Good morning, everyone. Morning, Bettina.
Good morning.
Two years ago, when we both were sitting here, and you just took over as CEO. To be named CEO literally the day before. Italian bank UniCredit took just the first position. It was already our intro in the meeting. Today, UniCredit sits on close of half of the register, and on Monday last week, your two largest shareholders had the first discussion and first meeting, and they both called it constructive. You laid out two phase path, collaborative first and consolidate later. I would like to spend the next few minutes on where this actually stands and what investors in this room should be watching between now and the moment something is signed. I'll let you maybe do from first introduction, and I will certainly follow up.
Sure. It's important to note that we are now entering a new phase, that's for sure, and we've been very successful in the past two years, so we are very proud of that. I think it's also important to note, when you look on our performance of the share price, but also when you look on the performance and profitability, I think we can be all very satisfied, and we are at least very proud. We are now in the situation, I call it always a phase zero, where we wait that the approvals come through. That will be either by the end of this year or beginning of next year. I think both CFO teams would rather prefer beginning of next year, just because it's much easier to consolidate first quarter as a testing moment than a full year. But we will take it as it comes.
It is now important to really prepare for that. That is number one. There is a phase I, which we phrase it like that, which is where we are still an independent bank, publicly listed, and we have our own strategy. But we are part of a group, and I think it is best if we use this phase for and that is why I called it a collaborative approach, where we can already use the power of the group for certain things. Still, HVB and Commerzbank are competitors and UniCredit, but we definitely will have some sources of potential revenue synergies and cost synergies which you can create in this time.
Then it is clear that the question that should not be the end, because if you have gone so far, it is very clear that you also want to get at a certain point in time realizing at least the domestic synergies which are in place, which means that in this phase II, there should be a kind of an integration between Commerzbank and HVB. For that phase specifically, for the structural changes, you need more than the 49% majority. You need to have a majority in an AGM of 75%, and therefore the talks between UniCredit and the government as a second largest shareholder are pretty important to make that happen.
Very clear. The press reported potentially an accelerated agenda to what you just described, where you would have a scenario where Commerzbank does a reverse takeover on HVB. That would be definitely an easier option for both parts and make things actually probably smoother and faster. Do you agree with this, and is that something been floated as an idea and discussed?
We have discussed and analyzed all potential options in the last two years, and UniCredit potentially has done the same. There are always three basic options on how you can structure such a structural deal. One is just simply a merger between Commerzbank and UniCredit. Another one is that you go out, make an offer to the remaining shareholders, most likely with a premium. You get above 90%, and then you can do this squeeze-out, and then you can integrate the two things. Or, and that is the third option, is that you do basically an acquisition of HVB by Commerzbank, and you pay in shares, which would bring UniCredit up in the share ownership with Commerzbank. All three basic options are on the table.
All three basic options require a voting in the AGM of minimum 75%, and that is something one needs to keep in mind, and that brings us back to the role of the government.
In these discussions and all these options, what is the role you are playing into this?
First of all, I think it is not on us in the moment to discuss at all this phase II. I think we have our hands full with preparation of phase zero, and we also have a bank where everybody expects that we deliver our Momentum targets, which we do. Which I am pretty sure we will talk about that in a minute. Then for us, it is important now to think about this phase I and how to detail that. Because that, I think, is a short-term expectation, and rightfully so, from investors that they see already in phase I what kind of additional value can be created. This is where we at Commerzbank focus on to think about potential levers one can pull.
Last question before we can move to phase II. There was also, in the press again, some conditions set by government as the seats in the board. Is that something you think could be a hurdle to progress into that phase II? Is it something really, from the government's point of view, a red line, or is this start of a negotiation?
Well, it is pretty clear that the government has two hats on in this thing. One is, they are shareholder. That is clear. But on the other side, they also are keen to see that for the economy in Germany, the situation is the right one, given that we are an important lender for German economy. Therefore, certain things are important, also from a political standpoint. But at the very end, that is something which needs to be discussed. I do not like the wording of a red line because I always think that all involved parties should always think to the benefit of the institution and to the benefit of all stakeholders involved in that.
Thank you. So if this phase I stays longer, investors in this room, how do they think about Commerzbank? Is it like a standalone bank, keep beating their targets and reaching these very ambitious targets, or actually a subsidiary of a bigger group preparing for integration?
Well, the thing is that company laws make this very clear in Germany. We are in this phase I . Commerzbank is an independently acting bank with a standalone strategy. We have a standalone strategy out there with some very ambitious targets for 2028 and 2030. We are completely convinced, and I have the feeling that investors also believe us, that we can realize these targets. I think now the trick is to think about what additional value can be created in this phase I to make it even more attractive to be invested in Commerzbank.
Thank you. Thank you, Bettina. Are there any questions on the floor before we move on to No? Very good. Maybe we can talk about the German economy first. Clearly the picture looks slightly better versus 12 months or six months ago. Can you tell us on the ground from your discussions with the Corporate Clients Mittelstand, what you see, what you hear, and how? You have been saying in the past that you have some constructive discussions to start to leverage again and invest. What do you hear now?
Yeah, I think it is a little bit an up and down, right? If you go back 12 months, I think GDP assumptions were already at 1%, then it dropped after the start of the Middle East conflict, I think down to something very low. Now we are back, and I would say it is even a little bit better because at least our latest research assumptions are that we are at 1.2%. Still not great, but it is a starting point. What we also see is that there are some positive signals. Just today, we saw the latest ifo data and they again have improved despite all the noise around the oil price, so that is good. Overall, also, PMI data, order data is good.
I think if you then do a drill down, you see that it is a mixed bag because it depends very much on which industries you look at. There are some sectors which are doing extremely well, who are extremely bullish, who also invest a lot. Then you have some other sectors who are still very cautious, who think a lot about restructuring and things like that. What we do not see is a very high level of defaults, but they are very much focused on smaller and younger companies and less related to a certain industry or to larger companies. So it is really a mixed bag, but I would say, clearly, some signals of recovery. Therefore, we believe we should also see a good outlook for 2027.
On the fiscal stimulus, and we are all waiting for this to show more than just green shoots. Do you think the latest elections in the Länder, that has been clearly a breakthrough for the AfD, will slow down or impact the reform agenda for Mr. Merz or even threaten the coalition?
I think there are two answers to it. My clear hope is that there will be no changes, because I think if there is one thing which is clear is that it is super necessary to just implement the reforms as quickly as possible. That is easy to say as a non-politician, to just not care about the polls, just do the right things. But then there is a political debate which is hard to be influenced by anyone from the industry.
Very good. Let's move on now to your CMD strategy. You've upgraded your guidance earlier this year with very, I would say, impressive RoTE targets above 20% in 2023, 2030, sorry. Six months into the plan, what areas you think that you've been perhaps too punchy or you see actually more upside?
Actually, we feel very comfortable with the strategy implementation. We just had yesterday our yearly meeting with the supervisory board, having a deep dive discussion on the strategy, and we are also in the middle of our multi-year planning exercise for next year. The good thing is that the targets which we have laid out in May, we feel very comfortable about it. We are progressing very nicely when it comes also to the implementation of the measures. We have just also launched, again, a very large part-time retirement program offer to also make the redundancies happening, which we have promised to the market. Overall, it's really progressing as expected. There are always some things which are developing differently when you take. Clearly, our expectation was that there would be more growth in Germany, lending growth. Now we have more lending growth internationally.
The deposit competition is very high, as we know. But then on the other side, you also have a very nice development of the forward rates, at least from our perspective. There are different factors, but overall, we feel very comfortable for this year. We will also have already. We will see some booking even this year in the fourth quarter, most likely, for some of the restructuring and then more to come in 2027. But despite that, we feel very comfortable with the guidance of the EUR 3.4 billion of net income.
Thank you. Your plan was very ambitious because you had behind you the Team Yellow, and it was almost seen as, of course, we want to do best and improve, but we have the incentive, we want to do it. With the current situation, do you still have the army behind you and delivering every day?
Yeah. You have seen it in the second quarter. We had so much noise in the second quarter because of the takeover offer, and we had an excellent second quarter. Third quarter, we all know, is always a little bit difficult because of the summer breaks and stuff like that. But we do not have the feeling that this is really preventing our team to deliver, and I have a lot of talks also with our clients. My first question, it is always about UniCredit, the question from their side, but I always then ask, "Is the team focused? Do you have the feeling that they are distracted when covering the clients?" And the answer is luckily always no. Team is fully focused.
Also, I have to say that clearly there is some nervousness in the system just because of all the headlines which we see that is not entirely helpful. We also have our competitors hanging around our key talents and our clients, sneaking around trying to convince them to move. But so far, I have to say, clients and also staff has been very loyal. I think the important part now is, and this is why we are also pushing for that, is people want to have clarity, clients want to have clarity, our staff wants to have clarity, and that is the most important thing, and I think that is the most important thing we now need to do.
Very clear. Let us talk about your net interest income. You are guiding for EUR 8.6 billion in 2026. The first half run rate suggests that second half you have to step it up quite significantly. What will be the levers to accelerate it? Because clearly you mentioned the rates are more favorable, but that is new news, I would say. What was the initial levers, and would that come on top of your guidance?
Yeah. Plus, the improvement of the forward rates basically since May, but I would say the possibility there might be another interest rate hike this year, that is nothing which will really influence the result of 2026. So it is the same. What we said is that, first of all, we have now this or we had this interest rate hike increase in September. Plus, we always said that most of the additional benefits from the replication portfolio you will only see in the second half, and this is what makes a difference between H1 and H2. That is still valid, and therefore the EUR 8.6 billion guidance is still a very valid assumption.
Very good. Can we spend a few minutes on deposit competition in Germany? You have always been very comfortable. I mean, Chase is the 13th bank competing. Do you still believe that? Can you maybe tell us on the ground how really you defend your deposit franchise there?
Yeah. Competition has been always high in Germany, so there is really no difference. It is just the players. There are more players out there. I would say also the offers are. Some of them are really crazy from an economic standpoint, because it is very hard to see how you can really make money out of it. You really have to see some of the offers as marketing spend, otherwise you cannot argue why you do that. We always said that we would do always the right balance of clearly keeping deposit base stable and also, to a certain extent, increasing. But on the other side, be also cautious about the deposit beta, and making it still economically sensible. That is what is driving us. We are also out there with some offers, but they are always coupled with some other products.
We also stay away from this offers above 4%. That is what also will drive our thinking in the upcoming quarters. But this is also why we always stay. People say sometimes we are conservative, but we are, I think, feel good about the deposit beta. So we also closely watch the market, and will also adjust, if necessary, deposit beta assumptions and stuff like that to be really sure that we are not in the pressure to do some stupid things to just create some top-line growth. So that is what is driving us. But it also stays that, there is a certain group of so-called interest rate surfers who really run around and move their money from A to B to C, and that has not changed.
How long do you, if this competition continues, irrational competition continues, in your eyes, the trade-off between managing deposit beta and actually the benefits of higher deposits and the benefits from replication portfolio works. I am sure you are watching it closely, but at some point you might actually try to jump into the competition, no?
Yeah, and this is why you need to be cautious on your deposit beta assumption, because it also means that whenever you participate in this game, you also need to be aware that your deposit beta is going up. This is what you need to try to balance out, and you also need to and this is where AI actually also helps is, what are you applying to which client group when? And to also watching and keeping the stickiness of your client in mind and also what you can achieve in addition. Because I think having an attractive offer out there, if it is a tool to really attract new clients and to keep them, then it is a nice thing.
But if you just have it to show a short-term increase of deposits and then you lose everything after that, then you have to ask yourself whether this makes a lot of sense. Specifically because there is always also additional costs attached to it, because most of the times, most of the offers only are valid for clients who are new clients. Which means you are opening up an account and these clients come, then they move to the next bank, then they close their account with you again because they want to be eligible for the next great offer. And that is creating a lot of useless costs also for the system. And this is where we are a little bit mindful of resources.
Very good. You have touched already on it on the lending growth perspective, but maybe you can give us a bit overview on the lending dynamics between Mittelstand, international, and also the public lending as well.
The trend is still what we also have seen after the first half of the year, more in international terms. Public sector is also providing some growth and domestic lending is still rather low. Yeah.
Thank you. On the fee income side, it was one of the pillars of your CMD, and you upgraded the guidance with the update. Beyond just the customer growth, what is the other opportunity you see? Is the pension reform kicking in from January next year would be significant of lever? It has been downplayed by some of the other players in Germany. Is that something relevant for you?
We have some pretty aggressive assumptions out there when it comes to the net commission income, and so far we have proven that we can manage that. We said that in the first years we would see a 7% growth, which would come a little bit less in the later years. You see that we are capable to organize this growth. It is a combination of many things. It is also due to lending growth because there is also some fee income attached to it. It is also payments, it is securities, it is trading on the one side, but it is also distribution portfolio management on the other side. It is at mBank, it is at Corporate Clients and private clients. It is all over the place, and that is the secret also that you always have different levers who work out differently in the different quarters.
So far, it provided us now for the third year in a row with more than 7% growth in net commission income. For next year, clearly the pension reform we see some support. We have an aggressive assumption again out there for next year. It will provide us some support, but we are not only relying on that. I think the good news on the pension reform is that the product itself, which is embedded in the pension reform, given the cost limit, and then also we have now first competitors out there with some for free things. The results out of this product will be probably on the upside, rather limited. I think the potential and the beauty of the pension reform lies in the things which might be connected to that. Because today we have only 72% of Germans saving money.
Out of this, only 40% are investing in securities. If there is really an activation of more people investing in securities and having just simply a securities account, our conviction is that you will then also see much more people investing, taking securities savings plans and stuff like that. That will become then very attractive for us as well.
Very clear. Just before we move on to costs, another question on revenues. Some of your another German-listed bank talking about positioning for capturing some of the dyssynergies you would have eventually with HVB. First of all, first question, do you still believe really that exiting that fast international market is a bad idea? Secondly, how does it work in Germany, the referral process or discussion between, like, okay, I have a client, he's too concentrated now, he needs to diversify. How does it work with other banks? How really is it realistic to move on from you and diversify?
As I said, competitors are clearly out there. But so far, clients have been very loyal. If you look also on our lending growth now for the first half-year, you see that we are also successful because we have the international network, because we support clients to go abroad. Lots of our revenues and Corporate Clients are connected to the international network. We have lots of clients who are banking with us because we have this international network, specifically medium-sized corporates like it, that they have one bank who supports them when they are hidden champions in one product area. They really like that they can use Commerzbank and go basically everywhere with us, be it Asia, be it Latin America, or be it Africa, whatever.
So there's a value proposition in that, and there's a lot of revenues connected to it, and we have shown that in the past. Therefore, yes, we believe that we need the international network to keep the clients. When it comes to synergies, as set in the moment, and we think that will also hold true then for phase I if we do it smartly. Clients see us still as two separate banks, and clearly it's always a question they have. But this problem of having more diversification will clearly come to with some clients when it comes to a real combination of HVB and Commerzbank, and might be also single cases beforehand. I think for us, in the moment, the bigger concern is really to keep the international network, because that is a real value proposition of Commerzbank today with our clients.
Thank you. Moving on to the costs. We know your target. You've been progressing well. But beyond that, with AI topic, it's almost every cost plan gets outdated the day after how AI goes fast if banks embrace AI in a smart way. So you've already, on the previous plan, mentioned that from February to we met in November, and you said so much things that could have been done. So now, even one year later, what opportunities do you think Commerzbank can leverage on?
Yeah. We have updated the plan also on that one in May. For the moment, we also feel comfortable with it. But indeed, we see lots of moving pieces here. We also see now, given that we have the rollout of different AI tools to the complete bank. We have done a lot in training our people. We have also implemented a number of tools now, like also Sales Companion for the Corporate Clients side. We are just in the testing phase and a friends and family phase for a wealth management tool provided to our private clients. So there are many things in innovation ongoing. But we also see the flip side. We invest much more than we originally thought in cybersecurity, given that AI has a lot of opportunities, but it also provides some risk. We definitely want to prepare it also on that one.
I think it will be the task in each and every cycle now to always. A three-year plan is great, but you really need to make sure when doing recruiting, et cetera, that you keep your flexibility to really adjust to all the benefits you see stemming from AI, that is for sure.
You mentioned earlier that your CFO, Carsten, is reaching out to HVB and start to think about consolidation and accounting and so on. Now on the cost perspective, the latest word is that some of the restructuring will be booked within Commerzbank. So how should we think about once the control is done in next year, the restructuring costs will be booked within yours before integration within the Commerzbank unlocked phase?
Well, I mean.
If we go that route.
I can only talk about Momentum 2030, and we said how much restructuring we would see here. We will most likely book a very small part this year, and then the majority will be booked in 2027. Besides that, we believe for achieving the targets which we have laid out for 2028 and 2030, there are no further restructuring measures and bookings necessary. There might be some additional ones when you think about some things which you can do jointly in the group. But it is nothing, I would say, which will prevent us of delivering really the results which we have promised and keeping up a very attractive capital return policy.
Okay. Just on asset quality, really a question just to check if everything is fine. So EUR 850 million guidance for this year as a cost of risk. We hear lots of delinquencies pick up in Germany. Presumably it does not sit with you or with Deutsche Bank, but do you see any flare-ups in asset quality there? Any pockets of concern?
No, everything is running smoothly. We stick to our guidance because we are always cautious on that, and as a matter of fact, it is always that there can be one larger default, and then you have it in your books, and therefore we just stay cautious on that. But we feel very comfortable with the guidance of the EUR 850 million. Given the constant increase which we have seen in the default rates, and one should not forget that we really had three years of stagnation behind us, I think it is a good number and we feel very comfortable. The whole guidance of the EUR 3.4 billion net income is based on the EUR 850 million assumption.
And then on capital distribution, you just said it, you stick to Momentum 2030, 100% payout, extra structuring costs. Are you not tempted to do something to please your investors rather than that?
Well, I think it's anyhow an attractive plan. Just look back what we have already returned. It's, I think, something around EUR 6 billion so far since we started really paying out, which has been not the case for quite a decade. But now for this year, we are fully focused on this year, and this year we said we will retarget the EUR 3.4 billion. If you then deduct the EUR 200 million, then you are at EUR 3.2 billion. And we said we will have a nice mixture of dividend and share buybacks. First share buyback program is ongoing up to EUR 1.2 billion. And then we will see how the year progresses, and then latest in the fourth quarter, we will have a decision on how to move forward.
But there's no reason to deviate from that either one or the other way because we also have the thing about the 100% embedded in our capital return policy. And clearly also when you look on our CET1 ratio, it's very decent. It will get even further relief through the RWA reduction, which we expect in the upcoming quarters. So overall, it seems to be a very attractive capital return plan, not only for this year but also the years to come.
Indeed. Checking last time on the floor if there's any question. No. Bettina, would you like to have some closing remarks?
For us, it's really now important to move on. We want to deliver on the targets. We think that there can be a very good phase one with a collaborative approach where we provide guidance to stakeholders and specifically also clients and staff. And I think it can be only better than what we have presented already today.
Thank you very much.
Thank you.