Stephan Engels - Chief Financial Officer

Nicholas Herman - Citi Johannes Thormann - HSBC Britta Schmidt - Autonomous Benjamin Goy - Deutsche Bank Giulia Miotto - Morgan Stanley Riccardo Rovere - Mediobanca Anke Reingen - World Bank of Canada

Good morning, ladies and gentlemen and welcome to the Commerzbank AG Conference Call for Q4 and Full Year 2017 Results. 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. And 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 today’s conference call. In addition to preventing our preliminary figures for the fourth quarter and full year 2017, I would like to update you on the execution progress of Commerzbank 4.0. We are very committed to make Commerzbank simple, digital and efficient as well as to growth with our customer oriented business model. That’s all the focus of 2017 has been on the implementation of our strategic agenda and reflecting on the first of our two transition years. I am pleased to say that we have delivered on key milestones of our program. To start with the building blocks for higher revenues. Net new customer and related volume growth in PSBC. We continue to take a changing German banking market as an opportunity to increase the investment of our franchise combined with our well designed product offering, high customer satisfaction and our multichannel approach we have proven but we significantly increase the pace in that new customer acquisitions in the first half of the year followed by more measured growth in H2. Since October 2016, we have onboarded 639,000 net new customers in PSBC Germany of which 502,000 stand from 2017. This is well in line with our plan. As of our 2017 year-end target assets under control have increased by €38 billion or more than 10% year-on-year. This proves that customer acquisition result in higher volumes. In Corporate Clients, we have focused on the strategic realignment of two previously separate setups to increase the focus of our business model and improve efficiencies. Despite this intense effort, the segment has maintained its market leading position of Mittelstands increased RWA efficiency and onboarded modern 5,400 net new corporates since the beginning of 2016. We continue to transform Commerzbank into digital enterprise, end-to-end digital invasion, automation of processes and enhance customer experience are centered to this effort. In 2017, we established the digital campus and ramped up our digitalization investments. As a consequence, we have increased our digitalization ratio from 30% to 48% in line with our target to digitize 80% of relevant processes by 2020. The most visible milestone is to go life of our digital consumer finance platform. With this in place, we were able to terminate our joint venture and have successfully transferred these loans of [Technical Difficulty] The agreement with employee represents in Germany is an important step to make the Bank more efficient and to continue delivering an all cost targets. Based on this agreement, we booked the full restructuring charge for Commerzbank 4.0 in 2017. Despite this restructuring expense of €808 million, we are able to report a positive full year net result of €156 million. This is based on revenues of €9.2 billion, which include €557 million of exceptional items. With stable expense in line with guidance of €7.08 billion and LLPs of €781 million, our 2017 operating profit stands at €1.3 billion of which Q4 had contributed €159 million. Furthermore in Q4, we have seen a stabilization of underlying revenues in Corporate Clients, despite a tough market environment. In PSBC, Q4 clean revenues have benefited from the first full quarter of consumer loans contributing to NII. Both developments are an encouraging starting point for 2018. Our balance sheet has shown a strengthened and the risk profile is very sound. The fully loaded core Tier 1 ratio stand at 14.1%, up 180 basis points year-on-year. Our leverage ratio has increased to a comfortable 5.1% giving no constraints to our growth case. With an exposure of €2.6 billion at year end, we have more then delivered on our ACR ship finance reduction target which stood at 3 billion. Successful closing of portfolio transactions in shipping have decreased our Group NPL ratio to a low 1.3%. With IFRS 9 coming into effect last month, future P&L burns from shipping portfolios will be minimized and the run down accelerated. Confirming our capital impact guidance perform our core Tier 1 ratio including IFRS 9 stands at around 13.3%. As highlighted in my introduction, the clear focus of Commerzbank 4.9 is to grow with our customer oriented business model. Slide 3 underscores the generating growth in a changing German retail market is possible, accelerated that new customer growth leads to higher securities and loan volumes in German retail banking. This has grown by 14% and 9% respectively year-on-year. Most importantly, our customer growth not only result in higher volumes but ultimately higher revenues. In 2017, we have generated around €150 million additional revenues as a result of higher loan and securities volumes. With this we have all those completely offset the direct from negative rate and pricing competition confirming our belief that this is the right strategy. Besides growth, digitalization is central to our strategic agenda. Transforming Commerzbank to enter digital enterprise result in our ability to adapt quickly to market changes and safe cost long-term. Slide 4 shows the digitalization includes various initiatives with the digital campus at the center of it. Today, we have started eight of our of the 14 defined master and support journeys with the aim to finish fix by the end of 2018. On top of that we have launched highly rated apps for our customers. By whereas example let me highlight our mortgage app which offers the complete customer journey including evaluation engines and the financial certificate. Slide 5 provides an update on our 2017 key execution indicator targets and introduces new targets for this year. The aim of these indicators is to closely track the delivery of our strategic program. The progress achieved in 2017 is well in line with our plan as most indicators are even at or above interim target. Admittedly below target itself wallet with small business customers as the internal setup of this sub-segment is taking a little longer than originally expected. Standing at 48%, our digitalization ratio has developed in line with our plan and will hit 65% in 2018. To achieve this, we will invest more than 45% of our annual IT budget into digitalization this year. Having digital processes in place, is an important we retrofit to reducing manual in product flows and FTEs on the past to delivering our back and loaded 2020 cost targets. As for Q4, Commerzbank Group had 41.8000 FTEs which is below our 2017 year-end target. The increase in the second half is due to the Onvista acquisition, FTE has taken from the consumer, finance joint venture as well as temporary sousing effect. On our part to launch 36,000 FTEs in 2020, we are targeting 41,000 FTE for 2018. Focusing on the development of segmental execution indicators in our presentation, let me sum up my strategy update. While our focus on Commerzbank 4.0 has delivered tangible progress in 2017, there is still lot on our agenda for 2018. Let me now present our financial result and start with Slide 6, which lists exceptional revenue items. These amount to 557 million in 2017 of which Q4 has contributed minus 60 million from hedging and valuation adjustment as well as PPAs. Slide 7 shows our key financial figures as a glance, but let me more straight to Slide 8. Thanks to our growth initiatives, revenues in PSBC has been stable despite the negative interest rate environment and 44 million higher customer acquisition incentives than a year ago. They later have an impact on that commission income. Higher cost due to our investments in digitalization and higher regulatory burdens have lowered the operating result. In addition to our focus on realigning Corporate Clients, revenues have been impacted by our decision to streamline the financial institutions network and a challenging market environment while higher LLPs due to a Q4 single case has been almost offset by our cost initiatives. Taking other in consolidation and ACR together, we have reduced the operating burden of the two segments to minus 372 million versus almost minus 1 billion in 2016. This development has benefited from lower LLPs and ACR and a better others and consolidation result. It shows our continuing effort to manage the non-operating segment. Based on this, we are adjusting our other and consolidation run rate guidance to slightly better than minus 100 million per quarter. In our first full strategy implementation year, we have achieved higher clean revenues for the Group than in 2016 helped by a strong fourth quarter. Higher NII year-on-year has been supported by our strategic initiatives in PSBC. Coming to the Group P&L. Reported revenues of 9.2 billion as well as costs in Group LLPs in line with our guidance, lead to the full year operating profit of 1.3 billion. With IFRS factors of 245 million and minorities of 94 million, we have achieved a positive net result of 156 million despite the 808 million restructuring charge. With this our reported net return on tangible equity stands at 0.6% for 2017. Taking out the one-time restructuring charge covering the entire 4.0 program and shipping LLPs which will no longer burden to P&L in 2018, the adjusted return first well to our path towards 2020 profitability targets. Slide 10 provides you with an update on our cost transition. In line with provided guidance, we have managed our cost full year to be below 7.1 billion. Lower group expenses year-on-year have been primarily driven by cost savings of 170 million net of cost inflation. Personnel costs including client FTE reductions amounting a net number of around 400 has been a major driver. Excluding transitory and one-off effects such as our sourcing effort, the joint venture termination has well as the Onvista acquisition, the growth FTE reduction stood at 1,200. Furthermore, we have continued efficient management of operating expenses. As stated, our efforts fully compensate the negative cost development for European banking levy which included Poland for the first time in 2017, the Polish banking tax and the deposit guarantee scheme, we paid a total of 417 million last year. This is a year-on-year increase of more than 10% and as a slight note doubling over the last three years. Most importantly though, rigorous cost control has delivered room for our investments into strategic growth project, the success for ramp up of our digitalization initiatives and the establishment of our campus. To summarize, 2017 clearly demonstrates our ability to deliver on our cost targets and shows our commitment to doing so in the future. Moving to Slide 11 and 12. Our risk profile remains very sound reflecting the stable Germany economy and the high quality of our loan book. Total loan loss provisions amounted 781 million. This is a 119 million less than a year ago, but admittedly very close to our guidance of around 800 million. While Corporate Clients has operated in an overall benign credit environment throughout 2017, fourth quarter LLPs have been hit by a single case. PSBC has benefited from the good solvency of German households and the high employment rate. Thanks to an improved chipping market, ACR has had 263 million less LLPs than in 2016, up still contributed more than 40% of Group LLPs. Following the introduction of IFRS 9, the will no longer have a tangible impact on Group level profitability. In total, cost of risk for Commerzbank is at only 18 basis points. Yeah-on-year, we have further reduced our non-performing loan volume to 5.6 billion resulting in a European benchmark low LLP ratio, NPL ratio of early 1.3%. As guided in our Q3 presentation, the major driver for this development has been the successful closing of our 2017 portfolio transaction in ship finance. Let’s carryon with the operating segment and start with private and small business customers on the next two slides. In 2017, the segment has delivered on its growth track as measured by the key execution indicators net new customers and associated assets under control in PSBC Germany. While in line with our target, we have acquired 502,000 net new customers in 2017, despite our ongoing focus to fully integrate new customers in our franchise and without the support of broader marketing campaign, we gained another 52,000 net new customers in Q4. At least as important however, and forming the basis for higher revenues, assets under control has increased by 38 billion, 10 billion of which were in the fourth quarter. At year-end, total assets under control stand at 376 billion, well above our year-end target of more than 345 billion. While securities volumes have grown by 22 billion year-on-year, loan growth in Germany have increased by 8 billion. This is driven by the strong mortgage business, which is 26% above previous year volumes, at a lower margin due to the competitive German market. Including loans specked by development banks, the German mortgage book stood at 69 billion at the end of 2017. In 2018, we target total assets under control in excess of 385 billion. This takes into account that securities volumes growth has been supported by favorable market performance last year. By the end of 2018, we aim to reach 1 million net new customers since the launch of Commerzbank 4.0. To get to this number, we have lined up acquisition initiatives which will ramp up in spring. Overall, we have achieved a stable revenue development year-on-year as these positive trends have compensated for the ongoing headwinds from the negative interest rate environment. Having said that, we have seen an increase of underlying revenues in the fourth quarter. Q4 has been the first quarter with a full and NII contribution from consumer loans after it has started Q3 due to the joint venture terminations effect. Let me talked about the revenue performance of our subsidiaries. Well positioned in the Polish market, mBank has continued its growth track with further revenue increases driven by both net interest and net commission income. Year-on-year, NII benefited from the further improvement of net interest margin along with strong new sides of consumer lending product. Comdirect has achieved a record growth in 2017 with asset under control increased by 21% year-on-year, they now stand at 91 billion. With nearly 20% growth and executed all those, net commission income has more than compensated for lower NII. While Commerzbank has seen growth across businesses compared to 2016 revenues did not benefit from significant real estate revaluations. To sum up, including €210 million exceptional revenue items, PSBC achieved an operating profit of 867 million in 2017, 149 million of which arose in the fourth quarter. Compared to 2016, customer incentive fees, regulatory burdens in Poland as well as higher cost from investment into digitalization have shown the impact. Slide 15 and 16 provide a picture of Corporate Clients. With a clear target to further improve our position at the number one bank for German corporate, our focus has been the strategic realignment of the segment. Our efforts to simplify our business model are progressing well. We remain very committed to deliver on our key execution indicators namely to improve RWA efficiency and to grow our client base in particular to expand our market leading position in Mittelstand. RWA efficiency stands above our full year target. We have onboarded more than 5,400 net new clients since January 2016, 4,100 of which joined Commerzbank in 2017. With this, we are well on track to achieve our target of 10,000 net new clients by 2020. To talk about the revenue development which has been facing various headwinds in 2017, the strategic realignment of the segment including the accelerated reduction of legacy portfolios and our decision to streamline the correspondent banking network and financial institutions have obviously had an impact. In addition to low volatility and capital markets, we continue to operate in a competitive market environment including the ECB bond buying program and new entrants competing on the margin side. On a positive note though, Mittelstand and Corporates International have slightly grown the loan book supported by our strong syndicated loan platform. In 2017, Commerzbank was the top three book run off syndicated loans in Austria, Switzerland and Germany. Furthermore, we have strengthened with our ECM footprint in France in line with our European debt house ambition. Having talked about revenue year-on-year, Corporate Clients has achieved a stable underlying revenue performance quarter-on-quarter, while a single case loan loss has impacted the Q4 operating result. As a positive effect of strategic realignment, cost have decrease by 88 million year-on-year supported by FTE reductions. Let me run up the operating segments by moving to Slide 17, which provides a consolidated view on loan and deposit volume dynamics. Over the year, we have continue to actively mitigate the negative interest rate environment. While we have seen stronger long growth in PSBC driven by the German mortgage business, the increase in PSBC deposit volumes result from net new customer acquisitions. In Corporate Clients, we have managed the loan to deposit ratio to value in excess of 100%, driven by lower deposit volumes. Loan volumes in the segment have been rather table of growth and Mittelstand Corporate International have almost compensated for the strategic reduction of legacy portfolio. In addition, we have increased our income from deposit fees to more than 50 million in 2017. With that additional burdens from deposit margins in Corporate Clients have been stopped. Finally on segments, please turn to Slide 18, to have a look at ACR. In 2017, we have used the opportunity of an improved shipping market and accelerated the rundown of the ARC shipping book. With Q4 contributing 700 million, the remaining exposure at year-end amounts to only 2.6 billion which is well below our guidance of around 3 billion. With limited support from FX effects, we have decrease the ACR shipping book by more than 40% year-on-year. This effort has been supported by portfolio transactions which have been successfully executed based on the well covered book. Continuing with RWAs in core Tier 1 capital on the next two Slides. At the end of December, we had 171 billion group RWAs. This is around 6 billion less than third quarter of which around 4 billion can be explained by lower operational risk and market risk RWAs. Due to the quarterly update of the external loss database as well as lower frequency of internal events up risk RWAs have decreased by 1.7 billion quarter-on-quarter. Over the same period, market risk RWAs has been lowered by 2.4 billion, reflecting an overall reduction of risk positions as well as the market environment with very low volatility. Credit RWAs are 1.5 billion lower in the fourth quarter, primary due to the non-core rundown. Looking beyond the quarter, credit RWAs has decrease by 9.1 billion year-on-year, net of growth in our core businesses. A weaker U.S. dollar explaining 4.1 billion and active portfolio management are key driver for this development. In addition to the plan decline in our shipping and commercial real estate portfolio startling 2.9 billion, further credit RWA reduction result among others from lower derivative exposures and our decision to streamline our correspondent banking network. The reallocation of capital into growth initiatives is core to Commerzbank 4.0 and RWA optimization is an important first step. As shown on Slide 20, we have increased our fully loaded core Tier 1 ratio by 180 basis points to 14.1 at the end of the year. In line with our capital impact guidance, the IFRS 9 introduction effect amounts around 75 basis points. Using our recent transaction experience, this includes the revaluation of all our ACR and Corporate Client shipping portfolios. Let me add that this revaluation has happened in the P&L in two way. With the remaining exposure of not more than around 2 billion for all legacy shipping loans, the rundown will be finalized well before the original 2020 target. After applying IFRS 9, the pro forma core Tier 1 ratio of around 13.3% is above our regulatory threshold including an unchanged 2018 as per requirement. In addition, it covers the potential return of higher market volatility and gives us room for further investments in growth and for driving digitalization. Ladies and gentlemen, let me wrap up 2017 and provide you with a summary of objectives and expectation for 2018 on Slide 21. Reflecting on our first full strategy implementation, here I am pleased to say that Commerzbank 4.0 is delivering. We have invested in our franchise for taking the opportunities of changing German banking market. We have managed to significantly increase the pace of net new customer acquisitions in H1 followed by more measure growth in the second half. More importantly though, associated effort volume has noticeably increased. This is essential for IFRS future revenues and underscores that our gross strategy is the right one. Our digitalization is on track with the ratio increasing from 30% to 48%. Corporate Clients has achieved significant progress in its strategic realignment. Furthermore, we have reached an agreement with employee preventatives in Germany. This is an important step to make the Bank more efficient and has allowed us to book before restructuring charge for Commerzbank 4.0 in one go. In spite of this, we have achieved the positive net result for the full-year. Finally, we have strengthened our core Tier 1 ratio to 14.1% and further cleaned up our balance sheet with an acceleration of the shipping rundown. To conclude with our outlook, in 2018, we will continue to focus on growth and remain fully committed to the swift execution of Commerzbank 4.0 in order to reach our 2020 profitability target. Based on customer and associated volume growth in PSBC as well as positive impacts from the strategic realignment in Corporate Clients, we expect higher underlying revenues in both operating segments. As previously guided, cost reductions are back and loaded and our strategic plan depend on the success of our digitalization efforts. In 2018, we will continue our strict cost management and targeted cost base of around 7 billion. Reflecting the newly introduced IFRS 9 regime, we expect the Group risk result of less than 600 million. Starting with first quarter results, the risk result will replace loan loss provisions in our disclosure. Finally on our outlook, we aim to resume dividend payments for the fiscal year 2018, one year earlier than originally anticipated at our Capital Markets Day in 2016. Thank you very much for your attention and I am now happy to take your questions.

[Operator Instructions] And our first question comes from Nicholas Herman calling from Citigroup.

Yes, good morning. Thanks for taking my questions. Three questions please, one on capital, two on PSBC. In terms of capital, how should investors think about your dividend policy, is it going to be based on a ratio of earnings or above a certain Tier 1 ratio threshold? Secondly on PSBC loans, so given such strong mortgage growth, it sounds like your loan mortgage loans in general in PSBC decreased quite materially quarter-on-quarter, what drove that and what is the margin impact from this? And finally, on customer acquisition, I know that you have beaten your target on customer acquisition for the full year, but this actually doesn’t hide the fact that you brought in almost 100,000 net new customers in Q4 2016, is anything that needs to be done differently to change the trend for to achieve the 2018 targets of 1 million? Thank you.

Yeah, on capital, in general, we have a dividend policy which will circus on payout ratio. We have that released in I think 2015 and I would assume always keeping in mind that 2018 as a starting year might not reach the full payout ratio which we originally envisaged should be driven on profits. At the end of the day, there is always a capital threshold but as I said, key metric should payout ratio of the profit. Your second question PSBC loans, both the loans on mortgages as well as on the other PSBC loans grew are stable. I am not sure whether we have a little hiccup in your comparison there, but our numbers are clearly showing that the other loans are high.

I guess I was just referring it to slightly, I think you mentioned, I might have misheard you that you said you had 63 billion or mortgages at the end of the last quarter and 69 billion this quarter, so therefore the rest other portion has decreased?

Now, I think that might be a slight difference in this, the 69 billion includes also the development bank backed loans that we channeled through the customers. So that explains the huge difference.

Right, and is there a margin impacts from this or?

In general, the margins in the German market has been under pressure since the general situations at all banks still have more than enough liquidity is the same, but as such the composition has no specific margin effect. Customer growth as I said and as we had already said inn Q1 and Q2, the customer acquisition rate has been extremely successful in first two quarters that is why we have focused properly onboarding all these customers throughout the year and more importantly also take on the associated assets with these customers, we should indeed as we work we rebuild. And I have also said, I am happy to reiterate it, we will achieve our 1 million net new customer target at the end of the 2018. You are right, that will probably see different net new acquisition numbers in the quarters to come and we expect the ramp up of that in spring. Keep in mind that the Easter break this part of the year is intense to be little bit earlier than it usually used to be.

Okay, thank you.

Thank you.

And our next question comes from Johannes Thormann calling from HSBC.

Good morning, everybody. Three questions for my side. First of all follow-up on the mortgage portfolio. With this strong increase, could you elaborate a bit more on average LTV levels have, how they have developed, how comfortable are you with the current market outlook in this respect and then how much growth do you expect in 2018 probably on qualitative means? Secondly, could you elaborate a bit more on the development of RWA in 2018, we’ve seen volatility picking up, so will see effect on Q4 revert and then how should be in the long term? Also could you give us any guidance of Basel 4 effects like other banks are doing in the last days? And last but not least, just a simpler one. What tax rate should we work for or look for 2018? Thank you.

Yeah, on the mortgage part of your question, our LTVs are as you know driven by the so what conservative German requirements to also fulfill cover. Fund requirements and on that level they are 80-ish which means if you map that to any other European country that will probably represent something in the 60s. So from that point of view, we feel very comfortable with our acquisition strategies. On top of that what we currently what we currently see is relatively high pay down rates of the customers. So in total, no headache or no thinking about that part. We would still expect based on our also very superior processes as the frontend side to have further in 2018 obviously depending on the developments in the market. RWA, as you rightfully said market risk RWA are on the lowest side, driven by the very low volatility. My simple equation is they would return to something that I would consider normally an inverted commerce. I have mentally reserved about 0.2 of our core Tier 1 ratio to be allocated to that. Secondly, I would expect that RWA should grow from our customer segments and then it depends a bit on how fast the shipping rundown will work in 2018 and then we’ll see a mix. Again, given with the core Tier 1 capital that we have, there is room for growth definitely. And as I said the rundown of shipping will probably contribute. Basel 4, as we all know that number of references to national discretion throughout the Basel 4 paper and given the long implementation time, my view is once I understand exactly which requirements will be managed and again in the detail as we all know. And then seeing at the long implementation times, I think I have enough time once I understand what is required to adjust business model is necessary. Tax rate – indeed tax rate has been a bit on the highest side this year, but the normal expectation for 2018 should work around the traditional 25% that we have seen.

Thank you.

And our next question comes from Britta Schmidt calling from Autonomous.

Yes, hi there. Good morning. I have got a few questions please. Coming back to the Basel 4 question, would there be any possibility that you can give us a bit of range of potential outcomes on the impact of the way and I’d also be interested to hear your views on trend, how that’s been growing and whether you think there is any downsize risk to capital for example from the EPA guide line? The second question I have is on the loan of provision guidance, this will be redefined on the IFRS 9 is risk result. Could you give us an indication what the restated IFRS 9 risk result would have been for example in 2017 also estimate how many [Technical Difficulty] to potentially at? And the third question I have is regarding the rate track, it sounds like, it is offset, quiet a lot of the rate track by both in customer business but could you give us an indication of what you expect the growth rate track to be in 2018? Thank you.

Yeah. Basel 4, again as I said trying to convert an excess spreadsheet with numerous variables that are also interlinked with the other number is from my point of view let’s say not a very sensible effort let me put it that way. In general, I think we would be less affected when the average are slightly less effective than the average. But again the level of impact that we see is dependent on the national discretion and law a set up that we will see. And let’s be honest if we see something that we would then rather adjust our business model were appropriate than just taking a full RWA effect. From today’s perspective, as I said, trying to understand what exactly will be the outcome and then having a longtime frame to debt seems to be the appropriate way to handle this. A trim currently no, no news, let me put it this way, we’ll see what needs to be done. Overall, the effort does not concern me, we do have every confidence in our models so far. Risk result, we don’t – we have not the restated risk result for 2017. The guidance for 2018 which is below 600 also reflects a little bit a let’s say cautious view because we probably want to develop a quarter of 2 or two of experience until we would be in a position to narrow this down a little bit more. I think that is other way you should look at this for now. Rate track, the number for 2017 is approximately 130. I would expect this number to be lower in 2018, I think below 100 is definitely the range to look for.

Thank you.

And our next question comes from Benjamin Goy calling from Deutsche Bank.

Yes, hi, good morning. Two questions please. Maybe follow-up to the rate track. In the past, you gave the quarterly loss guidance for the assessing consolidation of 100 million to 150 million, has that changed or you will mainly see the benefit here from his rate track, how could update? And secondly on your Corporate Clients segment. You’ve restated net interest income has been relatively volatile over the eight quarters we have seen, but recently you have started to build a curve. Should we expect this continues on this positive trend, despite a modern pressure you mentioned from competition balanced off with loan growth or any thoughts around that would be appreciated? Thank you.

Yeah, thank you, Benjamin. The rate track has nothing to do with the improved guidance on the others and consideration. The new guidance below 100 mainly reflects ongoing cleanup in this part of our balance sheet or in the segment if you want so including lower PPAs and some of effects which will as I say this is where we updated the guided to below €100 million loss at per quarter. You see besides the segment, we have changed the accounting regime, so that we have a better differentiation between trading result and real NII, in general and that is part of my outlook. I would expect the curve to have a positive way going forward. We have seen slight loan growth in Mittelstand and Corporates International year-over-year. And if we are successful with our growth initiatives, which we believe then we should have a good trend year. Let’s also keep in mind, running down the financial institutions business is something which went throughout 2017 and as well as a rundown of the legacy portfolios within a Corporate Clients have been partly affected there as well.

Okay. Thank you.

The next question comes from Giulia Miotto calling from Morgan Stanley.

Hi, good morning. Thank you for your presentation and for taking my questions. Two questions please, on Corporate Clients the first one. So looking forward and thinking about revenues trajectory, is the drag coming from exiting some of the businesses in financial institution over or is there a little bit more to come and similarly for the other perhaps legacy business is that you have in this division? And perhaps if you can also comment a little bit on competition plans that you’re seeing here that I think you mentioned earlier on in your presentation? And then my second question is on litigation. I’ve seen some headlines around the COMEX on trades and the potential for some impact to 24 German banks. I wonder whether you can please disclose how much provisions you have for these and any color or guidance you have there? And also some headlines around the KYC in Singapore and in the U.K., so any comments you have on for litigation? Thank you.

Okay. That was a huge number of questions, hopefully I’ll answer them all but probably don’t. Revenue trajectory Corporate Clients, as I said there is definitely good news, we have stopped the impact from the negative interest rates environment. The FI business restructuring is I would say finished and we have seen definitely a stabilization of revenue in FI, so that but definitely should bottom out. The legacy part is getting smaller. And as I said and it also includes the shipping part within MSP but that has been revalued, so that that shouldn’t have too much of an impact as well. Competition is obviously the issue in terms of margin pressure. And one of our competitors here is obviously the ECB buying corporate bonds which obviously puts burdens on the spreads and margins in that part of the market which then as it is used as a reference sort of finds its way down throughout all parts of the market. And we have still a number of new entrants into this market driven again by the huge cash surplus basically that we have in the German system. Litigation is, I’m surprised that you ask it at, litigation is not really an issue that concerns me. We have if you look at our nine month report, we have some very explicit comment on the COMEX part, I feel very well covered on that and of the discussion and currently have also no indication whatsoever that any of the other issues that you mentioned my turn into a litigation provision.

Thank you.

Our next question comes from Riccardo Rovere calling from Mediobanca.

Good morning to everybody. Three questions if I may. The first one is on the guidance in credit losses. You have posted a 780 million at Group level this year, they are related to ACR basically shipping. If I remember correctly, you’ve commented in the previous results conference call, you stated that after IFRS 9, technically shipping losses should go to zero after adjusting the value for shipping portfolio to market values, so it would be last with 550 million underline for the rest of the group. This 550 million include a one-off, I didn’t know whether this is a sign of and I don’t care. So I just was wondering why credit losses should be close up to 600 million or eventually much than 600 million with the underlying gross prospects in Germany and in Europe and I also was wondering what kind of cautiousness level of cautiousness you have in this 600 and actually if that number make sense at all? This is my first question. The second question I have is on the gross prospects in PSBC price had to go up. That you are saying that the current growth rate if you see in mortgages and maybe consumer finance too could slow down, so you might have eventually a positive margins but maybe the current ECB policy is actually helping you on the volume side, any thinking about that? The third question I have is your acquisition strategy is basically for acquire customers to your digital platform and so on. So with a capital you have, you keep saying that you have no intention to buy anything, correct me if I am wrong. So just – I would just wanted to have your thoughts on why in the current conditions you are saying that acquiring customers is a better strategy than try to bias the acquire customer to acquisitions, is just because with the technological development we have seen over the past few years it is much easier or much less complex to acquire customer in this way in the old traditional way especially when customers can move away from a banking few clicks. Any though on this would be helpful? Thanks.

I’ll try to answer a little bit shorter and I think we could take some of the discussions offline. On – let’s start with level of cautiousness as you said on the LLP or risk result guidance, indeed if you take 81 minus ACR charge you come up at a much lower number than below 600 number but you need to keep in mind that under the new IFRS regime you are expected to book at inception of the deal a full first year expected loss. So that will drive numbers a little bit up. Secondly, we have the first year in 2018 with a full consumer finance reflection, so far we have in earlier quarter. And thirdly, we both we definitely want to grow consumer finance, we want to grow mortgage business, we want to grow our Mittelstands business and the other associated business. And again taking into account, the IFRS 9 requires you to book the first year expected loss at the inception of the deal. That will drive numbers. As I said before, getting a little bit better ceiling how that really develops with the quarter or two is one of the reasons way as I obviously said the below 600 level is something that is not very specific. On growth in general, as I said just my answer on the risk part, growth is still behind of our strategy both in Corporate Clients as well as in PSBC. In mortgage, still is good business, we want to grow that as well as in consumer finance and the other lending especially around our small business customers. On M&A, we have never said that we will never no and not do any M&A. We have just said that the discussed international consolidation may not have quickly as some people hope for. In terms of M&A, we have done deals already in 2017, look at the joint venture or acquisition or resolution of the consumer finance is basically is an acquisition and the Onvista acquisition earlier in the year. So whenever there is a sensible deal, we look at that and in that sense that may or may not be something that may happen in the future.

Alright, thanks.

Our next question comes from Anke Reingen calling from World Bank of Canada.

Yeah, good morning. I have two follow-up questions. Firstly just on the capital. Can you just remind what your 2015 dividend payout ratio policy was, I mean I would congratulate the 23% but did you see this more as a normal level or this is low level, so just I didn’t quite see your comment in that, just bit more clarity would be helpful? And then on your capital management, following-up on this as well. Should we expect you to hold your capital in preparation of Basel 4 or would it become a bit more proactive as in capital returning looking for bolt-on acquisitions given your – put the ACR behind and the capital ratio went up quite significantly? And then on the 600 million loan loss provisions and it stand as a loss of uncertainty but just to understand how does you see developing going forward, should we assume whatever the number in 2018 has a trend slightly up given your both in consumer loans or how does it look compared to of course the cycle? Thanks a lot.

Just to remind you, the dividends that we pay was €0.20 per share and the payout ratio that we discussed at the time was around 30% to 40% of net profit. We do not expect to pile capital up endlessly, we want to grow and we will see to a proper employment of the existing capital at both our segments. The guidance is not 600, just technical speaking it’s below 600. And in general I think – and IFRS 09, we had to look at two things, IFRS 9 risk result is pretty pro-cyclical. So especially as rating in other things start to migrate, we switch into a regime where we have to book the expected lifetime loss of any existed effected loan which then will drive cyclicality very strongly. If things stay as they are, the general assumption has to be that as we grow these numbers should grow accordingly.

Okay, thank you.

And next question and this will be our last question today comes from [indiscernible] calling from UBS.

Yeah, good morning. Just two things left from my side. On the EMC business, can you just give us an update there what your current situation is? And I mean obviously revenues are around 380 million this year which is broadly in line with the numbers you mentioned at the Investor Day, and I think then you also said there is about 200 million cost attached to this, is this a number you can confirm at this point? And then probably also your general thinking around why you are setting a business which probably has quite an attractive cost income ratio? At the client profitability, just the second question. If you compare a typical Comdirect client is a normal branch client, how does the revenue per client look like, can you give us some numbers there it will be useful? Thank you.

On the EMC, there is in broad terms nothing new other than what we have said before that we have applied for the necessary licenses. And I want to make sure we can bring it to the market starting probably somewhere this year. The reason why we sell that and just to remind you and that one is also driven a lot by a possible RWA charges that might lie in the future and the complexity of this kind of business at on the IT and process side to our setup. That is in very short the very main topics to look at this as you said very successful and profitable business. Difference between or the comparison between Comdirect and branch customers, there is different group of customers in both ahead us, let’s state at this way, if you look at a very active trader at Comdirect that has probably a very attractive revenue stream. And if you compare that with a customer and the branch that doesn’t do too much than that compares very well. In general I would say slightly lower was the Comdirect customers than with the branch or retail customers.

Thank you.

Yeah, ladies and gentlemen, many thanks for your questions and discusses with you, unfortunately we are running a little bit others time because there is the upcoming press conference. I’d like to say good bye for the day and I am looking forward for future discussions with you. Good bye and have a nice day.