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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 the floor over to Stephan Engels.
Good morning, ladies and gentlemen. Welcome to our conference call on the results of the second quarter 2019. In Q2, we reached a year-on-year stable net result of EUR 271 million. This is based on an operating result of $298 million and benefit from a low tax rate. The operating result is based on a good performance of our customer businesses as we maintain our momentum and implementation of our client-focused strategy, Commerzbank 4.0. At the same time, we had a weak revenue contribution from legacy positions held at fair value, mainly in Corporate Clients, and faced higher loan loss provisions, leading to an overall lower group operating results.Let's look at growth in our client businesses first. Our strategic growth initiatives continue to add new customers and subsequently, new business and revenues in our core segment, PSBC and Corporate Clients. This continues to mitigate the negative interest rate environment, tight margin and regulatory headwinds in the highly competitive German market. In Q2, we added 108,000 net new customers in PSBC Germany. This brings the total to almost 1.3 million since the launch of Commerzbank 4.0 back in 2016. These customer gains contribute to an increase in assets under control of EUR 11 billion in the second quarter. The total of EUR 413 billion represents nearly 8% growth year-on-year, with all product categories contributed.Corporate Clients, too, is maintaining its momentum in the client business, reaching the 2020 growth targets a year early. We reached our target of more than 10,000 net new customers and grew our loan book with Mittelstand customers and international corporates to EUR 88 billion, 10% more than 1 year ago. With this growth from both segments, we could counter the ongoing margin pressure and increase NII by 7% on a group level year-on-year.While the client business has contributed positively, this could not compensate for the low fair value result. This has led to an overall decline in revenues of 2% year-on-year. While the macro environment has lost some momentum, this has not materially affected the credit quality of our bank. However, risk provisioning for few individual cases and fewer write-backs have resulted in a risk result of minus EUR 178 million in Q2.Let's move to digitalization and cost management. We are continuing to implement our digitalization program and deliver on cost management. At the end of June, our digitalization ratio stood at 64% based on journeys underway and completed at our digital campus. At the beginning of July, we initiated our Campus 2.0 strategy. This completely integrates the respective IT and business areas. The new units are fully responsible for providing and further developing their products from the business idea to the IT implementation. This aligns incentives and will improve efficiency and time to market --On cost, Q2 operating expenses came in $55 million lower than last year, more than offsetting the headwind we face from compulsory contributions and other regulatory costs. In sum, operating expenses and compulsory contributions amounted to EUR 1.65 billion in Q2 and EUR 3.5 billion for the first half of the year, but further pursuing our active cost management and applying a prioritized investment approach, we are on track to meet our cost target of less than EUR 6.8 billion for 2019.Finally, moving on to capital and risk profile. While continuing our growth strategy, we increased our core Tier 1 ratio to 12.9% at the end of June as compared to 12.7% 3 months ago. We are thus well prepared for the upcoming impact of TRIM on our core Tier 1 ratio. On top of core Tier 1, we optimized our capital structure with a successful issuance of USD 1 billion AT1 in early July.As ACR has made good progress and successfully de-risked and reduced their portfolio, we have decided to close the segment at the end of Q2 and transfer remaining exposures to Others & Consolidation. The success in our NPL ratio, which we further reduced early 0.8%, is testament to the health of our balance sheet. And finally, we have also accrued full dividend in line with the 2018 payout ratio.Let me now go into some more detail on our financial results. Slide 2 shows our key financial figures at a glance while Slide 3 highlights exceptional revenue items. So far, this year, exceptional revenue items had virtually no impact on our financials as Q1 and Q2 effects offset each other. Therefore, let me move straight to Slide 4 on our Q2 segment results.On the basis of customer and asset growth, PSBC has increased revenues this quarter. Costs and the risk results have developed favorably, leading to a strong increase in the operating result to EUR 239 million. Corporate Clients has also increased customer revenues, but the weak fair value result has led to an overall reduction in revenues combined with an increase in provisions from single cases, this has brought the operating result down to EUR 22 million. This is clearly disappointing and from today's perspective, not a good indicator going forward. I would rather expect quarterly results somewhat around EUR 100 million, obviously, subject to markets and risk positioning.In Others & Consolidation, we have managed to improve the operating result by EUR 50 million compared to last year. This is largely thanks to a good performance in Treasury, which will also manage most of the former ACR exposures in the future. This will most likely add some volatility to the divisional result. And with this in mind, we maintain our guidance for the operating results of Others & Consolidation of better than minus $75 million per quarter.Let's move to Slide 5 with the group results and take a closer look at the drivers. The customer business in PSBC and also in CC has held up well, growing loan and deposit volumes. This in turn has added interest income, again, clearly demonstrating that our strategic customer and loan growth is paying off. Interest expenses from funding were lower than last year. This has led to a 7% year-on-year increase in net interest income and more than compensate the 3% lower commission income. In sum, NII and commission income were 3.1% higher than in Q2 last year. However, the net fair value result is significantly below last year. This reflects lower contributions from legacy positions in Corporate Clients. In contrast, in Q2 last year, we benefited from a large transaction in credit portfolio management. While legacy is the biggest driver, also the contribution from hedging and portfolio management activities has been lower than in recent quarters.The discontinued EMC business contributed a small profit this quarter, offsetting the loss from the previous quarter. For the full year, we expect a lower double-digit million negative operating result.Finally, a brief word on taxation. Our loan tax rate in the second quarter is largely due to tax reimbursements for prior years, which we did not expect to settle so quickly. The blended tax rate for the first half stands at just over 20%. We continue to expect a normalized IFRS tax rate of around 25% throughout the remainder of the year.Slide 6 provides you with an overview of the cost development, which is in line with our full year guidance. Looking at Q2, we managed group expenses to less than EUR 1.6 billion. This brings H1 expenses, including compulsory contributions to EUR 3.5 billion, EUR 89 million or 2.5% lower than last year, despite an increase of EUR 35 million in compulsory contributions. We are on track to meet our year-end target of less than EUR 6.8 billion. In order to achieve this, we prioritized our investments in digitalization and growth. This allows us to apply considerably fewer external suppliers, while it also means we have postponed our capital investment project. Where appropriate, we continue to substitute external for internal resources, which increases efficiency and contributes to the cost reduction. We have also continued our general cost management based on staff reductions and sourcing, which have helped to mitigate the effects of higher staffing costs. All these measures have resulted in EUR 176 million decline in administrative expenses, more than compensating the increase in personnel expenses.Let me also spend a few words on compliance. Over the last years, we have strongly invested into our compliance framework. As a result, we believe that we have built a very robust system and that the money was well invested. However, this has come at a higher cost level to run the respective operations, which is now leveling off.Let's move to the risk result on Slide 7. You will all have seen the results of the most recent Ifo survey and other lead indicators. Given the macro uncertainties in the first half of the year, the German economy has been weaker and probably contracted in Q2. The service sector is holding up, supported by domestic demand, but some sectors in the more export-oriented manufacturing industries are affected by the headwinds and resulting lower external demand. For the full year, our economies continue to expect a positive GDP development for Germany, albeit at a low 0.4%. This compares to a growth above 1% in 2018. For 2020, the forecast is that -- the forecast for growth is around 1%. Against this backdrop, our risk indicators have remained stable. Only some individual names are showing any impact.Correspondingly, the underlying loss rate in PSBC and Corporate Clients remains largely unchanged, also reflecting our robust approach to risk and the healthy risk profile, including our NPL ratio of only 0.8%. While the Q2 risk result of EUR 48 million PSBC has been even lower than in the last quarters, Corporate Clients had, however, seen fewer write-backs of risk provisions and additional provisions for some individual names. This has led to a risk result of EUR 127 million, EUR 92 million higher than in the comparable period last year. Overall, this is in line with our expectation of the risk result not below EUR 550 million for the full year. Let's continue with the operating segments and start with Private and Small Business Customers on the next 2 slides. In line with our customer growth strategy, we have gained 108,000 net new customers in Q2, bringing the total for the first half to 232,000. Roughly half of these stem from comdirect. Our key focus remains on translating customer growth into higher volumes and revenues and ultimately improve profitability. In Q2 alone, we have achieved growth in assets under control of EUR 11 billion. Deposits have grown by EUR 4 billion, in line with the previous quarter. Securities volumes have grown by nearly EUR 5 billion, with new money of nearly EUR 2 billion, and the balance by improvements in market indices. Loan growth has been more than EUR 2 billion, slightly below the previous quarter. Loan growth has been about 9% annually and brings our loan book in PSBC Germany above EUR 100 billion. Assets under control have over risen by EUR 29 billion compared to Q2 last year.Of particular note is the growth in the mortgage book. The book now stands at EUR 78.1 billion. Margin on new mortgages have improved and are currently at level similar to the average back book margin. This is a validation to our systematic approach to mortgage lending in the highly competitive German market. The consumer loan book is at EUR 3.8 billion. The growth in lending activity and deposits resulted in a 7.3% year-on-year increase of net interest income. Quarterly underlying revenues in PSBC are at the highest level since the start of Commerzbank 4.0. This revenue growth has compensated the headwinds from the competitive and interest rate environment as well as regulation and is proof that Commerzbank 4.0 is working. The resulting operating performance of PSBC was healthy, with slightly higher underlying revenues, lower operating expenses and a better risk result year-on-year. While the overall positive development of the underlying business, the operating result improved to EUR 239 million in the second quarter.Slides 10 and 11 provide an update of Corporate Clients. In Corporate Clients, we continue to see progress in our growth strategy with a clear focus on our Mittelstand and international Corporate Clients. We have in total gained more than 10,000 customers and increased corporate loan volumes to EUR 88 billion. In doing so, we have now reached our original 2020 targets as set out at the beginning of Commerzbank 4.0, 1-year early. Increased loan volumes with corporate customers have led to an underlying NII growth of 4.2% year-on-year. This growth is broad-based with all core products, loans, trade finance and cash management contributing.Looking ahead, as we have already reached our loan growth targets, we will focus less on continuing loan growth, but more on cross-sell and making existing relationships more profitable. The good performance of the client business and resulting NII is reflected in the revenue growth in all customer segments, Mittelstand, international corporates and financial institutions. In contrast, and as already mentioned, the fair value result is significantly lower this quarter and mainly reported in the subsegment, Others.In summary, the missing contribution from Others and the increased risk result due to a few specific cases has led to an operating result of EUR 22 million in the quarter.Finally on segments, please turn to ACR on Slide 12. The segment has continued its orderly runoff, so much that the portfolio is now largely de-risked. Based on the clean and reduced portfolio, ACR contributed EUR 38 million to the quarterly results. With only EUR 4.5 billion of exposures remaining in the de-risk portfolio, we have decided to dissolve the segment already now and consolidate the balance of the portfolio within Others & Consolidation. Within Others & Consolidation, the bulk of the assets will be, in future, managed by Treasury, where the public finance exposure fits well into the existing portfolio. The assets will be integrated into the structures and processes already in place at Treasury, increasing operational efficiency. The transfer of all positions occurred as of July 1. For that reason, the result of ACR will remain at EUR 31 million for the rest of the year, as we will not restate our H1 results following the transfer.Let me continue with RWAs and core Tier 1 capital on Slide 13. At the end of the quarter, our fully loaded core Tier 1 ratio stood at 12.9% compared to 12.7% at the end of the last quarter. This is the result of increased RWA being more than balanced by capital build from retained earnings, net of dividend accrual and fewer regulatory deductions. Looking more closely at risk-weighted assets, the operational risk RWAs have increased by EUR 1.3 billion due to changes in the external loss database. Market risk RWA, however, have remained stable.Although we have increased our loan volume with our targeted customers, the credit RWA has also remained stable. This is largely due to our proactive RWA management and to a lesser extent FX effect. Our initial expectation was to receive our TRIM results in the first half of this year. We now expect the TRIM results in Q3.Ladies and gentlemen, let me wrap up the second quarter of 2019. In Q2, we have maintained the operational momentum in our client businesses and continue to move forward with the successful implementation of strategy, Commerzbank 4.0. We have achieved good new customer and asset growth in both PSBC and Corporate Clients and respective growth in NII. However, we had only weak contribution from fair value in Corporate Clients and experienced higher risk provisions due to single cases. We are on track to reach our cost target. We have maintained our good risk profile and improved our quarter ratio to 12.9%, and we have approved for dividend.Looking ahead, we continue to face headwinds from the ongoing competitive banking environment in Germany, which we are mitigating by our client-focused growth strategy. In addition, we are facing the potential effects of expected ECB actions, ongoing trade disputes, Brexit and the current slowdown in the German economy. These challenges are clear and require our full attention to meet our unchanged targets for 2019. We will continue with our growth strategy and expect higher underlying revenues. In our cost management, we plan for costs of below EUR 6.8 billion in 2019. We expect the risk result not below EUR 550 million for 2019. We aim to maintain a dividend payout ratio at a level comparable to 2018. Finally, we target a core Tier 1 ratio of 12.75% by year-end.As a last note and as previously communicated, following our usual internal strategy discussions, we will host a Capital Markets Day in autumn to update you on how we will further evolve the strategy beyond 2020. We will invite you once the date is fixed. Thank you very much for your attention, and I'm now happy to take your questions.
[Operator Instructions] The first question for today comes from Benjamin Goy calling from Deutsche Bank.
3 questions, if I may. First, on Corporate Clients, just to double-check, you said EUR 100 million is the operating profit guidance for the coming quarter? And basically, should it be better revenues or a lower risk result? Then secondly, on costs and your full-time employees, they are down 3% since your last strategy day and you targeted initially 15%. Is there much more to come over the next quarters and that should help for 2020 costs? Or with more insourcing, this is not a target anymore? And the last point is you kept your CET1 capital ratio unchanged despite now a bigger buffer on the AT1 bucket. So any considerations here, whether it's -- you just like to have a bigger buffer or any specific cases like Poland, FX and so on, that keep you more cautious?
Yes. Benjamin, if I do it in reverse order, the current view is that the additional buffer that AT1 provides is more giving us flexibility rather than having any specific event in mind, including Poland that you mentioned quickly. Cost, we've always said that costs, especially on FTEs is a bit back-end loaded since most of the products that we have used or the agreements that we have used are these German classical retirement schemes, which -- where a lot of them will kick in, in 2020. And in that sense, we should expect further FTE movement throughout '19 and a bigger chunk in 2020. CC, I don't necessarily expect a complete reversal of the risk trends for CC, the EUR 100 million should be driven by both an improvement on the core business as well as, let's call it, at least partly return of what you see on the other income. At the end of the day, the around EUR 100 million expectation is subject to risk and market development. And looking at the last 3 days, you can get depressed a bit. But again, I think, on the broader picture, as I said, we still expect somewhat growth in Germany. We have a strong position here. We have grown, and I think the chances of profitabilizing the existing relationships is a good chance for the second half.
The next question comes from Johannes Thormann calling from HSBC.
Johannes Thormann, HSBC. Two questions from my side. First of all, on your NII outlook, the NII has now been at the highest level since, I don't know, more than a dozen of quarters, now we are facing the ECB rate cuts or one rate cut at least, should we anticipate a decline of NII in the next quarters and years again? Or do you think you can compensate this and then keep it at least stable, with the measures you've found in Corporate Clients? And how could you offset higher negative rates in the private clients business? And secondly, on the risk result, should we expect a continued increase? Or what is the CFO view on the volatility of this line? Could we even see a much lower level in Q3 or a higher level in Q3 and then a low level in Q4? Just to understand this -- the dynamics in your loan book a bit better.
Again, trying to do it in reverse order. Risk result, the general trend, as I said, is that if we look at our portfolio performance and the classical risk indicators, we can't see any real change between now and a year ago. You saw PSBC even has a lower risk result in Q2. So in that sense, there is no indication whatsoever that we are looking at anything, but I would call a trend or something that makes me nervous. What we have seen is single cases. And my expectation is that we will see single cases probably throughout the year, which is the nature of single cases may see some volatility between quarters. It depends on the number and also the size of the cases. In general, the risk guidance that we have given in comparison to the previous year to a good extent reflects basically fewer write-backs, which we also need to keep in mind is one of the reasons why the risk result has changed or why the risk result is changing and why our risk guidance, on the other hand, remains unchanged, but obviously is higher than last year. So fewer write-backs is one clear issue. We will see single cases probably not as -- hopefully, not as convoluted as we have seen one in Q2, but no real difference in general risk front.NII, my general expectation with -- on a group level, to keep it simple, will be that NII continues to grow, but probably at a slower pace than we have seen last year. On the ECB, I think in a very simple assumption if you especially look at our slides that we are giving on the scenario of rising interest rates, the same mechanics basically apply, which means if I would take a 10 basis point cut as an assumption, that will probably cost us EUR 50 million full year impact. But again, it hasn't happened so far, and it probably also depends a little bit on what we see and if we see something on tiering and all the other measures. At the end of the day, it's pretty clear that the flat yield curve is one of the key topics of the asset and liability committee. So in that sense, it's a bit the crystal ball, but as I said, general trend is growing NII, but that is somewhat slower.
The next question comes from Britta Schmidt calling from Autonomous Research.
I've got a few questions, please. On TRIM, would you be able to give us any sort of range indication as to what the impact could be considering that the capital ratio beat this quarter, but you maintain your target? And secondly, on capital, what do you expect as a potential impact from fulfilling the supervisory expectation on the stock of NPLs, where there's some coverage -- calendar coverage provisions expected by the end of 2020? And secondly, on the loan loss provision outlook, your expected loss is still trending at around EUR 1 billion. And currently loan loss provisioning is still running significantly better than that. In a deteriorating macro environment, how quickly do you think we should expect the expected loss to increase just to a more normalized number? And then lastly, related to the question -- to the previous question, could you just give us an idea of the current stock of ECB deposits, please?
I admit that I don't know the total level of ECB deposits from the top of my head. And again, whether all of that deposit volume really is available for any ECB action, including tiering and other stuff is debatable. If you take, for example, the only required bit that we -- or the legally required bit that you can look at, like the stress liquidity portfolio, then you get to numbers which are probably relevant, but small, depending on what you apply. But again, it's all a little bit of crystal ball, and I think we haven't seen so far what is really happening, so I would be cautious in putting any number on to this.Risk result, as I said before, our full year risk guidance is not below EUR 550 million, that is what we still stick to. As I said, the general risk trends are stable. And in that sense, I wouldn't see too much change also in the expected loss from today's perspective. But also, as I said before, we might see one or the other single case throughout the year. Capital influence, or capital impact from the NPL coverage ratio at 0.8 ratio, which probably turns around pretty quickly, I would say the impact is 0. And in that sense, this issue is for me a nonissue right now.TRIM, again, I think I want to be polite and careful and not predetermine anybody or anything in this process. Currently, we are at 12.9%. My expectation would be that just the TRIM effect would probably still move it a bit below the 12.75% target that we have for the year-end, but then there's 2 quarters of capital build, RWA management and other stuff. So that's why we stick clearly to the 12.75% at the year.
Can I maybe just quickly follow-up on the NPL, on the supervisory expectations from the stock of NPL. I agree that the NPL volume overall is relatively low, but it's more about the coverage ratios, which are 60% on secured and 70% on unsecured to be fulfilled. Do you still think that the impact will be hardly anything from that?
Hardly anything because -- it will be hardly anything from my point of view, given that there is also certain time buckets attached to when you need to reach these coverage ratios. And my impression is that most of the stuff we handle in intensive care has left the pot even before it's reaching the relevant time buckets.
The next question comes from Anke Reingen, who is calling from RBC Capital Markets.
Three questions, please. The first is on the pension position on your capital. To be honest, I was a bit surprised that there wasn't a negative impact, but I guess, the positive market development helped here. Would you think that's a potential risk, given where markets currently are? And then secondly, coming back on the deposit hearing, do you expect you will be -- I mean, you said there's still a lot of uncertainty. But is there a risk that you might have or you consider passing part of the benefit on to your customers? And then lastly, on the NII, you mentioned the benefit of lower funding costs. And I was just wondering, is that on the wholesale, retail side? I guess I mean, if rates come down, there is more benefits, but do you think there is most of it already in the numbers or should we expect more benefits to come through in NII?
On the pension position, indeed, the discount rate has been -- has come down to 1.2%. And we have basically seen no impact, which is, as you rightfully assumed, a reflection of the performance also on the asset side. But in general, the plan that we have is pretty well funded. So that has kept level. Deposit tiering, again, this -- I don't know what it's going to look like. There's different models throughout the world, and I have no idea whatsoever which one is currently a reference model or not. The discussion about whether we or any other bank or the total banking sector would move on or pass on certain benefits of such a tiering, I think, is first and foremost, the discussion that the ECB needs to hold, and hold this assumption against its ultimate goals that it has with the deposit tiering. My simple -- but it may be too simple, my simple assumption would be that the ECB's interest would be to strengthen profitability and capital base of the banks, which would mean that they would look for a tiering model that probably allows you not to pass the stuff on. Whether this is possible or not, again, all sits in this crystal ball, which I don't have the possession of.NII, there is -- yes, there is a good bit of lower funding in there. You can think of probably up to half of it, maybe. If you look the 7% NII improvement, it's basically across the bank and across the board. I wouldn't exclude that we are seeing more, but probably not at the same size. As I said, NII, in general, I expect it to grow, but at a slower pace than we have seen before.
And the last question for today comes from Nicholas Herman calling from Citigroup.
Can you hear me?
Yes, I can hear you well, Nicholas.
Very good. So most of my questions have been asked, but I do have a couple of outstanding. Just on your revenue expectation for 2019, your first half revenues are down 2% year-on-year. I mean what need to change for you to reiterate your -- given that you've reiterated your expectation for underlying revenue growth this year? I mean I understand that other revenues in Corporate Clients will return, but even so. And then my second and third question are related to PSBC. So interesting to hear that your mortgage margins have improved. How much of this is -- presumably, this is also -- a lot of this is due to lower swap rates? And have you seen mortgage rates start to fall in response to the lower swap rates and so that mortgage margin could compress from here? And then on the fee and commission side, that was a little bit lower than I expected anyway, maybe that's an issue with my modeling. But I mean, have you seen -- I mean, I guess, given the DACs improved by 7% to 7.5% during the quarter, have you seen clients pull money out of securities? And how would you define the flow versus performance trends, please?
Okay. A full set of interesting questions. Revenues 2019. First of all, as I've said, looking ahead and reading at press and other stuff, it's pretty clear that the second half of the year not necessarily has a lack of challenges. Secondly, and nevertheless, I said that we expect NII to grow, again, at a somewhat slower pace. I would expect that some of the commission income should return both from corporates as well as from private clients. I will come to that in a minute anyway. I still think that there might be a better capital markets activity in the second half of the year. And as I said before, maybe not all of the historically -- historic levels of other in corporates may return, but at least some of it should show up again. And then thirdly, as our Corporate Clients' colleagues are focusing now and making the relationships that we have conquered over the last year more profitable, I think that also, at least, holds some positive expectations. PSBC mortgage rates, it's the mix of both, obviously slightly better funding, but also, let's say, stable to slightly improving customer margin. It depends a little bit on what you do on a bank level in mix of product duration and other stuff. It remains to be seen whether the market is holding up or whether it may not. But so far, I'd say we have seen a somewhat more disciplined pricing environment in the first half of this year. Commitment -- commission and fee business, securities has been okay. I must say what we have seen is definitely less capital market products and everything around pension products is not necessarily selling well in the current environment.
So it's not really an issue of weaker flows then. It's just -- it was...
No, no -- and we -- in general, Nicholas, you know that we have had a somewhat overarching impact from the MiFID stuff, which customers still need to adapt to. So we are not seeing the levels of securities transactional business that we would like to see. But again, roughly 70% of the stream is coming from the more volume-driven. And that is why your reference to the indices is right, the more volume-driven part, still transactional is weak, but it didn't get weaker in the second quarter. So I think the measures that we are trying to set up to stabilize this part and try to deal with the circumstances better and adjust to customer needs also should at least hold some opportunity.
And we actually have 2 more questions today. First one coming from Marco Di Matteo, he is calling from Goldman Sachs.
I have 2. One, in your report, you mentioned about the NII in PSBC that you had successful measures taken to increase the interest income in the deposit business. And I just wanted to ask if you could clarify what that refers to? If that is the increase in model deposits or if there is any other pricing actions you've taken there? And then going back to deposit hearing, I wanted to ask, I think you mentioned in the past that in certain quarters, the RWAs in Treasury increased as you were trying to manage and try to decrease the burden from negative rates on your cash. So in the eventuality that you were able to hold more cash at ECB at a more favorable rate, would you expect to be able to reduce the RWAs in Treasury?
Maybe the first one on Treasury, I think the current way our internal financial resource management works is that there is basically a RWA level allocated to certain buckets, and then we adjust according to needs and also profitability. So not -- again, not knowing what deposit tiering will really produce, it remains to be seen whether that is really a difference. NII in PSBC, I would think that this is a broader mix of several things happening. One is looking at pushing certain products and trying to get certain products a little bit reduced, pricing measures to a certain extent as well as a little bit of modeling where appropriate and still within the conservative limits that we run this stuff on.
The last question we have time for today comes from Jeremy Sigee, he is calling from Exane BNP Paribas.
Two follow-up questions, really. First one was about Corporate Clients. Your comments about EUR 100 million a quarter, I think we're talking about 3Q, 4Q. And I just wondered if you're comfortable with the consensus for next year, which is more like EUR 200 million a quarter. And perhaps, underpinning that, what do the drivers needed to get the trading result back up to something more normal? What are the factors that would influence that? And then my second question, please, is your new outlook language suggests that it could be a struggle to maintain net income similar to last year's level. And I just wondered in the event that it turns out below last year's level as it has in the first half, do we take the dividend accrual language literally about a payout ratio, so it could be EUR 0.19 or EUR 0.18 rather than the EUR 0.20 you paid last year?
Let me start with the level question, that contains many assumptions and then finally, at -- itself up at the payout ratio. So for the time being, I would say, payout ratio is the best indicator we have and that is what we have given, and I stick to that. In that sense, what it exactly is, at the end of the day, it's probably the balance between applying a mathematical percentage rate and then looking at the number and still deciding what you want to do and what you want not to do. Yes, your view on -- that the outlook is more stressed than it has been before, and that we will -- and you call it struggle, I call it fight. For what we have in our outlook is pretty clear, if -- as I've discussed, if you look at macro environment and all the other stuff. Your question on what does it need to improve CCs result that's across the board. One is profitabilizing the conquered customer relationships as discussed. A little bit of volatility on the markets, as we have seen it right now, might be helpful for some of our classical hedging products, so that has something as well as a little more capital market activity in our customer segments. In general, customer activity to certain extent needs to pick up, that's pretty clear.
So on the trading side in Corporate Clients, you say it's mainly about volatility. It's not about spreads or level of rates or curve. It's about volatility prompting hedging than anything.
No. I would call it activity rather than volatility, but it does not have -- definitely does not have positive rate assumptions, to be honest on that one.Okay. Ladies and gentlemen. Thank you for your questions. Thank you for your attention, and I'm looking forward to see you soon. Goodbye.