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Good morning, ladies and gentlemen, and welcome to the Commerzbank AG's 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 in the Internet. [Operator Instructions] The floor will be open for questions following Manfred Knof's and Bettina Orlopp's presentation. Let me now turn the floor over to our CEO, Manfred love. Please go ahead.
Good morning, and welcome to our earnings call for the third quarter of 2021. We have 2 key messages today. One, we lift our net profit guidance for '21 into positive territory and; two, our transformation is fully on track. This is based on good progress and performance in the third quarter, and we are confident to reach or exceed our targets for 2021. Let's look at the key dimensions on Page 2. Most important from a strategic perspective is that we are on track with our transformation milestones. This includes major steps in the setup of our business model as well as our redundancy program on which I will touch in a few minutes. Our transformation KPIs developed largely according to our plan, in some cases, even better. Good example for outperformance is the ongoing increase in business volume and especially in securities with Private Customers.Financially, the third quarter provided us with some tailwind for the remainder of the year. Revenues after 9 months exceeds the previous year by 3.3% and will exceed 2021 also on a full year basis. Furthermore, our loan book has proven to be very resilient in the pandemic. Especially our German Mittelstand clients have so far navigated very well through the challenging quarters. Thus, we can improve our full year guidance for 2021 to less than EUR 700 million. As a result and with costs in line with our guidance, the operating profit already exceeds EUR 1 billion after 9 months of the year. This makes us confident to guide for a full year positive net result despite the restructuring charges for the transformation.Last, not least, our capital ratio has also developed better than planned and stands at 13.5%, a level that we are expecting to be maintained at the end of the year. Overall, this is a positive development that provides us with further headroom for the further transformation.Now let's take a look at the strategic transformation highlights of the third quarter. In the last weeks, I had many meetings with corporate clients, and I'm very happy about the positive feedback of banking partner, which is not self-evident in the middle of such a large transformation. The positive response is also reflected in the fact that corporates in Germany have confirmed Commerzbank as the leading trading finance bank with a market penetration of 81%. This is a further proof to our high-quality client service and long-standing commitment to innovation and excellence within the trade finance space.A good example for innovation is the recently launched Marco Polo payment commitment, which enables trade finance to get digital on the basis of distributed ledger technology. In the Private Customer divisions, we have launched the first stage of our centralized advisory centers. Three centers in Germany are taking over clients from closed branches. With excellent service and advisory skills, we can effectively limit customer churn.We've also, again, made good progress in the digitalization of the bank. For corporate clients, we have launched a digital signature, which makes banking much easier and convenient. On sustainability, I would like to highlight that green mortgages account for already more than 25% of new business. This fits perfectly to the ambition that we discussed at our first sustainability dialogue, which took place in September and address the most important topics of our sustainability strategy.One of the key messages was that until next August, we will define concrete CO2 reduction targets for the relevant sectors within our loan and investment portfolio. These targets will all be based on the guidelines of the science-based targets initiative.Regarding profitability, I have picked deposits as a very good example for our management focus. Our strategy to put profitability before growth bears fruits. Revenues from deposits have stabilized due to active deposit management and pricing.Let's move on with the progress in our redundancy program on Slide 4. Core of our strategic transformation is a leaner setup with 20% lower cost. This requires 10,000 job cuts that had to be negotiated with the employee representatives. And we achieved very good results in a short time frame.In May, we already agreed on the framework for the redundancy program. In July, we kicked off a voluntary redundancy program. And as of now, we are very close to the finalization of all detailed redundancy agreements for all departments of the bank. In parallel and also due to the voluntary program, we already have insured and contracted more than half of the gross FTE reductions. 1,500 FTEs are already off payroll. A further 2,100 are contracted for exit in the time period until 2024.And the voluntary program has added another 1,600 FTEs that are going to leave the bank at January 1, 2022.Looking into 2022 and with concluded detailed redundancy agreements, I'm very confident that we will make further significant progress in the restructuring.Finally, let us take a view at some highlights in the development of our operational transformation KPIs. As usual, the full table of KPIs can be found in the appendix.In Corporate Clients, RWA efficiency measures stand on top of the agenda. In Q3, we have further reduced client business in the low-yielding bucket from 31% to 30%. This is further ahead of our year-end target of 32%, and we will keep on going to further improve our capital deployment. However, we will also face some RWA headwinds for model adjustments.Furthermore, the streamlining of our international network proceeds faster than planned. We have already closed 4 out of 15 exit locations, exceeding our plan of 3 exits at the end of this year.In PSBC, I would like to highlight the topic that is not exactly on the KPI list but, nevertheless, very important for the success of the transformation. Customer and revenue churn due to branch closures and pricing initiatives is so far limited. As of Q3, customer churn is 40% lower than expected. Better churn figures can also be reported for the Corporate Clients division. But again, we stay cautious on churn and want to see further good quarters in 2022 before we adjust our guidance here.Looking at operations and head office, we have made further good progress in the ramp-up of our nearshoring locations. Already 18% of our IT capacity sits in near-shoring locations, well on track to reach the milestones of 20% by the end of this year. In Q3, we have also further increased the share of applications that run on cloud technology from 34% to 36%. Our target to reach 50% by the end of this year will be, however, postponed to the first half of 2022. Key reason is the necessary enhancement of the infrastructure that we need to implement together with our cloud providers.Ladies and gentlemen, the strategic transformation of Commerzbank is well on track, and we are completely committed to our Strategy 2024. After the disclosure of our full year results for 2021, we plan to host the Capital Markets Day at the 1st of March. In this event, we want to provide you with an update on milestones and interim targets towards 2024.Let me now pass on to Bettina, who will walk you through the financials of the third 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 7. As Manfred already stated, we had a good financial performance in third quarter. The operating result reached EUR 472 million, and the net result was EUR 403 million.The operating result is mainly driven by 3 factors: a, strong revenues of more than EUR 2 billion, even considering the increase of legal provisions for Swiss franc mortgages by EUR 95 million to EUR 472 million; b, cost of EUR 1.5 billion, managed in line with our full year target; and c, a low risk result of EUR 22 million. This reflects the high asset quality of our portfolio.I want to stress that we did not benefit from a net release of our COVID-related top level adjustment. The overall level remains nearly unchanged at EUR 496 million. We further improved our strong capital ratio to 13.5%. The buffer to MDA increased to 410 basis points.Now let's briefly look at Slide 8 and the year-to-date view. Compared to 2020, revenues are up EUR 202 million. Operating expenses, excluding the onetime write-off in Q2 are EUR 93 million lower. And the risk result is EUR 810 million lower. This has led to an operating result of more than EUR 1 billion and already covers the EUR 1 billion restructuring charge booked in the first 9 months of the year.Let's jump to Page 9 with the exceptional revenue items. Overall, these items amount to only minus EUR 9 million. Higher valuations of EUR 32 million have largely compensated an additional provision of EUR 33 million for the German Federal Court of Justice ruling on fee changes. This additional provision covers expenses caused by the court ruling, like the cost of providing all customers with our terms and conditions in written form.Slide 10 shows the overall group P&L. As mentioned, we reached a good operating result and have booked the majority of restructuring expenses already. Further, EUR 90 million restructuring charges will be booked until the end of next year.The net result of the quarter benefits from a small tax gain as the taxable year-to-date income is negative. In the fourth quarter, we will finalize our annual planning process. The addition of 2025 as a planning year will likely lead to an increase in tax assets. This increase could be in the 3-digit million range. I therefore stick to my guidance of a tax gain for the financial year 2021.Now let's move to the next 3 slides where I will cover NCI and NII in more detail, starting with net commission income. PSBC Germany strongly increased commission income by 13% year-on-year. This has been driven by the securities business. Both trading volumes and securities in custody have increased significantly compared to last year. Commission income and Corporate Clients also increased this quarter. This is mainly due to transaction banking. We have seen better trade finance that is somewhat recovering from the negative effects of the pandemic and higher contributions from cash management.This leads us to NII on Slide 12. As expected, underlying NII has been on the same level as the previous quarter. In PSBC Germany, NII in the loan business is a bit better than last quarter. The NII from deposits was also slightly up. An increased income from deposit pricing offset effects from modeled deposits. In Corporate Customers, NII from loans were stable, while the contribution from deposits increased due to further progress in deposit pricing. Also for the fourth quarter, we expect the underlying NII in excluding the TLTRO benefit to remain roughly at the current level.Let's move to the next slide with the current interest rate development and the further outlook. This year, we have so far seen a limited churn in customers and corresponding revenues. If this trend continues in 2022, we expect the NII, excluding TLTRO benefits, to be at around the level we have seen this year.In the longer-term outlook of our Strategy 2024 that we presented in February, we had assumed constant low euro interest rates in our plan. However, while being quite volatile, the market-implied forward rates are increasingly reflecting rising rates. We are currently benefiting slightly from this as we can reinvest modeled deposits at better rates than originally assumed.Based on the forward rates at the end of the quarter in PSBC, we would earn more than EUR 200 million additional NII in 2024 compared to our strategic plan. Or in other words, we would be on a good way back to the NII from deposits that we had in 2020. However, in the years '22 and '23, we would still face some remaining headwinds from rates that we target to, at least partially, offset by increased deposit pricing.Now let's look at mBank. The pandemic induced cut in rates had an impact on the NII, which bottomed out in the Q1 this year. The Polish Central Bank has increased rates in October and again yesterday. The increase in rates will support NII at mBank. We estimate that the 50 basis point increase in October will lead to roughly EUR 40 million higher NII per year. It is fair to assume that the effect from the 75 basis points increase yesterday can be roughly linearly extrapolated.We had assumed rate increases in Poland in our 2024 strategy, but we were expecting them only from '22 onwards and rising more slowly. The current market expectation is that rates are not only rising earlier, but will also be higher than we had planned.Let's carry on with costs on Slide 14. We have maintained our strict cost discipline and operating expenses are in line with our full year target. At the same time, we continue to invest in our digital transformation, spending around EUR 360 million so far this year.Let's move to Slide 15 and the risk result. The EUR 22 million risk result is even lower than in the second quarter. This confirms the resilience of our loan book was largely stable or even improving 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 13 basis points.The so far low risk result in the second year of the pandemic is clearly very encouraging. Although we expect a higher result at the long fourth quarter, we can improve our guidance for the full year to below EUR 700 million. This is assuming that our TLA remains around the current level.Having said that, while certainly significantly more optimistic, we are not fully out of the woods yet. The government support measures will run until the end of the year and first repayments of support loans will start. There will be some companies that will be adversely affected. We also see secondary effects like supply chain disruptions and higher energy prices that put strain on customers. Therefore, an increase in default is likely in the next quarter.Based on this and following a review, we intend to keep our TLA to cover direct and secondary effects of the pandemic in 2022.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 had continued inflow of around EUR 3 billion net new money and securities in the quarter. So the trends that Germans invest more in securities is intact. We do expect this to continue for the time being. But a more uncertain outlook in the markets could slow down this trend. A lot will depend on the overall development of the market, which has moved sideways during the third quarter. Mortgage volumes continued to increase in the quarter at a steady pace and as planned.The Consumer Finance business has again been flat. We do not expect a significant change in customer behavior in the near term. In the deposit business, we have again made good progress in the quarter. We managed to reduce the overall volume of deposits while increasing the volume of deposits subject to pricing to EUR 16 billion. So far, this has contributed EUR 40 million to NII. Overall, we expect the contribution from deposit agreements to exceed EUR 55 million in 2021.This brings me to the performance of PSBC on Page 17. PSBC reached an operating result of EUR 299 million, significantly better than last year and also the second quarter. The good performance is based on 5% higher underlying revenues year-on-year driven by the German Private Customer business. The securities as well as the loan and deposit businesses contributed.Churn due to the streamlining of the business model has been lower than anticipated both in terms of the number of customers and revenues lost. The departing customers had on average not contributed much to revenues. So far, we continue to lose the right customers.mBank has also performed well, with underlying revenues nearly on the level of last year, even though the provisions for Swiss franc mortgages were increased by 95 million to 472 million. As the Polish Supreme Court has so far not ruled on Swiss franc mortgages, we do not expect clarity in the near term. We will continue to closely monitor developments and adjust reserves if appropriate.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, slightly reducing overall loan volumes in the quarter. Average RWA efficiency was maintained at 5%.In the deposit business, we have seen a continued increase in volumes from our customers. The increased volume has been fully priced, thereby ensuring no negative impact on profitability. We currently charge 50 basis points for most corporate deposits, but partially also higher rates, especially with institutional clients. The average was around 55 basis points this quarter.For the year, interest income from deposit pricing had so far added up to around EUR 175 million. We continue to actively manage the deposits and will adjust rates and introduce higher rates for more clients, including large corporate deposits beyond our allowances. With these measures, we expect to see the contribution for pricing to increase from around EUR 150 million in 2020 to more than EUR 250 million this year, offsetting our cost to hold these deposits.Let's move to Slide 19. Underlying revenues are around 4% lower year-on-year and a bit better than in the second quarter. At the same time, RWA were reduced by EUR 14 billion or 15% year-on-year. Thereof, EUR 9 billion come from credit RWA, driving the improvement of our RWA efficiency.Looking at our business lines, all client groups improved revenues compared to the second quarter. Mittelstand and Institutionals also improved revenues year-on-year mainly from better transaction banking. Trade finance recovered somewhat from the pandemic lows. Cash management also improved revenues, including from increased deposit pricing. International corporate revenues are lower year-on-year in line with our strategy.Compared to the second quarter, International Corporates also benefited from improved transaction banking and better capital markets business. With a lower risk result and lower cost, Corporate Clients reached an operating result of EUR 221 million.Let's move to Slide 20 and the development of Others and Consolidation. The operating loss of EUR 49 million in Others and Consolidation is, to a significant degree, driven by lower valuations at CommerzVentures. This is largely resulting from our stake in Marqeta whose share price is quite volatile and hit a low at the end of the quarter. Others and Consolidation's operating results stands at minus EUR 206 million after the first 9 months. Assuming that we can receive TLTRO benefits as well as some contributions from equity holdings in the fourth quarter, this should at least improve to a slightly negative operating result for the full year. Let's move to Slide 21 and the risk-weighted assets. Quarter-on-quarter RWAs were overall moderately reduced, driven by credit and market risk, partially offset by an increase in operational risk RWA. Credit risk RWA lowered to slightly reduced volumes, improved ratings and higher collateral with Corporate Clients. We also booked a small final impact of TRIM this quarter. Operational risk RWA increased due to the switch from the internal model we have used too far to the standardized approach. This leads to an increase but will reduce volatility going forward. The change will formally happen in Q4, but we have already included the impact this quarter. This RWA reduction, combined with a stable capital has further improved our CET1 ratio to 13.5%.To wrap up the financials of the quarter. The underlying business and strategy implementation has developed well. After 9 months, the operating results can already cover the restructuring charge of EUR 1 billion booked this year. This is reflected in our improved outlook on Slide 22.Based on the premise that there will be no extraordinary burden from Swiss franc mortgages in the fourth quarter, this is our outlook for 2021. Revenues will exceed the 2020 figure. We will reach 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 in the second quarter.Based on current observations and assuming a top level adjustment near the current level at year-end, we improved our guidance and expect a risk result below EUR 700 million. And given the aforementioned, we expect positive operating and net results. And last but not least, we expect a CET1 ratio of around 13.5%.Thank you very much for your attention. And Manfred and I are now very happy to take your questions.
[Operator Instructions] And the very first question comes from Izabel Dobreva from Morgan Stanley.
I have 3 please. So I was very encouraged to see your results and the updated revenue guidance given the improving risk outlook. And I don't mean to take away from the improving revenue picture, but I would like to actually ask you a question on the cost line.The wage inflation pressures are accelerating, which, I guess, impacts the business through the negotiations with the unions the nearshoring in Eastern Europe and, of course, Polish business, and the recent strategic update from mBank seems to imply cost growth around 10% or so a year. So in light of all of this, my question is, what levers do you have to offset these inflation pressures and reach the EUR 6.2 billion cost target for next year? Or would it be more appropriate to start thinking about the cost/income ratio target at this stage?Then secondly, I have a question on the capital return. It looks like the business is on track to be profitable already this year and on track for the 1 billion target next year. Does this change your thinking at all about the timing of when you might resume the capital return given you're already profitable or likely to be, and capital is at 13.5%?And then my final question, which I suppose is linked to the previous one is regarding the Swiss franc mortgages. There is increasing movement towards voluntary settlement, and there are headlines that mBank might be working on the pilot scheme. So what are your thoughts here? And would you be open to enter into a voluntary scheme?
Thank you, Izabel. So on your first question, the cost baseline, I mean we are closely following up on that and indeed, we see -- specifically in Poland, you see quite a huge inflation, and therefore, they have adjusted also already salaries and stuff like that. But I can assure you that we have embedded that in our plan. So we stick to our EUR 6.2 billion guidance for next year. And the rest we will take from there, and we have an update anyhow first of March, but the EUR 6.2 billion are our target for next year.Second, capital return. I know when you look at the results, you could think, couldn't we pay already dividends in 2022. To be very honest, let's have first 2022, and then we will definitely discuss and consider and we will update you on that one.And the third one, Swiss franc mortgages. Yes, I mean there are 2 banks now out with the voluntary settlement offers. mBank team is also discussing that. We are open for any solution to be very honest. I mean we definitely all want to have this story or saga, however you want to describe it, to end. The thing is only it must be a sensible ending. So we need to find a solution, which is then also binding for everybody and which is also ending the years of claims and court procedures, et cetera. So mBank is working on that, and the fourth quarter will definitely be also an insightful one on how to proceed on that.
The next question comes from Nicholas Herman from Citi.
Three from me, please. Hopefully, you can hear me okay. So 2 on NII and a follow-up on Swiss franc mortgage. So just to dig into NII trends, please. A significant step-up in German PSBC NII. I think underlying about EUR 440 million last quarter. It's about EUR 480 million this quarter. And per your comments, that seems to be sustainable. I'm just struggling to understand the moving parts there. I appreciate that price deposits increased but only by EUR 3 billion from what I can see. So if you could provide some detail behind the moving parts and the step-up on German PSBC NII, that would be very helpful. Secondly, you also said that your churn in PSBC has so far been far lower than planned with about 4% lower, very encouraging to hear. I guess that would imply if that holds, obviously, a big if, that would imply about EUR 200 million NII churn compared to the EUR 300 million that you originally guided. And along with the EUR 200 million higher NII from higher forward rates, as implied in the forecast, I guess that would imply that EUR 300 million higher NII versus plan. So just to confirm, that means that you would therefore be expecting EUR 5.7 billion of NII in 2024. I guess that would also then compare to EUR 4.7 billion consensus. So just to confirm I've got the math done right. And then finally just on [indiscernible] mBank, are you not encouraging the managing teams to settle, to take that risk off the table? Certainly, I guess, when you look at quite strong metric in the courts versus, I guess, when you see peers of mBank settling at significantly lower rates, just why not just trying to really accelerate the process and get it off the table as quickly as possible? Because from what I can see, mBank has been lagging peers on this.
Okay. Thank you, Nicholas. To the first question, I mean, what are the main drivers for the strong development of NII and PSBC. Number one, and you mentioned that already, is the deposit pricing. It's slowly but surely adding to the revenues, and we expect more. I mean you can see it also in the presentation that we have still EUR 32 billion above the EUR 50,000 threshold, which are not priced. So that is something.Second is the stable loan business with higher volumes and mortgages adding to the NII. And Additionally, in Q2, we had a negative effect of early mortgage repayment on NII that always happens end of June, and that always is a little bit depressing NII and PSBC in the second quarter. That's definitely a seasonal effect. And compared to Q1, if you take that, the development is clearly smoother.Second, on the churn rate and what we expect for 2024. First of all, what I said, I mean, we based our -- we will have more NII in 2024 on the fact that what we have seen in the forward rates end of the quarter. So I mean, at the very end, it depends on where we stand in 2024, what effects you will see. And we stick to our conservative approach for the time being that we do not expect rate increases in the Eurozone. That might change in the next months, but for the time being, we stick to that. But we know that there is clearly an upside which implied our assuming current forward rates, more than EUR 200 million of additional revenues.And then on the churn side, I mean, Manfred said it and I said it also, I think we need to stay cautious. I mean it's very promising what we currently see, but we are still in the closure of branches. I mean we closed this year EUR 230 million. We have closed already the first EUR 200 million last year. We haven't seen any effect of the first EUR 200 million. But we stay cautious. So there might be indeed an upside because we figured out that there would be a significant decrease in revenues due to churn. But we still stay cautious in the moment.And the third one on the settlement. I mean we are very supportive in finding a solution. But to be very clear, we need to find a solution which is ending the story. What is not helpful to have a voluntary settlement offer out there and then everybody who would not basically go to court because they do not see any necessity would take the settlement offer and all the participants who believe or people who believe that the court way is the more beneficial one, to say it like that, will stay on the court procedures because then we have not -- there is no win-win in that.So we definitely want to have an attractive settlement offer, but hopefully, also a settlement offer everybody can accept and which will end the court procedures. That's our target, and that's also the target clearly of the mBank management team and they're working on that. I mean it would be ideal if we would have seen a Supreme Court decision by September. Unfortunately, that did not happen. So we need to clarify it via other ways.
The next question comes from Johannes Thormann from HSBC.
Three questions or follow-ups, please. First of all, on the operating costs, I'm still a bit struggling to see personnel costs rising that strongly after the negative trends in the previous quarters year-on-year despite the headcount now being down by more than 1,500 as you flagged in your presentation yourself. Is there another step-up coming? Or will we see a drop in Q4? And then was this just some one-off effects or whatever in there?Secondly, on coming back to your retail deposits, you lowered the threshold where you can price. But first of all, the price ratio of the deposits, which you can price has gone down from 33%. And secondly, how much of the EUR 32 billion retail deposits, which are now above your EUR 50,000 threshold, can basically ignore your request to pay the fee? Because even under your new AGB from November, they can say, I've had my account with you for so many years, and I don't -- this is still the old requirement.And last but not least, on customers from my side, how much of the new AGB do you expect to have an impact on your customer churn?
First, on operating cost. Yes, indeed, personnel costs are currently -- we have seen a rise. There are 2 main reasons for that or 3. One is that, I mean, the leaving of people has always a time lag in the personnel cost side. That's number one. Number two is that we have seen a so-called tariff increase based on the collective bargaining round -- last round. So that one is automatically playing in to that. And third one is, honestly speaking, we also increased our provisions for -- our booking for variable compensation because apparently, we have good operating results. And clearly, the target to also give something back to the employees who did a great job in the last 9 months.Secondly, on retail deposits, I mean we clearly target the EUR 32 billion. But as we know, it's based on bilateral agreements with each and every client. And we definitely also will have a look on the client relationship, the profitability of the client relationship, the cross-selling we do with the client, and therefore, it's an individual decision by each and every client. But at the very end, I mean, putting deposits on our accounts is also kind of a service we provide. And as anybody else who's providing services to someone, you want to get paid for that if you have cost and we have costs out of that.So it will be discussions with each and every client. And hopefully, and this is also our experience, many clients understand this procedure and accept it. And I mean, they are also otherwise than just keeping deposits on your accounts, securities business is an attractive alternative, specifically if you're long-term oriented.The third one on AGBs, I mean, clearly, we have -- I mean we also assumed churn because of the new price models, the price model introductions, which we plan for comdirect by first of May and for Commerzbank by first of August, that was then kind of interrupted by the Federal Court decision.We are now out. We are asking for consent by the clients. We do that step by step. The feedback is rather promising. There will be clearly clients you will have discussions with. But it's a little bit the same story as I said on the second point on the retail deposit pricing. We provide services, and we need to get paid for that. And that's the discussion we have to have with our clients.
Okay. One follow-up on the tariff increase. In my understanding, wage negotiations just starting and [indiscernible] just called for a strike action on Commerzbank. So have you modeled in already some tariff increase in the results? Or is there more to come from the upcoming tariff negotiations?
Well, the one which I was referring to is from the last round, I think it's 2, 3 years ago. And there, you basically agree for certain years until you have the new start of collective bargaining, which is underway in the moment, but that's for the future. And we clearly have embedded our plan a certain result of the collective bargaining and also in our forecast.
The next question comes from Jochen Schmitt from Metzler.
Just a clarification on Others and Consolidation. Did you say that you expected a slightly positive operating results for financial year '21?
Honestly, we said slightly negative. So we guided so far 0. Now given that we are a little bit above EUR 200 million, it very much depends. I mean we are very sure that we get the TLTRO benefits. On the equity investments, it's always tough to predict how much we see. So therefore, there might be a slightly negative result.
The next question comes from Riccardo Rovere from Mediobanca.
2 or 3, if I may. The first one is a kind of clarification, if I got it right. You indicated 2022 NII, excluding TLTRO benefits, expected to be roughly in line with 2021. First of all, I wanted to ask you if that is a kind of formal guidance. And if it is, how would this cope with higher rates in Poland, higher long-term rates, which I would imagine part of the EUR 200 million that you have [indiscernible] in 2024 would be could be cashed in, in 2022? And with the [ sort of ] volumes are going quite nicely. I mean, can -- let's -- can price competition erode all of that, if I understood correctly the guidance?The second question I have is still -- if rates had to go up in the euro area, which I understand is certainly not your central case, but let's assume that happened, would you still be in the position to keep on repricing the deposits. Can you have both sides of the equation?And last thing I wanted to ask you, if I understood it correctly, you expect a year-end, the probability test to result in a reassessment of DTAs, and that should result in positive taxes at the end of 2021. Could you quantify what is the possible improvement in DTAs? And where are those DTAs booked? Are all in Germany, so we can have a let's say, an element to better assess what the tax rate for the group could be in the coming years?
Thanks, Riccardo. So in 2022, yes, we start roughly in line, excluding TLTRO benefits. I mean what's tough to say is -- and that all relates and comes back to the churn question. I mean, if we would not see any churn, then for sure, the rate increases in Poland are beneficial. And if there are further rate -- or if there are rate increases in the Eurozone, we would definitely benefit. But we have the other side of the story that, a, we will continue our closure of the exit locations in Corporate Clients, which will mean that we will lose revenues for sure and also NII. And the other side of the story is how much churn will we see on the Private Clients side.With respect to rates, if rates go up in Euroland, can we continue our deposit pricing? I would say it depends, right? I mean if there is a sharp rate increase, as we now see it in Poland to now 1.25, it would be probably difficult, and we would not do that. But that is a long, long, long way for Euroland. So as long as we are in negative territory with our rates, I also expect that you could do deposit pricing. Clearly, you would adjust and think about the amount you price.And third, on the DTAs, I mean I said that this would be a 3-digit million size. It's mainly Germany. And yes, we'll see. It's a lot of accounting, which you have in there, but it will lead definitely to a positive tax income and that also clearly supports our guidance on a positive net income.
The next question comes from Stuart Graham from Autonomous Research.
I have 2 or 3 as well, please. The first question is back to the dividend question. If you are profitable for the full year, why would you not pay even a small dividend? You've got plenty of capital. You've only paid a dividend in 2 of the last 13 years. I mean surely, you'd be keen to pay a dividend at the very first opportunity. So that's my first question.Then the second question is kind of back on the deposit charging. Within your rate guidance, the EUR 0.6 billion to EUR 1 billion NII uplift over 1 to 4 years, is that gross or net of the EUR 300 million or so of deposit charging income, which you currently receive? What are you assuming within that guidance, the EUR 0.6 billion to EUR 1 billion?And then the final question was on your EUR 200 million benefit from curve shifts on Chart 13. Is that just euro rates, so Poland's on top or that includes Poland as well?
So I mean on the dividend question, yes, we are absolutely keen to pay dividends because it would mean that we are returning to a normal state. However, I think we definitely also need to prove that we are able to show stable and positive results, not only for some quarters, but for the full year because that is the one which is required to show that in case we need it that we are able to create capital on our own, and that's the key thing.But I can ensure you, we will have the debate, and we will reflect that carefully because we are fully aware that paying dividends is belonging to a normal bank, to say it like that. But in the moment, we are still in a transformation phase.Secondly, the public charging is included, yes. So that is basically a part of the adjustment of the price models referred to. And depending on how things are now developing, it might be higher than we originally planned. But it also depends clearly on what the rates -- how the rates are developing in the next months.And the last one, the euro rate, the more than EUR 200 million, that is just related to euro rates. So it's not including the benefit of the Polish increase that is separate because that one we also see already today. And as that for the first increase, we expect an NII increase of EUR 40 million from 2022 onwards for mBank and the 75 basis point increase of yesterday we have not yet calculated because that was kind of a surprise, but you can assume that this will develop accordingly to say it like that.
So just to be clear on the second question then. So the EUR 1 billion after 4 years of plus 100 basis points. I mean, obviously, then you got positive rates for the deposit charging is gone. So it's EUR 1.3 billion gross minus the EUR 300 million of deposit charging gives you EUR 1 billion net. Is that right?
You mean -- are you referring to the EUR 1 billion increase the backup, right? We would see a 100 basis point increase in total. Okay, sorry. That one is assuming that -- well, it depends on where we start with. But there, we probably still have -- we would still need to deduct a little bit for deposit pricing.
The next question comes from Hugo Cruz from KBW.
Just a few clarifications. So first, on the NII, I noticed your underlying number for 3Q is a bit different from the reported by EUR 24 million. I couldn't understand what was the difference, so if you could explain that.Second, on TRIM. Was there any impact from TRIM 3Q? And are you guiding for anything in Q4 on the RWA?And third, I think you said that your profit guidance for this year does not assume anything material, extra on Polish loan provisions for the FX issue. So does that mean that you actually do not expect to book anything in Q4? Or is just that it's a bit too early to take a view there? And arguably, any provisions would be below smaller amount of DTA benefit? If you could clarify this would be great.
Yes, good spot on the first question. The main reason is that we have consolidated a securities transaction that we executed at the end of last year in the third quarter. And in the first 2 quarters, the cost of the securitization was reported as fees paid by following the consolidation is reported as interest paid.So we therefore had to reverse the bookings from Q1 and Q2 this quarter, leading a significant swing between NII and NCI in the third quarter. So to show the underlying trend in NII and NCI, we have therefore adjusted for the securitization. And in the underlying NII, the cost of the securitization is fully shown in NII now in all 3 quarters. That's the whole reason for that.Second, on RWAs, honestly speaking, we do not expect anything in the fourth quarter. TRIM is now completely in. It was a very tiny effect. And this is also why we are now very sure on the guidance for the capital ratio was 13.5% or around 13.5% for end of the year.And on the last question, I can read not anymore my owned scribblings, the profit guidance and were we material extra, yes. So I mean, the normal bookings, I would say, so something which we have seen in the last quarters would definitely be in our guidance. But if we would book a big, big provision for a settlement offering or something like that, that would be not included. So the differentiation is normal provisioning would be included. Material one like for a settlement offer is not included in the guidance.
And so just to follow up, the normal provision would be something similar to the run rate of 3Q and 2Q? Is there a way we should think about?
Well, I mean, what have we seen? We have seen provisioning everything between, I think, EUR 30 million to EUR 100 million, so everything is possible. That is really very much dependent on the claims coming in because we always base our assumptions on how are the claims developing, how many court processes starts.And to be very honest, we have seen an increase, and this is also why we increased provisioning over the summer, but now the past weeks show a slowdown of that. And we always take our current experiences and then make also an extrapolation for the future, and that's included in the provisioning. So it's tough to say. But anything what we have seen in the past quarters would be absorbable.
The next question comes from [ Youn Yang ] from Barclays.
I got 3 here. One on the macro. I'd just like to understand a bit more about the recent economic events such as inflation, the supply chain disruption, how does it impact on your clients and [indiscernible]? And then the second question is about your kind of outlook. You're talking about the full year positive set of results, I think the last kind of new [indiscernible] I just want to understand to [indiscernible] try to have a sense of [indiscernible] 9 months, that you are already positive so then a kind of guidance [indiscernible].Then guidance at thinking I can see on your Page 16, where you show the Q1 target and the securities and the long-term [indiscernible] [ 310 million ] decline, 5% decline Q-on-Q. Just try to understand what some of the revenue is [indiscernible] and there is are mainly coming from the securities or the [indiscernible].And lastly, just a high-level question on the revenue. Given the delay of the pricing change because [indiscernible] what is your thinking about the revenue impact from all these restructuring programs you are doing? Do I expect most of this revenue headwind to come through in 2022 and [indiscernible] in 2023? Just trying to understand the progress happening there.
We have -- honestly speaking, we had really difficulties to understand your question. I think I got the first and the third one, and you probably need to repeat the second one because it was -- the line was somehow, at least for us, disturbed.So I try on the first one. If I understood that correctly, you asked about the macro effects and how we embedded that in the plans, et cetera. So basically, what -- and that's why we keep the top-level adjustment because we see the biggest effect we might see in the risk result in -- with our Corporate Clients. And therefore, I mean, we basically did some shifts in the top level adjustment because we do not see really primary effects within the Private Clients segment, but we do expect some secondary effects in our Corporate Clients segment.So what we basically do is that we preserve for the time being the top level adjustment for anything which could happen either in the fourth quarter or in 2022. And that's also why we kept the guidance of the loan loss provision so far on below EUR 700 million, which is still even for a long quarter quite a risk result given that year-to-date, we have just seen EUR 257 million for 3 quarters.And the last question, I think, was the question on when do we expect the biggest revenue impact by the transformation. Honestly speaking, we would have expected that already for '21 partly. We haven't yet seen it entirely, a little bit on the Corporate Clients side, but definitely, as I said, not on the Private Clients side.But yes, 2022 will be most likely the year where you would expect to see the churn on the Private Clients side, but also the effects of the additional closure of the exit locations on the Corporate Clients side. And I think the second one will definitely come because we have in our plans the closure of the locations, and then revenues will be gone, but also clearly, the cost attached to it.On the private client side, it's very much depending on how our clients are reacting. If the trend continues as we currently see, that churn is, a, lower and that, b, that the revenues attached to the clients leaving is so low, then effects will be lower. But in the moment, we expect more to come in 2022. And now you probably have to repeat, make another attempt on the second question. Or otherwise, we need to take it tomorrow in our call.
Let me try to get on the second one. And the second one is hopefully straightforward. So your guidance on the full year is a positive net result, which you already achieved in the 9 months. So I try to understand, is that this conservatism being built in for the Q4? And thinking one thing, maybe you can give more color is in Page 16, where you show PSBC loan security volume to decline roughly 5% Q-on-Q in Q4. Just trying to understand, is that one of the concern for the revenue side?
I mean the fourth quarter, we expect very much in line with the third quarter with respect to revenues, but also cost. I think the big difference in the fourth quarter will be clearly the yellow piece because it's a long quarter, a. B, we will already see most likely some effects out of the ending of the government measures, et cetera. So that will be -- I mean, we do not expect EUR 22 million risk result for the fourth quarter. So the big difference between fourth and third quarter is clearly the risk result.
Yes, then I will jump in again. I would say thank you very much for joining us today and your questions. Thanks for being with us today, and Bettina and myself wish you all a successful day and bye-bye.