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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. [Operator Instructions]Let me now turn over the floor to Dr. Orlopp.
Good morning, ladies and gentlemen. Welcome to our earnings call on the results of the first quarter 2020. We are all in troubled times, and also it comes with many challenges. I'm happy that Commerzbank is holding up well which is, first and foremost, a result of the excellent job our staff is doing. We have been supporting our clients through the crisis and have seen good customer business in the first quarter. And equally important, we have a strong capital and liquidity position. This forms a very solid foundation to successfully manage Commerzbank through the crisis.Let me describe how we are positioned on Slide 1. We take care of our staff and remain fully operational. It is our first priority to ensure the safety of our staff and customers at all times. At the peak, 80% of our staff worked remotely, be it from home or from backup locations. Nevertheless, more than 200 large branches have been opened during lockdown. And since the beginning of May, we are step-by-step reopening branches again. Self-service facilities have been opened in all branches at all times. At the same time, we have been experiencing an acceleration in the adoption of digital banking by our customers. We see all-time highest in usage of our banking apps with a 50% increase in March over the 2019 average, and we are convinced that many customers will stick to the convenient digital channel once the crisis is over.We are committed to serving our customers, digital and personal. Our staff in the branches do a fantastic job to make sure that all support programs are effectively applied and efficiently processed in the best interest of our clients. In this way, this goes way beyond powerful government programs. We are also offering dedicated bridge loans to our corporate customers and advise them on how best to navigate the crisis.And we are well positioned for this unprecedented crisis. In Germany, we operate in one of the strongest economies with fiscal sustainability and budget surpluses over the last year. We have seen a decisive government response with one of the largest and most comprehensive support programs even in global comparison. Our NPE ratio of 0.8% is significantly below the European average of 2.7%. And also, our loan for parent portfolio of 0.6% scores well in European comparison. Together with our CET1 ratio of 13.2% and our LCR of 130%, this puts us at Commerzbank in a strong position. Or to put it in the words of our Chief Risk Officer, in such a situation, you definitely prefer to be CRO at a Germany-based bank rather than any other country you can think of. On Slide 2, I would like to provide you with some key figures that underpin support for our customers. This support is visible in strong loan growth and the availability of loan deferrals. Loan growth with Private Customers does not show any deterioration so far. We have provided corporates with EUR 11 billion of additional liquidity in March and April. This comes on top of the KfW program for which we have already approved a volume of more than EUR 4 billion. With an overall 14% market share on KfW loan to the Mittelstand, we demonstrate our commitment to support the real economy. On deferrals, the amount granted in PSBC Germany represents only 2% of our loan book. This reflects the still comfortable cash generation of the vast majority of households in Germany. In number, we have agreed payment holidays for 24,000 loans with additional of about EUR 2.6 billion. More than 80% of the deferrals are for principal only, i.e., interest will still be paid, but the maturity of the loans is extended. With those rather reassuring developments in mind, let us now turn to the financial highlights of the first quarter on Slide 3. We had a very good start into the year. Clean NII and NCI were up 6% and 14%, respectively. And even March was a strong month, benefiting from heavily increased securities business, not only at comdirect, but also in the branch-based business with Private Customers. The strong customer focus of our business model has also reflected a net new customer acquisition of 142,000 additional customers in Q1. And let me point out that this number is much higher than our planned run rate of roughly 50,000 per quarter. With attractive account offers and due to our convincing brokerage offering, we attracted many customers and have effectively front-loaded customer growth. And also, Corporate Clients was holding up well in the first quarter with activity and clean revenues almost from the same level as last year and also Q4. But with the crisis kicking in by mid-March, we have seen a very material but temporary valuation effect as well as prudent risk provisioning in the first quarter. Both in combination, together with the even increased annual banking levy for the European single resolution fund, weighted on the results of Q1. So despite the strong customer revenues and 4% lower costs, we had to recognize an operating loss of EUR 277 million, including negative corona effects of EUR 479 million. The risk result of minus EUR 326 million includes a top-level adjustment of EUR 111 million to cover anticipated effects from corona. The underlying scenario for this booking is characterized by a 2-months lockdown in Germany and subsequent step-by-step restart of affected businesses. The remaining EUR 250 million risk result also includes EUR 74 million credit losses related to corona, leading to a total corona impact on the risk result of EUR 185 million. Our balance sheet is very solid and healthy with strong risk and capital ratios. In this crisis, we clearly benefit from all the efforts we have put into our risk profile and the quality of our loan book over the last year. Our CET1 ratio stands at a high 13.2% with a significant buffer of 240 basis points over EBITDA, which has been reduced by ECB to 10.8%. And to make sure we contribute as much as we can to the real economy through the crisis, we followed the ECB's strong recommendation to not make dividend payments for the time being. Slide 4 shows the key financial figures of the group. As always, and without changing methodology, we have shaded the impact of exceptional revenue items in the operating results. But as the overall extraordinary effects from corona summed up to EUR 479 million, we have added Slide 5 to shed some light on the individual components. Our reported operating result of minus EUR 277 million includes a top-level adjustment of minus EUR 111 million in the risk result. On top of that, further EUR 74 million of the remaining risk result would not have happened without the crisis. Exceptional revenue items of minus EUR 160 million and additional temporary valuation effects of minus EUR 135 million following the third block of corona impact due to the market turmoil. Without these effects of overall EUR 479 million, our operating results would have stood at EUR 202 million with stable revenues and lower operating costs compared to last year. Without the increase of the European bank levy, it would have reached last year's levels.This good underlying performance is also visible when looking at the divisional revenues and results on Slide 6. Clean revenues in PSBC have increased significantly, and clean revenues in CC have remained almost stable. The negative valuation especially burdened our Treasury result within Others and Consolidation. Let's take a closer look at the development of our revenues by line item on the next slide. NII and NCI both show a positive trend with a combined increase of 10%, with the latter benefiting from high trading activities of Private Customers throughout the quarter, which further accelerated in March. Obviously, the further development of NII and NCI is very much a function of economic recovery and market development. Also, we are convinced that the positive trend will resume once the crisis is over. We would rather guide for stability and for growth in the next quarter. The very good revenue streams in NII and NCI have unfortunately been more than offset by increased CVA and negative valuation effects from long-term hedges. This negative impact arose in March and reflects temporary unrealized losses according to accounting rules. On Slide 26 on the appendix, we give additional information on the drivers of the valuation hit from long-term hedges to provide transparency on their nature. In April, as the volatility in markets reduced, we have already seen a partial reversal of around EUR 90 million. Now let's carry on with Slide 8 and the group P&L. As I have already elaborated on NII and NCI and valuation, and we'll do so on risk result in due course, let me spend some words on the sale of our EMC businesses and on taxation. We have transferred another big part of the business in Q1 and last weekend. We have fully finalized the transfer of the EMC business to SocGen. Consequently, we have booked another tranche of the sales price in discontinued operations in Q1, leading to an operating result of EUR 44 million. This and the final low double-digit payment expected in Q2 should cover remaining costs throughout the year. On taxes, please note that the taxes of Q1 are not only due to profits in some legal entities, but also due to the banking levy which is not tax deductible in Germany.This brings us to Slide 9, which provides a view on our cost development. In Q1, we could reduce costs that are under our control by 4.1%. This is a result of our effective and ongoing cost management. Personnel expenses benefited from a reduction of 1,200 FTEs as well as from lower accruals for variable compensation. Administrative costs benefit from cost management measures. Also, we will likely see at least some pickup in investment spend in the next quarter. In contrast, compulsory contributions unexpectedly increased by EUR 36 million or 13.4% due to an increased European bank levy. But coming back to what we can control and manage. Due to the effectiveness of introduced efficiency measures, we can already today improve our full year outlook on cost. We now expect costs at the level of 2019. This includes up to EUR 0.2 billion additional IT investments as well as increased compulsory contributions. This is about EUR 150 million less than originally guided. Furthermore, as already announced in February, we have currently an additional cost management project running, and we'll update you on additional savings potential with the disclosure of our Q2 figures in August. Now let's move to Slide 10 and our risk result. As already said, we have booked EUR 326 million in the first quarter, of which EUR 185 million are attributable to corona. As a result and including the top-level adjustment, we report a cost of risk of 27 basis points in the first quarter. Applying our risk management metric, we expect credit losses in relation to group exposure at default of EUR 470 billion. These 27 basis points translate into 47 basis points if you use the loan book of EUR 277 billion as denominator, as reported in Note 19 of our interim report. While the risk result is evenly distributed between PSBC and Corporate Clients, it is worthwhile noting that mBank contributed more than half of the provisioning in PSBC. On Slide 11, we have provided you with a drawdown of our loan portfolio into selected, potentially critical subsectors. As you can see from the numbers, our exposure to the most vulnerable businesses is limited. In retail, food retailing represents the largest stock portfolio as it's one of the few beneficiaries of the crisis due to increased eating at home and hoarding by customers. The smaller part of our portfolio consists, among others, of fashion, which is most severely affected. And overall, stringent customer selection and emphasis on sustainable business model, in combination with 88% of the portfolio being rated investment grade, clearly, pays off during the current crisis. 83% of our travel-related sub-portfolios are weighted investment grade and benefit from guarantees. On this basis and with government support available, we see a good chance to come through the crisis with not too much damage. On oil and gas, I would like to highlight that we are hardly engaged in any upstream businesses and that more than 50% of the exposure is to integrated oil and gas majors. Furthermore, we are not engaged in fracking or oil services, and we are also not engaged in any project financing. On Slide 12, we have put down the key rationale behind our approach to risk provisioning, especially with regards to our top-level adjustment. We have updated our macro scenario along the lines of a stressed ECB-based scenario, taken into account the envisaged corona adjustment that leads to a significant expected downturn. While we applied a look through the crisis approach to rating our corporate customers to avoid unwarranted staging under IFRS 9, we applied expectations of higher PDs and defaults to reflect them in the top-level adjustment. With the assessment of mitigating Germany and international support programs, including for [ Bernstein ], this has led to an overall top-level adjustment of EUR 111 million. For the upcoming quarters, we will not rule out additional top-level adjustments, subject to further development of the crisis. For the full year 2020, we expect credit losses of EUR 1 billion to EUR 1.4 billion. This translates into a cost of risk for loan book of 36 to 51 basis points and is based on the assumption of a step-by-step restart of the economy and no second lockdown, very important. Now let's carry on with the operating segments and start with Private and Small-Business Customers on the next 2 slides. In PSBC, we have acquired customers at a much higher growth rate than our plan of 1 million net new customers by the end of 2023. More than 75% of the 142,000 additional customers came via online channel. This is a clear proof that our digitization efforts in PSBC paid off. Customers like our offering and accounts as well as the brokerage and decide to join Commerzbank. And we are convinced that we can further leverage our customer-focused capabilities by the integration of comdirect. As the comdirect AGM approved the squeeze-out last week, we have now started to join forces, not only to lift the cost synergies of EUR 150 million, but also to reach the next level of consumer banking journey. While customer acquisition benefits from our digital capabilities, loans and securities volumes show a mixed picture. Loan volumes increased by EUR 2 billion in the first quarter due to further growth in our mortgage book. That shows 70% growth year-over-year. Though online partly contributed to the loan growth, while our consumer finance book has grown slightly to EUR 3.8 billion in the last quarter. On the other hand, we have seen a sharp drop in securities volume by EUR 24 billion, reflecting market turmoil at the end of March. On a positive note, we have seen almost EUR 4 billion net new money into securities. The market somewhat also fueled trading activities leading to a 25% increase in NCI. With NII up to 4%, this led to an overall revenue growth of 10% with all subsegments contributing to the increase. Including compulsory contributions of EUR 137 million in the quarter, this leads to a strong operating result of EUR 212 million before the divisional top-level adjustment of EUR 62 million booked in the risk result. Or to put it the other way around, the strong development of revenues in the first quarter could completely compensate for the booking of expected credit losses due to corona. Let me spend a few words on our plan for mBank. As you already have noted with our press release on Monday, we have decided to call off the sales process for our stake in mBank. In the current environment, the achievable terms and conditions for deals are simply not attractive enough to pursue the process. As we do operate with a strong CET1 ratio of 13.2%, this does not limit any of our strategic initiatives going forward and rather adds back high-yielding operations to our business model. Now let's switch to Corporate Clients on the next 2 slides. In the last years, we have grown our loan book with target customers in Mittelstand and International Corporates by more than 5% per annum. This growth comes with the sound credit quality, albeit in a tough margin environment. But it will probably pay off now that we have never really eased credit standards and could withstand the temptation to hunt for high-yielding but more risky loans. This is one of the key reasons why the EUR 11 billion new loan volume in March and April, which is driven by the drawdown of committed lines, does not really cause a headache. Looking at the P&L of Corporate Clients, we can state that clean revenues in the first quarter are stable against the background of stronger customer relationships in the German Mittelstand and with our International Corporates. To us, it is absolutely natural that we stand by our clients through the crisis. This is the time when strong customer relationships really matter. And to be clear, we do have plenty of balance sheet capacity to take over good business from competitors that withdraw from the market. And we will use this opportunity as a clear market leader in the German Mittelstand. But besides the good customer business in Q1, we have to acknowledge that negative valuation effects from CVA adjustments as well as additional LLPs or expected credit losses burdened the business. Both add to a drag of EUR 201 million and have pushed the operating results below 0. However, CVA should bounce back once markets have normalized again. Let me now turn to capital on Slide 17. With 13.2% at the end of Q1, we sustained a strong level despite additional RWA from increased lending. The drawdown of corporate customers, as already mentioned, contributed to the net EUR 2.2 billion increase of credit RWA. The impact of the crisis on market risk RWA has been very limited due to our business profile as a commercial bank and has even been offset by lower RWA from operational risk. On capital, we have seen some movements, which have led to a slight decrease of 10 basis points in CET1 ratio. Looking ahead, ECB's relief on capital requirements currently translates into an MDA reduction of 55 basis points for Commerzbank. We aim to use this relief to support the real economy and seize business opportunities. And we have adjusted our CET1 target for year-end 2020 from at least 12.75% to at least 12.5%. Now let me read about the financials of the quarter with some key messages and conclude with our outlook on 2020. First, we have a strong first quarter in our customer business, reflected a 10% growth of NII and NCI. Second, burdens from temporary negative valuation effects are likely to bounce back once the markets normalize again. Third, costs are down 4%, and we see potential for further reductions beyond our current plan. Fourth, we have booked EUR 111 million top-level adjustment for expected credit losses, reflecting the high quality of our loan book and one of the largest and most comprehensive government support programs in the world. Fifth, we maintained a high level of capital with a CET1 ratio of 13.2% and have ample capacity to support the economy and expand client business. Now let me start the outlook with some remarks on the strategy. We continue with the execution of our strategy. And of course, we will be incorporating consequences of the corona crisis, such as the increased usage of digital channels in our strategy going forward. We are planning to start the negotiations with the workers' council in late summer. As such negotiations usually last several months, it remains open to which extent restructuring charges can be booked in 2020. With that said, I would like to conclude my presentation with the financial outlook for 2020. The outlook is based on our expectation for a U-shaped recovery of the German economy, meaning a 2-month lockdown followed a subsequent step-by-step restart of the economy and no second lockdown in Germany. We keep our core client revenues, excluding exceptional items and valuations, largely stable. We expect a risk result of EUR 1 billion to EUR 1.4 billion. We tightened our guidance and managed our cost base on the same level as last year, and this includes IT investments for Commerzbank 5.0 of up to EUR 0.2 billion. We aim for a CET1 ratio of at least 12.5% by year-end. And as said, all these forward-looking statements are based on our current assessment of the economic impact of the corona crisis, and we all know that things might change pretty quickly. Thank you very much for your attention, and I'm now very happy to take your questions.
[Operator Instructions] And the first question for today comes from Benjamin Goy calling from Deutsche Bank.
Two questions from my side, please. First, on your capital ratio, you lowered the target to more than 12.5%. Should that mean that RWA growth, driven by business growth, but also migration is the main driver to get closer to this level rather than the 12.75% you flagged previously?And then secondly, maybe you can help us on restructuring costs and the net profit because when I add your guidance for the various lines, I get to more or less breakeven net profit for 2020. And then the question, how much restructuring you will book this year?
Yes. Thank you, Benjamin. On the capital ratio, I mean, the lowering is really also something to basically reflect this technical adjustment we now have seen by ECB where we even got a relief of 55 basis points. And it's a minimum target as we have set the 12.75% last year, and we ended up with the 13.4%. Now we have the 12.5% taking into account the relief of the ECB. And clearly, I mean, we want to use this leeway to be at the side of our clients to provide growth and to provide liquidity to Corporate Clients. And that's the key objective here because we are pretty convinced that clients will remember at the very end who was at their side during the crisis, and we definitely want to be at the side of our clients. On restructuring costs, as I said at the very end, it's very tough to say. I mean we have already booked one share in Q4 2019 for the age retirement program, part-time program, which we have just started. We literally sent out the letter, I think, last week. And we will now start the overall negotiations with workers' council late summer. And it's very much dependent on what we really booked this year on the progress we made there. So it's very tough to say in the moment. What we see is clearly the IT investments, and this will be basically -- is part of our cost guidance I just gave.
Okay. But maybe a short follow-up. Could it be that you split the restructuring costs depending on the negotiations? Or would it theoretically be the full bulk of the remaining costs that would be booked...
No. I'm pretty sure it will be definitely split, say, you will definitely not see a full bulk this year. And how much it will be this year really depends on the progress we make in the negotiation.
The next question for today comes from Stuart Graham who's calling from Autonomous Research.
I had 2, please. In the interim report, you gave us the allowance of Stage 2 provisions, EUR 372 million, although you didn't give us the figure for Stage 2 loans and advances. I think that figure was EUR 9.8 billion at Q4. Could you give us the Q1 figure, please? And then second, if I look at your expected loss disclosures in the interim report, it looks like your assumed risk density on Mittelstand has dropped from 33 basis points to 27 basis points. Can you explain why you think your Mittelstand book is now less risky than it was at the end of last year?
Yes. Let me start with your first question. So as said, on loans, we have not seen any corona staging from Stage 1 into Stage 2 as we look through the crisis. Thus, our assets in Stage 2 of roughly EUR 10 billion at the end of 2019 have not materially changed. The provisioning in Stage 2 has been an additional EUR 61 million in Q1, as you can see, as you said, in our interim risk report on Page 20, thus the overall stock of provisions in Stage 2 stand at EUR 570 million in Q1, which you find in Note 26 of the interim report. And now on your expected loss which has been lowered, it's a good question. And it's probably statistics, but I think we need to come back to you on this question, to be very honest, because I couldn't answer it right away why it is like that.
The next question comes from Jeremy Sigee who's calling from Exane BNP Paribas.
I just wanted to ask a couple of questions about the behavior of your loan portfolios. So 2 questions really. The first is just on the total volume of lending, the new loan volumes that you showed on Slide 2, I think EUR 4 billion PSBC, EUR 15 billion Corporate Clients. When we look at the stock of loans, they increased much less. There's relatively limited increase in the sort of quarter end stock of loans in both divisions. So could you -- I think you mentioned things like institutional clients, but could you talk about some of the exposures that reduced in the quarter offsetting that gross new lending volume? And then my second question was really around the customer deferral statistics that you gave, which I thought were very benign, very limited amount of deferrals going on. And I just wondered how you see that behavior through the remainder of the year. Do you think we remain roughly stable around these levels? Or what are your expectations on that?
Yes. Thank you. Well, on the first thing, I think we need to keep in mind on Page 2, it's March and April. So a large chunk really happened in April. So that's why you can't really compare the numbers.And on the second question, on the customer deferral, yes, we have seen very limited so far. I think it has a lot to do with the programs, the government programs we see here in Germany, which is basically helping the private clients, but also clearly the corporate customers. And I think we are pretty confident to not see a big increase as long as we really see the U-shape scenario because then people will return to their jobs and they will start consuming again, salaries coming in, et cetera. So it should be limited. But always assuming the U-shape scenario, it all depends on that, right? If we see a second lockdown, it might go up.
And on your U-shape scenario, I mean, it was -- could you talk around the sensitivities there? Because to talk about only 2 months of lockdown and then things kind of resume seems relatively optimistic scenario. I just wondered if you could sort of talk about what you're seeing on the ground that gives support to that view.
Well I mean, we always rely on the macroeconomic scenarios of our economists. And you see that also in the backup of the analyst presentation. I mean we're assuming a minus 5.5% GDP for Germany this year and 7% for Europe. And that is what we also have included in our assessment for LLPs and the top-level adjustment. And as said, I mean, the U-shape scenario in our case assumes that we see a step-by-step opening. So exactly what we currently can observe in most -- at least of the European countries, that you see small steps, but you see steps with opening, with people returning to production and stuff like that. And we just -- our assumption at the moment is that this trend will go on and that we will not stop again. That's basically the point, but more it's very tough to say. And then I am -- just to refer to the GDP scenarios.
The next question comes from Johannes Thormann calling from HSBC.
Johannes Thormann, HSBC. Three questions, please. First of all, on capital. In your current planning, how likely is it that you drop below the new capital target? Or can you exclude that? Secondly, if we look at your reduced cost guidance by EUR 150 million, how much of this is due to underspending on travel and everything in probably Q1 and Q2? And what is driven by reduced personnel costs?And last but not least, if we look at the EUR 150 million cost savings you hinted from the comdirect integration, this is still nearly half of their last year's cost base. If you could provide some more details on this, please.
Yes. On the first question, the likelihood that we drop below 12.5%, 0. You can be sure that I'm determined to show a capital ratio above 12.5%, otherwise, I wouldn't have set this guidance. Secondly, on the cost guidance, underspending with respect to travel, I mean, yes, we see less travel. But to be very honest, our travel expenses is rather a small share of our cost base. It's more on the personnel side. We definitely see -- we have seen a drop in FTEs of 1,200. That definitely plays into it. And it's a mixture of a lot of different things, measures we take, also including marketing, events and stuff like that. And I'm pretty sure that corona will also now have an impact on that on how we do certain things in the future. And hopefully, we'll do them more cost efficient than we have done that in the past. On the EUR 150 million for comdirect, it's a mixture of different things. I mean what we definitely do is we do a full integration of comdirect, leveraging the strength of comdirect. And therefore, we see that we can take out all double investments with respect to marketing, IT, specifically IT because we will just use one brokerage system for the bank. One -- and also the development of new products, et cetera, can be just done by one entity. So it's a mixture of a lot of things we can use.
The next question we have for today is from Riccardo Rovere calling from Mediobanca.
Just a couple of questions, if I may. Getting back one second to the GDP downturn that we plugged into your old models there. If I understood it correctly, you plugged minus 5% for 2020. Would it be possible for you to give us an idea of what you have plugged in 2021 and 2022 eventually? And also those, 2022 and 2021, must have been somehow capped into account what you've calculated at the EUR 110 million, EUR 111 million provisions related to the current macro scenario, if that is the case? And the second question I have is on a slide where you showed the amount of loans, the average loan volume in corporate. I think when you showed EUR 96 billion at the end of March, the rest of the value show 8 -- if I remember correctly, EUR 88 billion, EUR 89 billion. That means that most of the growth must have occurred right at the end of the quarter, right? Is that a fair reading of that slide, Slide 15, so the bulk of the growth has not been visible in the quarter in the average number, EUR 88 billion, EUR 89 billion?
Okay. I mean on GDP, yes, I said the minus 5.5% for Germany and 7% for Europe. We have also an assumption in there. You find that on Page 21 of the analyst presentation, which sets for Germany a plus of 4.5% and a plus of 5% for Europe. 4.5% for Germany, 5% for Europe, that's basically the reflection of the new scenario I have described earlier. To be very honest, I think nobody is currently in a position to say anything about 2022 and even, I would say, 2021. And it's something where we will probably see over the course of the next weeks and months some changes. I just remember that the GDP already for this year have changed quite significantly over the last weeks. So we are rather careful on that. On the second point, average loan volume, yes, you are totally right. It's an average loan volume, and then we put in the end of the month figure. And that basically is correct, what you're saying, we saw the majority of the increase in March.
And if I get back one second on the GDP, the 4.5% is plugged -- is part -- the 4.5% growth is part of the EUR 111 million, that is not just the minus 5.5%, right?
It's -- exactly. I mean what we do is with the guidance of EUR 1.0 billion to EUR 1.4 billion clearly reflects our assumption that we see a recovery. So we will see the bulk of problems, et cetera, probably coming up in Q2 and Q3, and then we see really a recovery of the industries. That's what we currently assume.
Very, very clear. And getting back one second to the second question we gave. If I understood it correctly, let's say, the amount of loans that are disbursed originated now under the protection scheme. Germany is fairly limited. This is my understanding. So is it fair to say that the bulk of the loans that we see in slide on the EUR 96 billion is written as originated at, let's say, market conditions, has nothing to do with loans guarantee and stuff like that, which is something that we don't see in the revenues, not now or very limited to market conditions?
I'm not sure, but I got the question. I mean we have the EUR 11 billion, which is basically drawn lines from existing clients, and that's the normal schemes we have agreed with them. And then we have the EUR 4 billion, which is linked to the KfW programs. I'm not sure what your question is behind it.
Yes, I was -- the question is, when I see the difference between EUR 96 billion in Slide 15, the EUR 96 billion and the EUR 89 billion, one is the average, the other one is the end of the period. So the EUR 96 billion, even that it ended the period and it's not in the average, the impact on the revenues from the extra growth is not visible in this quarter or not completely...
No. Oh, okay. No, no, no. It's not visible in this quarter, you're absolutely right. That is something which -- this will be the...
Okay. So the question was the margins, the margins behind, let's say, the delta between EUR 96 billion and the EUR 89 billion, can I assume that the margins are more or less market conditions, not that dissimilar between the 2?
Yes. Yes, you can see probably even a slight increase because also the KfW program, the EUR 4 billion, most of that has happened just in April. So the growth which you now see here on this page is rather related to a normal drawn line in our existing business.
The next question for today comes from Daniele Brupbacher calling from UBS.
I wanted to ask about loan growth dynamics more on the mortgage side and consumer finance. Mortgages grow, obviously, to 7%, but also year-over-year, but also year-to-date. So how do you see that going forward? How does the pipeline look like? I would expect to see quite a bit of a slowdown there for obvious reasons. And also on the consumer finance side, the EUR 3.8 billion, how do you expect that to develop going forward?And then, again, back on expected loss. I mean I once looked at that figure for the past 15 years, and it looks like -- because it's quite a bit below actual risk cost. And sometimes, it's somewhat higher. So just in general, how meaningful is that number to you? And I mean, obviously, here, we now see an increase only of around EUR 100 million to EUR 1.1 billion. Again, back a bit to Stuart's question, how could we read this? And how -- what's the -- how meaningful is that number? And probably just briefly on -- I mean 2020 is one thing, but 2021 -- we had very low-risk costs in 2018 and '19. How should we think about 2021 if the U-shaped recovery really materialize? Is it going to be then just significantly lower again? So do you really think 2020 is going to be the elevated level and that was it? Or how do you plan then a bit more longer term into 2021?
Okay. On your first question with respect to the mortgages and consumer finance development, I mean we even have seen in April very good activity in those areas. We expect a slowdown, but not significantly. So we think that within the core business, we can basically hold the business pretty stable, but again, to be seen. But there has been not too much of a dip in the number. On the expected loss, it's a very meaningful number for us. And if you take it, I think at the moment, the expected losses is around EUR 1.1 billion. That's very much in the guidance of the EUR 1 billion to EUR 1.4 billion. Why hasn't it changed? It's because also -- I mean we should not forget that we have a very low NPE ratio. We have an NPE ratio of 0.8%. And if you compare that to European competitors, on average, they have a 2.7%. So I think we have a very well-diversified risk portfolio. And that's -- yes, that's quite beneficial in a crisis like that. So we definitely look at the number and we take it serious. With respect to loan loss provisions for 2021, I know that this is something everybody is asking themselves, but it's a very tough question. I mean we have already increased guidance for this year regardless of the corona crisis, that we said we would see more than EUR 650 million of loan loss provisions. For 2021, that's very much dependent on basically the development we see in the next month and also what we see how really the government program, not only here in Germany, but also in the other locations we're engaged in, how they develop. So it's really tough to say, I have to admit.
The next question comes from Nicholas Herman calling from Citigroup.
Three questions, if I may. I apologize I cut out before, so sorry, if I missed this. But did you quantify -- I mean how should we think about the actual the risk migration effect for the second half of this year and maybe 2021? Just trying to get a sense on should we conceptualize that. Secondly, on capital. Have you used -- do you expect to have used the full of your expected loss shortfall by the end of 2020 with the EUR 1 billion to EUR 1.4 billion of losses?And then also as part of capital, are there any -- should we expect operational risk to continue to fall over the year as we get further away from the GSC and losses drop away? And also, do you have any updates to your models coming through that could also help your capital position? And then just a final quick question on the competitive environment. Has that -- presumably that's improved recently. Any thoughts or comments you have there would be greatly appreciated.
Can you just repeat the third question? I'm not sure that I got that one. Sorry.
Just trying -- how to think about the -- quantifying the risk migration effects for the second half of this year and maybe beyond.
Okay. I thought that was the first question. So the risk migration effect, I mean, we basically -- I mean we definitely will see some effects with respect to the increase of RWAs. We also -- I mean we will provide guidance on the LLPs of EUR 1 billion to EUR 1.4 billion, which definitely means that we will see some effects in here. And on the capital side, on the opposite side, I wouldn't expect too much. There are also not really model changes out there because also all model updates and provisions are passed from the ECB. What we clearly see is that, I mean, we got the relief on the P2R. And given our current funding situation, et cetera, we can only use so far part of it, and that might also change in the course of the next months. That might have an impact. And there's still the debate ongoing with respect to the deduction of some IT investments from the capital, and that would have also clearly a positive impact on our capital situation if this becomes effective.
And then in terms of -- just coming back to the expected loss shortfall by the end of 2020, do you expect to have -- for that deduction to have basically been fully utilized or gone by the end of this year?
The AT1 shortfall, well, it depends on the market, right? I mean it's clearly our plan to reduce the shortfall, but we should only do it if it's sensible.
I guess based on your current guidance of EUR 1 billion to EUR 1.4 billion, will it have basically been largely used up by the end of this year? This is my question.
Sorry, can you repeat that, please?
Is it likely that you will have used up the -- or the reduction will be mostly gone by the end of this year based on your impairment guidance?
I'm not sure -- I'm also looking at blank faces, I have to say, around the table. I'm not sure what you're really meaning.
That's okay. I'll follow up on the line in that case.
Okay. Thank you.
And the last question for today comes from Dieter Hein calling from Fairesearch.
I have 3 questions, 2 regarding your restructuring program, Commerzbank 5.0. You booked EUR 100 million costs in 2019, and no costs were booked for the restructuring in the first quarter. If I remind, am I right, your cost budget was EUR 1.6 billion for your 5.0 strategy, and you said you want to split it. Is it fair to assume that at least you should book EUR 500 million or more in the current year, restructuring costs? And is the budget, which was given before COVID-19 of EUR 1.6 billion, still what you expect? Then secondly, your target for return on tangible equity was from 2023 above 4%. And you said you want to announce additional restructuring measurements in the second quarter or with the release of the second quarter results. Is a target of this measurement to achieve then be above 4%? Or is the target to increase your return on tangible equity target above or significantly above 4%? And last question, you launched last year AT1 bonds. You booked, as far as I can see, no interest expenses for this AT1 capital. Which expenses do you expect for the full year 2020? And when will you book it?
Okay. So let's start with the restructuring. Yes, we booked EUR 100 million restructuring costs that started last quarter. That's for this part-time age retirement program we just have started to launch. We didn't book anything in Q1 simply because you can only book restructuring costs, head count related, if you have concluded negotiations with workers' council. And as such, we will start negotiations with workers' council end of the summer.The EUR 1.6 billion you were referring to, I think we need to differentiate, that half of it is real restructuring costs related to head count reduction and things like that. The other half is really IT investments, and the IT investments we show as part of our cost line. And there, I talked about the EUR 0.2 billion for this year because this EUR 800 million will be spread across the next 4 years, EUR 200 million this year. And they are part of our reduced cost guidance for this year, and they will be fully included in our cost base. So as said, how much of the real restructuring costs out of the EUR 850 million, EUR 100 million we have already booked, how much we will really book this year depends on the progress of the negotiation. So it's really tough to say. On the 2023 4% target, yes, we confirmed during our quarterly results announcement back in February that we are reviewing this target and that our objective is clearly to increase our target for 2023 above the 4%. And we also announced that we have started an additional cost-reduction program, and we will update you on the results of this program with the second quarter results. On AT1, we definitely booked the cost for AT1. It's approximately EUR 50 million, and it's included in our P&L and as presented today.
You booked EUR 50 million for AT1 interest expense, no?
I'm sorry, that's -- yes, I'm sorry, EUR 50 million for the full year. So we booked the share for the Q1, 1/4.I'm going to interrupt because I have now the answer for Stuart, thankfully. You asked for the development of Mittelstand because we see here a decrease from EUR 257 million to [ EUR 220 million ], and that is indeed due to migration default effects, like a migration to the default portfolio. So there, you basically see the reflection of what we also have seen in the Q1 LLP results. I hope that answers your question. Okay. And I got also the info that, that was the last question. So that was perfect timing to get the answer for Stuart. Ladies and gentlemen, many thanks for your questions, the discussion with you. Let me say goodbye for today. And I'm sure that we hopefully see you pretty soon also in person. Stay healthy, and have a nice day. Thank you.