Stephan Engels - Chief Financial Officer

Nicholas Herman - Citi Johannes Thormann - HSBC Britta Schmidt - Autonomous Riccardo Rovere - Mediobanca Anke Reingen - RBC

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 in a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to Stephan Engels.

Good morning, ladies and gentlemen. Welcome to Commerzbank's third quarter 2017 conference call. The transformation of Commerzbank continues. Over the last three months, we have achieved further tangible steps in implementing Commerzbank 4.0. To start with, in the middle of August, we successfully terminated our consumer finance joint venture and transferred around €3.5 billion of loans to Commerzbank's balance sheet. We have already discussed the technical aspects. However, this important milestone allows us to grow the business on our own fully digitalized platform. After the branch rollout online and point of sale offerings, our next steps towards the tripling of new sales volumes by 2020. Our aim is for book in excess of €10 billion by that date. The clear focus of Commerzbank 4.0 is to continue to grow our customer centric business model. Customer growth leads to both volume and ultimately revenue growth. We have gained almost 600,000 net new customers in PSBC since October 2016. Recent quarter show that the net new customer acquisition results into higher assets under control. Since the beginning of the year, as is under control has increased by €28 billion of which €9 billion were added in Q3. End of September, this execution indicator stands at €366 billion well above our 2017 year-end target. These two key metrics in PSBC Germany are ahead of plan. In Corporate Clients, the strategic realignment continues. The segment has successfully on boarded more than 4,100 net new corporates since the beginning of 2016 and has achieved loan growth quarter-on-quarter. Digitization and our restructuring program remain well on track. By way of example over the summer, we have operationalized the framework restructuring agreement across the organization. This means that the execution of our cost measures is well on track. Thanks to our growth strategy and market leading position within the German Mittelstand, underlying revenue development and both PSBC and Corporate Clients has been stable despite Q3 being seasonally slower. Supported by exceptional revenue items of €502 million, this is the basis for strong Q3 revenues of €2.5 billion. With costs constant at €1.7 billion, the Q3 operating profit amounts to €629 million and the net result to €472 million. Furthermore, one key highlight is our balance sheet strength. As of Q3, our fully loaded Core Tier 1 ratio stands at 13.5% up 50 basis points quarter-on-quarter and up 170 basis points since Q3 2016. The leverage ratio has increased to comfortable 4.7%. Our healthy risk profile benefits from a sound German macro environment, the group NPL ratio remained at European benchmark low 1.5%. Q3 LLP amount €268 million and include €66 million of ACR provisions which are almost exclusively driven by shipping. We continue to deliver on our committed rundown with a quarter-on-quarter ship finance reduction of €600 million, which once again includes successful portfolio transactions. As highlighted in the introduction, the clear focus of Commerzbank 4.0 is to grow with our customer oriented business model. We believe Slide 2 is prove that we have chosen our strategy for good reason. Over the last years, we have demonstrated that generating growth in the German retail market is possible based on high customer satisfaction, our well-designed product offering and the ongoing structural change. Strong and since the launch Commerzbank 4.0 accelerated net new customer growth leads to higher securities and learned volumes in German retail banking. These have grown by 10% and 7% respectively since the beginning of the year. Most importantly, customer growth net under result into higher volumes but ultimately higher revenues. Year-to-date, we have generated about €100 million additional revenues as a result of higher volumes. These revenues have almost completely offset the drag from negative interest rates and associated margin compression in a competitive German market. The next Slides provide you an update on our key execution indicators. Let me focus on the group in particular. We are undergoing a radical change to renew the bank. End-to-end digitalization and automation of processes are central to this effort. Our compass approach and agile working methods are designed to significantly show our rollout cycles. Here we follow the fail fast principle simply put we quickly reject failing ideas and allocate those resources to where they can better to develop in our target. Having said that, the digitalization ratio now stands at 43% in line with our run up expectations that do not follow a linear path. After a successful ramp up, the digitization percentage of total IT spend has come down in the second half as guided and now stands at the targeted 50%. As of Q3, FTEs are already below the 2017 year-end target, up slightly higher than in Q2. This temporary increase is due to headcount associated with the Onvista acquisition and the consumer finance joint venture both totaling more than 200. Let me now present our financial result and start with Slide 4. As already specified in our IR release in October, Q3 has been supported by one of totaling €502 million. €225 million stem from property sales gains and €89 million from the sale of our stake in Concardis, which was reflected in capital already. Hedging and valuation adjustments stand at €28 million in Q3. The final allocation of the consumer finance one of totaling €160 million has been slightly amended. Net of €16 million purchase price location effect in Q3, €148 million has been booked to PSBC and €12 million to others and consolidation. The €12 million are due to the close out effect of the form of funding line provided to the joint venture. Slide 5 shows our key financial figures at a glance. But let me directly move to Slide 6, which provides a segmental breakdown of the operating results. For the better tracking of clean revenues, we visualize them quarterly. Despite slow activity over the summer months, PSBC and Corporate Clients achieve an underlying operating results of €375 million. Including exceptional items of €247 million, total operating profit of the two segments came in at €622 million. ACR benefited from lower LLPs while ongoing portfolio reductions has impacted NII. Others & Consolidation end of the quarter with an operating result of plus €107 million mainly driven by property sales gains. Adjusted for this one of our quarterly run rate guidance continues to hold true. Slide 7 shows the development of the Group P&L. Before talking about the quarterly P&L, I would like to say a few words on underlying revenue trends. We have managed a stable clean revenue development in PSBC and Corporate Clients thanks to our successful growth path. Additional growth has almost offset burns from negative interest rates versus Q3 last year. However, the consumer finance transformation, lower contributions from financial institutions and the accelerated portfolio rundown and ACR have shown their impact. Also underlying revenues no longer benefit from the significant revaluation effects at Commerz Real and the higher treasury result a year ago. Coming to the quarterly P&L. Strong reported revenues of €2.5 billion form the basis for an operating profit of €629 million, including IFRS taxes of €135 million and minorities of €22 million, the net result stands at €472 million four Q3. With this, the net result for the first nine months of 2017 has returned to positive €66 million despite the €807 million restructuring charge book back in Q2. Slide 8 provides you with an update on our customization in the known format. Completely in line with our planned and provided guidance of full year cost below seven €1.1 billion, Group expenses stand at €5.3 billion after the first nine months of which Q3 accounts for stable €1.7 billion. Year-on-year, lower group expenses have been achieved through cost savings of €156 million. Our stringent cost control includes sufficient management of operating expenses and planned FTE reductions. While we have seen a slight FTE increase quarter-on-quarter mainly due to the Onvista acquisition and the joint venture terminations, Group FTEs have to increase by cross 1,100 year-on-year including internal sourcing units. Our sourcing efforts have a transitional impact on FTEs for the following reasons. Positions continue to be filled in our consolidated servicing units however current positions are only really reduced with the time back to allow for a smooth transfer of processes and know how, sourcing initiatives lead to significant cost savings per FTE. Investments in digitization, strengthening of the compliance function, as well as the external burdens including your bank levy in Poland together at €96 million in additional costs. Our cost saving effort more than compensate for this. Moving to Slide 9 and 10. Q3 loan loss provisions of €168 million are on the level of the previous quarter and well in line with the year guidance of around €800 million for the Group. PSBC and Corporate Clients accounts for €102 million. This generally reflects the benign state of the German economy and the high quality of our loan book. Slightly higher LLPs and PSBC are mainly due to mBank's corporate portfolio. Nevertheless, cost of risk of the two operating segments remain at around 10 basis points. Provisions for ACR standard €66 million driven by Ship Finance, however well below levels of the last few quarters. Group non-performing loans remain at an historical low of €6.5 billion of which €1.4 billion stemmed from ACR Ship Finance. This will come down with final closing of portfolio sales by year end. The slight 100 million increase in PSBC since Q2 is due to NPLs taking over from the Consumer Finance JV. Let me add in this context that the recently published ECB NPL guidance addresses the risk of high NPLs. With Commerzbank's benchmark low NPL ratio of 1.5% this is not a concern for me. Let's carry on with the operating segment and start with private and small business customers on the next two Slides. PSBC continues its growth track ahead of plan to start with net new customers' acquisitions. In Q3, we continued our control of net new customer acquisition growth all by the season to the slower pace and the kick start in H1. This gives us the opportunity to integrate new customers into our franchise. Year-to-date, we have acquired 450,000 net new customers of which 65,000 joint Commerzbank in Q3. Comdirect has contributed strongly, as nationwide broadcasting campaigns do have a lower impact over the summer months, we have focused on the spent effective online offering of Comdirect. Coming to assets under control in Germany. Major revenue drivers, securities and loan volumes have increased by more than 10% and 7% respectively since the beginning of the year. Let me highlight that the loan increase does not include the transfer of instrument loans as the funding provided to the joint venture was included in previous calculations. We have benefited from further customer driven inflows in securities contributing 10 of the additional €17 million year-to-date. The remaining €7 billion comes from a strong market performing showing the quality of our broad wealth management offerings. Our decision to manage customer securities volumes preferably in premium custody and managed accounts rather than in transactional structures have clearly had a positive impact here. Also, the mortgage product remained strong. Year-on-year, the German mortgage book has increased by €5 billion and totaled €63 billion end of September. These trends do have a positive impact on our income statement compared to Q3 2016, underlying revenues from growth have offset ongoing burns from negative interest rates and associated lower margins in the German retail market. To address the letter, we maintain our strict origination standards. The year-on-year clean revenue transition has to be seen in the light of two items I want to highlight. Firstly, Q3 2016 has benefited from significant real estate revaluation in Commerz Real. Secondly, the migration of the consumer finance business and our own balance sheet has shown its impact in Q3 2017. While in the past, we have received upfront fees booked in commission income for successfully originating loans to the joint venture, we now earn net interest income from the existing portfolio. As the book was transferred in the middle of the quarter, interest income for the half of the quarter is included in our underlying revenues. Finally, in this regard, year-to-date new sales volume standard only €1.4 billion due to the transitory sales impact. Our investment into accelerated consumer growth continues to have an impact on commission income. Incentive fees for customer acquisitions have amounted to €18 million in Q3, €10 million higher than in Q3 2016. To around [ph] at PSBC, let me comment on the revenue performance of our two digital apps mBank and Comdirect. mBank's proven growth track continuous with further revenue growth driven by both net interest and net commission income. NII benefited once again from further improvement of net interest margins with good new sales of consumer lending all by below and even stronger Q2. Comdirect has maintained its momentum and growing assets under management which now stand at €88 billion. The continuing growth in securities accounts and corresponding trading activities has more than compensated for lower interest income where this in the nine months result last year, including €238 million exceptional revenue items allocated to the segment PSBC has achieved an operating profit of €381 million in Q3. Slide 13 and 14 give an update on Corporate Clients, while the strategic realignment continues, the segment has delivered a stable operating profit of €241 million, despite some seasonality. Our segmental targets remain clear and the deliveries on track as well as improving our RWA efficiency, we will continue to grow our customer base as one major cornerstone and strengthening our position as the number one bank for Corporates in Germany. While RWA efficiency standard our full year target of 3.7%, we have on boarded more than 4100 net new corporate since January 2016. On top of that, we are making good progress with our strategic initiative to establish an industry sector coverage approach. With a new internal set up now in place, we will further leverage our capital markets and sector expertise. Taking a closer look at revenues for business lines reveals that International Corporates has expanded income from both a loan business and capital market products quarter-on-quarter. Better stand has produced a stable performance based on market leading position and almost unchanged quarter-on-quarter development proves that financial institutions revenues and bottomed out after decision to streamline the corresponding banks network. Client demand for EMC products remains healthy however reduced market volatility has an impact on the Q-and-Q revenue development. As shown into Slide 15, we have continued to actively mitigate the negative interest rate environment. As I said in the past, our approach differs by segment led by the strong mortgage business in Germany, loan volume growth in PSBC has outpaced the German market. The increase in PSBC deposit volumes results from net new customer acquisition. In Corporate Clients, active mitigation measures are just as high on agenda. Over the last quarter we have successfully reduced the deposit base by €5 billion leading to learn to deposit ratio of 104%. On top of that we have almost doubled our income from deposit fees compared to the 5 to the first nine months of last year. With these measures in place additional front deposit margins in Corporate Clients have been stopped. On the loan side, over the loan volumes have grown by net €1 billion mainly by the international corporate business. Finally, on segments, please turn to Page 16 to have a look at ACR. The value preserving rundown of portfolios continues across sub-segments. To highlight positive after X-effects are only account for €300 million of the more than 30% year-to-date rundown of the shipping book, end of September, the ACR Ship Finance portfolio including NPLs stands at €3.3 billion, €1.5 billion below year end and €600 million below Q2. This means that we are fully on track to reduce the portfolio to around €3 billion by year-end. As indicated in the last call we use every opportunity including portfolio transactions to accelerate the rundown of exposure on the basis of well covered book. And important effect of this rundown is that the operating profit for the group diminishes over time compared to the first months, first nine months 2016 the operating losses have been reduced by a €144 million. Continuing with RWAs and core Tier 1 on the next two Slides. At the end of September, we had €177 billion group RWAs, €2 billion less than in the second quarter. This confirms our guidance giving during the Q2 call for stable near-term RWA development. Drilling a bit deeper RWA trends underscore our strategic reallocation of capital into higher yielding growth initiatives. Intended loan growth in German retail, mBank and Corporate Clients has led to higher credit RWAs. On a net basis RWA has been more than compensated for by FX effects amounting to €1.3 billion lower derivative exposures and our active portfolio management including ACR portfolio reductions. After a few quarters of decreasing of risk RWAs mainly new and increased last events reflected in the industry wide database of cost €2.2 billion higher RWAs. In markets with low volatility market risk RWAs have decrease by €1.7 billion quarter-on-quarter, this is the lowest level since the introduction of Basel III. Slide 18, increase of fully loaded core Tier 1 ratio to 13.5%. Well as lower RWAs explained 10 out of the 50 basis points increase since the end of Q2, 40 basis points down from higher capital. The main driver has been the net result in Q3. And addition capital has been increased by a fewer deductions and the lower expected loss shortfall. Ladies and gentlemen let me wrap up the quarter and provide you with a summary of our objectives and expectations for 2017 on Page 19. Reflecting a major part of our first transformational year we have progress step by step with the implementation of Commerzbank 4.0 fully in line with our plan. Our strategic agenda which encompasses digital life in 80% of the bank's relevant processes increasing efficiencies and growing with our customer-orientated business model is well on track. Q3 underscores that our growth strategy is the right one with net new customer acquisition above target and volumes which have notably increased as a consequence. Growth not only has that the negative interest rate environment of today but just is essential for higher revenues in the future. We have terminated our consumer finance joint venture and successfully transferred around €3.5 billion of loans to own balance sheet. This is an important milestone to realize growth opportunities and our own fully digital platform. PSBC and Corporate Clients have managed a stable operating performance over the seasonally slower not summer months and we have achieved a strong operating profit at miserably supported by exceptional items. Finally, we continue to deliver on the non-core rundown and have strengthened our Core Tier 1 ratio by 50 basis points. Together with the €807 million restructuring charge booked in Q2 which fully covers the Commerzbank 4.0 efficiency program I expect a slightly positive net result for the financial year 2017. Since the current consensus spread the full year net result so widely let me narrow down that I mean by slightly from today's perspective I would consider around €100 million a valid assumption. Having said that, it remains our top priority to further strengthen our market position and we are fully committed to the swift execution of Commerzbank 4.0 in order to improve underlying profitability. Based on the Q3 Core Tier 1 ratio of 13.5%, we have adjusted the year-end guidance and now aim for a fully loaded Core Tier 1 ratio of at least 12.5% including IFRS 9 which becomes effective January 1, 2018. To provide more color I expect the IFRS 9 effect to be between 70 and 80 basis points. Let me explain the almost doubling of the impact compared to the previously provided guidance. Generally, a moderate impact remains a fully valid assumption. However, we want to further accelerate the successful shipping rundown in this market environment. To execute further portfolio affairs, we intend to mark the whole book IFRS 9 levels that we select recent transactions. With that, Ship Finance rundown will be almost completely finalized well before the original 2020 target. The result is also a significant reduction of Ship provisions going forward. Finally, on our outlook we expect our cost base to be below €7.1 billion and total group a little piece of around €800 million thereof ACR will contribute around €400 million, €50 million lower than guided in our Q2 call. Thank you very much for your attention and I'm now happy to take your questions.

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Yes. Hi, good morning. Two questions please. First in on the Q2 call you said you intend to keep adjusted revenue stable in H2 and they have also in 2017, now you're down in Q3 and Q4 not that easy so wondering if they could give an update here. And then secondly, on you EMC business you break down or you break out the revenues. But could you also update us on your annual cost run rate of this business and where the art of still stand they are roughly as compared to last year with you and today? Thank you.

Yeah let me start with the EMC question in simple terms RWA and the associated revenue numbers is small as unchanged. I think we haven't provided cost sub-segment in the past, so I wouldn't do it now and in general the process that we have described this fully on track and we expect to be in a position to decide about bringing this to market in course of 2018. Adjusted revenues indeed if you look at the numbers what you can see is that as much as we are in line with our two operating segments especially in the slow markets to affect our treasury results which mean that the adjusted clean revenue guidance is probably something that we are approaching from below end rather than from the upper end and that sense indeed it remains to be see what Q4 looks like but is obviously something as I said that we are approaching from the lower end.

Okay. Thank you.

Our next question comes from Nicholas Herman from Citi. Mr. Herman.

Yes. Good morning. Three questions for me please. Firstly, on your ACR track guidance of €1.1 billion by 2020. Just clarifying the IFRS 9 impact growth that will come from 40 to 70 or 80 basis points it's just the front loading then a part of that €1.1 billion? And then two other questions on PSBC, firstly on the customer position you mentioned last quarter that you keep pushing that this quarter the clients acquisition was 65,000 obviously part of the seasonality but I mean that 4Q should be reach us still, and as part that or all rather was there any increase or two in attrition rates in this quarter that also impacted the lower new acquisition of clients. And the third question is on fee income, so fee income in the German PSBC business fell Q-on-Q. How much of that was due to the joint venture transaction completion and what is a like-for-like number in Q2 side. I just could have I noticed that it looks like the fee income in 3Q 2017 was €427 million? What would be a like-for-like number in Q2 excluding the JV if you can provide that, I'll be helpful? Thank you.

Okay. Let's start with the ACR question. I think your view is correct. And if you try to tie the numbers are together you'll find that there's basically taking our original guidance of the €1.1 billion what we have booked in 2017 and what will most likely happen with the IFRS 9 decision pretty well ties up to the €1.1 billion so it is front loading. The PSBC the customer acquisition number as I said reflex more seasonality and active let's say, to driving off of the acquisition pace also to allow for integrating the huge numbers of that new clients as from the first half of this year into the system. I wouldn't expect despite for the normal seasonality again Q4 to be weaker. So, we will over achieve on the gross number definitely for 2017. Attrition rate has seen no change in the previous quarter and it's not influencing really the net number in that sense.

That's helpful. Thank you.

The joint venture we had that is obviously a clear effect from the change in the sense of that we used to receive so-called upfront commission income and now that will flow into our P&L over the line items NII and all the associated our line items cut over time. And secondly, we have only the transfer in the middle of the quarter so part of the effect that in previous quarters was a so-called run rate is now somewhere buried in the one-off. And in that sense the internal discussion we finally came out instead of splitting this all out and having an endless discussion we take the numbers as they are, but you are right there are bits and pieces also in the onetime effect that you could if you want it reallocate some run rate comparison.

So just as the follow-up on I mean you're kind of in the line about €40 million or is that too high 40 million or €30 million or €40 million for that will have come out.

You can even pick a slightly higher number but…

Yeah. Okay. That's what I thought. Yeah, that's good. Thank you.

The next question comes from Johannes Thormann from HSBC.

Good morning, everybody. Okay. Good morning. Johannes, HSBC. Three questions if I may as well. First of all, on your loan to deposit ratio you mention that you managed to bring down the levels in Corporate Clients, but others have seen a big increase in liabilities and overall your customers have also been up significantly in this quarter. What has been the effect behind it because this is on group level counterbalancing all your assets and leading to further track? Secondly, in terms of you hinting at the risk provisions in PSBC, you said mostly is from mBank. Can we assume that the rest in the increase is just generic driven from the increase in the mortgage book or any other effect in the cost of risk in PSBC. And last but not least could you give us an update on the quarterly loss guidance for Others & Consolidation in the next year. So, we still are on the 100 to 250 or is it changing now? Thank you.

Starting with the load to deposit indeed we have put in extra effort through the last quarters on getting the load to deposit ratio especially Corporate Clients above the 100% that has a lot to do with the fact that a lot of these deposits are regulatory not available for modeling and in that sense, I think our effort has paid off well. And on top of that the introduction of the deposit fee has left to a level of income that now at least stops the losses. The movement on the balance sheet is mainly driven by the repo business something that will most likely be going down towards the end of the year.

Okay.

PSBC, loan losses first of all that is still on a very healthy level in total let's keep that in mind to begin with. Secondly it was mainly driven by mBank's corporate portfolio. And I think whenever you have a corporate portfolio if something happens it sticks out a little bit because it is not very granular as we all know. And at the end of the day everything as and the PSBC I would consider being totally normal and in line with what we expect. Keep in mind that going forward the consumer finance book will obviously develop slightly different dynamics so in that sense that as you will see slightly higher a little piece in PSBC, but I will come along with higher and higher as well. Others & Consolidation, as I said our last guidance for 2017 is unchanged. And my guess is that we will comment on 2018 when we get the guidance for 2018.

Okay. Understood. Thank you.

The next question comes from Britta Schmidt from Autonomous.

Hi. I have got three questions please, the first one to come back to the EMC, CFG consolidation. Can you give us any idea of size of net interest income that we should expect in Q4 and also loans provisions I see that you haven't changed the total loan of provisions but how much of CFG is included there. And then just on the fee side, has that been any meaningful underwriting fees recorded by Commerzbank in 2017. I do recall you mentioned previously that the business hasn't been doing a lot of new lending because it was in the top three modes. The second question is on the EMC business, The RWAs haven't changed as you say but has there been any effort to mitigate the impact from the fundamental review of the trading book that initially got it at €8 billion. And then lastly can you update us on the interest rate track you previously expected €300 million to develop in your strategic plan. But where are we in this right now in the guidance will hold in that you've been able to reduce corporate deposit and also been going?

Okay. I think a good assumption for NII out of the CFG business is to take the book off €3.5 billion times roughly a 5% revenue or they just take something like €60 plus million on the quarterly level and indeed on the CFG transitional analysis there if a number of wonderful accounting experiences, one is that since the beginning of the year on the IFRS 5, we haven't recorded the results from joint venture as such. So, they also are part of the onetime and as of Q3 we haven't recorded the fee income anymore and in total since joint venture only moved in the middle of the quarter, half of the quarter also is in the onetime effect. I think that is some total of it in general and I think I've said that also in my little speech the transition has led to somewhat slower business. In Q3 which I think is still a great achievement given that €3.5 billion of a book was moving from one platform to the other. And in that sense the €1.4 billion of net new business that we have recorded in the first nine months probably come to roughly €2.2 billion to €2.3 billion which we had in the 12 months 2016. So that that gives you also a little bit of a feeling. As RTB and other associated regulatory initiatives from today's perspective I said nothing I would say nothing new on that one we're working on it and I think the general guidance that we should be infected about any average is the one part of the of a part is just simply let's see. The first part of the NII track guidance I would say that is in general use. The track by the way so far, this year is roughly 100, mainly almost totally in PSBC.

Our next question comes from Riccardo Rovere calling from Mediobanca.

Good morning to everybody. Three questions if I may, the first one I just wanted to get back one second on first time application of IFRS 9 on the shipping book if I understand it correctly on the 1, January you will mark down the shipping book to what you think is market prices to sell the portfolio on the 1, January. So, the shipping exposure or net value is going to go down equity of Commerzbank is going to go down to once you have done this and if you assume that the net book value is a fair one. Why shouldn't shipping losses go basically to zero actually they're already going closer and closer to zero. But is it a fair assumption that they should get basically close to zero, this is my first question. Second question I have is on the 13.5% for the low Core Tier 1 ratio you reported this year. It is going to have any impact on this season whether to pay or not the dividend for 2017 or this will be let's say overcome by the fact that you will add value for this time on the 1, January 2018. And very final question is on PSBC, I have noticed an uptick into the portfolio also the risk density of some segments of gone up, is there anything particularly happening in the division you're credit to stand has been loosened a little bit if you can comment on that? Thanks.

Okay. Working my way backwards through your questions the slight change that you noticed in PSBC is very simply explained it is the scope of the previous credit line to the joint venture for now having the full portfolio of consumer loan financing which obviously has a slight impact on the density other than that loan origination standards and all the other stuff have been unchanged and pretty prudent I have to say. Core Tier 1 ratio of 13.5 you are right technically speaking that is well above all thresholds that we have regulatory or otherwise the 2017 dividend guidance remains unchanged and as more driven by the results of this year and the fact that this is only the first of the two transformational years which we will have. On IFRS 9 the simple answer to your question is yes. Our expectation is that indeed shipping a lot of those provisions will basically be zero and more importantly the shipping portfolio will run down a lot faster well before the original 2020 guidance just for the completeness as long as we have the shipping book still on our books changes in valuation might still be reflected but that is the normal up and down which we will all experience around the IFRS 9 well that we will have of next year.

Thank you very much. Thanks.

The last question comes from Anke Reingen from RBC.

Yeah. Good morning. Two questions please. And the first one is on the capital discussion, now I see it seems to be quite comfortable pending the discussions on by this I just wondered what your priorities in terms of capital management as a dividend do you think you would need some add on deals in order to get earnings growth or well, but you basically set your priorities? And secondly on your guidance to the giving of raising interest rates and the €500 million benefit longer term. I was just wondering can you just remind me how much this is a function as well assumption on customer behavior because you mentioned one of the slides loan pricing pressure would that play a role in the long-term guidance as well and just it's a price it doesn't change at all over year-over-year. Thank you very much.

Yeah, the first question on the capital and priorities again where we started Commerzbank 4.0. One of our key priorities was to keep the capital ratio a above the 12% mark all during the first two transformational years that admittedly has worked a lot better during 2017. And in that sense, that is our core priority also for the second transformational year. Basel IV, I think there still a lot of discussions going on, I think what has been said before still holds true, we do not expect at all that we will be an out layer under this process. Still I'm not sure what the final result of this one will be or should be. Interest rate sensitivity on the €500 million that is in model deposits is that is the question you had. That basically remains unchanged we have given that sensitivities earlier this year I guess we will update it towards next year, but you can assume that the basic assumption is still pretty valid and if I remember why we have even given slightly ranges so for the time being that still fits well. And the associated question to margin does margin pressure our customer behavior have an impact theoretically speaking if you model something that is always a model risk, but I would think that that model risk is pretty limited and very well tracked currently and the margin pressure in Germany I think that is also a pretty well-known effect and doesn't affect the models anyway.

Okay. Thank you.

Ladies and gentlemen, many thanks for your questions and the discussions with you, I would like to say goodbye for today. And I'm looking forward to a few to discuss this with you. Good bye and have a nice day.