Commerzbank Ag · XETR:CBK
Commerzbank — Investor Day (February 2021)
72 slides from Commerzbank's investor day presentation, Feb 11, 2021
Slide 1: Strategy 2024 Capital Markets Day
Strategy 2024 Capital Markets Day 11 February 2021 11 February 2021 Capital Markets Day All figures in this presentation are subject to rounding
Slide 2: Agenda
Agenda Manfred Knof Chief Executive Officer Michael Kotzbauer Board Member for Corporate Clients Sabine Schmittroth Board Member for Private and Small Business Customers Jörg Hessenmüller Chief Operating Officer Marcus Chromik Chief Risk Officer Bettina Orlopp Chief Financial Officer Manfred Knof Ch
Slide 3: Strategy 2024
Strategy 2024 Manfred Knof Chief Executive Officer 11 February 2021 Capital Markets Day 2
Slide 4: Initial analysis: strong franchise with high value potential
Initial analysis: strong franchise with high value potential STRENGTHS CHALLENGES Trusted client relationships Low profitability Strong digital competencies Weak execution record Rock solid balance sheet Lack of performance culture 11 February 2021 Capital Markets Day 3
Slide 5: Clear priorities to pave the way for sustainable success
Clear priorities to pave the way for sustainable success Ambitious restructuring plan Stringent & rapid execution Transformation of organisation & business model 11 February 2021 Capital Markets Day 4
Slide 6: Ambitious targets for 2024 require strict execution
Ambitious targets for 2024 require strict execution €1.4bn ~10,000 ~7% up to €3bn Cost Gross FTE Group Potential for reductions reduction RoTE capital return1 1) See capital sensitivity study in CFO section, share buy backs are subject to receiving the prior permission of the ECB 11 February 2021 Ca
Slide 7: Strategy aims at core clients, digitisation and efficiency
Strategy aims at core clients, digitisation and efficiency Private & Small Corporate Operations & Business Customers Clients Head Office Focus on German clients and Increase efficiency in Operations Digital daily banking clients with German connectivity and Head Office Optimise products and Improve
Slide 8: New strategy built on four cornerstones
New strategy built on four cornerstones Customer-centric Digital Leading franchises focused on Superior scalable digital 1 the needs of our core clients in PSBC and CC 2 banking model based on a modern IT architecture Sustainable Profitable Strong focus on sustainability Significant transformation t
Slide 9: Corporate Clients
Corporate Clients Michael Kotzbauer Board Member for CC 11 February 2021 Capital Markets Day 8
Slide 10: Market leading position, but insufficient RWA efficiency
Market leading position, but insufficient RWA efficiency STRENGTHS CHALLENGES Market leader in the German Shrinking revenues and a high cost Mittelstand segment base due to significant complexity Consistently high level of client Costly and undifferentiated satisfaction coverage Proven ability to ac
Slide 11: Broad range of levers to improve profitability
Broad range of levers to improve profitability 1 Focusing on German corporate clients and clients with connectivity to Germany 2 Establishing a needs-based coverage model with a cutting-edge digital banking proposition 3 Reducing international footprint with significant nearshoring and highly effici
Slide 12: German corporates are at the core of our strategy
1 German corporates are at the core of our strategy German corporates International clients Institutionals In the future, we will only serve To serve our top clients with trade international clients with products and market placement connectivity to Germany and / or capabilities, we build on our act
Slide 13: Cost-efficient and differentiated coverage model
2 Cost-efficient and differentiated coverage model Relationship managers Specialists How we create value Upgraded personal coverage with an efficient Mittelstand Revenue manufacturing approach for 19,000 clients and targeted (SME) wallet growth with 3,000 high-value clients Personal +€110m coverage
Slide 14: Reduced international footprint
3 Reduced international footprint Rationale Key initiatives 25% of top clients’ revenues with Intention to reduce the international footprint by exiting 15 locations (branches / international products subsidiaries and representative offices) Unchanged coverage of major trade corridors Improvement of
Slide 15: Improved product offering
4 Improved product offering Rationale Key initiatives Maintaining competitive- Cooperation model for Equity Sales & Trading as well as Equity ness and meeting client Research needs Reduction of the offering Discontinuation of Credit Solutions within Corporate Clients for products with limited demand
Slide 16: Increased profitability with data analytics & rightsizing
5 Increased profitability with data analytics & rightsizing Repricing of the portfolio using Customer Sales Analytics and Smart Pricing Revenue Increase in cross-sell through digital lead generation and data-powered coverage growth Implementation of a strict monitoring and steering cadence to ensure
Slide 17: Active RWA management
6 Active RWA management Rationale RWA efficiency Key initiatives Optimisation of the low RWA portfolio Continuous review of the efficiency portfolio with RWA-E below 3% >5% 33% Addressing significant to generate profitabilisation variation in RWA or exit efficiency Establishment of Targeted improve-
Slide 18: Targeted RWA release in Corporate Clients until 2024
Targeted RWA release in Corporate Clients until 2024 Development of RWA in Corporate Clients 2020 vs. 2024 (€bn) Credit Risk Market Risk Operational Risk 100 1 -4 7 8 -1 90 -3 2 -7 7 84 15 -8 7 8 8 12 75 77 65 2020 Regulatory Total after Closure / sale Exit of RWA Economic Re- 2024 and model regulat
Slide 19: Significant cost reduction until 2024
Significant cost reduction until 2024 Revenues Corporate Clients Costs Corporate Clients1 (€bn) (€bn, incl. €0.3bn reduction of back-office cost allocations) -0.1 3.1 -0.1 3.0 0.1 -0.2 -0.6 0.1 2.5 -0.1 -0.1 -0.1 -0.2 1.9 2020 Locations RWA Coverage Products 2024 2020 Locations Coverage Products Bac
Slide 20: RoCET of ~9% in 2024
RoCET of ~9% in 2024 2024 €3.0bn €1.9bn €84bn 2.5k 62% ~9% Revenues Costs RWA FTE CIR RoCET before tax Difference to 2020 -€0.1bn -€0.6bn -€6bn -900 -18pp +13pp 11 February 2021 Capital Markets Day 19
Slide 21: Clear milestones defined
Clear milestones defined 2021 2022 & 2023 2024 ● Complete >30% of FTE reductions ● Complete >85% of FTE reductions ● All MSB clients transferred to new coverage model ● Roll out a sector-focused advisory for ● Fully establish a digital banking an additional 150 clients proposition ● International fo
Slide 22: Private and Small Business Customers
Private and Small Business Customers Sabine Schmittroth Board Member for PSBC 11 February 2021 Capital Markets Day 21
Slide 23: Strong market position at weak cost income ratio
Strong market position at weak cost income ratio STRENGTHS CHALLENGES Continuing business and customer Profitability unsatisfactory – growth ahead of market CIR at 85% (PSBC Germany) Strong market position with Expensive parallel development of profitable wealthy customers digital banking model Ackn
Slide 24: Levers based on radical change of business model
Levers based on radical change of business model Cost savings – Strongly modified sales approach with substantially lower cost-to-serve – we close 1 >50% of branches and reduce costs materially by ~20% 2 Unique blend – Leverage comdirect to create scalable digital banking model combined with superio
Slide 25: Strongly modified sales model – focus on profitability
1 Strongly modified sales model – focus on profitability Services for all Exclusively for customers premium clients Mobile / Online Advisory center Advisory points Premium branch “Mobile First” for all 24/7 Remote advice Quick advice & self- Best-in-Class branches requests service for premium client
Slide 26: Closure of >50% of branches by end of 2022
1 Closure of >50% of branches by end of 2022 Number of branches (end of period) thereof premium branches -55% Achievement 2020 ~1,000 ● ~200 branches remain closed (closing Corona-related) ~800 Transformation & optimisation 2021-2022 ~600 ● ~450 advisory points, thereof ~220 branches for ~450 premiu
Slide 27: €0.7bn cost savings by 2024
1 €0.7bn cost savings by 2024 Costs PSBC Germany excl. mBank1 (€bn, incl. €0.2bn reduction of back-office cost allocations) -0.7 3.2 I Net reduction of ~3,500 FTE due to significant reduction of branches -0.4 as well as modified sales model & synergies from comdirect integration -0.1 -0.3 II Closing
Slide 28: Leverage comdirect across the entire franchise
2 Leverage comdirect across the entire franchise Excellent digital products and processes offered to 11 million customers THE BEST BANK comdirect catalyst to extend digital product range significantly faster Provide excellent customer Highly above-average share of wealthy and highly digital affine c
Slide 29: Focus on growth with premium clients
3 Focus on growth with premium clients 2024 Market growth of ● Active approach to develop existing +2% clients into premium clients wealthy households Premium Clients ● Market penetration through modified CAGR 2020-2024 sales model Increase high- +10% +10% ● Increased use of analytics & big data mar
Slide 30: Comprehensive set of measures to limit churn
4 Comprehensive set of measures to limit churn Losing customer relationships and related …will be limited by data-driven customer income… communication ● Individual support including fast lane hotline … due to modified sales model based on proximity, ● Promotion of digital offering with active suppo
Slide 31: Only limited net revenue growth assumed
Only limited net revenue growth assumed Revenues PSBC Germany excl. mBank (€bn) Net commission income +0.1 ● Securities business benefits from 3.9 comdirect’s brokerage expertise and 3.8 0.1 -0.3 0.3 positive market outlook -0.3 0.3 ● Payment business with modular pricing Net interest income (loan b
Slide 32: Improve CIR from 85% to 62%
Improve CIR from 85% to 62% 2024 excl. mBank €3.9bn €2.4bn €35bn 7.3k 62% ~31% Revenues Costs RWA FTE CIR RoCET before tax Difference to 2020 +€0.1bn -€0.7bn +€7bn -3.5k -23pp +23pp 11 February 2021 Capital Markets Day 31
Slide 33: Strict execution: progress will be visible every year
Strict execution: progress will be visible every year 2021 2022 & 2023 2024 ● Start remote advice pilot for ● Additional ~150 branches closed ● New sales model fully in place private customers ● Final completion remote advisory ● Active digital banking users: 73% ● ~200 branches permanently closed c
Slide 34: Operations & Head Office
Operations & Head Office Jörg Hessenmüller Chief Operating Officer 11 February 2021 Capital Markets Day 33
Slide 35: New delivery model with more potential to be lifted
New delivery model with more potential to be lifted STRENGTHS CHALLENGES New organisational model introduced Structures and processes in Head Office & Operations not yet (Campus 2.0 / Delivery Organisation) comprehensively optimised Already significant efficiency gains Modernisation of IT infrastruc
Slide 36: Large efficiency potential but also investment needs
Large efficiency potential but also investment needs 1 2 Efficiency Build new bank Efficiency gains and cost reduction Backbone for new strategy €700m €1.7bn cost reductions 2024 vs. 2020 total Change-the-Bank budget 2021-2024 Head Downsizing & adapting functions, e.g. Office finance, risk, communic
Slide 37: ~20% cost savings from efficiency gains
1 ~20% cost savings from efficiency gains Direct cost reduction FTE reduction (€m) (net) ~ -3,200 -700 3,700 ~18,700 Occupancy 600 ~15,500 3,000 Operations Operations 800 500 (incl. Transfers) ~9,000 ~6,800 700 Head Office 700 600 Head Office ~4,200 ~3,500 Delivery 1,600 Delivery Organisation 1,200
Slide 38: Efficiency gains of €300m in Operations & Head Office
1 Efficiency gains of €300m in Operations & Head Office €100m ● Downsize head office to adapt to new business model occupancy cost reductions ● Transfer administrative processes from sales to operations achieving more economies of scale €200m ● Digitise E2E and automate processes ● Streamline organi
Slide 39: Delivery Organisation adds €400m to cost savings
1 Delivery Organisation adds €400m to cost savings €400m ● Reduce change budget following successful trans-formation cost reduction 2024 vs. 2020 and implementation of technological enablers ● Decrease FTE at high cost locations by ~1,000 (-20%) ~300 ● Increase FTE in nearshore locations by ~700 (+1
Slide 40: Investment of €1.7bn to build new bank
2 Investment of €1.7bn to build new bank Higher change budget 2021/22 driven by necessary transformation: ● Significant investments until 2024 ● Modernisation of technological basis and strengthening of €1.7bn capabilities, capacity and stability ● Decent share of one-off investments (e.g. comdirect
Slide 41: Change of Commerzbank's technological foundation
2 Change of Commerzbank’s technological foundation Digitisation & smart Best of two business Establishing one, uniform automation of further mass Implementation of regulatory models – scalable and European IT platform as an processes in operations, risk requirements, especially in efficient platform
Slide 42: Implementation of tech enablers key for strategy
2 Implementation of tech enablers key for strategy Architectural success components Application Security Software Deve- Architectural Data infrastructure architecture lopment process coupling architecture As-Is ● On Premise-based ● On Premise and ● Manually driven ● Monolithic ● Batch-driven (end- ●
Slide 43: Targeted innovations as important building block
2 Targeted innovations as important building block Open Banking Distributed Ledger Data Creation of technological Systematic expansion of DLT- Use of data and artificial foundations for participation in based products & services, intelligence to continuously Ecosystems and connectivity to esp. in wh
Slide 44: Ambitious roadmap to achieve objectives by 2024
Ambitious roadmap to achieve objectives by 2024 2021 2022 & 2023 2024 ● Enforce efficiency measures ● Realise additional sourcing and ● Full impact from E2E digitisation / (paperless bank…) & FTE reduction nearshoring projects process & functional optimisation realised – net 3,200 FTE reduced ● Star
Slide 45: Group Risk Management
Group Risk Management Marcus Chromik Chief Risk Officer 11 February 2021 Capital Markets Day 44
Slide 46: Strong risk profile
Strong risk profile German economy strongest in EU Commerzbank with resilient loan book ● AAA rated by rating agencies ● Operating mainly in attractive German economy ● Unemployment rate of 4.7% vs. 7.5% EU average ● Focus on stable client segments with low risks, resulting in fortress balance sheet
Slide 47: Well prepared for 2021 due to TLA booking in 2020
Well prepared for 2021 due to TLA booking in 2020 Risk result (€m) -1,748 ● Overall TLA increased to -€505m to cover expected impacts considering forward looking Corona -505 information TLA ● TLA is based on in-depth portfolio analysis Corona effects -456 considering ECB’s December scenario which as
Slide 48: Limited exposure to affected sectors – covered by TLA
Limited exposure to affected sectors – covered by TLA Top Level Adjustment ● Tour operators and hotels severely affected by (€m) Corona crisis Travel ● Due to shutdown of airlines / airports suppliers 0.9% of EaD will also be severely affected 505 ● Cruise ship financings mostly ECA covered 373 3 ●
Slide 49: Limited stage migration throughout 2020
Limited stage migration throughout 2020 Exposure Risk provisions (€m, excl. mBank) (€m, excl. mBank) Stage 1 Stage 2 Stage 3 TLA • TLA will cover Corona 2,762 related stage migrations 505 which are anticipated today 397 391 and will materialise in 2021 372 18 3 19 4 371 1,707 • Increased risk provis
Slide 50: No significant impact of deferrals
No significant impact of deferrals Loan deferrals since start of crisis until 31 Dec. (€bn, Germany) 30 Jun. 2020 31 Dec. 2020 1.9 ● Represents <1% of Group loan portfolio ● Marginal impact on our private clients loan portfolio – reflects robust credit quality 1.1 ● Most deferrals ended as scheduled
Slide 51: Risk result expected at normalised levels from 2022
Risk result expected at normalised levels from 2022 Risk result 2019-2024 (€bn, CoRL in bps) 1.7 Pre-crisis 0.8-1.2 standard ~0.7 0.6 2019 2020 2021 2022-2024 Low level, first signs of Corona effects: Still Corona Normalised economic slowdown -€940m in 2020 effects levels CoRL: 24bps 68bps 30-45bps
Slide 52: Financials
Financials Bettina Orlopp Chief Financial Officer 11 February 2021 Capital Markets Day 51
Slide 53: Targets 2024 based on prudent assumptions
Targets 2024 based on prudent assumptions Economic scenario COVID-19 accelerated adoption Economic recovery in 2021 of digital banking Unchanged Euro interest rate environment in planning period Post pandemic normalisation of economic and regulatory environment Persistent competitive pressure in Ger
Slide 54: €1.4bn net cost savings identified and validated
€1.4bn net cost savings identified and validated Cost reduction by segment1 (€bn) Personnel costs Admin costs Compulsory contributions 6.7 0.5 -0.7 -0.6 5.3 -0.2 0.2 0.3 2.7 2.1 €1.6bn gross cost savings 3.5 2.9 2020 PSBC Germany CC O&C mBank 2024 1) Differences due to rounding 11 February 2021 Capi
Slide 55: Every year lower cost – more than ⅓ of savings by 2022
Every year lower cost – more than ⅓ of savings by 2022 Costs incl. compulsory contributions (€bn) Change-the-Bank IT cash spent -1.4 6.7 6.5 6.2 5.8 5.3 2020 2021 2022 2023 2024 0.4 0.6 0.6 0.3 0.2 Increased IT investments in 2021/2022 for transformation 11 February 2021 Capital Markets Day 54
Slide 56: Gross FTE reduction of ~30% outside mBank
Gross FTE reduction of ~30% outside mBank Internal FTE transition Commerzbank Group excl. mBank mBank ~ -7,500 ~39,500 ~6,600 ~32,000 ~ -10,000 ~6,800 ~2,300 ~32,900 ~25,200 2020 Reduction Nearshoring & replacement 2024 of external staff External ~2,200 ~ -1,300 / ~ -60% ~900 staff (excl. subsidiari
Slide 57: €1.8bn restructuring charges booked until 2021
€1.8bn restructuring charges booked until 2021 Restructuring charges (€m) Personnel reduction Occupancy related ~900 814 ~150 43 ● Booking of all restructuring charges will be completed by end of 2021 ● €1.6bn restructuring charges for gross reduction of ~10,000 FTE vs. 2020 771 ~750 ● €0.2bn real e
Slide 58: Moderate revenue growth
Moderate revenue growth Revenues 2020 vs. 2024 incl. mBank (€bn) NII NCI Others Drivers NII − Drag from rates and customer ● +0.5 churn 8.7 ● + Loan growth PSBC 8.2 0.6 0.1 -0.1 -0.1 ● + Margin management 5.4 5.0 Drivers NCI ● + Additional business with core clients in PSBC & CC 3.3 3.8 ● + Growth o
Slide 59: Recovery of risk result until 2022
Recovery of risk result until 2022 Risk result 2020-2024 (€bn, CoRL in bps) -1.0 / -60% 1.7 0.8-1.2 68bps ~0.7 30-45bps ~25bps 2020 2021 2022-2024 11 February 2021 Capital Markets Day 58
Slide 60: Clear turnaround visible in targets
Clear turnaround visible in targets Transition of operating result (€bn) +2.9 2.7 1.0 0.5 1.4 -0.2 2020 Cost reduction Revenue growth Normalisation 2024 of risk result CIR (%, incl. compulsory 82 61 contributions) Net RoTE (%, w/o capital mgmt.) -11.7 ~7 11 February 2021 Capital Markets Day 59
Slide 61: RWA reallocation to increase profitability
RWA reallocation to increase profitability Development of RWA 2020 vs. 2024 (€bn) Credit Risk CC Credit Risk PSBC Credit Risk O&C Regulatory changes Operational Risk Market Risk 179 183 -4 3 8 1 12 2 -12 7 16 18 18 33 28 40 57 75 65 2020 Market Risk Operational Regulation Optimisation Growth Growth
Slide 62: Resulting CET1 ratio far above MDA
Resulting CET1 ratio far above MDA Development of CET1 ratio 2020 vs. 2024 (%) 14.6 0.4 13.2 -0.5 1.0 -1.1 1.9 -0.3 Targeted corridor 200-250 bps above MDA 9.5 MDA 2020 2020 Restructuring RWA reg. RWA mgmt. RWA growth Retained Other 2024 expense effects CC PSBC earnings (incl. mBank) 11 February 202
Slide 63: Significant potential for capital return
Significant potential for capital return ~5bn 8.4% ~3bn 7.8% Potential capital return to share- ~2bn 7.3% holders until 20241 No capital return/ dividend 7.0% 14.6% 13.5% 12.5% 11.5% RoTE 2024 CET1 ratio 1) Share buy backs are subject to receiving the prior permission of the ECB 11 February 2021 Cap
Slide 64: Transformation Management
Transformation Management Manfred Knof Chief Executive Officer 11 February 2021 Capital Markets Day 63
Slide 65: Create a new performance culture
Clear governance for strict execution CEO Create a new PSBC CFO performance Group Strategy, CC Transformation & Sustainability CRO culture COO HR Rigorous strategy steering through: Transformation ● Bi-weekly Strategy SteerCo with full board participation management led ● Dedicated cost reduction tr
Slide 66: Fast implementation of FTE reduction program
Fast implementation of FTE reduction program Timeline Guidelines April / May 2021 Negotiation of framework agreement until AGM ● Fair treatment of affected staff YE 2021 ● Voluntary leave programs as basis for Closing of agreement with workers’ council socially responsible reduction program YE 2023
Slide 67: Operational KPIs 2024 underline transformation progress
Operational KPIs 2024 underline transformation progress Private & Small Corporate Operations & Business Customers Clients Head Office ~450 domestic 15 intl. locations exited2 26% of IT capacity in (~-350) locations (+12pp) nearshoring locations ~73% active digital digital banking 100% users activate
Slide 68: Significant delivery already visible in 2021
Significant delivery already visible in 2021 Private & Small Corporate Operations & Business Customers Clients Head Office ~600 domestic 3 intl. locations exited2 20% of IT capacity in (~-200) locations (+6pp) nearshoring locations ~67% active digital digital banking 10% users activated 50% decentra
Slide 69: Three major key takeaways of our new strategy
Three major key takeaways of our new strategy 1 Clear and ambitious plan with full commitment to related targets 2 Complete focus on customers, digitalisation, sustainability and profitability 3 Disciplined execution and delivery in every single year 11 February 2021 Capital Markets Day 68
Slide 70: COMMERZBANK
COMMERZBANK
Slide 71: For more information, please contact our IR team
For more information, please contact our IR team Investors and Financial Analysts Christoph Wortig Ansgar Herkert Michael H. Klein Dirk Bartsch Head of Investor Relations Head of IR Communications P: +49 69 136 24522 Head of Strategic IR / Rating P: +49 69 136 52668 P: +49 69 136 44083 M: michael.kl
Slide 72: Disclaimer
Disclaimer This presentation contains forward-looking statements. Forward- In addition, this presentation contains financial and other information looking statements are statements that are not historical facts; they which has been derived from publicly available information disclosed include, inter