Stephan Engels - CFO

Britta Schmidt - Autonomous Research Benjamin Goy - Deutsche Bank Giulia Miotto - Morgan Stanley Andrew Stimpson - BAML Daniele Brupbacher - UBS Johannes Thormann - HSBC Nicholas Herman - Citigroup Riccardo Rovere - Mediobanca Hugo Cruz - KBW 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 on the Internet. At this time, all participants have been placed on 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 conference call for the numbers of the first quarter 2018. Starting our second strategy implementation year, I am pleased to say that Commerzbank 4.0 continues to be on track. Step-by-step, we are moving forward with the execution of our strategic agenda. In the first quarter, we have progressed on our committed growth path, with net new customers and associated asset acquisitions. Since the launch of Commerzbank 4.0, we have added a total of 712,000 net new customers in PSBC Germany and also around 6,500 net new customers in Corporate Clients since January 2016. Both targets are well in line with our plan. Benefiting from a larger customer base, we have also achieved further loan growth in our core products, mortgages and SME lending. This confirms our belief that customer growth results in higher volumes and ultimately, stronger revenues. The Digital Campus has also delivered tangible progress. In Q1, we have completed two master journeys in Corporate Clients, namely digital account opening and SME lending. In addition to our strategy implementation, we are able to report a steady business performance in Q1, with stable revenues quarter-on-quarter of €2.3 billion. Q1 expenses of €1.9 billion fully reflect the booking of a yet again higher European bank levy and ongoing investments in Commerzbank 4.0. With a risk result under the new IFRS 9 regime of minus €77 million, we have achieved an operating result of €289 million and a net result of €250 million in Q1. Benefiting from the reclassification of ACR assets to fair value, the group nonperforming loan value has started to reduce to €4.2 billion. This leads to a benchmark low NPL ratio of only 1%. Including the guided day one IFRS 9 implementation effect, our fully loaded core Tier 1 ratio amounted to 13.3% and the leverage ratio to 4.6%. Both ratios are well above regulatory thresholds. To underline our aim to pay a dividend for 2018, we have accrued 5% per share in the first quarter. With a comprehensive update in the appendix, I will focus on key messages around our execution indicators on slide two. Our investments in digitalization continue. After the successful ramp up in the first half last year, our digital IT investment ratio has increased to 56%. In absolute terms, this means that we have spent almost €100 million on digitalization in the first quarter. We have completed two master journeys for Corporate Clients and achieved measurable progress on further seven journeys currently processed in our Digital Campus. As stated in the past, digital end-to-end processes are an important step to achieve our targeted FTE reductions by 2020. In the first quarter, group FTEs have been reduced by around 400 and now stands at a total of 41.4000 [ph]. In PSBC Germany, we have gained 73,000 net new customers in Q1, raising the total new adds to 712,000, well in line with our yearend target of 1 million. Benefiting from a larger customer base, Q1 has been another quarter of strong growth in German loan and deposit volumes, as well as ongoing net inflows and securities accounts. However, the decline in relevant equity indices has impacted overall securities volumes. Last, assets under control stand unchanged at €376 billion. In Corporate Clients, we are continuing to grow our customer base. This is one major cornerstone of strengthening our position as Germany's number one bank for the Mittelstand. With a target of 7,000 net new clients by year end, at the end of Q1, that number stood at 6,500 [ph]. This is well ahead of our plan. The same holds true for the RWA efficiency ratio, which is well advanced at 4%. As a next step, we are introducing a complementary indicator, corporate loan volumes, to refocus on RWA efficient volume growth in a highly attractive, albeit competitive German market. Let me talk you through our financial result and start with slide three. This slide shows that the impact from exceptional revenue items has been very limited in Q1. Positive and negative items have offset each other, resulting in only €1 million positive one-offs. Slide four shows our key financial figures at a glance, but let me move straight to slide five. Thanks to our growth path, clean revenues in PSBC have increased by almost 4% year-on-year, thereby more than compensating the drag from negative interest rates, reflecting ongoing investments in digitalization as well as higher regulatory burdens, the operating profit for the segment amounts to €202 million in Q1. While we have maintained our market leading position, increased pricing competition and slower capital markets activities versus a strong Q1 2017 had an impact on corporate client revenues. Considering a risk result benefiting from write-backs and a Q1 bank levy of €91 million, the operating profit for the segment stands at €145 million. The first ever positive operating result of ACR has been supported by positive fair value revisions and a low risk result. The absence of further shipping provisions following the IFRS 9 revaluation has shown its benefit here. With €37 million of bank levies, the operating profit of others and consolidation stands at minus €76 million. These segmental contribution have led to an overall steady business performance, reflected in the group operating result of €289 million. This is shown on slide six. While underlying revenues have remained flat with €2.3 billion, Q1 was the first quarter with full application of the new IFRS 9 standard. This explains some of the revenue line item movements, in particular between net interest income and net fair value result. Having gained further experience with the new accounting regime, we expect commercial NII trends to become much clearer over the next quarters. Benefiting from rather nonrecurring tax refunds, we only had €5 million of tax expenses in Q1. Over the course of 2018, however, I expected IFRS tax ratio to return towards a more normalized run rate. With higher minorities of €34 million due to the Polish gain on sale, the Q1 net result stood at €250 million. Slide seven provides you with an update on our cost transition. Overall group costs stood at €1.9 billion in Q1. After the successful ramp up of our digitalization initiatives in the first half last year, we are continuing the pace of our investments. As a consequence, we had a higher operating cost run rate in the first quarter 2018, similar to Q4 2017. This is reflected with €48 million higher investments and growth compared to last year. In addition, project cost for the separation of the EMC business and compliance with regulatory and financial reporting requirements, such as IFRS 9 or MiFID II, have shown their impact on expenses. In Q1, external regulatory burdens have yet again increased. Total compulsory contributions, including the European bank levy, the Polish banking tax and deposit guarantee schemes, add up to €244 million in the first quarter, €18 million more than last year. Main driver of this development is a higher European bank levy, which has been fully booked in Q1. Having said that, we are intensifying our stringent cost control, while we continue to invest in Commerzbank 4.0. Net of temporary sourcing effects, we have achieved cost savings of €29 million year-on-year. This is driven by lower personnel expenses, mainly due to the reduced FTEs in the German operations. Over the course of 2018, we will increase our efforts to deliver on our cost guidance of around €7 billion for the full year 2018. We continue to operate in a very benign credit environment across PSBC and Corporate Clients, benefiting from the robust German economy. This is reflected in our group risk result of €77 million for the first quarter. Following the reclassification of the ship finance exposure, ACR suffered no risk losses in Q1. After a prudently provisioned single case in Q4 '17, the Q1 risk result of Corporate Clients has benefited from the single case release. The PSBC risk result amounted to €52 million, around €20 million of which stem from consumer loans pulled on our own balance sheet. We are maintaining our full year risk result guidance of less than €600 million for now, given the single case release in Corporate Clients, our targeted loan growth and to gain further experience with the newly introduced IFRS 9 regime. Let's carry on with the operating segments and start with Private and Small Business Customers on the next two slides. Based on our multi-channel approach and consistently high customer satisfaction scores, net new customer growth has continued. In Q1, we have gained 73,000 net new customers in PSBC Germany. This is more than in the last two quarters, but, as anticipated, slightly below our targeted 2018 run rate. While we have focused in Q1 on the spend effect of online offering of Comdirect, broader marketing campaigns are rolled out in Q2. Based on our growing customer base, we have increased deposit and loan volumes by €6 billion and achieved net inflows and securities accounts of almost €3 billion year-to-date. As said, this has been offset by the decline of the relevant equity indices. Our mortgage business continues to be very robust. With new sales of more than €3 billion in Q1, the German mortgage book stood at €71 billion at the end of March. Compared to Q4 '17, which was impacted by the transitory sales effect, new sales of consumer loans have doubled to more than €500 million in Q1. This shows that the rollout of our digital consumer loan platform, with point-of-sale offerings still to come is on track. Quarter-on-quarter, clean revenues have remained stable. Loan and deposit growth was offset by the ongoing pricing competition in the German market, as well as the impact from lower securities volumes on net commission income. Let me also point out that the go-live of MiFID II has significantly complicated communication and documentation requirements, which has negatively impacted customer activity and therefore revenues. Looking at the year-end development, positive effects of our growth strategy are becoming visible. More than compensating for the drag from negative interest rate, underlying revenues of PSBC have grown by €44 million. A year-on-year increase in net interest and commission income highlights mBank's ongoing revenue growth, mainly driven by consumer lending products and higher income from deposits. Comdirect's revenue over the same time period is due to a strong rise in net commission income, thanks to ongoing customer growth and related trading activities benefiting from higher volatility in equity markets. This is in contrast to the Private Customers business where net commission income is generated, to a large extent, through premium custody and managed accounts. Including continued investment in digitalization and growth as well as the implementation of regulatory requirements, such as MiFID II, PSBC achieved an operating result of €202 million in Q1. Slides 11 and 12 provide an update of Corporate Clients. We are fully committed to further consolidate our position as the number one bank for German corporate. This effort is closely tracked by our segmental key execution indicators. As I have touched on our successful customer growth already, let me focus on our new key execution indicator, corporate lending, which we introduced complementary to RWA efficiency. Since the launch of Commerzbank 4.0, RWA efficiency management has been on top of our strategic agenda. Driven by a significant reduction of low yielding RWAs, RWA efficiency has well advanced to 4.0% as of Q1. Together with the recently launched Mittelstand campaign, we think now is an appropriate time to introduce an additional indicator which focuses on RWA efficient growth. If and when the rate cycle turns, it is our intention to be in as strong a position as possible to benefit. Thus, loan growth in this highly attractive but competitive German market is part of our strategy to expand our market-leading position. In addition, we aim to improve loan disclosure transparency and track changes in capital allocation. We start the indicator, which combines Mittelstand and corporate international, with a loan volume of €77 billion in the first quarter. Loan volumes are targeted to exceed €80 billion by the end of 2018 and €85 billion by 2020. Talking about revenue trends, it is important to understand that we have seen some shifts between line items in the light of the new IFRS standard, especially development in NII is somewhat distorted. The decrease of €54 million quarter-on-quarter includes only around €10 million from loans and deposits due to margin pressure. The remainder of around €40 million stems from shifts between NII and fair value result and thus therefore not reflect changes in commercial performance. Pricing competition in loans has also impacted the year-on-year revenue development of Mittelstand and corporates international. In addition, we have seen slower client activities across capital markets businesses after a particularly strong Q1 2017. On a positive note, there are first signs of improvement in the Financial Institutions business after our decision to streamline the correspondent banking network. At our workshop in London tomorrow, Michael Reuther, our board member responsible for Corporate Clients, will provide further insights on how we address the current market environment. This includes small background on the recently launched growth initiative in German Mittelstand. Proving the progress of our strategic realignment of the segment, cost savings, due to FTE reductions, have offset increase in these investments. On top of the two finished master journeys in the campus, we are the first bank in Germany to offer a completely digitalized advisory process for the management of interest rate and currency risks. Reflecting our continued growth, deposit and loan volumes have increased in PSBC, benefiting from customer additions and the strong mortgage product. In Corporate Clients, we have further optimized our loan-to-deposit ratio to 105%. This is driven by our ongoing and stringent deposits stirring, focusing on cross-sell potential. While we have managed to grow our loan book in Mittelstand by around €700 million quarter-on-quarter, this has been offset by reductions of legacy portfolios. Finally on segments, please turn to slide 14 to have a look at ACR. Thanks to the P&L neutral revaluation of the shipping exposure under IFRS 9, ACR's risk result in the first quarter amounts to zero. Also benefiting from positive mark-to-market of positions now held at fair value, Q1 is the first quarter with a positive operating result for the segment. Except for exposures creating the known hedging and valuation adjustments, we will continue to report the remaining exposures in underlying revenues. While the net fair value result can add some volatility going forward, a clean revenue basis of around zero is a valid assumption for the next quarters. Driven by the revaluation under IFRS 9, the shipping book has been further reduced. At the end of March, the group wide shipping finance portfolio stood below €2 billion. This is about one third its size versus the first quarter 2017. Continuing with RWAs and core Tier 1 capital on slides 15 and 16. We started the quarter with a core Tier 1 ratio of 13.3%, reflecting the guided IFRS 9 implementation impact of around 80 basis points. This all-in impact included the fair value reclassification effect on credit RWAs, which led to a reduction of €2.2 billion. Taking this as a starting point, credit RWAs have increased over the quarter with the help of targeted loan growth in the core segments. As higher RWAs have been offset by retained earnings, net of a 5% per share dividend accrual, our core Tier 1 ratio at the end of the quarter stood unchanged at 13.3%. Ladies and gentlemen, let me wrap up the first quarter. Step-by-step, we continue to move forward with the implementation of Commerzbank 4.0 in line with our plan. Overall, we have achieved a stable business performance in Q1. This has been supported by our growth strategy. In Q1, we have achieved strong new asset acquisition in PSBC and loan growth in Mittelstand. In order to address the competitive German corporate lending market, we will refocus loan growth and track it with a new execution indicator, which is complementary to our well advanced RWA efficiency measure. In Q1, we have increased our digitalization ratio to 53%, our risk profile has further strengthened and we have accrued dividend. To conclude, I would like to provide you with our unchanged objectives and expectations for 2018 on slide 17. In the further course of the year, 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 targets. This comes with the expectation of higher underlying revenues in PSBC and Corporate Clients. We will manage our cost base at around €7 billion. We expect a risk result under the IFRS 9 regime of less than €600 million. Finally, on our outlook, we aim to resume dividend payments for the fiscal year 2018. Thank you very much for your attention today. I'm very much looking forward to meet one or the other at our workshop tomorrow in London. But before that, I'm now happy to take your questions.

[Operator Instructions] The first question comes from Britta Schmidt who is calling from Autonomous Research.

Hi. Good morning. Thanks for taking my question. I've got two questions, please. With regards to the marketing campaigns that you're launching in PSBC, can you give us any idea as to what the outlook is for fee income in Q2 there? And the second question is regarding the digital IT investments, which have stepped up quite significantly and are ahead of the plan. Can you just explain a little bit as to where that's an acceleration of investments, as to where that the change may be in the spending that you have versus previous expectations or just a change in the execution? Thank you.

Yes, good morning. Indeed, as we all know, an increase of marketing campaigns will at least be partly reflected also in revenues since we book the incentives there. I think it's a bit too early to really give numbers here. But as I said, we are going to considerably ramp up the campaigns here during Q2, not surprisingly around the soccer championship. On the digitalization investment, as I said, we have basically ramped up our investment through the first half of 2017, and we are basically keeping that pace currently, and I expect that to go on at least for the second quarter. And then as the number of journeys completed goes up and the digitalization ratio goes up, I would think that we will see a decline again probably in Q3 and Q4. And in that sense, it is a unchanged approach throughout the quarters and is basically following the base plan of Commerzbank 4.0.

Thank you.

Thank you. And the next question comes from Benjamin Goy who's calling from Deutsche Bank.

Yes, hi. Good morning. Two questions, please, from my side. First, on your EMC business, there were some news over the last weeks and also in mid-March specifically that you're close to selling the business. So I would like any thoughts you can share on that. And also, an article mentioned more than €100 million would be the price tag. I mean, for a business making €400 million revenues annually, I sincerely hope it's more than €100 million. Any further thoughts around that will be much appreciated. And then secondly, you highlighted your digitalization spend and how that should phase through 2018. But just also wondering, with the cost-cuttings you're planning, do you think reaching the €6.5 billion has become more difficult or less difficult as compared to October 2016? Thank you.

Yes. Maybe on the EMC business, I think we have always said in the past that we wanted to bring our EMC business to the market. This includes exploring all options like an IPO or sale via an asset transaction, meaning basically selling assets and transferring the associated staff. From today's perspective, I can say that a portfolio sale without capital transfer is the more likely outcome. As you would expect, multiples known from share deal transactions obviously do not apply on such asset deals because we basically keep all the employed capital in-house. On the digitalization, again, I think - or as we have said before, digitalization is the core prerequisite to do the changes in our FTE numbers because only on fully digitalized processes, we have the opportunity to really reduce cost in that sense. And in that sense, as I said before, that follows the plan. And the cost target of €6.5 billion for 2020 also stands unchanged, albeit that an increased bank levy, for example, is not helpful, but maybe there will be some tailwinds in the future as well. But as I said, €6.5 billion is the target.

Okay. Thank you.

The next question comes from Giulia Miotto who's calling from Morgan Stanley.

Hi, good morning. Thank you for the presentation. A couple of questions, please. So the first one, on provisions. Your guidance remains below €600 million, but it looks to me, if the first quarter is a good guidance for the remainder of the year, that you should be significantly below that, like around maybe €400 million. Can you perhaps update us on why that guidance isn't changing? And perhaps, any thoughts on the consumer finance side? And then - so my second question is on your guidance for higher underlying revenues. If I look at the underlying trends year-on-year for the first quarter for the two main divisions, PSBC and Corporate Clients, it doesn't look like revenues are stepping up materially. And you keep mentioning margin pressure, especially in Corporate Clients. So what gives you confidence about higher underlying revenues and, perhaps, if you can indicate where are these coming from mostly? Thank you.

Yes. On the risk result, to a certain extent, Q1 unfortunately is always not a very good indicator because Q1 tends to be a bit shorter in terms of provisioning because you quite book a part of it still in the previous year. Secondly, we had a release from a single case in Q1. So the number in Q1 is not too good an indicator for a full year guidance. And secondly, as we expect the consumer finance to ramp up through the year, that we should see some additional risk result, and we have seen roughly €20 million in the first quarter. And in general, as we said before, learning how the IFRS 9 machine really works is what we would like to see for another quarter. And I don't know what your number is, but my guess is that it will be below €600 million. But still, I think Q1 is not a good indicator. Revenue growth, I think if you look at PSBC, you can clearly see two things, one is that the underlying revenue is growing from more customers and more assets; secondly, the drag from negative interest rates, which was roughly €130 million in '17, should be less in '18. So there is a little bit of a positive development. And the clients that we onboard, and I think you will have the opportunity to ask in more detail tomorrow at the workshop, the clients that we onboard produce additional revenue, albeit that we have, especially in the mortgage business, a margin pressure in Germany because there are an increasing number of competitors who are under pressure from the high deposit numbers. In Corporate Clients, again, the numbers, if you compare quarter-over-quarter, are a bit distorted by this booking of NII Internet net fair value result. The underlying performance still is €10 million minus from deposits and loans. But again, the growth, as part of that, we have completed basically the RWA efficiency exercise, to a large extent, so focusing on growth now and very optimistic that we will see some growth there. And again, tomorrow, with the workshop with Michael Reuther, I think you have every opportunity there to get some additional insights.

Thank you.

Next up, we have Andrew Stimpson who's calling from BAML

Good morning, everyone. Thank you for taking my questions. I understand the issue of NII in the corporate division going into some of the trading lines. But I just want to get a good gauge on what the group level and interest income could be. I guess, we need to look at the other divisions as well. And in that regard, it looked like there was a big jump in net interest income from others in consolidation. So I'm just wondering what drove that in 1Q '18 and how sustainable that is, please? Just to try and help us gauge whether the group level NII was actually representative or not. And then, secondly, on consumer finance. Could you just tell us what - sorry if I missed that, but what is the actual size of the book now and what was the growth like in 1Q '18? So obviously, that you're targeting pretty rapid growth in that book, so I just want to see if that's on track? Thank you.

Yes. On the NII issue, as I said earlier, given that the new accounting setup has a huge number of rules and most of them are automated, we had these bookings of NII bits into the fair value result. We will look at this through Q2. And as I said, it overstates negatively the commercial performance. In Others & Consolidation, I think that is only reflecting some smaller items going in and out in Q1. In general, our guidance of less than minus €100 million as the quarterly result for Others & Consolidation is unchanged. Consumer Finance, the book is €3.5 billion. As we said in Q1, following the transition, we had a little bit of slower quarter. Q1 now is stronger with €500 million net new business. We expect that to increase as the systems and processes get more stable and as we broaden the offering finally also to point-of-sale setups.

Okay. The next question comes from Daniele Brupbacher who's calling from UBS. Over to you.

Good morning and thank you. Just a couple of follow-ups. You did mention, I think, margin pressuring retail mortgages. And I was just wondering whether you could give us some updates on trends, margin trends also in the corporate business. And probably, the €500 million net new business for Consumer Finance, if you could give us a bit of a number there as well, so just basically competitive environment in general. And then I probably missed one of the statements, but did you mention what the NII drag was coming from the replication book basically, because in the past, you did show the number that will be useful? Thank you.

Yes. On mortgages, let's start, we have roughly €3 billion of new businesses mortgages in Q1. We have a stronger focus because Q1 normally is a very, let's say, active quarter where a lot of the competitors try to get a head start. We have focused a bit more on the margin side. So quarter-over-quarter, we have a slight improvement in margins on the front book. In general, again, the deposit overhang in Germany obviously, let's say, leads to interesting calculations at some of the competitors. They don't necessarily price off the swap cost with a curve or something, like with also a kind of have a view that as long as the mortgage produces more interest income, that a deposit at the ECB would be - that might still be a good deal. And on top of that, we all know that we have substantial market share over the last years. And with some of the competitors, they also seem to adjust pricing to make sure that the existing platform at least has a certain level of load, and that makes for interesting pricing competition. Now pricing is not everything on that, as we all know. It's also service, product offering, handling and the reliability in service business, while we still believe that we can produce enough net new business at slightly better margins than the average market. But again, the market is seeing margin compression here. The same holds true, to a certain extent, with Corporate Clients. By the way, both in corporates, as well as in retail we see every now and then new market entrants, which obviously believes that Germany, despite all the margin pressure, is a highly attractive market where a lot of banks want to be in. Margin pressure in Corporate Clients is also driven still a good part by the bond-buying program of the ECB. That doesn't really pressure on interest rate, but it always - but it has basically compressed credit spreads substantially, which is also something that finds its way into our calculation. Now given that there is at least some hope that the bond-buying program as well as some of the other QE measures of the ECB will at least be reduced during the end of 2018, coming 2019, we believe that the margin levels are, especially on the credit spread side, have every chance to go up. Then Consumer Finance, as I said, we have net new business of €500 million in Q1, and we expect that to grow substantially throughout the rest of the year. And I hope now I have all your questions covered. All right. And I direct Q1, it is a little bit less than €20 million in the replication portfolio.

Okay. Thank you.

Thank you.

The next question comes from Johannes Thormann who's calling from HSBC.

Morning, everybody. Johannes Thormann, HSBC. Two questions left, if I may. So first of all, number one, on your 2018 tax guidance, you said it will normalize again. What will be the normal run rate for this year or at least for the next quarters? And secondly, on your fee income, you talked about pressure from MiFID and all the stuff. But actually, the firm payments has seen the relatively - at least the biggest decline, driven by the corporates business, and the retail doesn't seemingly do so bad, especially that it's up quarter-on-quarter. What is hampering your FX payments as German export is still doing quite well? Do you lose market share or something like this?

Maybe I start with the tax rate. As I said, the Q1 has benefited from settling some older tax year issues, which has led to a refund. In general, our tax guidance is somewhere between 25% and 30%. I would expect 2018 to end up at the lower end of the range. So on fee income, I'm sorry I can't answer that question immediately. I suggest you take that offline with Michael Klein after the call.

Okay. Thank you.

The next question comes from Nicholas Herman who's calling from Citigroup.

Morning. Most of my questions have been asked already, but I just have a couple of follow-ups, please. Firstly, thanks for the clarification of the commercial NII reclassification scheme to fair value. So I may have missed it, but did you use - are there any other reclassifications that we need to be aware of as well? That would be helpful. Secondly, did you say as well that the Consumer Finance book is still only €3.5 billion? I thought it would be a little bit more than that. Also, €3.5 billion would imply almost what, 230 basis points cost of risk in Consumer Finance, is that what we should be running with or is that - I think it's a little bit higher than what I would have expected. And then finally, in terms of your new customer acquisition, you previously guided to ramping up in spring. How is that - we are halfway through the quarter now, how is - is there any update that you can provide us on how that's going, please? Thank you.

On the NII, just to be very precise, we didn't reclassify anything. It is just the new application of the standard IFRS 9. And then, as you remember, we changed the treatment of trading NII following Q4 last year. So in that sense, it's not a reclassification. It is just the application of a new standard. And again, as I said earlier, we have been tracking and are always tracking obviously closely the commercial performance. And that is, as I said, we will invest additional time in exploring, let's say, the beauties of IFRS 9 in Q2. The Consumer Finance book is...

So just a follow-up, were there any other ones that we need to be aware of then in terms of kind of...

No.

If that was the only one then?

Yes. Just for the record, no reclassifications nowhere and...

But I'm sorry, application of the new standard that resulted in the €40 million, would that be any one of...

No, that's the only just portion that we have and that we'll try to understand and smooth out as soon as we are fully booked - as we have fully understood all the bookings. The Consumer Finance book indeed is €3.5 billion. I think the normal cost of risk that you would expect for that kind of book is more the 150 basis point range rather than the 230. Again, first quarter under IFRS 9, we all need to get used to the somewhat fully automated but not easy machine. And net new customer acquisitions, I think on the new number, on the new net customer's acquisition on Q2, we will talk about in Q2. But as I said, the campaigns are already ramping up. And in that sense, I'm very confident that we'll achieve the 1 million towards the end of the year.

Thanks very much.

The next question comes from Riccardo Rovere who's calling from Mediobanca.

Good morning. Good morning to everybody. Three questions, if I may. The first one, to try to help us in assessing whether your less than €600 million guidance is reasonable or not. Would you be in the position to quantify the reversal you had in the corporate division in this quarter, because you mentioned that the PPA effect is kind of €20 million in Consumer Finance, so should I assume that the corporate reversal is more or less at the same size? I think this is the first question. The second question is, again, sorry to get back on NII again. But seeing 4% to 5% of the NII traveling between NII and trading, every single quarter, and this quarter is again the same thing, has been a common feature for Commerzbank results over the past couple of years. So I'm not sure if this has something to do with IFRS 9 because at a certain point last year, you started providing a single line between the two. So can you explain exactly what is this traveling related to because it's really uncommon to see 4%, 5% of one line moving to one - to the two different lines. And the last question I ask, it's not clear to me whether in this quarter, you have up-fronted some certain kind of costs, like IT, digitalization, and it should - and this amount of cost should eventually go down a little bit over the next few quarters or if the marketing campaign has been particularly aggressive this quarter and let's say, the client acquisition cost should eventually go down a little bit over the rest of 2018?

Okay. The risk guidance, I think, it applies what I've said earlier, Q1 is not necessarily a good indicator. And all the other comments I made, I'm not going to repeat them. I won't get any more specific than the less €600 million now, but I'm sure I will with Q2. NII, again, addressing part of the discussion that we had in the previous years, we have decided to treat NII from trading income along the same lines that everybody else does. That, in combination with IFRS 9, has obviously produced these kind of bookings in Q1. And as I said, I'm sorry, as we find them as uncommon as you are, we will put some further investigation into that and try to exactly understand which combination of which rules and which changes has produced this movement. Again, tracking the business has the results that I said earlier. Up-fronted cost, that is mainly the full booking of all the bank levies and other stuff, which in total is €244 million. We have also seen some project costs during Q1, IFRS 9, MiFID II and partly also the EMC project. As I said earlier, in net new customers, we have focused on the very cost-efficient online marketing campaigns with Comdirect. So in contrast to what you said, you should expect marketing spend rather to go up over the next quarters and incentives also to go up, which will then be reflected the incentive part in NCI, especially in PSBC.

Thank you.

Thank you. And our next question comes from Hugo Cruz who's calling from KBW.

Hi, thank you. Apologies if you answered this already, but can you give your NII net fair value result and the cost of - the loan loss provisions? If you were into IFRS 9, can you just tell us what the impact of IFRS 9 was? Thank you.

I have the basic expectation, and that is already what we said last year or at the - you also had the press conference, given that the IFRS 9 is a, let's say, completely new accounting regime, which we have fully implemented and which is fully integrated into the IT systems. It has a vast number of different accounting rules than the previous world. And the application of these accounting rules, including the fair value movement, is something where we would like to see or where we would like to gather some life experience, which is what we are currently doing, and that is why we have given the somewhat conservative outlook on the risk results, saying that it should be less than €600 million. And once we have better understood all the bits and pieces, we will then obviously more specify this guidance. And as I said before, we have some movements in bookings between NII and net fair value, which we also need to analyze to really understood whether the combination of certain accounting rules maybe has an unintended result.

Okay. Thanks.

And the last question for today comes from Anke Reingen who's calling from RBC.

Thank you very much for taking my questions. The first one is just on volume growth. Given your relatively strong capital ratio, I just wonder what stops you from - or why you're not tempted to accelerate the volume growth more. Is just mainly the margin equity right in the business? And on that question, on the Corporate Clients business, is the front book margin still - is it below the back book margin or are they at similar level? And then just one tiny question on corporates and adjustments. Your interim report talks about the benefit of a decline in the Dresdner Bank PPA. And I was just wondering what's left and how much - for how much longer that will run through the P&L? Thank you.

Yes. On volume growth, indeed, I think from a general point of view, I'm happy to see that credit RWAs have grown in Q1. And in that sense, that we get our capital to work again, I would expect that trend to follow or to go on throughout '18, which means that the consecutive increases in capital ratios, which we have seen over the last years, especially following the rundown of our non-core businesses, should now be more focusing to allocate capital to growth. That is what we have seen already in Q1 and that's what we have seen also the previous years. And in that sense, you are right, applying capital and make it available for volume growth is exactly what Commerzbank 4.0 is around. And the PPAs on Dresdner has been going down from 2017 to a - from 2017, basically a 3-digit number for the full year, more or less to 0 in 2021.

Okay. Thank you.

Many thanks for the questions, and I am very much looking forward to tomorrow, and hope to see you all in London. Thank you.