Okay, we're going to start so we can be on time. Hello everyone. I'm Flora Bocahut. I Head European Banks Research here at Barclays. I'm very happy to have with me today Bettina Orlopp, who's CEO of Commerzbank. Thank you for being with us. We are going to go through a few questions. There will be time then for the audience here to ask a few questions, and then we will also put you to work. We have also three questions we're asking in every fireside session, so bear with us. I think let's start with the obvious big topic of the moment, the M&A situation between Commerzbank and UniCredit. UniCredit currently owns just below 30% in Commerzbank. They will be closer to 50% ownership once the offer settles, which is later this year or early next year. Once UniCredit effectively owns a majority stake, what do you expect the next steps will be?
Yeah, I think best is to think about different phases we are in. At the moment, we would say we are in phase zero, so we have the tender offer completed. It's clear how much shares UniCredit will have whenever they get the approvals from the different authorities, and that will be slightly below 49%. What we currently do is really prepare for this next step. So whenever there is a technical consolidation due, that we are prepared for that, and that can be the case either end of this year or beginning of next year, and we need to prepare that to make sure that this is working. Then there's clearly a phase where you have a de facto control of UniCredit, which means they will have the simple majority in the AGM, and they can clearly influence the supervisory board composition and other things.
However, it's also very important to note that Commerzbank in this phase I is still an independent, publicly listed company with a large majority shareholder, but also a minority shareholder, and supervisory board and management board are obliged by law, by company law, to act in the interest of the institution. We have to file a dependency report and all the stuff. So we really need to make sure that we only do things which are in the interest of the institution. We should anyhow always do that, and if there is anything we do, which is to the disadvantage of minority shareholders, we would have to ask for a disadvantage compensation.
In this phase still, it's not only about the implementation of our standalone strategy, but we can also clearly think about things we can do together and how we can make our targets laid out for 2028 and 2030 even better by cooperating, finding joint ways of increasing the efficiency gains, increasing revenues and stuff like that. That should be the objective of phase I to deliver on the targets which we have promised, but probably also lay out even more aggressive targets based on the new situation. Then there is a phase II, which is however unclear when it starts, where the real consolidation would happen, when you would have an integration of HVB and Commerzbank, and you could create all the domestic synergies one could expect out of such a transaction.
That is however phase II, and I think we should be all very much focused on this phase I, because at the very end, our organization, our institution needs to know what they're heading for, what's the North Star, where do we want to go? What do we want to have? Our clients want to know. They like, apparently, our business model, and they want to know how this is developing, and staff also wants to know it, because our competitors are sneaking around our clients and talents, and we want to make sure that they are not successful in that. For that, it's always important to have clear messaging.
Well, Germany has been a very competitive market for a while, so, indeed I can only imagine. One question also I wanted to ask you. There was obviously this meeting taking place yesterday between UniCredit CEO and the German finance minister. Is there any comment you want to make around this meeting?
It's very clear that we are aligned with the government because it's an important shareholder as well, and also they have two candidates in the supervisory board, which are sent in from the government, and they have some special rights still around, and they take that. I think it's important that there's also discussions between the two large shareholders, specifically when it comes to a potential phase II, because it's also very clear to really do structural measures, meaning a merger, a domination agreement, a squeeze-out, or what is currently in the discussion where you have a sale of HVB to Commerzbank. All this only runs smoothly when you also have an agreement with the second-largest shareholder, the Bund. So I think it was an important step that they sit down, and I think we have to take it from there.
There is obviously many scenarios out there. It is still early days at the end of the day. If I were to ask you, and you touched on that already in your answers, but 12 months from now, what would you say is success in this situation?
Well, success is if we have a collaborative, friendly approach where we provide a lot of stability necessary for clients and for staff, because that is the best way to maximize also the value for our shareholders. Success is if we stick to the targets which we have set also for 2027, and that we most likely will have even new targets out there for 2028 and 2030. The objective and expectation clearly is that it is not worse to what we have seen so far. Short-term for us, it is really important that we will deliver on 2026, and it looks pretty good as you might have seen from the half-year results, and there is no reason to adjust that. We feel pretty comfortable on the delivery for 2026.
It is also very important that we do not stop any change, any update, any upgrade of the business model, because there is so much going on, specifically when it comes to AI, that we cannot afford an institution which is frozen for a certain period of time, because this is really changes and adoptions on a daily business. It is really important that we keep doing what we are doing, also providing new products, new service offerings every month to our clients, and that we should not stop that. I think that is the most important part, and that our competitors have not been successful in getting any core clients or staff would be the other one.
Actually, let us dig now a little bit more into first the macro environment and then the micro, if I may say on Commerzbank specifically. Let's start with the German outlook. We are starting to see positive signs, the factory orders, on the confidence index.
Yeah.
On your side, are you seeing early signs of a pickup also on the loan growth, or what's your take from the ground on the German economy?
Yeah. First of all, it's correct. Signals are better and the IFO is an important indicator, but also, as you said, the production and the order data, which is developing nicely and heading in the right direction. Also we now have an adjustment by nearly all economic research departments. We are back to something around 1% GDP growth, which is not great as we know, but it's a starting point and it's better than what we had before the summer break where we were, I think, down to 0.5%. That despite all the things ongoing with the geopolitical conflicts we are currently seeing. So that's good, and we, however, also still see that the default rates are still very high and we haven't the feeling that we have seen the peak, so we stay cautious on that.
When it comes to the investment behavior, it's still that in Germany, people are cautious, which has probably also a lot to do with the reforms and are the reforms now implemented? Are they not implemented? Are they progressing in the right way? Will there be more to come? Those are the things where German corporates wait for and they are, as you know, a conservative group, so they really need to be sure that things are implemented before they really move. So we haven't seen really something yet, and you see it also in our loan growth numbers of the first half year, that the majority stems from our international growth, and less from domestic. It will take a while until you see it.
But I think for us, specifically important is how the industries are developing and we have no reason to believe that we cannot keep our risk guidance, so we feel very comfortable with the risk result guidance, for example.
Okay. That's very clear. Okay, so let's move maybe now to the NII, which is another big topic of discussion with
Yeah
investors. So for this year, 2026, you target an NII of roughly EUR 8.6 billion.
Yeah.
In H1 so far, you've achieved EUR 4.1 billion.
Yeah.
You are implicitly pointing toward an acceleration of
Yeah
your NII in H2. Can you maybe remind us why you are confident this is going to happen?
Yeah. Two main things. One is clearly that we always assumed also that there would be one other interest rate cut, and that has happened last week. That is one which supports H2. The other part is clearly the replication portfolio because we said that the majority of the positive extra contribution, we rather expect a little bit back-end loaded and not front-end loaded. That is the second part which we will see. We feel very comfortable with the guidance of the 8.6. We all know that forward rates have also developed very much nicely in our direction in the latest weeks. That will less have an impact on 2026. That has more a positive impact, at least from our current perspective for the years to come.
As we talk about dNII, there is a question we receive a lot also from investors, and you touched earlier on how competitive a market Germany can be.
Yeah.
How is the deposit pricing ongoing? Are you seeing increased competition?
Well, the competition has been always very high, and it has not weakened with the entrance now of Chase. Chase is out there with a big campaign, and it is a very attractive offering from the consumer perspective. What we, however, currently see is it is always the same group of consumers, clients, that are targeted by these offering, very digital native. It is really a play mostly between the mobile banks with the mobile and online offering only, while the clients of the ones with the branch network a little bit more sticky. We call them interest rate surfers or interest rate hoppers because what they basically do is, and the interesting part is that they are now doing it also for 10, 15 basis points difference in the offer. They really move from bank A to bank B and to bank C, whoever has a good offer.
The caravan, the troop is moving in this direction. Retention is not really high on this group. One really need to think about what type of offer you have, what do you want to achieve with it. Ideally, and that is our perspective, we do not want to have only the ones who come there, give us the money for three months, and then move on to the next one. Plus, it is also a lot of work because normally they close down your account with you, then you have to have the cost of the closure of the account and the reopening of the account and all the stuff attached to it. We rather target clients who then really want to stick with us as new clients and take that as an attractive entry point.
That is something we are, as everybody else are, a little bit experimenting on. Competition is high, has never been really easy. It is just the players who are changing, who are the attackers.
If we summarize on the NII, because we have had quite a move on the rate curve over the last few weeks now, especially the last one or two weeks.
Yeah.
Would it be fair to say, even considering this level of competition, which maybe is captured already
Yeah
with deposit beta guidance you have, the risk is more to the upside maybe versus your guidance, considering the rate changes we have seen so far?
Definitely for the years 2027, the following, because you know that the replication portfolio has quite an important impact for us. And such a move of the forward rates, which we currently have seen, is definitely impacting in a positive way revenues stemming from the replication portfolio. However, we also always have to think about potential counter effects of the interest rate cuts, be it increased deposit beta, be it some less demand and things like that. But overall, it is definitely a plus for the years to come and for this year. We just feel comfortable with our increased guidance. And one should not forget we increased the guidance once, so we feel pretty comfortable with that one now.
Moving slightly away from the P&L here temporarily, I wanted to ask you a question also on the payout policy. Because you have this target of 100% payout in your existing plan. And then obviously now UniCredit is a bigger and bigger shareholder with possibly different plans here. Is there, from your standpoint, a risk on the payout policy?
Well, I think we have seen in the past years that we really are very solid on our capital return policy. I think in total since we started the pickup of dividend payments and share buybacks, and we all know that we haven't been really reliable in the decade before. We now have returned something around EUR 6 billion so far to our shareholders in the last four years with a very sharp increase. For this year, we planned EUR 3.2 billion, which is a EUR 3.4 billion net result, which we expect. And then you take away the AT1 payments, and that leaves you with a 3.2. And we have a clear commitment that as long as we are above our targeted CET1 ratio of 13.5%, we will return 100%.
That has not changed, and we have apparently started with it, because we have a share buyback running as we speak of up to EUR 1.2 billion. So in total, we believe that the EUR 3.2 billion capital return is the right one. We also said that we want to have a good, and that's also what we heard as feedback from investors, it must be a good balance between dividend and share buybacks. So you can assume that there will be a 50% share of dividend. And then it's very clear, we as supervisory board and management team, we will propose that to the AGM, and that's the AGM who will decide on that one in May. I see no reason why AGM should vote against it as long as we deliver according to plan, and as long as we have this surplus capital.
Because if you look at the capital return policy and what UniCredit has done in the past, it is very similar. They also have a little bit lower target CET1 ratio despite similar MDA, which clearly has to do that their profitability is also still higher. Besides that, I think we have the very similar approach, so I do not see any reason why that should change. It is always backward-looking. It is for the year 2026. It seems to be that we are in full delivery modus, so you will see the results, you will see the CET1 ratio, so no reason to change that.
Okay.
For the years to come, you know what our targets are there for 2027 and 2028, and up to 2030, and that is in constantly increase of the net profit. So I would also assume that there will be a constant increase of the capital return, and that is also embedded in our share price, as you see.
Yeah. You mentioned profitability. This is actually the next question I wanted to ask you. In terms of ROE, you target significant improvement over the next few years. You target an ROE of around 12% this year, but then 17% in 2028, 21% in 2030. On our numbers, in fact, you are one of the best EPS growth among European banks in the next three years. So can you maybe elaborate here on the main drivers that you expect will help you achieve this RoTE development so quickly, between the revenue growth, the efficiency gains, the capital optimization, and what gives you the high level of confidence that you can get through this-
Yeah
strong improvement?
Yeah. Well, as you summarized nicely, it's everything as you described it. It's on the one side, it's clearly, Momentum 2030 is about growth. We have some aspirational target out there when it comes to NII. The 7% growth on a yearly basis is something, but we have now proven, also we will prove this year, that this is the number we can achieve by multiple levers, and that will also play a role in the years to come. That is coupled with a very strong increase of NII, which is a mixture of the one side that you will still have pressure because of the deposit beta and other things. Then you have a positive loan growth and you have the positive contributions, the additional contributions of the replication portfolio, which is huge.
Yeah.
You can see that when you look in our analyst presentation. We always now put it in the backup, but you see basically the annual additional contribution we expect out of the model deposits. That is the revenue side, which is clearly positive. Then the other side, with all the initiatives ongoing, also supported by AI, we will balance out all the inflationary effect, all the investments we expect, and keep the cost base pretty stable, which, given the growth on the other side, will automatically improve our cost-income ratio down to 48% for 2028, and then 43% for 2030. That includes compulsory contributions, that is important to state. Then the RoTE is a very sensitive ratio. It's pretty sensitive on how much you can improve the net income. Plus, we try to get the CET1 ratio in the direction of our target CET1 ratio. That clearly helps to achieve these targets.
Okay, I'm going to take a first pause here to check if there's any question from the audience at this stage. We have a mic in the back, so if you want to ask a question, just raise your hand. If not, I give you some more time, and I will continue for now with more questions on my side. There's another question I wanted to ask you, which is around this effort we're seeing in the EU around the competitiveness of the banking industry. Very important, obviously
Yeah
for the industry. Any view you want to share there
Yeah
on what you expect to come
Yeah
in the next few months?
Well, we are in full support of this paper. We think it is addressing the right topics. When you look at it, specifically when it comes to the level playing field and the thing about rethinking, reconsidering, the rules still out there for the Basel regime to come in, the output floor for unrated corporates, for mortgages. We considering the implementation is something which is pretty important and would make a huge difference, specifically for banks like us. German economy has a lot of unrated corporates because
Yeah
we have this medium-sized Mittelstand clients who traditionally, as family-owned companies, do not see the need for a rating. So that one is an important one. Same holds true with the treatment of software assets when it comes to capital, which would be really a beneficial one, and it would create a level playing field, because we know for the U.S. banks, that's very different to them. Also this gold-plating [preach] is definitely something we can only support. Same holds also true about everything what is said about the Savings and Investment Union when it comes to the securitization regime. We really need progress there. We also need progress on the banking union. So, believe it or not, but we are full supporter also of this European-wide deposit protection scheme, because if we can really achieve that
Yeah
cross-border groups, cross-border consolidation makes much more fun because then you really can move liquidity and capital around and can really treat Europe as one market and not as the different markets as we have it today. So we are in full support. I think the only worry we currently have is that specifically the topic on the banking union and the European-wide deposit protection scheme is such a political thing, that if it's too much connected and treated as one package, then the fear clearly is that we will see the relief, which we would all really, really support, we would see for quite a long time, we wouldn't see that.
So we think that probably you need to decouple some of the initiatives and not try to bring everything in one program because that might have the disadvantage that it would take too long. Otherwise, we think it's super important that we make progress there. Yeah.
Checking again in the room. We have one question here. Please, if we can get the mic over there. If you can maybe raise your hand. Thank you. I think we can hear you okay.
You can hear me?
Yeah.
Okay, fantastic. Bettina, thank you. I guess you outlined two distinct phases to the integration of the merger, phase I, phase II, and you said clearly we are in phase I right now. Can you outline the conditions that are needed to move from phase I to phase II?
Well, first of all, we are in the moment in phase zero because we are still waiting for the approvals to come, but that is an automatic thing, and then we clearly are in phase I. I think it depends a little bit on. Actually, that is a question UniCredit needs to answer because they need to think about when they move to phase II, because phase II requires even more support. Because for the phase II, which is some kind of an integration of HVB and Commerzbank, and UniCredit and Commerzbank, you would have to have a 75% majority in the AGM.
That would require that you either have a very convincing proposal which you can bring forward to shareholders so that shareholders vote, or that you make an offer to get even more shares in the possession of UniCredit. Those are the two ways on how you can achieve that. I think it's also important then to see when does it make sense, and when do we think that this is the right moment to move in the full integration. Because at the moment, I think everybody has also the feeling that we have our hands full when it comes to the digital transformation and the AI transformation game. I'm not sure whether this will be better in two years' time, we don't know.
It might be also that, given the developments which we currently see specifically on the IT software development and migration side, that AI can also help do some of the pain which we have seen in former integrations might be eased also by AI. I think it's really a question when phase II begins, which needs to be addressed in the direction of UniCredit.
Do we have any other question in the room? I'm going to ask you another question, different theme, but coming back a bit to the mega trends that we are seeing in the back, the German pension reform.
Yeah.
There's one element we didn't discuss here. We talked about your NII. We didn't discuss the fees, but you do actually target 7%.
Yeah
fee growth. You are in fact running ahead right now, 8%, 9% growth in Q1 and in Q2. You are very supportive of the German pension reform. I think this could also help you, especially if we look forward towards your larger plan to 2030. So how could Commerzbank potentially benefit
Yeah
in terms of fee growth?
Yeah
of the pension reform?
What we clearly do in the moment is do what everybody else is also doing, preparing the specific products because there are some certain requirements for this product to then offer to the clients when it comes to the state-subsidized product. That is our expectation is that this will start 1st of January 2027. This will definitely also support a little bit net commission income. Although I think our expectation is more that by the mere fact that you will convince much more people to have a securities account, that this next step, which is so necessary to really activate capital, that people start thinking more about security savings plans and stuff like that we can really change really the investment behavior of German citizens.
Because so far we do a yearly survey among clients, private clients, and the latest survey of summer revealed that still we have only 72% of Germans are saving at all, which leaves you with 28% of Germans not saving any single euro, which is bad news. That is another topic. But out of the 72% who are saving actually, only 40%, still 40% are investing in securities. The rest keeps the money in call money, term deposits, and stuff like that. That is something we definitely need to change to activate the private capital, and that is also part of the Commission paper, by the way, because it is really about how to activate, how to free the private capital.
Our assumption is that by really opening up citizens with a state-subsidized product for securities, that they will feel also more comfortable to do more than that if they have already a securities account and the step is a little bit smaller. That is what we expect, and that will clearly help our ambitious targets to be met also in 2027 and the following. Also, I have to say that with the product, given that there are certain requirements, how much it is, what the costs are, you should not expect too much impulse out of the original product. But there should be a huge impulse just by changing the investment behavior of Germans, which would be a big, big step in the right direction.
Part of the European plan in the SIU as well, right?
Yeah. What you see is also that it is changing with the younger generation, which is good news. Because younger generation has, I think now understood that this thing that they can only rely on the state retirement programs, that this is no longer feasible, and you see an increasing number. So the increases we currently see in investments, specifically with the younger generation, which is great, but we also need to activate the other generations. Yeah.
Yeah. Last chance for the audience if there is one question. If not, I will ask the last question. One, two, three. We have one.
Could make my comment again. I just wanted to come back to the point of the competition, especially from the international players. I am just zooming out a little bit, trying to understand when people come in trying to hunt these interest rate surfers.
What is the strategic rationale for going after this client base when the money is so hot? Is this just opening up initial client relationship and then trying to cross-sell? Clearly, there is a bigger agenda here for someone like Chase to go after these guys.
Yeah. The clear objective is to get a solid client base. The interesting part is that Chase, and it is contrary, I think, to the introduction in the U.K., is that they have really only started. They have not started with a current account and a call account. They only started with a call money account. So in the moment, there is no possibility to do more with the clients, but whenever they also offer a current account and then even more, it is always an angle. We also use that. For us, it is very important for the new client acquisition also on the contract side to have an attractive call money offering. Same holds true for wealth management clients. Wealth management clients, you can trigger with a positive one. Sometimes I think it is also funding why some people are having these very insane offerings out there.
It's very much dependent on who you look at. Truth is, however, also that has changed over the last 12 months, I would say, that before you really had the kind of a stickiness in the deposits, so you acquired a huge amount of deposits, and then there was always 30%, 40% stickiness, which you kept. That is different in the moment because there are some very attractive high offerings out there that clients are really moving. It will be an interesting one. For us as an established player who have to defend every quarter our results, we always can only do things which make economic sense. We can't do it just for showing top line and growth. We really need to make sure that our products really create value.
We would rather say we have a little bit less growth as long as profitable growth, instead of showing an insane high number of deposit inflow, which we then risk to lose three months later. We only have spent a lot of money in it. That's very costly marketing spend from our side, because then you can only see that as marketing spend, nothing else.
Before we finish, we actually need to put you to work. We have three questions we'd like to ask the audience, please. The first question, so you have this small remote on the table, if you don't mind helping us out here. First question is, how do you think Commerzbank's share price is going to perform over the next 12 months compared to the European banks index? If you think it's going to outperform, perform in line, or underperform, and we're going to leave you a few seconds to answer. Around half is outperform, which is good. Then, let's say a small third perform. That sounds rather good to me.
Yeah. Well, I like that. It looks good.
We move to the next question. What do you think the main earnings growth driver is going to be for Commerzbank over the next 12 to 18 months? Whether it is NII, fees, lower cost, lower provisions, more buybacks or M&A. Then we can test if you actually listened carefully to what we have been discussing. I mean, I do not know if you want to comment these results on your side.
No, I mean, it is pretty clear. If you look in our Momentum 2030 documents, I think it is-
Yeah
very much supported by that. I would also say that without growth on the fee side and without major cost discipline-
Yeah
you will not achieve really the earning improvements because we really need to make sure that we stay flexible also on the cost side to move and stay very flexible. It is good. It is also good, I like that provisions is not-
Yes
of any-
It is zero, which is good. Let us move to the last question, please. How would you prefer Commerzbank to use any excess capital it may have? It does have, actually. More dividends, more buybacks, more organic growth, investments into AI, M&A but bolt-on only, or transformative and large M&A. That is the last question. This is rather spread.
Yeah.
More buybacks. I mean, you do have 100% payout, so I do not know if you can do much above that. It is rather spread, but let us say buybacks, which you are doing, and more organic growth, which you are doing as well. I do not know if you have any closing remark you want to make at this stage?
No, I mean, it fits to what we really target to do because it is very clear that we should always invest which is necessary to provide further growth, and we should not return capital if we have a great idea internally for organic growth or even other investments or bolt-on M&A. I think it is exactly the order we follow. First is where do we want to invest, what to invest. Second, then is there any inorganic M&A opportunity, and then third is clearly return the capital to our shareholders, and then it must be a good mixture out of buybacks and dividends. I am glad to see that people still like our buyback program, which is a good signaling for our ongoing buyback program of up to EUR 1.2 billion. Yeah.
Very good. Well, thank you again.
Thank you.
for this presentation. And yeah.
Thank you.
We are just going to close it here. Thank you. Thank you, everyone.