say that the competition, we really always need to differentiate between Commerzbank brand and comdirect brand. Also the Chase offer specifically goes, if at all, against the comdirect brand and less against Commerzbank brand, because Commerzbank is very much driven by full-fledged offering, including a branch network, which still a lot of Germans love.
Have you talked about the replicating portfolio?
Sorry. Big important step. I assume this is a very informed crowd. You have seen the replicating portfolio. It is basically adding value every year. We have not assumed, which will probably not the case, that the replicating portfolio will further increase. There is the upside part because we kept it stable. We have assumed the forward rates back end of April. We all know that this is very much something which has a decent volatility in there. You also see that these benefits come pretty surely because we have an average yield currently at the replicating portfolio of 1.3% for this year, which means every year, and as long as we do not have a changing of the forward rates to a significant extent, you will see additional benefits every year, as long as we keep at least the deposits stable.
Even then, we have a lot of buffer when it comes to our sticky deposits, so we haven't spent and not invested everything in the replicating portfolio. It's a very safe bet on this revenue stream.
Yeah. Thank you, Bettina. Then maybe switching to the other side of the balance sheet, a little bit about loans and loan growth. I think we've seen quite significant loan growth in our Corporate Clients division. What do you expect going forward? Is that trajectory going to continue? Where does the loan prospectively come from, the growth?
Yeah. We have assumed further loan growth, that has not changed between Momentum and Momentum 2030. We have seen more loan growth last year than originally expected, because we thought it would be an annual growth rate of 8%. Last year it has been 10%, so even more. It will probably not go on with this double-digit number, but it will be still a very high number. I think what has been a surprise was what were the sources for loan growth? Originally, we really thought that there would be more in Germany, given that we have the stimulus package, and we also had originally higher assumptions on the GDP growth for Germany.
What we currently see is that, also due to the geopolitical topics we see, including the Middle East conflict, that there are investments, but there are unfortunately not so much investment in Germany. Our German clients localize even more, and they do investments outside of Germany. The good thing is we have an international network, which works very nicely. Therefore, we do the loan growth, and we show the loan growth outside of Germany except for a little bit. Public sector is strong, which has to do with the stimulus package. We have some things that link to institutions, business, and also renewable energy.
Super. You touched on it in the very beginning of the session talking about AI. Would you like to share some numbers from Commerzbank of what we expect as contribution from AI in terms of efficiency levels?
We said we figured, that is our current belief, I have to say, because what we learn is every day something new. Our current belief at the moment is that you will have a value contribution of AI from 2030 onwards of around EUR 500 million. Vast majority will be linked to cost reduction. There's also some cost avoidance. There's also revenue increase or also avoidance of negative revenues because you can avoid fraud via AI. We also use AI already today when it comes to pricing. I have to say, it's our current assumption because we really see how powerful it is. I just had a meeting this week with our legal team, which have just introduced Legora, which is a Swedish legal tech tool.
One of our level 2 managers said that she had to write a brand new policy, which we didn't have so far. You could say, policy? We are a regulated bank. She said for the basic draft, where she normally would need a week to do so, she basically had this basic draft within 30 seconds. She said now she's working on that. That's basically also the examples which we have, we are collecting, and we need to see what does this do to our business model. That are the current numbers which we have.
All right. Now let's switch gears a little bit and talk about the big topic, which is the offer of UniCredit. Maybe it's best to start with your view on the question: Is there still a path, a potential path, for a friendly deal?
We always have said that we would be open for discussions, and that has never changed. We said that from the beginning on, because we see as management team our task to produce value for our stakeholders, and that starts with the investors, with the shareholders of the bank. I think we have proven to a large extent that we were able to produce a lot of value in the past 20 months for our shareholders, but also for our customers and for our staff. That is the driving force of what we do. We also said that our job is to provide alternatives. We now have provided, again, the alternative. This is the value you can get with our standalone strategy, which is with the set of targets we have just talked about. Then there might be different paths.
There is a path of a friendly deal, and we are fully aware of it, and we always said that we would also be willing to sit down and discuss such a solution. We just set two prerequisites on that. One is we want to have a decent premium for our shareholders because we see that the current offer does not include any premium. It rather comes as a discount as we speak. We said there must be a significant premium in it because our shareholders give up control, they give up value creation potential. That is one of the prerequisites, and the other one is that we believe that there's a lot of value in our business model in how we do things because we are not a risk bank which needs to be restructured.
We are a bank which will show significant growth over the past years, and you can make use of it. If you're smart, you can use that very nicely also in a combined bank. We said we want to make sure that this is reflected in business model and governance. One should not forget that if there would be a combination, the largest market would be Germany. You need to reflect to a certain extent, also for the stakeholders in Germany, that this is reflected. These are the preconditions. We said that publicly. I said it during the AGM. To be very clear also, I did an active reach out to UniCredit to make sure that they also know that we are prepared to do so. There are these two prerequisites. We are where we are.
There is, at the moment, no friendly deal, but there's always a side that we say we want to provide you as our investors with the alternatives. There is a third alternative clearly out there where you could say that there's an acceptance of the offer, but it takes place in a hostile approach as it appears at the moment, which I think is value destructive. It's value destructive for all stakeholders on both sides, actually. It's not only on Commerzbank side, it's also on UniCredit side, because we will suffer, Commerzbank will suffer, HVB will suffer. Our competitors out there publicly state that they think it's great if that would happen because they can steal clients from us, they can steal key talent from us, and that is what happens if we are not doing it in a proper and an organized version.
We think that currently in this hostile approach, we see no reason why our investors should accept the offer because there is no premium. It comes with a discount. It would be if you really want to have UniCredit shares, it would be much smarter at this point in time, sell our shares and buy UniCredit, which I think would not be very smart because we have a very good stand-alone strategy out there, super attractive capital return. One should not forget that with the plan we have presented, as we speak, we will return approximately 50% of our market cap in the next four years to our shareholders. It's super attractive. You have to compare that.
Absolutely. Is there any news on the German government and what the German government is currently saying in the situation we're in?
Well, they have been very clear. First of all, they are also investors, so shareholders. Clearly, they have an interest that there is a stability for German economy. With a bank where 30% of German trade runs over its books, you can imagine, and who is the financer of the German Mittelstand, there is an interest also from public authorities on how the whole governance look like. Also one should not forget, which hopefully it will never happen, but we also know that always the government of an institution where the largest market is in is always the one everybody will turn to first. If such an institution would be in any point of time in trouble, they would always turn to the government, which would lose most for its economy. They have an interest that the governance works.
When you listen carefully to them, they always said that they don't like the approach, and they will stick to their shares until the approach is not changing.
All right. Very clear. Now let's turn and let's talk about the tender offer. You released a press release yesterday. We released a press release yesterday, that's right, questioning the progress of the offer. What are your concerns, actually?
Well, it's exactly what I just said. Our real task, and I see that personally as my task, is that you get the best out of what can be offered. I want to create the maximum value for our stakeholder, and therefore, I want to have a fair process. I always said that the investors will finally decide what happens. If they like option A better than option B, one has to accept that. I think we should be all aware of the fact that there is a transparent process, what's really going on.
What triggered us actually already last week when we saw it for the first time, is that there is a tendering into the offer where it is economically not sensible or rational to do it, because why should you, at this point in time, tender into an offer which is a discount to the current share price? We don't find any reason why you should do that. This is why we dug a little bit deeper into it. We did that already last week and saw last week it was just one player tendering. It was Nomura. This week there are more, but we see that at least for many, what we have seen already, and the analysis are still ongoing, that these are banks who are, in most cases, even connected with UniCredit via the tier structures.
That is something where we have to say that, no, it's not that our institutional investors, they do not like this offer, and that was the impression created because no institutional investor, and when I listened to you when I was at another conference in Paris on Tuesday, and I spoke to many of you and your colleagues, and they all said, and you all said to me, you would not take this offer because it is a discount. No institutional investor, and the retail investors are at a 0.05%, so negligible. You can't say that this offer is in the moment attractive, and that is the one key message we want to bring across. This offer is not attractive.
The second part is that there is this attempt to increase a little bit the tender dynamic, if I may say so, by suggesting that basically in the majority, a control majority, a de facto control is already achieved also by including the derivative structure into the thing. What we see is, yes, there are 3%, which are also linked to physical shares, so they will allow you also to have voting rights. The now 13%, we were wondering, how can you build up such an enormous amount without seeing it in our share price? You would assume normally, because at a certain point in time, UniCredit could ask the counterpart to deliver shares.
You would assume that the counterpart somewhere has already the shares, but that is not the case, because we only find 5% approximately maximum, with banks holding it for such purposes. That compares to the 16%, 13%, and 3%, which we have here. Which also means that if this should be delivered at a certain point in time, there must be a lot of acquisition via the market to ensure that, which also means our share price will go up. What we just wanted to achieve yesterday is that we make that very transparent so that people know that everybody is considering carefully the next step. We also asked BaFin to look into it because we at least have the feeling that this is not what was originally intended with a public tender offer, that you have so much intransparency in the whole process.
I can say so because it's my academic background, that I have spent a lot of time in finding out how you do that with minority shareholders, and it was definitely not the intention to create a situation which you currently have.
Yeah, super clear. At this point in time, is there any questions from the audience we should take? Yeah, happy to hear them.
It's Patrick from [small commercial store]. Just to pick up on that last point you made. In terms of the best price rule and the contract that UniCredit may or may not have with the banks tendering the stakes, how would that work if they buy them at a premium? Who takes the loss when they tender?
That is exactly the question we are asking ourselves as well. That is something we also want to know who's paying for it, because someone indeed needs to pay for the difference. It's not on us who can figure that out, but we exactly put this question in the direction of BaFin.
Thank you. Are there any other questions from the audience? I would move on with one more aspect in that sphere, that is share lending. I think we figured out that there is quite an amount of the tendered shares, obviously, from our lended shares, or borrowed shares, and I wonder what your take is on this one.
Well, this is a little bit a similar take on what I said on the derivative structure. If it's borrowed, and someone is tendering it, in my little world, I find it anyhow totally strange that this is possible, but that is a different thing, that still the one who now tendered and has borrowed somewhere still needs to get the shares from the market. Again, that will also put additional pressure on the whole price levels because, let me also say one word, that even if UniCredit ends up with something between 40%-50%, and they would have a majority in the AGM, this is what I said, which is the third scenario. This is a very messy scenario for both sides.
Not to say also that UniCredit would have a real high negative capital impact. They also could still not do structural measures, because for that, they need a 75% majority. That's very hard to get if you have a government and probably also some other shareholders against you. It is really this path of misery we would then see, because we wouldn't really be able to move neither party. Therefore, we can live very nicely, as we have proven also the last 20 months with a very large shareholder, but we need to make sure that our team, which has presented really good results and which is working really hard on delivering the future, that they feel the stability, and also our clients.
We are in the lucky situation that our clients are super loyal to us, but you never know how this change if we come in such a limbo situation.
Absolutely. Maybe for all Commerzbank shareholders that do lend their shares, you should maybe reconsider the policies behind it if you're not wanting them to be tendered into the offer. That's just the Investor Relations view on this one. Other than that, is there further questions from the audience? Please go ahead.
One question. Is this 40%, 50% limbo a base case scenario for you? First question, and second question, is such scenario a drag for credit investors? Did you have exchange with rating agencies? What they think about this kind of situation?
No, it's not our base scenario. Our base scenario is, and I think UniCredit has a similar base scenario, if I follow up on all what they have said when they launched the lowball offer, is that they will rather end up above 30%, they will not enact control, and we are a little bit in this situation before 15th of March. It's very clear that nobody wants to have this limbo situation, and then it's much better to arrange again as a very high-performing bank with a large shareholder at their side. That's the base scenario for us. The credit investors, we have no indication. We have very frequent interactions, and we also see when we do funding in the moment, we are very successful. We have lots of demand. We come in always with lower rates than expected.
Nothing, absolutely nothing what we see currently.
I could open up for one or two additional questions if there is demand. Otherwise, Bettina, you want to do some closing words before we finish the session?
Yeah. Thank you very much for your attention. I'm pretty sure that you are observing the situation quite intensively. I can only ask you to first trust in us that we will do whatever we think is best for the bank, for its stakeholders. I can tell you, I'm not always popular because I'm saying that also internally, because I want that also our staff knows that if we believe that a friendly, agreed deal is the best for the company, we would always go for that as a management team, because we really want to do what is best for the bank. Keeping that in mind, however, I would say you should carefully compare the different options on the table, and I think it's also very clear that the worst of all options is a hostile takeover because it will destroy a lot of value.
Thank you very much.
Thank you.