Commerzbank Ag · XETR:CBK
Commerzbank — Investor Day (October 2016)
41 slides from Commerzbank's investor day presentation, Oct 4, 2016
Slide 1: Commerzbank 4.0 Capital Markets Day
Commerzbank 4.0 Capital Markets Day Martin Zielke, CEO / Stephan Engels, CFO | London | 4 October 2016
Slide 2: We have made Commerzbank more stable – and less risky
We have made Commerzbank more stable – and less risky 636 533 Balance sheet Total assets down by 16% -16% (€bn) FY 2012 H1 2016 160 63 Risk €97 bn reduction of non-core assets -61% (€bn) FY 2012 FY 2015 23 18 Capital CET1 capital increased by 28% +28% (€bn) FY 2012 H1 2016 Martin Zielke, CEO | Londo
Slide 3: Banks are facing major challenges
Banks are facing major challenges 1 2 Interest rate environment Regulation The low interest rate environment is Regulatory initiatives and further expanded burdening the entire banking sector – compliance requirements involve with no relief in sight further investments for banks Mounting pressure on
Slide 4: Commerzbank 4.0 – a strategic programme with three cornerstones
Commerzbank 4.0 – a strategic programme with three cornerstones We will focus on businesses where Focussed business model we have clear competitive 1 advantages, discontinuing non-core activities Higher Digital enterprise We will transform the Bank into a profitability, and 2 digital enterprise enha
Slide 5: Commerzbank will have two strong customer segments going forward
Commerzbank will have two strong customer segments going forward PC Private and › Private Customers, Small Business Customers, Small Business comdirect, Commerz Real, mBank CEE Customers MSB Corporate › All corporate clients, institutional clients, Clients Corporate Finance and FICC C&M Separation/
Slide 6: Private Customers: successful business model in the challenging German market
Private Customers: successful business model in the challenging German market › Private Customers business is already profitable (> 20% RoTE), and growing › Profit contribution has tripled since 2012 (FY 2015: €701m) › One million net new customers by the end of 2016 accomplished Target: 2 million n
Slide 7: Private Customers: faster growth with digital platform and modern branch formats
Private Customers: achieving faster growth by combining digital platform strategy with modern branch formats Digital and personal › Multi-channel bank "One" is the IT platform for all channels and all customers › Two branch formats provide for broad market City branch coverage at approximately 1,000
Slide 8: Private Customers: accelerated growth through attractive products and partnerships
Private Customers: accelerated growth through attractive products and partnerships Digital and personal › Digital instalment loans: high-margin product on own platform, and on the Bank's own loan book › Digital asset management: Robo Advice and digital asset management via comdirect › Partnership Ba
Slide 9: Small Business Customers: growth through regional proximity and digital advantage
Small Business Customers: growth through regional proximity and digital advantage Digital and personal › Competitive advantages by combining the strengths of PC (efficiency) and MSB (loans) › Digital offers and strong nationwide presence – Customers have 24/7 access to small business customers offer
Slide 10: Corporate Clients: focus on core business – integration of investment bank
Corporate 2 Clients: focus on core business – integration of investment bank Persistent market leadership in German corporate banking Mittelstandsbank Financing more than 30% of German foreign trade Strong international presence Leverage of unrivalled sector expertise Corporates & Leading provider o
Slide 11: More efficient structure through reduction of parts of trading activities
More efficient and cost-effective structure through reduction of parts of trading activities and focus on core products Product offering today Future product offering › Credit › Credit › Trade Finance › Trade Finance MSB Corporate Clients › Structured Finance › Structured Finance › Cash Management ›
Slide 12: Our evolution into a digital enterprise
Our evolution into a digital enterprise 2016 2020 Reduction of complexity Target: 80% of all relevant processes are digital Martin Zielke, CEO | London | 4 October 2016 11
Slide 13: Digital Campus as engine of transformation
Digital Campus as engine of transformation E2E: Management Board responsibility Business and IT experts working together in one place All experts will commit 100% of their capacity Priority for internal resources Agile working methods Shortening of implementation cycle Digital transformation 'Fail f
Slide 14: Significant cost savings and FTE reduction through digitalisation
Significant cost savings and FTE reduction through digitalisation and reduction of complexity Cost reduction until 2020 FTE reduction until 2020 1.1 9,600 2,300 7,300 0.5 0.6 €bn Gross Cost Net Gross Growth Net reduction inflation reduction reduction reduction Martin Zielke, CEO | London | 4 October
Slide 15: Targets 2020 of new strategy Commerzbank 4.0
Targets 2020 of new strategy Commerzbank 4.0 Current rates Rising rates Revenues (€bn) 9.8-10.3 11.3 Costs (€bn) 6.5 6.5 CIR (%) <66 ~60 Net RoTE (%) >6 >8 CET1 (%) >13 >13 Martin Zielke, CEO | London | 4 October 2016 14
Slide 16: Commerzbank 4.0 simple – digital – efficient
Commerzbank 4.0 simple – digital – efficient Martin Zielke, CEO | London | 4 October 2016 15
Slide 17: Revenues and costs, Capital, Outlook
1 Revenues and costs 2 Capital 3 Outlook Stephan Engels, CFO | London | 4 October 2016 16
Slide 18: Simulation H1 2016 of new customer segments
Simulation H1 2016 of new customer segments Revenues 2.4 PC Private and LLP 0.1 Small 116 Business Costs 1.8 38 Customers CEE Operating €bn 0.6 RWA Assets result Revenues 2.0 MSB 263 LLP 0.1 Corporate 108 Clients Costs 1.3 C&M Operating €bn Exit 0.5 RWA Assets result O&C O&C unchanged ACR ACR unchan
Slide 19: Growth measures and cost savings lead to CIR <66% and RoTE >6%
Specific growth measures and significant cost savings lead to CIR <66% and RoTE >6% 11.3 Upside 9.8- 9.0 10.3 Revenues €bn 20161) 2020 Costs 7.1 6.5 <66% CIR 79% (~60% Upside) >6% RoTE 3% (>8% Upside) 1) Based on analysts’ consensus as of 15 August 2016 Stephan Engels, CFO | London | 4 October 2016
Slide 20: Substantial revenue increase from growth – revenues >€9.8bn in 2020
Substantial revenue increase from growth – revenues >€9.8bn in 2020 even in current interest rate environment Ongoing negative interest rate 1 environment anticipated – upside case if rates increase 11.3 Upside ACR run-down and reduction of 1.0 2 trading activities 9.0 1.1- 0.3- 1.4 0.5 0.1 0.5 Grow
Slide 21: Growth and pricing measures compensate for adverse interest rate environment
Specific growth and pricing measures compensate for adverse effects from current interest rate environment In current rate environment 3M-Euribor (avg. p.a. in %) › Expected gross revenue decline under current interest rate conditions by 2020: ~€300m vs. 2016 2016 2017 2018 2019 2020 › Revenue loss
Slide 22: >€1.1bn additional revenues from Private and Small Business Customers
>€1.1bn additional revenues from Private and Small Business Customers Private and Small Business Customers Private › Expansion of customer base by ~2m Customers › Build-up of own consumer lending platform €450-550m › Rise in net commission income in particular in securities and payment transaction b
Slide 23: >€300m additional revenues from Corporate Clients business
>€300m additional revenues from Corporate Clients business Corporate Clients Customer growth › Customer growth in particular in Mittelstand clients segment & pricing › Continuous development of product portfolio and launch of new digital products and €185-270m services › Implementation of data drive
Slide 24: Reduction of trading activities releases capital
Reduction of trading activities releases capital Reduction of trading activities Revenue loss › Exit of exotic derivatives business in interest-rates trading, significant right-sizing of ~€400m credit trading and exit of market services business › Separation of structured equity business with less c
Slide 25: Further value preserving run-down of ACR
Further value preserving run-down of ACR Run-down ACR Revenue loss › Further run-down of CRE portfolio and PF assets (held to maturity) ~€100m › Shipping market deterioration increases cost of risk › Expected cumulative operating loss of ~€1.1bn for 2017-2020 › RWA reduction of ~€9bn leads to gross
Slide 26: Significant cost savings through digitalisation and reduction of complexity
Significant cost savings through digitalisation and reduction of complexity Inflation, regulatory costs and 1 depreciation €1.1bn Cost reduction through run-down 7.6 2 ACR and reduction of trading activities 0.5 0.2 7.1 0.5 Savings through digitalisation and 3 0.3 automatisation of processes 6.5 0.1
Slide 27: Detailed action plan to deliver €1.1bn in cost savings until 2020
Detailed action plan to deliver €1.1bn in cost savings until 2020 Cost savings Run-down › Significant cost reduction in front office activites and ACR and reduction €0.2bn administrative functions of trading activities › Further run-down of ACR › Digitalisation and automatisation of processes Digita
Slide 28: Simplification allows increased investments in digitalisation
Simplification and reduction of complexity allows to increase investments in digitalisation Simplification & reduction of complexity allows a higher share of investments in digitalisation (~50%) Focused use of IT- budgets through effective IT systems e.g. investments in a uniform distribution platfo
Slide 29: Transformation requires two years with low profitability
Transformation requires two years with low profitability 2017 2018 2019 2020 Current rates Rising rates 9.8- Revenues €bn 11.3 €bn 10.3 Costs 6.5 €bn 6.5 €bn Restructuring costs €1.1bn RoTE >6% >8% Stephan Engels, CFO | London | 4 October 2016 28
Slide 30: Revenues and costs, Capital, Outlook
1 Revenues and costs 2 Capital 3 Outlook Stephan Engels, CFO | London | 4 October 2016 29
Slide 31: Group RWA remain stable – ongoing portfolio optimisation
Group RWA remain stable – ongoing portfolio optimisation Pro forma RWA Path H1 2016 (€bn) 2020 Private & Small 38 Significant growth in capital efficient lending business with private and Business small business customers Customers 102 Corporate Overall stable RWA development due to further portfoli
Slide 32: Focus on client business leads to improved balance sheet structure
Focus on client business leads to an improved balance sheet structure 100% 100% 100% Loans to customers significantly increased 1 – further growth until 2020 1 29% 40% 45%- 2 ACR portfolio minimised 50% 2 24% 3% Trading assets will be significantly 2% 3 downsized due to reduction of trading 22% 13%-
Slide 33: CET1 to be at ~12% during the transition period
CET1 to be at ~12% during the transition period >13 ~0.2 ~1.5 11.5- 0.4 0.5 >12 12.0 0.6 CET1 ratio % 2016e Profits & Exit RWA Volatility 2018 Profits RWA 2020 capital growth growth deductions › Suspension of dividend payments to cover restructuring costs › Comfortable capital position including buf
Slide 34: Comprehensive set of CET1 capital measures
Comprehensive set of CET1 capital measures Capital Efficiency RWA Efficiency › Prudential Valuation › RWA efficiency Consistent steering of derivatives Focus on business growth with high business towards capital efficiency RWA efficiency › Expected Loss Shortfall › Securitisations RWA efficiency mea
Slide 35: Revenues and costs, Capital, Outlook
1 Revenues and costs 2 Capital 3 Outlook Stephan Engels, CFO | London | 4 October 2016 34
Slide 36: Capital neutral goodwill impairments in the third quarter 2016
Transformation of Commerzbank 4.0 requires capital neutral goodwill impairments in the third quarter 2016 Expected goodwill impact PC €1.1bn Private & ~€170m Small Business €1.5bn Goodwill allocations and intangible assets in CEE €0.2bn Customers C&M see full impairments of ~€170m ~€530m MSB
Slide 37: Outlook on the third quarter 2016
Outlook on the third quarter 2016 Q3 2016 We expect revenues in the third quarter to be flat compared to the preceding quarter LLPs should be significantly above the two preceding quarters in 2016 due to sustained weakness within shipping market We expect third-quarter operating profit to be lower t
Slide 38: Outlook FY 2016
Outlook FY 2016 FY 2016 Despite goodwill impairments in Q3 2016, we expect a small net profit for the full year 2016 We expect the CET1 ratio to stand at almost 12% at year-end 2016, provided no significant market distortions occur To refinance our restructuring costs, dividend payments will be susp
Slide 39: Targets 2020 of new strategy Commerzbank 4.0
Targets 2020 of new strategy Commerzbank 4.0 Current rates Rising rates Revenues (€bn) 9.8-10.3 11.3 Costs (€bn) 6.5 6.5 CIR (%) <66 ~60 Net RoTE (%) >6 >8 CET1 (%) >13 >13 Stephan Engels, CFO | London | 4 October 2016 38
Slide 40: For more information, please contact Commerzbank's IR team
For more information, please contact Commerzbank’s IR team Christoph Wortig (Head of Investor Relations) P: +49 69 136 52668 M: christoph.wortig@commerzbank.com Institutional Investors and Financial Analysts Retail Investors Michael H. Klein Florian Neumann P: +49 69 136 24522 P: +49 69 136 41367 M:
Slide 41: Disclaimer
Disclaimer This presentation contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include, inter alia, statements about Commerzbank’s beliefs and expectations and the assumptions underlying them. These statements are based on plans, estim