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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] And the floor will be open for questions following Manfred Knof and Bettina Orlopp's presentation. Let me now turn the floor over to our CEO, Manfred Knof.
Good morning, and welcome to our earnings call for the second quarter of this year. I will provide you with the overview of the strategic and financial development before Bettina will guide you through the details of the financial performance. Overall, we have made good progress in the strategic transformation of the bank and reached a solid operating result of EUR 570 million in the first half of the year. Q2 stand-alone came in with an operating result of EUR 32 million. It benefits from the benign risk results and from our robust client-facing business, but has been burdened by significant one-off items. I would like to stress that these one-off burdens and also the booking of further 50 -- EUR 511 million restructuring charges have not impacted our sustained strong CET1 ratio of 13.4%. Thus, we can confirm our financial outlook for 2021, including a slightly more positive view on our risk results and capital. Also, our cost guidance of EUR 6.5 billion for 2021 is operationally still valid. On top, however, we have to account for EUR 200 million extraordinary write-off on which we have released an Ad-hoc statement 2 weeks ago. On the strategic transformation of the bank, we have made good progress in line with our plan and effectively tackled upcoming issues. Let me be crisp and clear: the execution of our strategy is on track, and I make sure that any road blocks are removed ASAP be it the Federal Court ruling on pricing changes or the malfunctioning of a large project. This leads me to the next slide and recent key topics on our management agenda. Firstly, we have reached further key milestones in the transformation. With the appointment of 300 Level 2 managers, we have reduced the number of positions by 27% and completed the selection of the senior management team. This team is going to be the backbone for the transformation of Commerzbank, and I'm looking forward to working together with this group. Furthermore, we have already concluded almost 50% of the detailed negotiations with the works council. And the recently started offering of overall 1,700 voluntary redundancies shows good response from employees. Secondly, we have to handle the Federal Court ruling on fee changes, which basically declared recent pricing actions as invalid. We immediately set up a task force to tackle the issue. On the one hand, we have to identify the amount of reimbursements to customers and booked a provision of EUR 66 million. On the other hand, we had to define a process going forward that ensures the continued rollout of our planned pricing measures. This includes the solicitation of active content with the current pricing for products such as current accounts or securities accounts. We expect some temporary revenue losses in the next month, but we are confident to compensate this shortfall and keep our revenue guidance. Thirdly, we stopped the outsourcing projects for security settlement. The implementation risk would have been too high and the benefit is too small in a market environment with strongly increasing transaction volumes, providing internal economies of scale. This decision stands for the clear focus on the transformation of our bank. Such a large project that does bottom line not contribute to the strategic plan must not eat up scarce resources. I'll put it this way, we take necessary decisions even if they are painful. There is no way of muddling through. Our transformation towards our targets in 2024 require strict focus and clear decisions. Now let's move on with a view on all 4 cornerstones of our strategy. Regarding digitalization, I would like to highlight that the team is really fast in delivering new functionalities. We have added 10 new major client features in the quarter, especially the enhancement of our mobile app stands out, which now allows for the mobile purchase of security savings plans, including ETFs. This will further support the strong growth in this product category. On sustainability, we have accelerated our efforts to seize the opportunities from the increasing client demand for sustainable products. After roughly EUR 100 billion at the end of last year, volumes stand at EUR 141 billion as of Q2. Based on that, we feel very comfortable to reach our target of EUR 300 billion by 2025. On this slide, you can also see the drill down of our target with corporate clients accounting for EUR 200 billion and private and small business customers accounting for EUR 100 billion in sustainable business volume. Overall, it is of utmost important that we support our corporate clients in their transformation process. We believe it is better to finance the path towards a greener economy rather than withdrawing from certain clients right from the beginning. In Private Clients, let me point out that since March this year, more than EUR 30 billion of securities volumes qualify as sustainable products according to the sustainable finance disclosure regulation. Finally, I would like to provide you with an update on the development of our operational transformation KPIs. In Corporate Clients, our efforts to increase RWA efficiencies show further results. In the second quarter, we have reduced client business in the low-yielding bucket from 33% to 31%. Here, our strict management approach using list of single client names pays off. We have reduced the portfolio in the low-yielding bucket by EUR 2.2 billion RWAs or 65 client groups, respectively. In PSBC, we accelerate the closure of branches by additional 40 (sic) [ 240 ] branches this year. Hence, we will have 550 branches and 3 remote advisory centers when we start into 2022 and close a further 100 branches in the course of next year. Furthermore, our business volumes are growing ahead of plan and the anticipated customer churn from branch closures and pricing initiatives is less pronounced than expected. But of course, it is still early days in the transformation of the business model and it remains to be seen how the churn evolves. In the redundancy program, we have also made further progress. From the planned gross reduction of overall 10,000 FTEs, 3,400 are already off payroll or have signed the contract to leave. On the other hand, we are hiring 2,500 FTEs and nearshoring stands for a large share of this number. Our location in Sofia is now fully operational and a step-by-step taking over tasks for much more expensive external consultants in Germany. All in all, our transformation is well on track, and we are completely focused on the further execution of the strategy. Stumbling blocks will be tackled and removed to make sure that we head towards our targets. Let me now hand over to Bettina, who will provide you with a more granular look into the financials of the second quarter.
Thank you, Manfred, and also good morning from my side. I will walk you through the financials before we move into Q&A. Let's start with the overview on Slide 8. As Manfred already stated, we had a good performance in our customer businesses, in line with our expectations. The underlying net interest income is unchanged to the first quarter. Commission income continues the good trend was plus 7% compared to Q2 2020. This is testament to the viability of our business model. The risk result came in at a low EUR 87 million. This reflects the high asset quality of our portfolio. And I want to stress that we did not benefit from the release of our COVID-related top level adjustment. It remains unchanged at EUR 495 million. Costs have been managed in line with our targets with the exception of the extraordinary write-off. This write-off has been one of several one-off items in the quarter that have reduced the operating result to EUR 32 million. I will cover these in more detail later on. We also booked the vast majority of remaining restructuring charges in the quarter. Hence, the net result amounts to negative EUR 527 million. And we maintained our strong capital ratio, which stood unchanged at 13.4% at the end of the quarter. Following the issuance of an AT1 instrument in June, the buffer to MDA increased further to nearly 400 basis points. Now let's briefly look at Slide 9 and the year-to-date view. Revenues are above previous year's level with benefits from the TLTRO offset by other one-offs and despite the ongoing drag from the rates environment. The operating result improved to EUR 570 million due to better revenues and a significantly lower risk result. The net result reflects the EUR 976 million restructuring charges we have booked for the implementation of our strategy 2024. As the quarterly results have been strongly affected by one-off bookings, we have broken down the effects on Slide 10. As mentioned, the quarter was overall negatively impacted by one-off events. In aggregate, they reduced the underlying operating result from EUR 208 million to EUR 32 million. The one-off can be separated in 2 buckets. The first is the usual exceptional revenue items that add up to minus EUR 22 million. TLTRO benefits of EUR 42 million were more than offset by the EUR 66 million provision for the German Federal Court of Justice ruling on fee changes, where we will have to reimburse some fees to our customers. The second bucket contains 3 significant one-offs in the underlying result, adding up to minus EUR 154 million. On the positive side, CommerzVentures contributed EUR 101 million. And on the negative side, mBank increased reserves for Swiss franc loans by EUR 55 million. And as mentioned, we have also booked a onetime write-off of EUR 200 million for the stop of the security settlement outsourcing project. And in addition, we have booked a double-digit million provision associated with the write-off but have not separated this out. Let's jump over Page 11 with the exceptional revenue items and quickly look at Slide 12 on CommerzVentures. CommerzVentures continued to contribute to revenues. The IPO of the portfolio investment company, Marqeta, has led to the revaluation of our holding. We have not taken the full valuation in the Q2 results, but have applied a prudent discount to reflect the fact that we currently cannot sell our stake. And also the increased valuation have bought by many following a funding round has contributed. While obviously uncertain and set back is always a possibility, we expect further upside in the second half of the year. And given our good experience and track record, we plan to continue investing in start-ups and will most likely increase the funds made available to CommerzVentures by setting up a third fund. We will report on the progress in the next quarters. Slide 13 gives an overview of the restructuring charges. We booked EUR 511 million in Q2, slightly lower than originally anticipated as we have not yet fulfilled all formal requirements to book the restructuring charges in some foreign locations. The majority of the remaining around EUR 170 million will be booked in the second half of the year. Slide 14 shows the overall group P&L with revenues by line item, excluding exceptional revenues. The impact of one-off items is especially visible in other income and the operating expenses. I will cover NCI and NII in more detail on the next 2 slides, starting with net commission income. PSBC Germany and also mBank have strongly increased commission income by overall 14% year-on-year. This has been driven by the strong securities business in Germany. While trading volumes have not been as high as in the exceptional first quarter, securities and custody have significantly increased. Commission income in Corporate Clients is slightly lower due to a slower bond and syndication business. And also the Payments business is still affected by the pandemic. This leads us to NII on Slide 16, where we show the underlying interest income, excluding TLTRO benefits. As expected, underlying NII has been on the same level as the previous quarter. In PSBC, NII growth and mBank and loan growth in Germany have offset the drag from deposits. German loan margins have been broadly stable for both private and corporate customers. Lower volumes in corporate customers, in line with our strategy, have led to a slight decline in NII. For the rest of the year, we continue to expect the underlying NII, excluding the TLTRO benefit, to remain roughly at the current level. Let's carry on with costs on Slide 17. We managed our operating expenses in line with our full year target. While we continued to invest in our digital transformation spending around EUR 270 million of the planned EUR 600 million in 2021 in the first half, we reduced administrative expenses. We kept the burden from compulsory contributions on the level of last year by using payment commitments to compensate for higher contributions due to deposit growth and the Greenville Bank insolvency. The operational cost management delivered as planned, we had to book the unforeseen onetime write-off of EUR 200 million due to the project termination. To be absolutely clear, this is a burden on the 2021 cost base, but it will not impact our strategic cost measures and midterm targets. Let's move to Slide 18 and the risk result. With EUR 87 million, the risk result is the lowest since the start of the pandemic and reflects the resilience of our loan book with largely stable ratings and a low number of defaults in the quarter. This is also clearly visible in the cost of risk on loans, which stands at a low 18 basis points in the first half. While the first half was clearly very encouraging, the trajectory of the pandemic with the still unknown effects of the virus variance and the possibility of a fourth wave later in the year cannot be predicted with certainty. An increase in pandemic-driven defaults can't be ruled out for the second half of the year or possibly next year after government support measures have ended. Therefore, the EUR 495 million top level adjustment remains unchanged. We will continue to review the top level adjustment quarter-by-quarter. Now let's carry on with the operating segments, and let me start with private and small business customers on the next 2 slides. We have continued to see a strong increase in securities volumes by EUR 11 billion in the quarter. Of these, EUR 3 billion were net new money invested in securities. So the trends that Germans invest more in securities continues and should continue in an overall friendly market environment. Mortgage volumes also continued to increase in the quarter at a steady pace and as planned. In contrast, the consumer finance business has been flat. Given the still high savings rate due to the pandemic, we do not expect a significant change in customer behavior in the near term. In the Deposit business, we have made good progress in the quarter. We managed to reduce the overall volume of deposits and increase the volume of deposits subject to pricing to EUR 13 billion. So far, we have signed agreements for deposits above EUR 100,000. From August on, deposits above EUR 50,000 from new clients will be priced. We will also apply this threshold to new agreements with existing customers. Deposit pricing has helped to somewhat reduce the ongoing drag from deposits, but it's not enough to fully compensate for the effects from the interest rate environment on deposit-related income. Overall, we expect the contribution from deposit agreements to be around EUR 50 million in 2021. As Manfred mentioned, we are currently obtaining active consent from our private customers to our fee structure as required by the German Federal Court of Justice ruling on changes in fees for banking services. As this process takes time, we will not see the originally planned respective fee income this year. However, given the good overall development of customer business, we expect to reach our revenue targets for the financial year. This brings me to the performance of PSBC on Page 20. PSBC reached an operating result of EUR 138 million, up nearly 30% year-on-year despite significant one-off bookings based on stable customer revenues and a low-risk result. Looking at underlying revenues year-on-year, these were up by 3% in Germany, driven by the strong performance of the German Securities business. This, together with loan growth, compensated for the drag from deposits. We also had some revenue attrition from customer churn, as expected, with the implementation of our strategy. So far, this churn has been lower than anticipated, both in terms of number of customers and revenues lost. The departing customers had, on average, not contributed much to revenues. Meaning, we have lost the right customers so far. mBank has also performed well in a challenging interest rate environment with underlying revenues on the same level as last year, excluding the addition of legal reserves for Swiss franc mortgages. The addition of EUR 55 million to mBank legal reserves is mainly driven by higher-than-expected new court cases and changes in loss levels in case of mBank losing cases. The setting of the Polish Supreme Court on Swiss mortgages that has been scheduled for early September will be important. We hope this will bring more clarity and allow mBank and the whole Polish banking system to establish a workable solution. Now let's move to Corporate Clients on the next 2 slides. In Corporate Clients, we have continued our active portfolio and RWA efficiency management. While volumes in Mittelstand have slightly increased, we reduced volumes with international corporates in line with strategy. This has led to an increase of the average RWA efficiency to 5%. In the next quarters, we do not expect a further improvement in RWA efficiency as there are some adjustments to the regulatory models, including some churn. While lower volumes in line with strategy reduced credit risk RWA, this was offset by higher RWA resulting from model adjustments. As the first changes only became effective at the end of the quarter, they did not yet have a notable impact on the average RWA efficiency. In the deposit business, we have seen a strong increase in volumes from our customers. The increased volume has been fully priced, thereby ensuring no negative impact on profitability. We currently charge our corporate customer 50 basis points, while we partially charge higher rates to institutional clients. We are planning to also introduce higher rates for large corporate deposits beyond our thresholds to ensure that these deposits are not a drag on P&L. Overall, we expect to see the contribution from pricing to increase from around EUR 150 million in 2020 to around EUR 200 million this year, offsetting our cost to hold these deposits. Underlying revenues are around 4% lower year-on-year. This is mainly due to lower revenues from international corporates, in line with the strategy, while Mittelstand, could increase revenues by 3% with revenue contributions across all product areas. With a significantly improved risk result and lower costs, corporate clients reached an operating result of EUR 244 million. Let's move to Slide 23 and the development of others and consolidation. The operating loss of EUR 349 million and others and consolidation is driven by exceptional items. These are reflected in the fair value and other income line as well as the operating expenses, where the write-off from the stop of the outsourcing project is booked. While we had positive contributions from CommerzVentures to the fair value result, these were offset by valuation effects largely driven by moves and basis spreads, reversing some of the corresponding gains from the first quarter. Other income includes the usual items like effects from hedge accounting, but also increased provisions. These provisions include related to the stop of the outsourcing project and potential tax claims for prior years. Based on the H1 results of minus EUR 158 million and assuming that we can receive TLTRO benefits as well as some contributions from CommerzVentures in the second half and operating result of others and consolidation of around 0 for the full year could be achievable. But of course, the result could also be affected by changes in valuations over the course of the second half. Let's move to Slide 24 and the risk-weighted assets. Quarter-on-quarter RWAs were overly -- overall slightly reduced. This is driven by reduced volumes with corporate clients. The reduction has been partially offset by increases at mBank and regulatory effects. Operational risk RWA increased due to changes in the loss database. In the next quarter, we expect a further increase. As mentioned before, we also anticipate a regulatory-driven increase in credit risk RWA from TRIM and adjustment of models. Regulatory capital decreased slightly mainly due to the net loss. Overall, the CET1 ratio remained at 13.4% and provides us with a comfortable buffer of 400 basis points to MDA. Now let me wrap up the financials of the quarter. Q2 was burdened by one-offs, and this is clearly visible in the results. At the same time, the underlying business and strategy implementation have developed well, and this is reflected in our outlook on Slide 25. Based on the premise that there will be no extraordinary burden from Swiss franc mortgages in the course of the year, these are our updated objectives and expectations for 2021. Given the strong first half results, revenue should slightly exceed the 2020 figure. With further progress of the transformation, we maintain our target of an operational cost base of around EUR 6.5 billion. In addition, we have the EUR 200 million onetime write-off booked this quarter. While uncertainty of further development of the pandemic remains based on current observations and assuming an unchanged top level adjustment, we improved our guidance and expect a risk result below EUR 1 billion. This assumes that the current wave of the pandemic will not have a further adverse effect on some sectors. Given the aforementioned, we expect a positive operating result. Based on the first half results and considering the expected regulatory-driven RWA increases, a CET1 ratio around 13% is likely. Thank you very much for your attention. Manfred and I are now very happy to take your questions.
[Operator Instructions] And the first question for today comes from Benjamin Goy who's calling from Deutsche Bank.
Two questions, please, 1 on mBank on 1 on fees. Starting with mBank, I think it's core for your 2024 guidance and in particular, on the revenue growth. So I was wondering whether -- when we get more details on how the EUR 600 million is split? And also whether you could comment on these press reports in June that it might not be core going forward anymore? And then secondly, on fees, you mentioned the temporary impact from the active content, maybe you can quantify it? And how -- and staying with fees, retail brokerage, it's up 12% in the first half year, maybe you can give us an indication how this looked Q2 versus Q1 in terms of growth rates?
So thank you, Benjamin. I start with mBank. I mean if you look on the numbers and you need to keep in mind that interest rate environment in mBank looked still very different in the second quarter of 2020 because the sharp decline basically happened in the second quarter in Poland. I think they have shown a very good results, and they continue this trend. At the moment they see strong growth across their customer groups, across all product groups and that's also the basis for their assumptions until 2024. And this is basically also based on the customer base, they have a very young one, growing one. So it's growth across the group and that had a very low cost-to-income ratio. So overall, we are very confident that they will achieve the targets specifically because there are clear signals given inflation in Poland that there will be interest rates and increases earlier than you would expect for the rest of Europe. That's on mBank. On fees, I mean, we now booked the provisioning of the EUR 66 million. That's definitely backward-looking and also take into account the fees which we have now booked and will be -- will rebook to our clients since the ruling end of April. You will see a lower -- I mean, we missed this year a lower double-digit revenue -- or we will see a double-digit revenue impact on that because we assume that we will only see the price model increases next year. However, given the overall very good customer business development, we will stick to our revenue plans in private clients. Yes.
And sorry, just quickly on the retail brokerage fees, plus 12%, but I assume some slowdown in Q2. Can you contrast the developments here, please, as well as Q1?
Yes. I mean we said that already after Q1 that we should -- nobody should expect Q1 to be repeated because it was exceptionally high. I think it's better and more fair to compare your net commission income and private clients with the previous quarters and also Q2 2020. And there, you see that we have a continued trend of increased net commission income. We've got this whether you take Q2, Q3, Q4 of 2020. So Q1 '21 was clearly an exceptional, but we see strong growth in the securities business.
The next question comes from Izabel Dobreva, who's calling from Morgan Stanley.
I have 2 of them. So my first question is on the Corporate Clients division. If I look at the net interest income in the division is down about 11% year-on-year and also the fees are down about 4% year-on-year. And I wanted to ask you how much of that is due to the restructuring program? I think at the Capital Markets Day, you quantified about EUR 300 million of revenue attrition. So of that amount, how much is in the run rate so far? If you can give us a number, that would be very helpful. And then my second question is on capital return. Capital is now solid at 13.5% nearly and you have taken the bulk of the restructuring charges, there is also the EUR 500 million of top level adjustment in the back pocket. So with all this in mind, what are your views of starting the capital return early in 2022, perhaps in share buybacks? Are you open to it? And if not, what are the obstacles in your mind?
So thank you, Izabel. On Corporate Clients, I mean as you rightful sat there are -- what you basically see are the first effects of the strategy implementation. I mean, Mittelstand is up year-on-year by 3%. That's exactly like planned. We would even like to see more. But we all know that Mittelstand is still very cautious with respect to their investment programs, but we definitely are convinced that we will see some pickup when we are even further through the crisis. Specifically, international corporates has been down. There are 2 reasons for that. One is that if you compare Q2 2020 with this year's quarter, we had a very strong bond issuance quarter last year due to the pandemic, and that has not been repeated this year. But then also, it follows our strategy that we exit some locations that we exit certain clients with an unsufficient RWA efficiency, and that is specifically attached to international corporates. I think it's tough to say out of the EUR 300 million how much you see already. Unfortunately, probably not everything, given that the sale of our locations and the rundown is still to come. So you will see more in, specifically, 2022, I would assume. On the second question, capital return. I know 13.4% is a very nice number, specifically given that we now have booked nearly EUR 2 billion of restructuring costs and still stick to 13.4% because that's exactly the number we had last year. And I know that this creates increasing questions about share buybacks, dividends, et cetera. But I think we should really make progress. First, on the restructuring, on the transformation, we should show decent operating results, decent net income. And if this is the case in 2022, I'm pretty sure we will also start a debate on dividends and capital share buyback.
Moving on to the next question. Next up is Jeremy Sigee, who's calling from Exane BNP Paribas.
Two questions, please. So the first one, really just following on from the previous one about capital. I just wondered if you expect any change in capital requirement after the recent stress tests and possibly heavier Pillar 2 P2G requirement following on from that and probably your results in the stress test? And then second question on a different topic, operating costs. If I look at the costs in the divisions, you're up slightly in PSBC and you're down quite nicely in CC, Corporate Clients. So I just wondered if you could put those developments on costs in the divisions in the context of your medium-term plans? Are you happy with the underlying reductions that you're achieving relative to your medium-term plans? Are you ahead of plan in corporate clients that looked like quite a good number? So if you could just talk about the cost trends in the divisions, that would be great.
Okay. So let me start with the first question on P2G, you will have seen that we have been classified for the second bucket, which means that P2G will be in the range of 50 to 200 basis points. At the moment, we do not say where we are, most likely that will change, but we'll see how things are developing. But I can ensure you that we feel pretty relaxed on that, that we do not believe that we will be at the lower or upper end of this range, but I would rather expect something which is very nicely in the middle of that. On the second question, operating costs, the costs are developing absolutely according to plan in the moment. Why is PSBC slightly higher? Two reasons for that. We have seen tariff increases, which just have an immediate effect and the voluntary programs, et cetera, will only show up by the end of the year, and we plan that. And the second thing is, we integrated comdirect. And by the integration of comdirect, we saw first an increase in HR-related costs because of the fact that employees of comdirect were integrated in our tariff system to say like that tariff model of Commerzbank. And that's the key reason that is also according to plan. We have clearly calculated that into our plans. And you will see the reductions also on the private client side in the course of the next months and years. So everything really as we plan. And we would expect that by the end of the year, we will most likely have already signed solutions or have people left of more than 5,000 out of the 10,000.
And on the corporate client side, it looks, if anything, better than expected. Is that real? Is that recurring that lower cost level in corporate clients?
I mean, also corporate clients has clear targets, and they are a little bit ahead of plan. And we hope that this will continue. But we should also keep in mind that some of the cost items you would normally see in corporate clients are a little bit depressed due to the pandemic, travel costs and stuff like that. But overall, we are very satisfied with the development of the costs in corporate clients.
Next up, we have Nicholas Herman calling from Citigroup.
Three from me, please. One on NII referenced [Technical Difficulty]. Do you mind just providing a breakdown of that outlook by division, PSBC, German mBank, corporate clients and fees. Second [Technical Difficulty] announced the portfolio with RWA efficiency less than 3%. That's ahead of your target for your [Technical Difficulty] continue pushing that down this year?
Mr. Herman, I'm afraid we didn't quite catch most of the question there because of your connection. Could you repeat your questions, please?
Hello? Hello? Can you hear me?
Yes. It was tough to understand you, Nicholas. I think the first question I got is the outlook by division on NII. The second one, I think, was an RWA efficiency bucket, whether we believe that we will be even go -- come down further than the 31% we currently have, and we use this share of less than 3% even further? So we just wait for your third question.
Sorry about that [Technical Difficulty] the question is on capital. I appreciate that you want to see progress [Technical Difficulty] Would you be willing to disclose approximately what CET1 ratio you were expecting at the end of 2022 as part of the plan that you announced back in February, particularly? That would be helpful.
So -- I mean, on NII, our expectations is overall that it will be flattish in comparison to H1. If I split that now by PSBC and CC, I would say PSBC should be slightly up because we expect stable margins, loan slightly up, and we also expect some upside from the deposit facility fee. And clearly, also mBank will contribute to that. NII on corporate clients might be lower slightly just because of the fact that we continue our RWA efficiency program and that will show effects on our NII. And that also basically is a perfect fit for the second question. I mean, we continue our RWA efficiency measures meaning that we do not stop now at the level we are currently just because we have already surpassed the target for this year, how much we come down, we'll see definitely also depends on what's up for prolongation and things like that. And the third thing, a prediction on capital ratio. End of 2022, honestly, Nicholas, I'm happy to give you a forecast for this year. And as you have seen, we increased it to 13%, and I feel very comfortable on that, but I will not do any prediction on the capital ratio now for the end of next year.
Yes. Just to clarify, it was more just in terms of the -- the last question was more just as part of the plan. Obviously, the world is different now. I'm not asking for your current prediction. It was just kind of what the previous prediction was?
The previous prediction was basically -- I mean, we started to say that we would be this year around 12% to 13%. And then, I mean, we always plan to have a full booking of the restructuring costs in 2021. Meaning that in 2022, we expected already a decent operating and -- operating results, but also positive -- clearly positive net income, which would then also have a positive effect on the capital ratio.
The next question for today comes from Anke Reingen, who's calling from RBC.
Just firstly, on the cancellation of the outsourcing. I just wanted to make sure, I mean, EUR 200 million is not insignificant in terms of impairment that you stick to your original plan of bringing costs down on an absolute basis year-by-year as you announced last year. And I think at the time you announced the EUR 200 million charge. You also talked about legal provision and other income. I don't think you specified this one as a one-off. And I just wonder if you can give us some board indication? And then secondly, on the court ruling. I mean, how does the work in practice? I mean people need actively concerned. Is there a risk that it actually becomes more of an issue as it currently suggesting? And just in terms of the benefit you were indicating in your strategic plan last year, is that basically part of the EUR 300 million fee uplift you were indicating, but that's not only because of the higher fees? Just -- yes, if you can give a bit more indication about the potential risk from the ruling to your plan?
Yes. Anke, you're absolutely right. The EUR 200 million is not insignificant. But I think I had a very deep look into the project. And when we discuss that into the Board in detail, and we found that it's better now to stop it and to take a hit now. Also, because of the changes that the business is now stronger, and we feel comfortable to do it internally. But you're absolutely right, it has an impact on the cost base for this year. But operationally, all our plans and transformation efforts are in plan. And for the midterm, we are fully on plan also with regard to the costs. On the court ruling, you've asked how is that really working? I mean, it's clear that the automatic increase is not possible. So we are now with the clients going from an individual content, either digital or in the branches in a one-on-one content. That's why it takes time. But I can show you that we are already working and are in contact with our clients to negotiate an individual pricing model and to ask for the consent. And so far, the reactions of the customers are good. And for the large amount, it is not a problem for the customers to -- yes, to agree on an individual consent on the pricing measures also offering new accounts.
And perhaps on your first question, legal provisioning, yes, there is something embedded under other income. We didn't reveal that. I mean, it's clear that if you end a contract with a partner, there are costs attached to it. And I can only say that it is a double-digit million amount. And leave it for now and you will understand why. And on the second point, the EUR 300 million uplift, which we calculated in our plans, this is still valid. I mean it has -- as I said, it has a short-term impact this year, which is balanced out by better customer business overall in PSBC, but we expect that we will get the contents of the clients within this year. And therefore, there is no change of plans with respect to revenues and also revenue increases due to price model changes for the coming years.
Next up, we have Johannes Thormann, who's calling from HSBC.
Johannes Thormann, HSBC. Two follow-up questions and 1 other, please. First of all, on follow-up, you -- how far is the competitive pressure in corporate business changing in Germany, as you and several other banks are exiting relationships, which you call unprofitable? Do you see an impact on new business margin or on the behavior of corporates, in general? Or is the competitive landscape unchanged? Secondly, -- sorry to come back on the BDAA ruling. But do you actively ask for consent of a customer or so you want to fall back on usage content like other banks are doing in Germany? And are you thinking about additional price changes due to the recent ruling? And last, but not least, what needs to happen to reach EUR 1 billion risk cost as a, I don't know, bad case scenario, worst case, we never know. But what would also be needed to reach current -- or what should happen if you maintain current cost of risk this year?
Okay. First, with regard to the landscape of corporate business in Germany. It's -- our strategy is absolutely clear. We go profitability first. And this is more important than growth. And that's why we're talking with our clients, either on up-pricing, up-selling products. And this is clearly part of the transformation program also in corporate clients with regard to RWA efficiency and margin increase. Therefore, profitability comes first, and that's fully executed. On the court ruling, yes, we are going only on individual consents, and that's what we're doing. And Bettina is now asking -- is answering on the risk.
Yes. And there are no additional price changes in the moment in the planning. I mean, we just announced 2 price model changes, 1 for comdirect and 1 for Commerzbank, and we stick to that for the time being. On the third question with respect to the EUR 1 billion, yes, indeed, I mean, if you take the first half with the EUR 235 million, this is quite a way towards the EUR 1 billion. This is why we less than EUR 1 billion, specifically, if you keep in mind that we have the top-level adjustment of EUR 495 million. But we stay cautious. We all know there is Delta, there is Lambda. We do not know how winter is developing. And we should also not forget that government measures will end by the end of this year, and we really need to watch out on that. And that might have -- some sectors are vulnerable and very exposed due to the pandemic, and we just stay cautious. So there is a lot of upside, also, I would say, if you are an optimist on what's happening in the coming months. We just stay cautious for the time being and to keep our buffers where they are, and then we are very happy to release the buffers if they are not needed.
We'll move on now to the next question, which is from Timo Dums, who's calling from DZ Bank.
Can you hear me?
Yes, we can.
Yes, we can.
So I've got 2 questions, if I may? So first would be on -- can you -- you laid down in the presentation that you expect further restructuring expenses of roughly EUR 170 million by the end of 2022. Can you give us some indication how these expenses will be spread over this period? This would be the first one. And the second question would be, you mentioned in the press release that your customer satisfaction, can you give us some more color on how you measure the customer satisfaction? And if -- is there any difference among the different brands and customer clusters?
So the EUR 170 million, very simple, EUR 140 million, we will most likely see in the second half of 2021 and then the EUR 30 million will be, let's say, before 2022. And now I hand over to Manfred.
I mean for customer satisfaction, we use -- have a user process of pulse checks we're doing on a regular basis. So there's no change of what we did, and it's consistent all over the bank in all areas.
Okay. Is there any difference, for instance, among or between Commerzbank clients and comdirect clients, for instance, maybe?
No method is the same.
Moving on now to the next question from Hugo Cruz calling from KBW.
I have 4 questions, if I may? First, on the loan loss provision, the EUR 495 million overlay. When do you have to decide on whether you're going to use it or release it? Then on the -- can you give guidance for the TLTRO benefit for the second half and also for the tax rate? And then finally, with the last results, you gave guidance for EUR 3 billion to EUR 5 billion of RWA growth for the rest of the year. Can you update us on that guidance or the new guidance, please?
Yes. So the EUR 495 million top level adjustment, as said, I mean, if we can, to be very honest, we will even put that -- or yes, keep it for next year 2022 as a buffer just to make sure that we have this buffer given that government measures will end by December 2021. So -- but we will see -- we will review that quarter-by-quarter and evaluate the situation. On TLTRO, I mean, we have now a volume of roughly EUR 36 billion, the 50 basis points means you're talking again about more than EUR 180 million of revenues, and we will book it accordingly when we have achieved it. First share you will see in the fourth quarter this year, and that will be approximately EUR 95 million. Tax rate, very difficult guidance. I'm really, to be very honest, I'm not giving any guidance on tax rate because you all know that there are so many different effects impacting that. So it's very tough to predict. But I would say something either slightly positive or slightly negative is probably the right assumption. And on RWAs, I mean, we are now at 13.4%. We expect something around 13%. Why is that? That has to do that we expect specifically some changes in the RWAs we would see some volume increases, hopefully, but also we will see some model changes potentially that will lead to RWA increases. We see TRIM, which is good for nearly a little bit more than EUR 1 billion of RWA increase that are basically some op risk model changes. So that are the key drivers for the RWA increase until the end of the year.
Next up, we have Riccardo Rovere, who's calling from Mediobanca.
I hope you can hear me well. Three questions, if I may? The first 1 is on the risk cost guidance that is more a conceptual one. Before the guidance was a range between EUR 800 million and EUR 1.2 billion, which was a fairly large range, but let's say, the current of less than EUR 1 billion is even more vague, I would say, than it was 3 months ago, while you should have now a better visibility. Now what does -- can you narrow down a little bit what less than EUR 1 billion means because it could be EUR 300 million, EUR 700 million, EUR 999 million, considering that we are in July, so 7 months out of 12 are run out. So you should be in the position to have a better visibility than 3 months ago. And still related to that, is it the use of PLA somehow factored in, in the guidance you're providing of less than EUR 1 billion? Or are you expecting to carry this amount, this EUR 500 million over till 2022 and then take a decision only in 2022? The other question I have is on -- well, is still on the guidance. When you say expectations are based on the assumption that there is no fundamental change affecting the Swiss franc loan portfolio at mBank. What does it mean? Does it mean that you expect a kind of EUR 50 million of provisions every quarter as we have seen so far? Does it mean 0 provisions in the second half of 2021? What that means in, let's say, numerically? And last question I would have, is it possible for you to list all the one-offs that have affected this quarter because I don't think that it's really clear to the people that are listening to this call, we have the TLTRO, then we have Commerzbank Ventures. TLTRO, EUR 40 million positive. CommerzVentures, a EUR 100 million positive. Then you got EUR 55 million mBank provisions on Polish FX loans. Then you have an unspecified amount, if I understood it correctly, on the ruling of pricing models. Then you have an unspecified amount on the provisions related to the outsourcing. Then you have EUR 200 million of costs related to the -- cancellation of the outsourcing. Is that all? Am I missing anything here? And if you do not want to provide numbers related to the court ruling and so on, could you be able to give us an idea what would be the profit before tax, if we excluded all these one-offs in the second quarter?
Okay. I'll start with the last one, Riccardo. If you just go on Page 10 of the analyst presentation, there, we basically have done that. And the EUR 32 million of operating result is then turning into a EUR 208 million operating result if you exclude these one-offs. The only thing -- the only puzzle missing in there is the one related to the provisions which we booked related to the -- yes, to the stop of the contract with our outsourcing partner, and that we do not reveal. And clearly, also, I mean, tax topics, et cetera, we also have not included in that. But that gives you, I think, a good guidance on the exceptional items on Page 10. First, I mean, the risk costs -- first of all, I think it's important to say, last time we sat basically risk result of less or equal to EUR 1 billion is likely. What we now say it's definitely below EUR 1 billion. So I would say, at least it's an improved guidance. I know that there is quite a bandwidth between first half EUR 235 million and less than EUR 1 billion. However, we always know that the second half specific to the fourth quarter is a longer 1 than the rest. So you always have higher LLPs also in total normal years than you have in the first half of the year, that is something which gives you a guidance. And then as I said, it all depends also on what happens with some of the sectors, just think about the travel sector, which is very much exposed to the pandemic. And we assume the less than EUR 1 billion really that we can keep the EUR 500 million. If we can't keep the EUR 500 million, that's pretty sure that the loan loss provisions will be reduced by this number. So that is the equation. And we feel at the moment, given that the virus is still ongoing, and we still don't know whether there will be a fourth wave more comfortable and being a little bit cautious on that. But clearly, as I said before, there is upside on that, I'm pretty convinced. And the third question, the Swiss franc, yes. What does it mean the nonfundamental change? I mean, if we book as we have done some provisions because of changes in the incoming cases, et cetera, I would say that is very much covered by our guidance. If there is total relief based on the September 2 the ruling on hopefully the ruling on the September 2 then we will have a different story or if we need to do a large booking based on a potential ruling. So normal provisioning, I would say, is included extraordinary either rebookings or bookings are not included.
We'll move on now to a question from Jochen Schmitt, who's calling from Metzler.
Could you get a bit more specific on the tax provision which you booked in other income? What's the order of magnitude? And also in this context, has this also affected the tax position, for example, because the provision might refer to interest rate payments on potential tax claims? These are my questions.
Yes. That's totally correct. You will also see a sentence on that in the interim report. I mean, there is a new ruling or guideline out from the Minister of Finance on cum-cum. What we have done is we have basically considered that in the tax line with a certain amount. And as you rightfully say, then there is always also interest rate -- interest, we need to basically provision for under tax claims and that happens in other income, and this has been reflected.
But sorry for following up, you don't want to disclose the number for other income for the order of magnitude and provisions?
To be very honest, I mean we now have the guideline out there. We know that our tax authorities will apply that, but the discussions are ongoing. So we booked something just as, I would say, cautious action, but we will definitely see what the final number is when we concluded the discussions with tax authorities.
The next question for today is from Jun Yang, who's calling from Barclays.
Hope you can hear me okay? I have 2 questions. The first 1 is on mBank. So based on the mBank disclosure, I can see the core case number has been increasing by 20% each quarter over the last few quarters. I just want to understand what is your kind of assumptions in your provision guidance? Your current provision level on the number of cases in the future? And then when -- how should we think about the impact from the out-of-court settlement versus the court cases, how much difference is that?And then the next question is on the restructuring. If I hear correctly, you mentioned about 5,000 FTE to be in signing contracts for certain contract with you of the payroll. How -- just want to understand what is that impact -- timing of that impact from this reduction? Where is that going to come through in the future? Is that this year or next year? And a touch to that, I just want to understand on the branch closure, you mentioned the customer leaving you does not change too much of your revenue. But I just wanted to understand, is there any follow-on impact from the branch like closure into the future? And how much is in this year's number and how much is in next year? And has there been any change in your financial guidance into 2022?
Okay. Jun, on the ruling, what we have done is, basically, we have a model in the moment where we take the incoming cases, we then make an extrapolation also for the future based on the incoming cases. We then also take the size of damage or decision plus also our win-loss rate into account. And that we review together with our auditor, quarter-by-quarter. And what you have seen in the last quarters that indeed court cases have increased, and therefore, we have also increased provisioning. We would expect, if there would not be the ruling now anyhow on the 2nd of September that court cases would probably slow down because specifically, the rulings end of April and beginning of May, which we have seen were rather encouraging for the banks. But these type of processes are always started like 3 months before. So you always have a time lag until you see certain decisions also unfolding in the number of cases. But we feel pretty much based on current rulings, et cetera, that we have the right level of provisioning. On the impact on what we have now already done today on the restructuring. I mean, we have -- we said that we now have settled basically agreements with more than 3,400 employees. That doesn't mean that they are leaving right away. Some have left already, some will leave until the end of the year, but we also have this part-time retirement programs in there and some will just leave in 2022 or 2023 or even 2024. So you will see the impact in the coming years. It's different to the voluntary program, which we have just started and launched with the 1,700 FTEs because there we expect that all of the people who signed this voluntary agreement will leave by the 1st of January 2022, meaning you see the full impact of the 1,700 in the 2022 cost baseline. And the last question on the branch closures. I mean, we see churn that's for sure, but it's not as high as we have expected. And we will also see further churn in the coming months and years. But this is what we have basically assumed in our plans. If we remember, we had a EUR 300 million churn negative revenue impact due to churn.
In light of the time, we'll move on to the last question for today from Lukesch -- Tobias Lukesch, calling from Kepler Cheuvreux.
I'll be quick, just focusing on 1 big issue, which is the stop of the outsourcing of the security settlement process. If I read your press release, it pops to me that you are highlighting the risk basically of the complexity of the issue and then saying more or less, and yes, we can do it ourselves, and it will be profitable. So first, my question basically is twofold. So a, what is the risk here also for the rest of your system landscape IT-wise? Is there any further risk visible, i.e., higher IT investment requirements, further write-offs in other segments? And secondly, going for this profitability argument, I would have assumed that with higher volumes, i.e., lower marginal cost than we would even more benefit from an outsourced IT landscape which HSBC. So my question here is if you go through the in-house solution now, what kind of profitability would you expect on the level expectations or volume expectations that you have? And secondly, what kind of margin do you expect from that business?
Yes. Just the opposite for us now with the higher volumes, it's better to have it in-house because we have economies of scale here. And yes, and for any other things, I mean, this is a total hypothetical questions. We are pushing our transformation. We're measuring our initiatives and projects. And okay, as you've seen, we are not afraid of taking painful decisions, but it's a total hypothetical questions. And that's not...
It's not hypothetical in the way that I asked for any visibility in the short term. Is there any additional IT investment requirement? Is there further write-off potential in other segments? It's not the hypothetical in 3 years, it's really what you see now? Should we factor anything in for H2? Or is that just another quarter like we have seen that with Commerzbank for years basically?
I mean, there's nothing what pops out right now what we have seen. So we have a review of all the initiatives and projects we undertake in the Board very much into detail, and this was the 1 project which popped up. And there's not more to say than all the others. I mean, this is 1 project where we found this is necessary to do. And we have all other initiatives and projects always under review. And yes, so I think what we can say is that we are fully in the plan and of our expectations and the transformation is on plan. And this is all what we can say now. Yes. Thank you. Since this was the last question, I would say thank you very much for your participation in this call. So we are looking forward to our future interactions virtually or hopefully in person in some time. Wish you all a nice day, good summer vacation, and thank you very much, and bye-bye.