Operator  

Hello, and welcome to the Commerzbank AG conference call regarding the first quarter results 2025. 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. [Operator Instructions]

The floor will be open for questions following Bettina Orlopp's and Carsten Schmitt's presentation. Let me now turn the floor over to our CEO, Bettina Orlopp.

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

Good morning, everyone, and welcome to our earnings call for the first quarter 2025. The strong momentum we have created in recent quarters has continued in Q1, and we are looking to the future with confidence. We are happy to walk you through our very good results and provide you with our largely unchanged outlook for 2025. I start with an overview before Carsten takes over to present the details of the financials.

Let me start with four key messages before I discuss them a little bit more in detail. First, we delivered the best quarterly net result for Commerzbank in more than a decade. Second, the implementation of our strategic program towards 15% return on tangible equity in 2028 has kicked off well with first tangible milestones already reached. Third, our business model is robust, and we are well positioned to cope with the macro challenges ahead. And last, we confirm our positive financial outlook for 2025 and increase our expectation for the CET1 ratio to at least 14.5% by the end of this year, which is our forecast and not any new threshold.

Let's have a closer look at the key financials in Q1. The strong start to the year is reflected in the very good cost-income ratio of 56%. As always, Q1 benefits from some seasonal support and the improvement is driven by revenues, while strict cost discipline has been maintained. This performance further increases our confidence to reach our full year target of 57%. The same holds true for our net result and return on tangible equity. With the net result of more than EUR 800 million in Q1, we are well on track to reach our 2025 target of EUR 2.8 billion ex restructuring and EUR 2.4 billion including the expected restructuring charges.

The double-digit return on tangible equity demonstrates our ability to earn cost of capital and supports the re-rating of our share. This targeted 9.6% ex restructuring for the full year 2025 will be another major milestone in Commerzbank's profit generation. Higher revenues have been the basis for the increased profitability in Q1 and special interest goes to the development of net interest income and net commission income.

NII is holding up well in a decreasing rates environment. Our ECB rates decreased by 100 basis points in the last 6 months, NII decreased by only less than 1% in Q1 compared to Q4 2024. This achievement reflects good margin management and the support from the replication portfolio, which will also drive NII going forward. Based on this, we still expect a very good NII of base case, EUR 7.8 billion even on current forward rates. Carsten will further expand on this in his presentation.

On NCI, we're also very pleased with the performance and the revenues in the first quarter. Especially the securities business with private customers has been very strong and leads to an overall 6.4% increase in NCI. Hence, we remain confident to reach our 7% target for 2025. The strong securities business has also been the key driver for overall revenues in PSBC Germany. The respective growth in fee income could fully offset the rates-driven pressure on NII.

Similar logic applies for corporate clients. Based on very good FX business, the financial markets revenues in Corporate Clients have largely offset the expected decline in NII from deposits. Core revenues in mBank increased again to almost EUR 700 million due to good margin management and volumes. The decreasing burdens of FX loan provisions, the reported top line of mBank contribute significantly to our revenue growth in the group.

Overall, the revenue development, including treasury contribution, is very healthy and reinforces our confidence to reach our financial targets for 2025. Q1 was not only a very good quarter in terms of financials but also regarding progress in the execution of our Momentum strategy. We have reached the first important milestones. Our negotiations with the workers council are progressing very well. We have already agreed on an early partial retirement offering and booked the respective restructuring charges of EUR 40 million.

Based on the very constructive collaboration with the employee representatives, we are confident to conclude the majority of negotiation topics in Q2. Hence, we expect to largely book the remaining restructuring charges this quarter. Still in May, we expect to agree on the employee share program, which we announced at our Capital Markets Day, and we will implement it later in the year.

In terms of capital return, we have delivered what we promised. Our share buyback program for the year 2024 has successfully been concluded, and next week's AGM will most likely approve the distribution of EUR 0.65 dividend per share. In total, we have distributed more than EUR 3.1 billion over the last 3 years. Looking ahead, we plan to apply for next buyback at ECB and the German Finance [indiscernible] early in the third quarter. This will already be part of our planned capital return for the fiscal year 2025.

On the operational side, we invest a lot in our core systems to ensure high stability, which is of utmost importance in our daily business. Besides this, we have a strong focus on NII and have set up an infrastructure which we can leverage for business processes. Let me highlight three important use cases. First, our avatar has just gone live for private customers. General questions regarding our products and services can be answered by the avatar and provide a human-like interaction that caters to customer needs, enables efficiency gains in our service units. We will continuously upgrade the capabilities based on customer experience and feedback.

Second, we have implemented the AI-assisted documentation for advisory calls with corporate clients. Starting in financial markets, this saves about 30 minutes per case. Based on the good experience, we will roll it out to Mittelstand bank later in the year and free up significant sales capacity. And third, we have introduced an AI-based tool for fraud detection. It helps to reduce losses through automated fraud alerts and creates potential for efficiency gains. These use cases illustrate the potential of AI as a significant contributor to our cost-income targets.

So Q1 was a successful quarter for Commerzbank financially as well as with respect to the strategy execution. Looking ahead to the next quarters, I guess everybody tries to make up their mind on macro impacts. Obviously, we also have done our homework. We developed an initial view on the German stimulus package and on U.S. imposed tariffs. Furthermore, we squared this with the sentiment in the German Mittelstand and reviewed our view on asset quality. As a result, we do not see reasons to change our financial outlook neither for 2025 nor beyond. April as the first checkpoint has provided us with a good set of financial results, supporting our outlook.

Let me discuss the different topics step-by-step. Regarding stimulus and tariffs, we are convinced that in 2025, current tariffs will have some negative impact, while we will hardly see positives from the German fiscal package yet. This should lead to 0 growth in 2025 but does not change our financial outlook for the year. In 2026, however, we modeled the positive impact of the fiscal package to 0.7% impact on GDP compared to minus 0.2% burden from tariffs. Hence, we expect German GDP in 2026 to grow by 1.4%. Inflation is not expected to be materially impacted in the Eurozone.

The sentiment in the German Mittelstand fits to this picture. They are reluctant to invest, factoring in uncertainties from tariffs while facing a high level of bureaucracy. With the fiscal package, however, the picture might become more positive. And this is what we already see when studying the recent ifo data. While the negative impact of tariffs in the manufacturing sector in Germany is lower than expected, business climate in the construction industry has improved significantly due to the announced fiscal package.

For Commerzbank, we see clear opportunities regarding our business with clients in the field of infrastructure and defense. Being a reliable banking partner for corporates in the relevant sectors for decades, we are convinced this will pay off in the upcoming quarters and years. In terms of asset quality on our outlook for 2025, we anyway planned with conservative GDP assumptions and feel no need to adjust at this stage.

And this leads me to the confirmation of the key elements of our outlook for 2025. We confirm our target to reach a net result of EUR 2.4 billion, which translates into EUR 2.8 billion when excluding the expected restructuring charges. We stick to our cost-income ratio target of 57%. Regarding capital return, we plan for 100% payout based on the net result before restructuring charges and after AT1 coupon payments. And we increased our expectations for the CET1 ratio from 14.0% to at least 14.5% at the end of this year. All of this, of course, is subject to further developments with respect to macro as well as FX loan provisions and our Russian subsidiary.

In summary, we had a strong start to 2025 and confirm our outlook despite the challenging macro environment.

Now let me hand over to Carsten, who will walk you through the detailed financials of the first quarter. Over to you, Carsten.

Carsten Schmitt   CFO & Member of the Board of Managing Directors

Corporate Clients again delivered a good performance with the operating results of EUR 592 million, well above the levels of the last 3 quarters but not reaching the exceptionally strong Q1 of last year. Revenues are on the same level -- sorry, revenues are on the level of Q4 last year but lower year-on-year due to the effect of lower ECB rates on the deposit business. This is especially pronounced in Mittelstand, where revenues declined by EUR 41 million compared to Q1 last year.

Expenses were lower than last quarter. As communicated on the Capital Markets Day in February, we have transferred Structured Solutions and Investments from Others & Consolidation to Corporate Clients. Accordingly, we have restated the 2024 figures. In Q1, the revenues of Structured Solutions and Investments are reported in Institutionals, EUR 14 million in Q1, and in others, EUR 67 million in Q1. Structured Solutions and Investments brought around EUR 16 billion of RWA to Corporate Clients.

With the transfer, also some of the technical offset between NII and the fair value result moved to Corporate Clients. The main source are some legacy positions, which consist of cash instruments with corresponding derivatives, better economical hedges that are reported in different line items. In line with the ambitions of our Momentum strategy, we've changed the way we calculate the return on equity for the segments going forward. We now use 13.5%, in line with our CET1 target, leading to lower reported figures. This obviously has no bearing on the actual performance of the business, but it ensures that businesses use the right yardstick to capital allocation decisions.

PSBC Germany managed to reach the same operating result as in Q1 last year and is also well above the last 3 quarters of 2024. This has been achieved mostly by slightly higher revenues, supported by an even lower risk result. The driver has been the growth of the fee business that is most pronounced in Private Customers with growth of 14% year-on-year, more than compensating lower interest income. With 8%, small business customers also managed to grow fee income substantially but couldn't fully offset the drag from deposits at lower rates. Commerz Real has slightly higher revenues due to valuation effects and other income compensating lower fee income.

mBank again performed well on an operating level, more than doubling the operating result to EUR 204 million. Revenues before burdens from FX loans are up 5% compared to Q1 last year. But the main driver for the better operating results is the ongoing reduction of the quarterly burdens from FX loans over the last quarters. mBank continues to work on settlements and bringing the number of open court cases down. On current trends, mBank is well on its way to largely book required provisions for legal risks of FX loans this year with the quarterly booking falling from quarter-to-quarter.

As a housekeeping note, we have adjusted the way revenues from the FX business of mBank are reported to be in line with the rest of the group, where the sales margins from the FX business are reported as fee income. This has led to a restatement between fee income and trading income but did not change the total reported revenues.

Finally, a quick look at Others & Consolidation. Others & Consolidation had a slightly positive result of EUR 6 million in the quarter based on good revenues. Following the transfer of Structured Solutions and Investments to Corporate Clients and the reallocation of prebooked RWA for expected changes relating to internal models to the segments, the footprint of Others & Consolidation has reduced substantially. Of the remaining EUR 14.6 billion RWA, around EUR 5 billion are from treasury activities, especially the liquidity portfolios and connected hedges. The remainder is due to corporate items like DTAs, equity participations, real estate, et cetera.

I will now move to the group RWA and capital development on the next slide. RWA have increased by around EUR 1 billion compared to the end of last year. There has been no adverse impact from the implementation of the CRR 3 as expected. As mentioned, prebooked RWA were reallocated from Others & Consolidation to the other segments. In total, EUR 10 billion of prebooked credit risk RWA remain across the segments to cover expected changes relating to internal models. Also, the allocation of operational risk RWA to the segment was increased as RWA prebooked for CRR 3 and Others & Consolidation were replaced by the new CRR 3 operational risk RWA.

While we had an effect from the U.S. dollar on RWA, this was offset by other currency moves, in particular, the Polish zloty. Capital is up slightly as we had positive valuation effects in other comprehensive income, resulting in an unchanged CET1 ratio of 15.1%. As we target a payout ratio of 100% before restructuring expenses, we did not accrue any net result and deducted the restructuring expense after tax from capital.

Nevertheless, based on current RWA and taking into consideration planned loan growth, we expect year-end risk-weighted assets of less than EUR 180 billion. Except for the deduction for the restructuring expenses, we do not anticipate a significant change in capital. This should result in a CET1 ratio of at least 14.5% by the end of the year, leaving us significant potential to maintain a high payout in the next years. As a forward-looking remark, you will have seen that the BaFin has reduced the sector-specific buffer for mortgages from 2% to 1% effective from May. This will reduce our MDA by around 4 basis points from Q2.

This brings me to the end of the presentation and the outlook for 2025. We confirm our outlook adjusting some details following the very successful first quarter. We now expect net interest income of around EUR 7.8 billion and an increase of the related net fair value result by around EUR 300 million based on our base case assumptions. This leads to a combined contribution of around EUR 8.1 billion. We continue to target around 7% growth of the net commission income. We confirm our targets for the cost-income ratio of around 57% and the risk result of around EUR 850 million, assuming usage of the top-level adjustment. We also maintain our outlook for the net result of around EUR 2.4 billion after and EUR 2.8 billion before restructuring expenses.

Also, our target of a payout ratio of 100% before restructuring expenses and after AT1 coupons is unchanged. We increased our expectation for the CET1 ratio from more than 14% to at least 14.5%, following the implementation of Basel IV and our updated RWA outlook.

Thank you very much for your attention. Bettina and I are now looking forward to taking your questions.

Operator  

[Operator Instructions] And the first question comes from Jeremy Sigee, BNP Paribas Exane.

Jeremy Sigee   BNP Paribas Exane

Congratulations on the strong numbers. I just wanted to get you to expand a little bit on a couple of points that you've already touched on. The first is if you could just talk a bit more about the conversations you're having with Mittelstand clients, in particular, in relation to this sort of the negatives of tariffs, the positives of German stimulus. What are they tangibly doing and working on? Are they starting to invest, preparing to invest? Or are they more in wait-and-see mode? If you could just describe those conversations that would be really interesting.

And then the second thing, the CET1 guidance being slightly higher for the full year, I think you've said that this is just a numbers thing. It reflects the strong starting point and the improved RWA outlook. But I just wanted to get you to confirm that. And it's not about being more prudent in a wobbly environment, it's just really a numbers thing.

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

Thank you, Jeremy. So a dialogue with Mittelstand, I mean, the Mittelstand clients are clearly currently analyzing the situation and are cautious. But they all have their investment plans ready. We know that because we have the dialogue with them very intensively over the last quarter. And you see it also now on the Ifo data, things are getting better, sentiment is improving. I think a lot will also depend on the first actions of the new government now in the next couple of weeks.

But clearly, the stimulus package will help and Mittelstand clients also see that as a positive, but it will take time until you will see really the stimulus package unfolding, meaning that the real positive impact of the stimulus package will come -- will start next year. This year, we will rather have the tariffs putting some pressure on German economy. But still, we expect that investment plans will now start -- to be started in second and third quarter, assuming that situation is not worsening and that hopefully also the European Union can drive kind of a deal with the U.S., as we have just seen by the U.K.

On the second point, you are totally right. It's just a number thing. I mean, we have just adjusted our RWA forecast and capital forecast stays the same. Our target CET1 ratio is unchanged with 13.5%. This is what we want to achieve until latest 2028, hopefully, probably also even before. And you see that also what Carsten said with respect to the allocation. We use that now also as a target ratio for the segment, so 13.5%. So that has not changed at all. It only gives you a good sentiment that our possibility to return capital probably has even improved.

Operator  

The next question comes from Benjamin Goy, Deutsche Bank.

Benjamin Goy   Deutsche Bank AG

Two questions also from my side. First, it seems like the usual question every year. Net interest income guidance. You're tracking well ahead of your full year numbers. Really appreciate Slide 17. But still the question is why you are on some elements, so conservative, maybe in particular to deposit beta? And what could change that guidance throughout the year?

And then coming back to the fiscal stimulus in Germany and your long-term target, I mean, early days, and obviously, you're not changing 1 quarter into the plan. But maybe you can frame the debate a little with -- on the corporate side, you have a relatively punchy 8% CAGR targeted. But I think the German client is much, much lower. So what could be an outcome here? On the other hand, on the mortgage side, it's very low. Now you mentioned German mortgage buffer coming down, mortgage rates feel actually all right at the moment. So is there something of a renaissance of mortgage growth over the next quarters for you?

Carsten Schmitt   CFO & Member of the Board of Managing Directors

Thanks, Benjamin. Let me take the first question on NII and specifically on the beta that you asked for. So as you could see, we were able to keep our beta stable into the start of the year. There have been a few effects to this. First and foremost, we had positive effects from larger deposits in Corporate Clients that ran out. But I think mostly, we have to also look into Q1 and see what the market situation gives us, especially on the PSBC side, where we see quite a competitive market at the moment in terms of rates that are offered to clients in the market, which will mean that from the low beta in Q1, we are conservative in our estimates towards the end of the year.

And as you can see, we plan for a 3% increase in beta once we actually increase our volume in deposits throughout the year, especially on the PSBC side, we cannot rule out that there are pricing effects given the competitive market at the moment. So therefore, you see that we are still planning for 41% towards year-end and clearly continue our active margin management on this end to aim to keep it as low as possible. And secondly, there's a technical effect with lower rates overall in the market. Clearly, we have to expect that managing the beta will become challenging.

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

And on your second question, I mean, we have seen already in Q1 with respect to mortgages, very nice development of the new business. So the mortgage market has clearly recovered. Price development is also more favorable than a year ago. And so therefore, yes, we expect a positive impact there. We have been very cautious on mortgages in our Momentum strategy. We have been more ambitious on the Corporate Clients side, and the stimulus package, the fiscal package will definitely help us to also fulfill the targets here. And therefore, we feel very comfortable also with our plans going forward. I think it has proven right that we have been rather conservative back in February with respect to our macro assumptions.

Operator  

The next question comes from Kian Abouhossein, JPMorgan.

Kian Abouhossein   JPMorgan Chase & Co

I have a question, first of all, on Slide 17. Just on the NII, I'm trying to understand just putting the EUR 7.8 billion in context of what you said in the past, which is a range of EUR 7.7 billion to EUR 7.9 billion, what we should read into this. As you know, consensus is closer to EUR 8 billion. I just wanted to see if you could comment around your guidance compared to the range that you've given in the past.

Secondly, on deposits, you highlight on Page 16 the competition within PSBC. And I was hoping you could discuss that a bit. And if I may, this is still the same question, if you could just comment briefly also on beta velocity in a lower interest rate environment. I know you do great work around beta and you just mentioned you had a comment here that there's pressure potentially at lower rates, but I'm just trying to understand how we should think about beta velocity. I assume it's convexed to lower rates. And as a result, I would like to understand that as you do great work around betas.

Benjamin Goy   Deutsche Bank AG

Yes. Thanks, Kian. Let me start with the first question on NII. I think what we want to clearly bring across, that we are increasing our base NII case from EUR 7.7 billion to EUR 7.8 billion with these quarterly results. You were referring to the range that we gave in February. If I can just take a second or step back to February, we indicated EUR 7.7 billion as a base NII scenario, and back then saw forward rates that indicated potential upside of EUR 0.2 billion. By now, the rates have come down, as we all know, given the ECB moves, and hence, this EUR 0.2 billion actually as market movement has gone. Our base case, however, we increased to EUR 7.8 billion. And on top to this, you would see the connected net fair value, which then brings us to EUR 8.1 billion for the year, as stated. And that keeps us relatively stable compared to last year despite the ECB movements.

On the second point on competition in PSBC, and that is pretty much linked to the beta side. What we are referring to here is especially in the deposit market, we've seen competitive offers in the market all through Q1, which means that competitors are out and offering quite lucrative rates for short-term deposits. We have not participated in this first quarter game. We're waiting to see what's happening in this but expect that this will be still a challenging market, especially in a sinking rate environment and hence, also our statements to cautiously plan with a slightly higher beta. Then in general, beta sensitivity, that's to your last part of the question, would go down with lower rates. And as you said, we are constantly monitoring and managing this in order to keep the beta stable.

Operator  

The next question comes from Stefan Stalmann, Autonomous.

Stefan Stalmann  

Two questions from my side, please. The first one, just a numbers question on the expected credit losses in the first quarter. Could you tell us how much of that number was actually Stage 3 provisions, please?

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

In Stage 3, and it was then the usual mixture of things which we have seen occurring. And on the dollar funding side, I hand over to Carsten.

Carsten Schmitt   CFO & Member of the Board of Managing Directors

Yes. Your question on the dollar funding side, I think I should start with looking at our issuance plan for the year. We have actually started quite strongly in Q1 already covering more than half of our funding requirements for the year. Regarding the dollar funding, we do have dollar funding also covering our original business that we have in U.S. dollar, but mostly manage this by a cross-currency swaps. So at this point in time, actually, we feel no additional pressure while watching, of course, what's happening to the U.S.

Operator  

The next question comes from Johannes Thormann, HSBC.

Johannes Thormann   HSBC Global Investment Research

Three questions, please. First of all, you argued about your NII guidance increase that it's mainly due to the stronger-than-expected performance from mBank, which was up 1% quarter-on-quarter. But German PSBC, considering the rate cuts, was also was just down 1%, surprisingly stable. Can you explain the stable performance of both businesses? And this is probably -- is this a good run rate for the next quarters? That's my first question.

And secondly, just on technical numbers. Do you still expect the remaining restructuring charge of EUR 560 million? And is this fully tax deductible? And in this context, what tax rate are you planning for the full year?

And last but not least, if we look at your industries in your loan book and your exposure, you talked that construction probably becomes -- the outlook becomes better. Are there any other industries where your outlook has changed versus previously?

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

So I'll start and then give it to -- hand it over to Carsten. Just on the NII guidance I mean, you have well spotted that mBank and PSBC have proven to be very resilient with respect to NII. And this is what Carsten said, our 7.8% is now our base scenario. You know us. We wait for the next quarters to come. We have been very cautious, very conservative also on the beta management, which gives us also some flexibility given that we are still at a 38%, and our average plan for this year is 41%. So I think we can all do the math and know that there is some positive upside still available for us.

On the restructuring charges, yes, they are fully deductible. We expect to close our negotiations very soon with respect to the frame agreements with the Workers' Council that is the so-called [Foreign Language] and the social plan. And based on that, we will book the vast majority of restructuring costs in the second quarter, and we will deduct it from tax. And I think tax rate, do you take?

Carsten Schmitt   CFO & Member of the Board of Managing Directors

Yes. Tax rate, as you've seen, actually is very low at 26% in the first quarter. We still guide for 25% to 30% for the year. The restructuring expenses will certainly be deducted in that calculation, but we also have other effects that might play into this. So we still stick to the 25% to 30% guidance.

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

And regarding sectors, I mean, we have special sectors which are under special attention. We will talk about automotive. Machinery has been also under monitoring. But we have no need to change any outlook or something like that. We have been rather conservative for this year with respect to our risk results and we keep that. But we also do not have to increase our guidance or something like that.

Johannes Thormann   HSBC Global Investment Research

Okay. Just coming back on your NII guidance as -- you did a bridge, and now I'm doing a bridge of EUR 2.1 billion, EUR 2 billion in the next quarter, EUR 1.9 billion and EUR 1.8 billion to get to your guidance despite more interest days every quarter now coming, at least from Q1 to Q2 and Q2 to Q3. So is this really the worst case guidance, EUR 7.8 billion? Or what would need to trigger that threshold?

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

Nice try. So I would say, a base case means that we really mean base case. So it's the floor. And everything else will come as the icing on the top, to say it like that.

Operator  

Your next question comes from Borja Ramirez, Citi.

Borja Ramirez Segura   Citigroup Inc.

Can you hear me?

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

Yes, we can hear you.

Borja Ramirez Segura   Citigroup Inc.

I have three quick questions, if I may. The firstly is on the deposit market in Germany. I understand there's -- there has been increased competition in Q1. But I -- if I understood well, some competitors have cut rates. So there was one large bank that cut rates last week in the -- deposit rates in the German deposit market, so maybe that could maybe alleviate the competition and maybe suggest better trends in deposits. So that is my first question.

My second question would be if you could provide some details on the potential upside linked to the fiscal stimulus. I think you mentioned you have a better relationship with the defense sector. So maybe that can help your loan volumes. And also any details on the tailwinds from the capital markets and savings union?

And lastly, linked to the steeper yield curve, I would like to ask, given you have a sizable fixed rate mortgage book, if there could be upside from the renewal at higher rates and also maybe in your bond portfolio, if you could also [indiscernible] upside there.

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

Thank you for your question. So I mean, with respect to competition, what we have seen since the change in the interest rate environment, you always have banks with attacker products out there and they changed. I mean also Commerzbank and comdirect have been part of the banks with attacker products at a certain point in time. This quarter, we didn't -- we weren't part of this group. And you will see that also in the upcoming quarters that banks come out with a certain product and then they also decrease their offering after that. So I would say there's not a big change, but it's -- the competition has not changed but stayed strong. And it's always dependent on who's doing it is and some of the smaller players are going out. We feel that less and see it less than if a large player has an attacker product out there.

You asked for the potential upside from the stimulus package. I mean, first of all, I think we will see for the German economy only a positive stimulus from that from the fiscal package in 2026, as I said in my speech. Before that. It's too early. And I would say, given our quite aggressive loan growth numbers and momentum, I think we will use that first to deliver and then use that as a tailwind to see perhaps even more positive upsides. But we have no indication at the moment given that we don't know how this program is unfolding to now increase today our figures for the coming years. But I think it's a good confirmation and it gives us a lot of confidence.

With respect to capital markets union, I mean, it's part of the correlation treaty also that the new German government wants to push it. But I think that's still a way to go. And so we first wait and see how and when it comes and then we will see the upside. We are a big supporter of the capital markets union because we think it's important to ensure sufficient financing across Europe. But first, we have talked about this topic for quite a long time, so we would like to see first actions and see some effects and then we will judge what it means also for us as Commerzbank.

Carsten Schmitt   CFO & Member of the Board of Managing Directors

On your third question regarding the steeper curve, let me reiterate that we use the current development in the rate environment and the steeper curve to reassess. And if you look at development of our replication portfolio, for example, we increased the size and we also slightly sort of changed the duration of the portfolio to longer tenors, which will give us, as we demonstrated earlier, EUR 0.4 billion in additional NII this year and an increase up to EUR 1.1 billion to '28. So you can already see the steepened curve and the effects reflected in our numbers from the recent movement.

Operator  

The next question comes from Tobias Lukesch, Kepler Cheuvreux.

Tobias Lukesch   Kepler Cheuvreux

Also two, three questions from my side, please. Firstly, touching again on the NII and the net fair value. So I was just wondering, you guided basically for this EUR 8.1 billion combined. I understand forward rates slightly down. Is the message actually that you achieved that with lower capital intensity since this capital calculation and RWAs, you're now guiding forward actually way less than initially thought?

And secondly, with that EUR 1.1 billion in additional revenue from the replication portfolio, what does it mean for '28 now with a longer duration? So is that kind of EUR 8.9 billion forecast? Or let's take the combined EUR 9.5 billion. Is there an upside to that number? Secondly, again, on the RWA calculation, maybe you can shed a bit more light on what changed here.

And very lastly, maybe a quick word, is there any update regarding UniCredit?

Carsten Schmitt   CFO & Member of the Board of Managing Directors

Yes. Let me take the first question before I hand over to Bettina. So the NII of EUR 8.1 billion, I would like to reiterate, is combined of the slightly increased base case of EUR 7.8 billion plus the net fair value of EUR 300 million. And your question was regarding achieving this with lower capital intensity. I think you can draw that conclusion. We guide for lower RWA towards end of the year and, hence, also slightly increased capital. So that's a yes.

Then on the second question on the additional EUR 1.1 billion for the replication or from the replication portfolio, yes, we do see an increased amount coming from this given the recent changes. We do, however, stick to the guidance for '28. We actually have a benefit of a slightly changed duration in the portfolio, but we also expect that from the steeper curve, we will or might see slight changes in other line items. As I mentioned earlier, we definitely see this as a tailwind to '28.

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

Yes. UniCredit, no news actually. So we -- to what we have done also in the past 6 months, we focus on our own standalone strategy called -- named Momentum, and we focus on delivery and the value creation for our key stakeholders. So nothing has changed.

Tobias Lukesch   Kepler Cheuvreux

And the last one, if I may on the...

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

It's clear that we -- sorry. And then it's clear that if -- I mean, if something would come on the table, we would evaluate the option. I think that is needless to say.

Tobias Lukesch   Kepler Cheuvreux

And very last one, if I may, on other income and the hedge result, which was also quite positive and actually beats -- basically consensus expectations for this quarter. Looking ahead into '26 to '28, you have basically 0 other income or minus EUR 100 million guided.

Anke Reingen   RBC Capital Markets

Keep it short. The first is on the buyback request at the start of Q3. Are you willing to share a bit of the way of thinking on the amount you would request? Is it sort of like 50% of your net profit and then part of it in buybacks or any like on sizing?

And if there's time for a second question, on the cost trend in Q1, your cost-income ratio, 56% is within your guidance. But on absolute level, should we be thinking it could be coming down Q2, Q3 and then seasonality in Q4 in terms of the absolute progression?

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

So thank you, Anke. On buyback, yes, we plan to request or ask for approval for next buyback beginning of the third quarter. I mean, we have been very clear on our capital return plans for this year, which means 100% before restructuring, we guide for a net income of EUR 2.8 billion before restructuring. Then you have to deduct the AT1. That gives you a flavor of our total number we target as a capital return.

The concrete split between share buyback and dividend is not yet decided. However, you can assume that the next share buyback program will be larger than the last one, which was EUR 1 billion. And we will do it very similar as we have done it last year, in several tranches. So there will be a first tranche we will apply for based on the results we see in Q1 and Q2.

Anke Reingen   RBC Capital Markets

And does that mean like 50-50? Or are you -- I mean, first half is generally like a stronger profit? Would you consider to request a higher level in the first half than second half?

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

We will now -- I mean, we had also a very good start in the second quarter with the April numbers, but I would definitely wait on how numbers are evolving in May and June, and then we will make up our mind what we ask for.

Carsten Schmitt   CFO & Member of the Board of Managing Directors

And then very briefly on your cost question, yes, the 56% out of Q1 gives us a good head start into the year with our target to 57%. We know there's seasonality in Q1, but still we want to stick to the 57%. So EUR 6.8 billion for the full year. And of course, we are applying due management and intend to -- or expect that we manage that potentially even a bit lower, but we'll see that throughout the year.

Operator  

The next question comes from Tarik El Mejjad, Bank of America.

Tarik El Mejjad   BofA Securities

I think we established well in the call that your NII target is conservative. Just quick two follow-ups on this. On deposit beta. I think in the previous instance, you mentioned that Q1 is usually weaker -- I mean seasonally weaker because of the more attackers. I hear your comments about which banks are actually coming with low rates and has different impacts on competition. But do you still reiterate the fact that Q1 is easily weaker from that perspective with some challenger banks doing their budget in terms of deposit growth early in the year? Or it's not necessarily the case anymore? I understand competition is through the whole year, but just seasonally in Q1, is it higher still or not given the rest?

And then in Poland, I mean, the Governor of Central Bank sounds a bit more dovish now than earlier this year, probably because of political reasons. And now you changed your stance about being slightly more positive on rate direction versus what you had in the plan. So what's your read on that? And how confident you are in that there's no big dovish turn in Poland?

And just on NII, can you confirm that the relationship between NII and NAV is the same as we had before, and there's no kind of different changing dynamics? Just this is for our own modeling. And the last one, just by curiosity, what exact Basel IV CET1 -- Basel IV impact on CET1 that you had expected for the first-time application in Q1?

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

Okay. Then let me briefly go through the questions. So on beta, I think what we said applies, right? It's really tough to assess 100% what's happening in the market regarding competitors' moves in this. So I wouldn't necessarily be able to extrapolate that into the year. Q1 has been quite competitive. We see this at the moment still. Some move out of this, some don't. I would rather say we monitor this going through the next quarters.

On your question regarding Poland, we were extremely conservative, I should say, going into the year with our rates that we had. Meanwhile, the rates have come down in Poland, but we expect a higher average throughout the year. We still have a slightly more conservative stance on our Polish rate assumptions in our plans and hence go with that.

Then your third question was on NII, net fair value mechanics. Yes, that is still as we described it also in the last call. So we have counter effects from connected net fair value that move counter to the interest rate movement and hence support our NII. And then your last question on Basel IV. We don't see any effect in Q1 from this. As we mentioned, we prebooked RWA before and have now reflected those in the segments. So we don't see anything out of Q1.

Tarik El Mejjad   BofA Securities

Just on the Basel IV, and I understand you don't have any impact. But going into Q4 -- in Q1 and the implementation, I think you had -- you expected some small impact from the first time application. I just want to know the delta between what you anticipated and what's actually happened of being neutral. But it's okay. We can take that off-line.

Carsten Schmitt   CFO & Member of the Board of Managing Directors

We'll take that off-line.

Operator  

The next question comes from Riccardo Rovere, Mediobanca.

Riccardo Rovere   Mediobanca - Banca di credito finanziario S.p.A.

Two or three, if I may. The first one is Bettina, Carsten, you have delivered 11.5% return on tangible equity net of restructuring in the quarter, and you still aim at 9.6% at the end of the year. Do you think it's going to be easy to lose 1.5 percentage points of RoTE in only 9 months? That -- and related to that, if the situation remains as it is, I understand its first quarter, we got tariffs, there is no incentive for you at the moment to change the message, I get that. But would it be -- June 2025, would it be enough time has passed into 2025 to make a broader assessment on where you stand. Because 1.5 percentage points of lower RoTE in only 9 months is not a small number.

The second question I have is on asset quality. The EUR 850 million guidance was set before the Liberation Day, if I'm not mistaken. And that stands unchanged. So politically, and correct me if I'm wrong, you are basically saying the underlying is going better than we think because, otherwise, the EUR 850 million would have become, I don't know, EUR 1 billion with the addition of macro uncertainty from tariffs and so on. And somehow related to that, why should we get to EUR 850 million, given that you have reported EUR 120 million and you're using PLAs?

And to be honest, Germany is alerting with stagnation, technical recession or whatever it is, since a while -- a couple of years. So if something had to go wrong, maybe we would have already seen something while, honestly, we don't see much. So implicitly, are you basically saying that the underlying is better than you thought 6 months ago?

Last but not least, when you say negotiation started -- negotiations, restructuring charges will be mostly booked in the second quarter in '25. Would it be ahead of shadow in respect to what you had in mind? Does it mean eventually that the cost cutting could be accelerated -- cost savings could be accelerating with respect of the original -- of your original expectations?

And last on Polish FX provisions, what do you expect in '26, them to continue or to fall dramatically?

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

So thank you, Riccardo. A lot of questions. I'll try to be as fast as possible on it. So on the first question with respect to what we have today and what we guide for the full year. And you said that rightfully, we are after the first quarter, there are 3 quarters to come. And it's clear that we will closely look on the H1 quarters and then think about our guidance. But for now, we feel very comfortable with what we have guided. And I want to not forget specifically, when you look on the risk result, for example, that we guide for a much higher risk results for the full year. And it's just the truth that the sensitivity of our RoTE is pretty high with smaller changes of net income. So I would say stay tuned. And you should take from here that we have lots of confidence in achieving our targets.

The second point is a little bit related to that. You said that we have come out with our risk result guidance before Liberation Day. First of all, I would say that lots also have happened since Liberation Day and a lot of things have also calmed down again. But nevertheless, we have been anyhow rather conservative at the beginning of the year with respect to this year. So when it came to a risk result, we had our GDP guidance from our own economic research, which was just at 0.2%. That one, we now have lowered to 0% and we feel still comfortable with the risk results guidance because we had that in mind already. And the positive effect, as I said, from any stimulus will only come in 2026.

And so I think that covers also your third question, which were all related about what we think about the risk result of what's happening in the credit portfolio. And we think we have -- and that's the benefit now. We have a very well diversified loan portfolio, and that helps in the moment, clearly.

On the negotiations with the Works Council, I would say we are absolutely according to plan. It was always our aspiration to be finished in Q2 with the frame agreement, and we will manage that. So therefore, we can book it. And then what you -- what we then need to do is we need to agree on partial agreements with each and every executive area which will see headcount reduction. That will come after that in the third quarter and will be latest ended in the fourth quarter. And then on FX for 2026, I would say expectation is we won't talk about it anymore because it will not be worth talking about. That's our expectation.

Operator  

The last question at this point comes from Jochen Schmitt, Metzler.

Jochen Schmitt   Metzler Equities

One question on Private Clients business, Germany. Following the announcement of your new fee structure for current accounts, do you have observed any change in the client churn rate from either Commerzbank to comdirect or obviously, more important, from Commerzbank to third-party banks? That's my question.

Bettina Orlopp   CEO & Chairwoman of the Board of Managing Directors

Yes, thank you. So we have now nearly 50% approval already. So all clients have received their letters. 50% have already signed or agreed to the change. There is a churn, but it's much more limited than we thought. And it's -- some are indeed moving in the direction of comdirect and some moving out. But overall we are pleasantly surprised by the development.

So I think we come to an end. And thank you very much for your questions. And we look forward to the upcoming quarters and later. Today, have a great weekend. Thank you very much. .

Carsten Schmitt   CFO & Member of the Board of Managing Directors

Bye.

Operator  

Your conference call has come to an end. Thank you for attending. Goodbye.