Stephan Engels - Chief Financial Officer

Johan Ekblom - Bank of America Merrill Lynch Britta Schmidt - Autonomous Research Benjamin Goy - Deutsche Bank Nicholas Herman - Citigroup Johannes Thormann - HSBC Guillaume Tiberghien - Exane BNP Paribas Heiner Luz - Goldman Sachs Matthew Clark - Nomura Kiri Vijayarajah - Barclays Hugo Cruz - KBW

Good morning, ladies and gentlemen, and welcome to the Commerzbank AG Conference Call. Please note that this call is being transmitted as well as recorded by audio webcast and will subsequently be made available for replay in the Internet. At this time, all participants have been placed on a listen-only mode. The floor will be opened for questions following the presentation. Let me now turn the floor over to Stephan Engels.

Good morning, ladies and gentlemen. Welcome to Commerzbank's conference call for the preliminary figures of the fourth quarter and the full year 2015. Let me start with an overview of the last year. In 2015, we made significant progress executing our strategy and growing our sound and robust Germany based business model. The visible result of our achievements is more than EUR1 billion net profits. We have improved the profitability of the Bank significantly despite operating in a challenging environment. We more than doubled the group operating profit to EUR1.9 billion, compared to EUR0.7 billion in 2014. This is the best operating result of the Bank since 2007. Our net result has increased by almost EUR800 million to EUR1.1 billion in 2015, which is the best net result in five years. The group’s annual operating return on tangible equity spends at 7.3% and the net return on tangible equity reached 4.2%. The bank earned $0.88 per share. Our core Tier 1 ratio amounts to 12% and has increased by 270 basis points in the last 12 months. The leverage ratio is at a level of 4.5%. In the light of the comfortable capital position, the board plans to propose a dividend of $0.20 per share for the full year 2015. The risk profile of Commerzbank improved materially in the last 12 months. Loan loss provisions at the group level for 2015 were reduced by almost 40% versus the previous year to EUR696 million, because of risk is at a historically lower level of 16 basis points. The default portfolio came down by more than EUR8 billion and now stands at EUR7.1 billion and was therefore more than halved in the last two years. This reduced the NPL ratio in the group to a record low of 1.6%. Today, we have one of the lowest NPL ratios in our European peer group. In our non-core asset division, we have quickly and efficiently run down the Commercial Real Estate and Ship Finance portfolio in the already below our 2016 exposure target of EUR20 billion. Our track record in improving asset quality was also positively acknowledged in the recent rating upgrade by Moody’s. On Page 2, you can see examples, how the execution of our strategy has strengthened our market position in the Core Bank. Let me highlight a few achievements. In private customers, our strategy has kicked in, we have gained around 820,000 net new clients since 2012 and increased assets under control to more than EUR300 billion. This is approved that we have regained the trust of our customers, which is as well reflected in our increased Net Promoter Score. Due to a strong management focus on digitalization, we have made a significant strategic move towards becoming a multichannel bank. In Mittelstandsbank, we have increased our loan volume by 12% since 2012, clearly outperforming the market. We have significantly improved our digital client in the phase with the introduction of new multilingual online portal and cash management app. In CEM Bank already servers now nearly 5 million customers in three countries. The award winning and most innovative bank has strengthened its lending position in mobile and transactional banking in 2015. The diversified business model of Corporates & Markets has a customer centric large international play approves to be resilient in a challenging environment. Our franchise is the number one in syndicated loans in Germany by the number of use. Page 3 summarizes the development of the key financial figures over the past three years. To sum it up, we have higher earnings, we have a much higher capital ratio and risks are significantly lower. The operating results in our core business was increased by more than 50% versus 2014 to EUR2.3 billion. As we disclosed at the beginning of the week, we have successfully implemented our new group finance architecture in Q4. The new platform significantly reduces complexity and provides a structural basis for further regulatory reporting. We are not able to consolidate our financial data on a single platform. This innovative architecture is one of the largest investments ever made by Commerzbank. The implementation has resulted in a restatement of our 2014 and 2015 financial figures, but had only a minor impact on our group in segmental number. The operating full year results of the segments in a three year comparison can be found on Page 4. In private customers, we have achieved a significant positive result swing in the last year. We managed to keep the result of CEE almost stable compared to 2014, while Mittelstandsbank and Corporates & Markets faced challenging conditions due to the persistent low rate environment and difficult markets especially in the second half of the year. I’ll give you more details on the segmental difference in the course of the presentation. When you turn to Slide 5, we can have a look at the development of the group P&L. Growth in the Core Bank and significantly reduced loss in NCA contributed to an increase of the operating results by EUR1.2 billion in the group to EUR1.9 billion in a full year comparison. The full year result according to German GAAP amounts to EUR1.7 billion. Revenue significantly improved by EUR1 billion due partially to the U.S. litigation burden of almost EUR800 million we saw in 2014, but also because of the significantly improved performance in private customers and treasury. Please note, that the net interest income in PC and Mittelstandsbank in 2015 was burdened by around EU200 million in a year-over-year comparison. This is due to the negative rate environment which burdens our deposit base. We managed to substantially mitigate these effects with the growing loan business at stable margins. The last quarter of 2015 showed an operating result of EUR376 million. As expected, it was marked by seasonally slightly lower revenues, but benefited from the current low level of loan loss provision. As envisaged, Q4 saw restructuring expenses of EUR20 million, reflecting additional efforts in order to realize existing restructuring programs earlier. Full year restructuring expenses amounted to EUR140 million. The last quarter of the year includes the DTA impairment, this led to a higher tax rate as we foresaw in Q3. The full year tax rate of 34%, included a DTA impairment and loss carried forward of 260 million, with compensating effects from temporary DTAs netting to EUR149 million burden. On Page 6, we can take a more detailed look at our cost base. We managed to keep expenses flat at a level of slightly below EUR7 billion, excluding external effects. This means that all strategic investments, for example, into digitalization and sector cost increases could be fully offset by our ongoing cost initiatives. In addition, regulatory and compliance related cost as well as the Polish deposit insurance contribution could be entirely compensated. This was accomplished by a set of efficiency measures such as the reduction of more than 900 gross FTEs in 2015. The cost base solely increased due to external burdens such as the European bank levy amounting to EUR119 million unless and FX resulting effects resulting from a weaker Euro of EUR85 million. Loan loss provisions as shown on Page 7 amounted to EUR696 million in the last year compared to EUR1.1 billion in 2014. This further material LLP decline reflects that our non-core assets came down significantly as a result of the rapidly decreasing portfolio. Furthermore it shows the high quality of our loan book in the Core Bank and the benign phase of the credit cycle in Germany. The cost of risk in the group amounts a very low level of 16 basis points. The high quality of our loan book is also reflected in the non-performing loan ratio of 1.6% in the group, which is an all-time low. The NPL book was reduced by 40% in the last year to a level of EUR7.1 billion. We continue to closely monitor the current risk trends of our energy and commodity exposure. Our oil and gas exposure is less than 1% of group’s total exposure and more than 75% of that exposure is investment grade. The exposure of around EUR3.9 billion is one of the lowest, compared to our European peers in absolute and relative terms. We view this portfolio as unproblematic, as it is well diversified with more than 90% short to medium term maturities. You can find more details regarding this portfolio on Slide 30 in the appendix. Page 8, shows that our core business is clearly on track, the operating result of the Core Bank stands at EUR2.3 for 2015, translating into an operating return on tangible equity of 12.3% and the net return on tangible equity of 9.4%. Thus, we’ve increased the net RoTE in the Core Bank by 200 basis points in a 12 months comparison. Revenues in the Core Bank are up almost EUR900 million versus 2014. Net commission income increased by more than 5% or EUR175 million, due to the successful execution of our strategy in the securities and consumer loan business and PC. Combined net interest and trading income remain stable year-on-year, despite the negative interest rates introduced by ECP. The strong increase of EUR685 million in other income reflects the burden from the U.S. legal provisions in 2014. Q4 2015, operating result was stable compared to the third quarter, thanks to a good treasury result mitigating a seasonally slower December. Private customers on Slide 9 had a very successful year 2015. The business showed visible growth in customers, asset and revenues. The operating full year result of EUR751 million is more than 65% higher than the previous year and already significantly above the EUR500 million target for 2016. While income from deposits was further burdened by the even tougher interest rate environment in the last 12 months, the increasing new mortgage volumes partially balance this out. We were able to increase the ratio of assets and premium and manage the accounts from 36 to 46 since Q4 2014, providing a recurring revenue stream. The strong contribution from securities business ended 27% growth in customer loan stroke and an increase of 11% in commission income. Our retail bank brought in 286,000 net new customers last year, standing up to around 820,000 net new clients since the end of 2012. Mittelstandsbank continues to generate solid results in the challenging interest rate environment as shown on Page 10. Revenues are lower compared to 2014, as a result of the interest rate environment and impairments on the shareholding of a tech provider. Despite a robust segment environment, we were able to grow the loan volume by 4% year-on-year. While we have seen a solid volume growth on the loan side with loan margins remaining stable, the challenge for MSV clearly comes from the persistent pressure on the deposit base due to the negative interest rates. The further decline of the deposit margin in the last year was accompanied by an increasing deposit base. In the current environment, most of the Core Banks leave the high levels of cash on the current accounts as they’re avoiding other investment alternatives. These deposits currently are dragged in the heart of fed off as basically the entire industry has lowered site deposit rates to zero. Going forward, this means that we will have to intensify the dialogue with our corporate clients, institutions and public sector clients on how we can find an investment and compensation model in order to avoid P&L burden for us caused by short term cash deposits. With a level of EUR192 million, loan loss provisions are on a very benign level due to the robust shapes outcome of German Corporate, excluding the European bank levy and Euro cost were up slightly due to higher regulatory cost. In Central and Eastern Europe, as illustrated on Page 11, the growth story continued in 2015. All party subsidiary and bank saw a strong development of loan and deposit volumes as well as an increasing number of actions in the last year, and bank gained almost 400,000 the new claims supported by the cooperation with Orange Polska. Despite two central bank rate cuts at the end of 2014 and in 2015, revenues remained stable due to a strong operating growth. In addition, the sale of the insurance business and the non-strategic participation contributed to revenues in 2015. Expenses were up compared to 2015, driven by the contribution to the Polish Bank guarantee and distressed mortgage fund. We expect result pressure in CEE in the current year as the newly introduced Polish bank takes group on profit. Furthermore the general environment for bank in Poland has become more challenging as you all know. Let’s carry on with Corporates & Markets on Page 12. While the first six months were marked by a strong performance, driven by a high client demand in favorable markets, the second half of the year was burdened by global growth concerns adding the year seasonality. Nevertheless, the segment has achieved to maintain a stable annual revenue level of close to EUR2 billion. An increase cost base due to external effect with lower annual profit of EUR610 million. The equities business showed a strong performance in 2015, in fixed income and currency, a healthy demand for FX products could not offset the lower client activity in interest rates and credit sales and trading. Corporate finance was impacted by the effects of lower interest rates on deposit fees and the slower primary deal activity. On the other hand, the unit benefited from the sale of an equity stake in Q4. Corporates & Markets has continuously invested into improvements of front-to-back efficiency over the past year, additionally a higher regulatory requirements impacted the cost base. On the following Page 13, we can have a look at the risk profile of the Core Bank. At only 1.3% of the NPL ratio in the Core Bank stands at an all-time low. Cost of risk in the Core Bank was reduced significantly from 20 basis points in 2013 to a single digit level of currently 9 basis points. These figures stand out even a European peer comparison. They proved the high quality of our predominantly German loan book with more than 80% investment grade ratings and the benign face of the credit cycle. We show the P&L development of our non-core asset unit on Slide 14. The segments more than half the losses compared to previous year. The operating year loss amounted to EUR401 million. We managed to significantly improve the result on all levels as revenues increased, loan loss provisions came down and the cost base declined. The negative impact from the impairment on our exposure of almost EUR200 million was more than offset by valuation gains and positive effects from the restructuring of funding. Although, we clearly overachieved all asset runs on targets that we had set out at the end of 2012, we never less the past of a value preserving run down. With regards to our EUR3 billion operating loss guidance from the years2013 to 2016, we have so far consumed around EUR2.3 billion. This means that we are on a good track to beat our loss budget projects in NCA. The trend is underpinned as well by the total capital relief resulting from the run down. The freed up capital due to the reduction of RWS minus the incurred P&L loss stands at EUR0.4 billion for the year 2015. This adds up to more than EUR0.8 billion capital release since the end of 2012. Excluding the negative Basel 3, the total net capital relief even amount to EUR1.6 billion. In Q4, revenues of EUR35 million benefited only to a limited extend from volatile valuation effect. Slide 15 illustrates the tremendous run down achievements in the NCA in the last years. Combined exposure at default of Commercial Real Estate and Ship Finance was reduced by 62% in the last two years and is now at EUR19 billion. This means that we have achieved our EUR20 billion asset reduction target for 2016, one year earlier than planned. Out of the EUR366 million LLPs for NCA in 2015, EUR311 million spent from Ship Finance. This figure means two things first Commercial Real Estate has become a normal portfolio with a very sound asset quality. Second, provisioning for Ship Finance has been almost half compared to 2014, in line with a portfolio reduction. Commercial Real Estate and Ship Finance has been massively de-risks in the last year via early repayments of loans, portfolio size and maturities. Non-performing loans in these division shrank by 80% since 2013 and now stand at reminding EUR1 billion for each unit. At the same time we have increased the LLP coverage ratio excluding the collateral in Ship Finance from 41% to 66% as of Q4 2015. Page 16 highlights the strong reduction of our risk-weighted assets predominantly in the fourth quarter 2015. RWAs decreased by around EUR16 billion to less than EUR200 billion in Q4 lifting our fully phased in Core Tier 1 ratio by 90 basis points. The continued asset run down in NCA lower credit RWAs by EUR5.2 billion and the replacement of unwinded securitization of corporate loans portfolios had a relieving effect of EUR1.4 billion. Furthermore, the application of revised treatment of the defined been benefit pension fund exposure by EBA was a material driver for RWA rundown, the implementation in line with peer practice lead to a credit risk reduction of EUR5.3 billion quarter-on-quarter. On the market risks side, we saw RWA reduction of EUR3.1 billion. The weaker euro in the fourth quarter resulted in higher RWA of around EUR1 billion. On Page 17, you can see the material increase of four fully phased Core Tier 1 ratio by 120 basis points to 12% in Q4. As elaborated, this is mainly due to strong RWA reduction which accounts on increase of 90 basis points. In addition, the buildup of regulatory capital, further increase the ratio by 30 basis points. The higher capital base predominantly stems from the retained earnings of Q4 as well as the positive IRB shortfall effects. As already envisaged with our Q3 figures, our Core Tier 1 ratio includes a dividend accrual of EUR0.20 per share for full year 2015. Positive development of the capital ratio is a visible proof point of our success and strength in income aspect. We have increased our Core Tier 1 fully loaded ratio by 270 basis points since year ended 2014. We are now comfortably above all regulatory hurdles and have clearly moved up to the midfield of European peer table. As stated several times in the past, we do not expect a linear development of the Core Tier 1 ratio going forward. On Slide 18, we show how our current capital ratio compares with the SREP requirement by ECP. Our SREP hurdle stands at 10.25%, which gives us a comfortable buffer of 325 basis points reflecting our Core Tier 1 phase in ratio of 13.5% as of January 2016. Including and this estimated O-SII or D-SIB buffer of 150 basis points, our fully phased SREP requirement as of January 2019 would stand at 11.75%. This means that our current Core Tier 1 fully phased in ratio is already above the estimated future requirement. This should rate up for our operating performance and financial results in 2015. Turning to Page 19, I would now like to give you a brief update on our plans to sharpen the profile of the group. These realignments affect three areas, asset transfer from NCA to the Core Bank, reshaping of the segment others and consolidation and capital allocation of the operating segments. They will come into effect as of Q1 2016. First, we will set the focus in our non-core unit on the more complex assets. Let me remind you, we managed to rundown NCA by almost EUR100 billion since the end of 2012 to remain exposure EUR63 million. In the same time, we have always over delivered with regards to our loss guidance and to free up of capital. Therefore management is in the final stages of deciding that this is the right point in time to right size our non-core units. We plan to transfer assets with low credit risk and manageable P&L volatility to the Core Bank. The remaining more complex assets of around EUR18 billion will remain in our non-core segment, which will be labeled Asset & Capital Recovery unit ACR going forward. This is less than 4% of the group’s total assets. The segment will be financially ring-fenced with sufficiently equity to cover losses even under severe stress scenarios. Second, we will reshape the segment others and consolidation which means that certain P&L items will be transferred to the operating segment. This will increase the management involvement of the business segment. Undisputable group items for example like expenses to comply with company law and Purchase Price Accounting effect regarding from the takeover of Polish Bank will remain in the corporate center. The positive P&L bottom-line impact will gradually face in until 2019 however market-driven revenue volatility from Treasury will remain. Further and finally, we will alter our capital steering approach and adjusted to Basel 3 fully loaded regulatory capital. This means the divisional returns on the Core Bank are calculated on 11% Basel 3 RWAs. On Slide 20, we provide you with more detail on the criteria for the upcoming asset segmentation between ACR and the Core Bank. More than two thirds of NCA assets qualified for transfer to Core Bank. These are exclusively performing high quality and low risk loans or bonds. Of the remaining EUR10 billion exposure at the part of the Commercial Real Estate, the volume of around EUR7 billion of predominantly German loans will be transferred to Core Bank. As the Ship Finance portfolio is the most challenging than Commercial Real Estate, only around EUR3 billion of these assets will go to the core bank. These loans have been performing throughout the crisis and are high-quality. Further more liquid public finance funds will be managed by Treasury. This criteria and applies to roughly EUR36 billion of the public finance portfolio. Page 21 highlights how we plan to ring fence the remaining asset volume and ACR offer around EUR18 billion. For commercial real estate and shipping, we expect that combined rundown to a low single digit billion exposure by 2019. We expected cumulative operating P&L loss in the range of EUR750 million to EUR815 million resulting from the rundown in the four years from 2016 to 2019, thereafter only a minor exposure will remain in Commercial Real Estate and Ship Finance. ACR will carry around EUR23 billion of risk-weighted assets which will be prudently under lead with 15% of capital. This means that the exposure of default of ACR will have an equity allocation of almost 20%. This provides a sufficient cushion even under severe stress scenarios including substantial NPA migrations and collateral write-downs. The new segment structure will become effective with Q1 2016. We will provide you with restated figures for the final segment breakdown of 2015 by the end of March. Slide 22, provides you with an update on where we stand with regards to our 2016 targets. Over the past three years, the bank has significantly improved returns on a substantially increased capital base and sound risk profiles. Our Core Tier 1 ratio of 12% and our leveraged ratio of 4.5% are clearly above all current regulatory hurdles. Our asset rundown targets for NCA were upset at several times since 2012, due to our successful track record in managing these portfolios. Profitability in the Core Bank has been substantially improved showing a net ROE of 8.1% in 2015. Please keep in mind that this was achieved despite a capital build up in the Core Bank of 50% or EUR7 billion since 2012. We continue to face severe headwinds from the negative interest rate and the regulatory environment. This is the reason why our Core Bank targets of net ROE of more than 10% and of course income ratio of 60% are currently not within reach. Please keep in mind that at the time we had set our targets in 2012, our assumptions where interest rates and GDP growth did not envisage the negative interest rate and low growth environment we have seen in the last three years. Let’s conclude with the outlook for 2016 on Page 23. Even though we face an overall challenging macroeconomic and uncertain geopolitical environment, I would like to give you some guidance on our expectations for 2016. We pursue our strategy and aim to further increase market share in our core bank divisions. We aim to keep our cost base stable except for additional external burdens. We expect a moderate increase in loan loss provisions due to a lower release from impaired loans and overall we expect a slight increase in net profit. Ladies and gentlemen thank you for your attention and I am now looking forward to your questions.

[Operator Instructions] And the first question comes from Johan Ekblom from Bank of America Merrill Lynch. And you have your question please.

Thank you very much. Just two areas really, you mentioned that with negative rates you have to work even harder to maintain margins and I guess expectations for that to ECB will go even further into negative territory. In many other countries where we have seen negative rates longer time, larger corporate are already paying negative rates, institutional clients are certainly paying negative rates. From your comments, it seems like there is not on the table, can you say what is that, what would it take for you to more aggressively reprice deposits into negative territory on the large corporate and institutional side, And then if not you know what other options are there that you can take. And then the second area is just on the capital, I think you know clearly a very strong performance in the quarter, you’ve raised the rate that you don’t see it being a liner development, but what pieces are we missing in terms of I think in the past, you’ve state that operational risk, you know what’s the timing, any update on the expected impact from that? And then related as well, I am bit surprised is as high it is relative to what we’ve seen from some other European banks, given the credit quality, the quality of the assets that you highlight, do you think this is related to the large non-core we’ve seen historically, should we expect that to come down going forward or is it 10, 25 what should assume sort of indefinitely? Thank you.

Yeah, let’s start with your question on the negative interest rates. Effectively we are already charging negative interest rates for institutional and large corporate. What we are currently seeing is despite this effect especially on our let’s say bigger Mittelstands clients that they are just assembling additional cash on our transactional accounts. And given the current interest rate environment and already taking into account the assumption that this will get worse rather than better, this is exactly the reason why we will now widen our efforts here to also our middle Mittelstands clients and discuss with them how we can - lets’ put it this way share the burden. On capital, indeed there has been ongoing discussion in the market about the possible adjustments of operating risk RWAs, I think that is still a certain level of discussion but nothing so far that I can report in terms of that I would know a date of an amount. On the SREP, I do agree basically with your comment. I can only guess to a certain extend how you can make these number fit in comparison with other countries. My guess is that partly it is reflective our relation good capital position, so if you look over - in the overall market, everybody has about 300 basis points of SREP requirement which is true as this well we are even slightly above that. So if you have a lot of capital, you probably get a higher hurdle is my impression. Secondly, I am not totally sure how these process is since it’s been the first time and partly also steams from 2014 yearend figure whether and how these processes for the - in the first round so to speak really are comparable between countries. And at the end of the day, I think the simple fact is we are well above the current phase in hurdle and even if you take into account a possible decent additional at a stable SREP level, we are already above the 2019 requirements fully loaded as per today. So in that respect, I think we are in a very comfortable position.

And just on that the 1.5%, on what basis, I mean is that your best guess or is that where your discussions with the regulator has been or?

I would label that as being our consultative guess.

Perfect, thank you very much.

The next question comes from Britta Schmidt from Autonomous Research. Please your line is open now.

Yeah. Hi there, good morning. I ask two questions please. One is relating to some press comments recently about potentially cutting back some of our financial institutions business in the Mittelstand areas, can you confirm that you cut some plans that you chance you exposure and can you help us a little bit, is this any profit impact from such action? And the second one is, can you give us a little bit more of a quantitative here is to how low interest rates impact in net interest income of the Core Bank, could you help with any sort of ideas net interest incomes and activities to let’s say 10 basis point change?

On the discussion - on the financial institutions indeed following our focus on trade finance, we have a very high number of correspondent banks throughout the world, we are currently going through refocusing in here and we’ll reduce this number, also drive by obviously cost of compliance which for some countries obviously is a burden. And in that context, I would guess that the impact will probably be more limited given that the business will probably be distributed over a lower number banks rather than losing the business completely. With respect to your interest rate sensitivity, I guess that this is a little bit too easy as a concept given that a number of factor play a larger role here starting from the deposit levels over to our mitigating measure. I’ve given you the number that we have seen for 2015 which was roughly 200 million for MSV and PC. And yeah that is as much as I can say.

Okay, thank you.

And the next question comes from Benjamin Goy from Deutsche Bank. And you have your question please.

Yes, good morning. Three questions please from my side. So as again of your SREP and your domestic buffer, normally we’ve seen the banks in Europe have roughly 100 basis points of management buffer on top, now you say your SREPs might look a bit high than how do you think about a management buffer? And is actually 100 basis points required or might be bit less enough. The second one also coming back to net interest income just in this environment specifically from Mittelstandsbank where you grow your loan book significantly in 2014, now ‘15 was a big slower, how do you think about in 2016 and would it be one major mitigation measure with respect to margin pressure? And then largely would just be interested in your take on capital markets and then funding markets. And more specifically on Slide 31, will you give us some numbers of compounding activities, is it year-to-date or is it since first of December? Thank you.

Yeah, Benjamin, on the SREP and the management buffer, again if we look at the numbers and again the German deposit is a conservative assumption from our side. We are already having a management buffer so to speak of 25 basis points above the 2019 as per today. Is that enough? I don’t think so, so it will grow overtime and how SREP will develop is something I don’t really from today’s perspective. But one thing is for sure, since we have a buffer already now above the 2019 requirements, I am not too concern that I will get to a reasonable management buffer by the end or the beginning of 2019. And in Mittelstandsbank, clearly we have seen a very successful loan growth in Mittelstandsbank since 2012 and as we have repeatedly said at a stable margins. As highlighted, the pressure really is on the deposit business right now and that’s where we will have to focus our management attention to reduce the burden. If the current - whether the current environment really provides opportunity to grow rapidly, I would from today’s perspective not necessarily see so nevertheless we are always client focused in Mittelstandsbank. And as I said I think we are from pretty successful of that. Capital markets, I think what we see currently on stock markets is over exaggerating a possible concerns to amazing extend. Nevertheless, we don’t see any limitations in terms of funding nor do we have any real issues there. What you see on Page 31 is year-to-date December capital market funding activities and I think we are well set now for the time being

Okay, thank you very much.

The next question comes from Nicholas Herman from Citigroup. Maybe have your question please.

Yes, good morning. Thank you taking my questions. I have three questions, please. The first is on public finance. So I saw on - I can't remember what slide it was but I think it was on the ACR, it said that you are breakeven by 2019 there. In terms of the public finance that you are transferring into the Core Bank, could you please quantify the drag from that, please? And, as part of that as well, I also see that the risk density, RWA density, on public finance assets that are being transferred into the ACR is about 120%. What assets are these, please? My second question is then on your regulatory capital for your divisions. You said that you allocate regulatory capital at 11% of RWA but your minimum requirement could be up to 11.75%. Could you explain that, please? And then the final question is on dividends. Now that you have instigated a dividend, will you aim for a progressive dividend policy? Thank you very much.

Sorry, that was huge number, of course I already started talking well was - I hopefully I get them all together. If we start with public finance in detail, what we see going forward is total majority rundown which will focus of using these papers in the treasure for positive liquidity and cover full purposes in that context but so very well that purposes. With respect to the - what’s the next question, RWA density on ACR these assets are mainly long term - very long term assets, public finance infrastructure and they are in let’s say more complicated hedging structure, so the hedging part as well as the long maturity makes them RWA heavy. From a credit risk point view, they are of no concern. Then the 11% allocation of capital versus the 11.75, the 11.75 is a 2019 requirement, the 11% is what we start with the segments in 2016 and I would envisage that we will adjust segmental capital requirements as we go forward. And keep in mind ACR will have a 15% capital requirement. The last one was -

On dividends.

Dividends, sorry. Yeah, we set throughout ‘15 that we will start paying the dividend and that’s what we will purpose to the AGM and we have also said that the plan is to increase our payout ratio midterm to 40%. And I always said midterm is not next year, but again I think the positive movement in 2015 definitely allows us to stick to our midterm target.

Thank you very much, that’s very helpful.

The next question comes from Johannes Thormann from HSBC. Please your line is open now.

Good morning, everybody. Three questions. First of all, regarding your cost challenge, 2019 in others & consolidation is probably a bit far out. What can you say? Are there any measures in the short term? Also probably for the investment bank where we had basically no rundown of costs in the fourth quarter despite those weaker revenues? That's my first question. Secondly, in general, on the investment bank as well on Group level, could you provide a breakdown of net interest income for the full year and trading result? And last, but not least, on your 2016 guidance you said net profit will be slightly up. Is this - versus 2015, is this just due to lower taxes or should we also expect a better pretax profit in 2016? Thank you.

Yeah, Johannes, maybe I start with the easiest question first, the breakout between NII and NVI is for the investment back this make any sense given the accounting treatment between these things that’s why we give the numbers only on a consolidated basis which probably is the answer you have heard from me before for the last I am not sure six or seven quarters. With respect to cost challenges, in fact we do have as always and as the whole industry across challenge and I think especially Corporates & Markets be very successful over the last three or four years in producing basically a 2 billion revenue stream per year and still maintaining a reasonable profitability. They obviously are subject to a number of these regulatory initiatives that’s why we have ongoing efforts to adjust the business model here and you can also see that at least partly in some of the restructuring charges which we have booked in the segments. So that is an ongoing exercise. And as you know we believe in that constant efficiency and effectiveness approach rather than announcing big onetime of programs, so I guess that would really go on. With respect to other and consolidation, the loss guidance should be a EUR100 million to EUR150 million per quarter for next year and it should be running down going forward. But I guess once we have done all the restatement and reshape the segmental reporting as per Q1, we will again a discussion on that one. Indeed the guidance on the net profit for 2016 is in comparison to 2015 obviously and I think in general your assumptions given the current interest rate environment certain expectations for the development of our LOPs do exactly indicate what you’ve said.

So let me rephrase my question there. What is the expected tax rate for - or guidance range for 2016? And secondly, just I know maybe it makes sense on the investment bank not to break down trading and net interest income, but surely the reporting standards are different for the time being. And I know a bunch of investors who really would appreciate this breakdown, at least on Group level. Thank you.

Again the tax rate and that remains unchanged, also we expect our tax rate normally to be in the range between 20% and 25%. And if you look through our appendences, you can see the break out of NII and NDI for all segments except for the reasons discussed for Corporates & Markets.

Okay, thank you.

The next question comes from Guillaume Tiberghien from Exane. Maybe ask your question please.

Yes, good morning. The first question relates to the NCA assets that you will transfer to the core bank. I think the question was asked earlier but I didn't quite understand whether you answered or not, but what is the negative P&L attached to these non-core assets transferred to the core bank? And the second question is just a clarification on the comment you made on the dividend. You said that you had suggested that next year would not be the year where payout policy can normalize. But, given that you're now at 12%, can it normalize already in 2016? Or is it still unrealistic to expect normalization of the payout in 2016?

Sorry, I probably I didn’t answer the Core Bank transfer P&L question earlier. Indeed the assets that we move from NCA to the Core Bank do not have a negative P&L. So dividend policy is also what I said is we have paid EUR0.20 this year and want to increase midterm to 40% and in that context since 2015 was the starting point 2016 probably is not midterm is what I said what exactly we will do I think we will follow the results throughout the year and then see how we can adjust it. But in generally you are right, the current very comfortable capital position at least is not hindering us on following our - pursuing our midterm target.

Thank you. Can I just ask for clarification also on the capital comment you made earlier that development should not be expect it to be linear? In the past when you commented like that you said, it doesn't mean we would expect capital to go down. So the question is, is there anything that you know of now that would suggest that we could have capital going down in Q1 or at some point in 2016?

Again the comment was driven by the very fact that also in the capital position there are number of items which were influenced by mark-to-market of development, so that is where the non-linear expectation comment predominantly spends from, as per today, I would necessarily see anything that would mean that we will see the ratio going down in the quarters to come, but again looking at the still very dynamic regulatory environment and also the market environment as a prudency of or you would never exclude something like that. Again, but it’s not my expectation.

Very clear. Thank you.

The next question comes from Heiner Luz from Goldman Sachs. Maybe have your question please.

Hello, yeah. If you can - my last question has been answered. I just want to quickly ask on the outlook. You're basically saying costs stable, you're going to continue to win market share, therefore volumes, and then with a slightly higher provisions coming from the very low level, so you have a slight increase. Well, if you look further out to 2017, just looking at forward curves so it's probably relatively unlikely for the rates much to change. And is there further down the line that you would expect substantial cost savings somewhere from other revenue initiatives? Or is the trend you're modeling for 2016 something that's reasonable to forecast further to 2017 and 2018, so basically very benign profit growth but rather stable earnings?

In general terms, I do agree but I wouldn’t see the interest rate environment moving to the better for the foreseeable future. I think the more realistic expectation is that will even get more burdening that it has been for the last years. Secondly as a general comments, I think our strategy for the last two or three years in that regard has to prove to be the right one both on trying to compensate the interest rate environment by growth and on the other hand trying to reshape the cost bases on the more permanent and continues approach rather than running bigger programs than put everything up in question. And in that context, I would expect more proper execution of our strategy as you have seen it so far rather than any terrific onetime effect both on revenues as well as on cost - revenues as I said, growth was one of the part of the answer and addressing the deposit business is obviously another focus point for the time going forward.

Okay. Thank you very much.

The next question comes from Matthew Clark from Nomura. Please your line is open now.

Hi, good morning. Just want to come back to net interest income. I'm afraid I can't find the Group net interest income figure anywhere in either the press release or in the slides. So could you either point me to the specific page that it's on or read out what the Group net interest income figure was for the first quarter, the second quarter, the third quarter and the fourth quarter? Thanks.

May I refer you because we have only limited left. May I refer you to the IR guys after the call, they will take up the point with you.

Okay, thank you.

Thank you.

And the next question comes from Kiri Vijayarajah from Barclays. Maybe have your question please.

Yes, good morning, guys. On the new ACR division you've got a budget for an operating loss of EUR750 million to EUR850 million. What's the assumption there in terms of natural runoff versus accelerated sales? Is there any room in that budget for you to maybe offload assets faster than just simply waiting for natural runoff? I know in the last couple of years you've done well in terms of offloading certain commercial real estate portfolios. And secondly, just a real point of clarification on your oil and gas exposure, if I look at the pie, are you saying that the reserve based lending in that is zero or close to zero? And if it isn't could we have the number, please? Thanks.

On the ACR, given that the portfolio that we then have in ACR is indeed the more complex part, I would think that you would more expect a relatively linier pop out for the public finance part, so that will develop rather slow. And as I’ve said for Commercial Real Estate and Shipping, we expect a low single digit exposure at the end of ‘19. As in the past especially on Commercial Real Estate and Shipping that would be a very active approach and in that sense that will hopefully get us to the single digit number. On the reserve lending, my understanding is that indeed if I at least interpret your question right, we do not do real reserve lending here.

Okay, that’s clear. Thank you.

And the last question comes from Hugo Cruz from KBW. Maybe have your question please.

Hi, thank you. I just wanted to have your thoughts on volume growth in private - the loans in the private customers in the Mittelstandsbank, if you have any guidance there it will be helpful? Thank you.

Yeah, the volume growth, the Mittelstandsbank obviously depends a little bit on what will happen on the macroeconomic environment in Germany and in that sense I think we currently do not expect too much growth there. But clearly is we want to at least growth with the market but as I have mentioned before, the focus point is more on the deposit business right now.

And in private customers, where it's been growing very fast?

Private customers, I still do see a lot of market opportunity for private clients, those on the real estate mortgage market as well as on the consumer loan business, so that I would definitely see also given the competitive situation in Germany that we do have a pretty unique market opportunity.

Thank you.

Okay, ladies and gentlemen, thank you very much. And I hope to hear from you all in our Q1 call. Thank you.