Manfred Knof : Good morning, and welcome to our earnings call for Q4 and the full year 2021. The first year of our transformation and my first year as CEO of Commerzbank turned out better than expected. We have delivered. We have achieved a positive net result despite extraordinary burdens of almost €2 billion. Thus, we have digested the necessary restructuring charges for our transformation without eating into capital.

The execution of our strategy is progressing well. We have delivered on almost all milestones towards our targeted business model in 2024. This is a result of hard work and required some tough decisions. But with very good teamwork, we have successfully managed the first important steps of the transformation. And this is exactly the spirit and attitude we need for the steps and challenges ahead.

The success of 2021 and the prospect of rising rates provides us with tailwinds for 2022. I'm convinced that we will take the positive momentum into 2022 and the first business weeks of the year support my assessment. With the respective financial delivery in 2022, I have the clear intention to resume dividend payments, starting with a payout ratio of 30%. Now let's have a look at the key building blocks of our financials in 2021. When we guided for a positive net result back in November, we did not have in mind the significant additional provisions for the Swiss franc loans in Poland.

But in particular, the very good revenues from our customer business helped us to offset this burden and to reach an operating profit of €1.2 billion. Bottom line, we can report a net result of €430 million. The high quality of our loan book and our thorough risk management pay off. While still applying an overall cautious view, our net risk provisioning in 2021 has been reduced by 2/3. On expenses, we kept our promises, which we have reiterated with the disclosure of our Q3 figures.

We delivered. Our high cost discipline even allowed us to increase variable compensation and still meet the budget. Net-net, 2021 was financially a good start into the transformation of Commerzbank. And we have also delivered on our major transformation milestones. The business model transformation is well underway.

In PSBC, the first 3 advisory centers have started operations. They already serve around 850,000 customers, thanks to excellent service, high advisory expertise and the expansion of our digital offerings, we have so far been able to effectively limit revenue churn. Whether this will continue in the current year remains to be seen. In any case, we will fight hard for it. In Corporate Clients, we have also delivered on the business model transformation.

Our digital direct bank coverage model is in rapid construction and has on-boarded the first 1,000 clients. With these initiatives, we built a cost-efficient setup while keeping high quality in customer service. Regarding the redundancy program, the reduction of [across] 10,000 jobs is well on track. In May, we had agreed with the employee representatives on the framework for the program. In July, the voluntary severance program was launched.

And in November, we were able to complete the arrangements for the respective areas of the bank. This means that only 9 months have elapsed between the adoption of the strategy and the final negotiations of the target structure. This is quite an achievement at least by German standards. Today, at a good 6,000, more than half of the gross FTE reduction is already ensured by corresponding contracts with the employees. The optimization of our branch network is also making significant progress.

Before the pandemic, we had 1,000 branches in Germany. In 2021, we have reduced the number of our branches from 800 to 550. Thus, most of the reduction to the target number of 450 branches has already been achieved. We are also making fast progress in streamlining our international network. We have already closed 6 of 15 locations we are closing in total.

In addition, we have signed the sale of our Hungarian subsidiary to Erste Bank. Thanks to the corporation agreement concluded at the same time, we will be able to expand our range of services in the region for our corporate clients. One of the most important cornerstones of our strategy is the improvement of capital efficiency. We need to make sure that all our client business improves its return profile towards cost of capital. Therefore, we tackle all client business with revenues per RWA of less than 3%.

In 2021, we could reduce the share of such low-margin RWA and corporate clients from 34% to 29%. This is an important step in the right direction, and there will be more to come to make sure that shareholders' money earns decent returns. For both private and corporate customers, a stronger focus of our business on sustainability is crucial for the future. In September, we set ourselves ambition targets for this. Our credit and investment portfolio is to become net-zero by 2050 at the latest and our own banking operations already by 2040.

The valuation of our portfolio by using the methodology of the science-based target initiative is currently one of our key tasks. We have already defined targets for automotive and energy and will add further sections in the upcoming months. Based on SBTI, we will steer our portfolio towards net-zero carbon emissions. Also our new coal and gas policy, which is effective since January 1, marks an important step into this direction and will contribute to achieving our targets. We are aiming for sustainable product volume of €300 billion by 2025.

Last year, we have already made a large step. End of December volumes reached €194 billion almost doubling the figures of 2022. At the bank, we play an important role in the green transformation. We aim to contribute to challenging more capital into sustainable economic activities in order to mitigate the consequences of climate change. And we aim to actively support our customers in their transformation into sustainable companies.

Sustainability, thereby becomes a fundamental pillar of our business model. Let me conclude with the takeaways from our first transformation year. First, we delivered a good financial performance in 2021. Second, we delivered the promised transformation progress in 2021. Third, based on the results so far, I'm confident to reach our strategic and financial targets in the upcoming years.

This will not be easy, and I'm sure that we will face some real challenges. This transformation requires hard work of the whole team. I'm looking forward to our Capital Markets Day in 2 weeks, and we will present our strategy update for 2024. Our ambition for the current year is clear. We expect a net result of more than €1 billion, and we intend to pay a dividend for 2021 at a payout ratio of 30%.

This leads me to the final slide of my presentation. We have decided on a capital return policy that goes beyond the year 2022. Starting with 30% payout ratio in 2022, we aim to increase payouts up to 50% thereafter. Moreover, we will consider share buybacks as part of the payout ratio or as an additional payment. This is our clear commitment.

And now over to you, Bettina. Bettina Orlopp : Thank you, Manfred, and also good morning from my side. As Manfred already stated, 2021 has been a very successful year for Commerzbank. We have made significant progress in the strategy implementation, while at the same time, delivering a solid financial performance, better than expected at the beginning of a year. This is, in particular, visible in the Q4 results.

Despite the booking of €436 million in provisions for Swiss franc loans in Poland, the operating result of the quarter reached €141 million. The net result was €421 million, including a tax gain of €199 million. The Q4 operating result has been driven by 3 factors; A, revenues that are up 3% year-on-year. We have seen a strong increase of NII and NCI based on healthy underlying customer business. Additionally, we have benefited from valuation gains of some investments and from the TLTRO; B, cost of €1.6 billion, fully in line with our guidance; And C, a risk result of €313 million, which is lower than last year, underpinned by a strong portfolio and a low underlying default rate.

And finally, we further improved our strong capital ratio to 13.6%. The buffer to MDA increased to 420 basis points. Now let's briefly look at Slide 10 and the full year view. All key figures compare well with 2020. The operating result improved to nearly $1.2 billion, fully covering the restructuring charges for the implementation of our strategy.

The net result of €430 million benefits from tax gains, reflecting our improved outlook. Let's move to Page 11 with the exceptional revenue items. In 2021, we have benefited by €264 million from the TLTRO and by €160 million -- €116 million, sorry, from the revaluation of our participation in the German credit borrow, [super]. More than half of these benefits were booked in Q4. As we had further large and non-regular revenue contributors in 2021, we have adjusted the revenues accordingly to give a clearer picture of the trends in the underlying business on Page 12.

When adjusting for goods, but slightly lower contributions from CommerzVentures and the strong increase of provisions for Swiss franc loans in Poland, revenues clearly improved in 2021. This improvement was driven by the strong growth of the net commission income from our customer business detailed on the next slide. The full year net commission income of PSBC Germany has increased by an impressive €215 million or 11% compared to last year. Q4 alone was €53 million better year-on-year. Trading volumes have held up well, and securities and 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 contributions from payments and FX businesses. This leads us to NII and Slide 14. Underlying NII has been up from the previous quarter.

And PSBC Germany NII from the loan business is a bit better than last quarter. The NII from deposits was also up, mainly from deposit pricing. mBank has benefited from the strong increase of interest rates in Poland. And in corporate customers, NII from loans were stable while the contribution from deposits further increased. The stabilization of underlying NII during the year is encouraging.

Our aim is to exceed this level in 2022, and compensate any potential churn resulting from the further implementation of our strategy, in particular, the closure of domestic branches and foreign locations. Now let's move to the next slide with the current interest rate development and the further outlook. Knowing how important transparency on our interest rate sensitivity is, we have further refined our disclosure this quarter. As our Strategy 2024 is based on constant rates during the planning horizon, we had assumed a €300 million reduction of revenues from deposits in PSBC Germany by 2024. Of this, we have seen around €100 million in 2021.

We could compensate this drag by higher loan volumes and increased pricing of deposits. However, the current forward rates priced by the market predicts significant rate rises. Based on these, we would not see a reduction of NII in 2024. On the contrary, based on the forward rates as of the fourth of February, we would expect NII from euro deposits in PSBC and corporate clients to improve by more than €500 million by 2024 compared to 2021. And this is net of the effects from deposit pricing.

It would result in an NII being more than €800 million higher than planned in our strategy 2024. Assuming no deposit beta once we reach positive interest rates and constant deposit volumes. Now let's look at mBank. The Polish Central Bank has started to increase rates in October last year. The reference rate stood at 225 basis points at the end of January, more than 200 basis points from the loan.

This increase in rates leads to around €200 million higher NII at mBank per year. We expect this benefit to persist into 2024. On February 9, the reference rate was further increase by 50 basis points to 2.75%. Many market participants expect more rate increases in the course of the year, which would add more NII. However, we will have to see to what extent the deposit beta starts to kick in, in the next months, reducing the positive effect of higher rates.

As I have already covered the key aspects of the revenues and the operating results, I will skip over Slide 16, which summarizes the group P&L. Let's move straight to Slide 17 at the cost development. Throughout the year, we have stuck to our strict cost discipline. Operating expenses are in line with our full year target. Investment spending was also well within the 2021 budget.

We have exceeded our 2021 FTE reduction targets. This will have a positive effect on our cost base from Q1 2022. While again, requiring discipline and a sharp focus on execution, we are well positioned to reach our 2022 cost reduction target of net €300 million. However, costs at mBank will increase by €50 million to €100 million, not only due to growth and higher expected compulsory contributions in Poland but also due to the high inflation. mBank is managed based on its excellent underlying cost/income ratio of around 40% to 50%, excluding provisions for Swiss franc loans.

Higher revenues will more than compensate the cost increase. Let's move to Slide 18 and the risk result. The Q4 risk result of €313 million includes €99 million from IFRS9 parameter updates and an increase of the TLA by €27 million. These are model-driven and do not indicate a deterioration of our underlying portfolio quality. The remaining underlying risk result is €187 million.

It mainly results from a few single cases in Corporate Clients and mBank. The overall cost of risk on loans for the year is 22 basis points, which is around our expected long-run average. We go into 2022 with the benefit of a €523 million top level adjustment to cover possible primary or secondary effects of the pandemic that may materialize 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. The Securities business has again developed well in the quarter.

The volume increase is not only coming from market developments. It is also supported by the continued inflow of around €4 billion net new money in the quarter. We expect the Securities business to remain strong. But the growth rate we have seen in 2021 is unlikely to continue into 2022. Of course, a lot will depend on the overall development of the market.

Mortgage volumes continued to increase in the quarter at a steady pace and as planned. Also on the Deposit business, we have again made good progress in the quarter. We managed to keep the volume of deposits largely stable, while increasing the volume of deposits subject to pricing to €18 billion. For the financial year, deposit pricing contributed €16 million to revenues. This brings me to the performance of PSBC on Page 20.

While the Q4 operating result has turned to a loss due to the increased provisions for Swiss franc loans and mBank, the underlying customer business has performed well. Revenues increased by 10% year-on-year. All client areas have contributed. Churn due to the streamlining of the business model continues to be lower than anticipated, both in terms of the number of customers and revenues lost. So far, we continue to lose the right customers.

For 2022, we prudently expect higher churn. Customers of closed branches might exit with a time gap. This could materialize in 2022. Now let's move to Corporate Clients on the next 2 slides. In Corporate Clients, we have continued our active portfolio and our RWA efficiency management.

The segment maintained loan volumes while increasing average RWA efficiency to 5.2%. There has been an increase in demand for investment loans towards the end of the quarter. It's too early to tell if this is the start of a trend, but surely encouraging. In the Deposit business, we have successfully managed to reduce volumes, in particular, FX and term deposits. And at the same time, we have maintained disciplined pricing of deposits and kept the average at around 55 basis points.

For the year, interest income from deposit pricing has added up to around €255 million. We continue to actively manage deposits and expect to maintain the revenue level in 2022. Customer revenues have improved in the quarter, driven by the Mittelstand Bank with international corporates also contributing. The focusing of the business on core clients has not resulted in large revenue churn so far, but we expect this to become somewhat more noticeable in 2022. At the same time, RWA were reduced by €8 billion year-on-year.

Thereof €4 billion come from credit RWA, driving the improvement of our RWA efficiency. Let's move to Slide 23 and the development of others and consolidation. The operating result of €157 million in others and consolidation is to a significant degree, driven by valuations at CommerzVentures and TLTRO. We have sold our stake in Marqeta in the quarter and thereby realized the gains from the investment. This is in line with our strategy of investing in the pre-IPO stage and subsequently exiting.

Further holdings from the First CommerzVentures fund also increased in value. We expect some benefits from planned IPOs of investment companies in the next quarter. However, the investments of the first fund will soon have reached the potential, while the investments in the second fund are likely to take more time to reach their potential. Therefore, this year, we do not expect to see contributions on the level of last year. Others and Consolidation operating result for the financial year stands at minus €48 million.

For 2022, we again expect a negative operating result in the minus €50 million to minus €150 million range over the last 2 years. Let's move to Slide 24 and the risk-weighted assets. RWA have been largely stable compared to the previous quarter. As mentioned in the Q3 disclosure, we have moved to the standardized approach for operational risk. This results in stable operational risk RWA going forward.

We are also in discussion with the ECB on moving some of our credit exposures to the standardized approach. We hope that this will be approved in the first half of the year. This would allow us to reduce cost while maintaining appropriate risk coverage. We do not expect to see a reduction from RWA from this change, but there could be an increase of RWA in the Corporate Clients segment that should be largely offset by reductions in other segments. An increase in RWA, our Corporate Clients would, however, reduce the reported RWA efficiency of the segment.

This, however, would only be a temporary dip. We maintain our 2024 target for the improvement of the RWA efficiency in Corporate Clients. Based on the net profit of the quarter, the CET1 ratio further increased to 13.6%. This compares to 9.4% for the MDA. With the introduction of countercyclical buffers in the U.K.

and Germany as well as a sector-specific risk buffer for German mortgages, the MDA is estimated to increase to around 10.1% in 2023. To wrap up the financials of the quarter. The underlying business and strategy implementation have developed well. The financial burdens from the restructuring are nearly fully booked. We have significantly increased our provisions for the Swiss franc loans in Poland, and we have a strong CET1 ratio going into the second strategy implementation year.

Based on the assumption that there will be no extraordinary provisions from Swiss franc loans in 2022, this is our outlook. Despite effect from potential churn, we expect underlying interest and commission income to increase, thanks to higher NII in mBank from rate increases in Poland. We target cost of €6.3 billion. This includes higher cost at mBank due to inflation. We stick to our cost reduction path in Germany.

The risk result is expected to come in below €700 million, and we expect the CET1 ratio well above 30%. We expect a net result of more than €1 billion. And as Manfred already pointed out, we intend to propose a dividend with a payout ratio of 30% of the net result after 81 coupon payments for the business year 2022. Thank you very much for your attention, and Manfred and I are now very happy to take your questions.

Operator: [Operator Instructions].

The very first question comes from Benjamin Goy, Deutsche Bank. Benjamin Goy : Two questions, please, from my side. First, on net interest income, maybe you can help us a bit more. Your guidance sounds rather unambitious considering the strong Q4 run rate. So is it fair to assume at least annualizing the Q4 clean number? And I know corporate clients has been quite strong, but you have polish rate hikes, you have loan growth and so on.

So is at least that a good level to think about? And then secondly, on capital return, I mean, your capital ratios are very comfortable and it doesn't strike me you need a lot of capital this year. So in terms of timing, in terms of capital return, is it only with full year results? Or would you revisit maybe with Q2 results for interim dividend or already launching the buyback?
Bettina Orlopp : So on NII, yes, the guidance is as follows. I mean, the stabilization of underlying NII during the year is really encouraging. And our aim is to exceed this level in 2022, which means that we want to continue the trend which we have seen in the Q4. And it's mainly also due to higher NII, we expect from mBank due to the rate increases in Poland.

But we also need to take into account that we need to compensate for the missing TLTRO. We will see another €85 million the first half of out of the program. But honestly, nobody, I think, expects a continuation of this program, but rather some rate increases, hopefully, even this year, and we have not included in our guidance any rate increase already in 2022. So if ECB is surprising us positively we will also have an upside in our NII. But besides that, an increase in NII is what we guide.

On the capital return, yes, I mean we are now already early because -- in last year, we said we would start and consider paying dividends in 2023. We now said we will do that already in 2022. What we will do clearly because of the announcement that we will reflect that quarter-by-quarter already, the dividend payment. But the final decision will be taken in 2023 and then also by the AGM in 2023. And share buybacks, I mean, it's part of our capital return policy, clearly.

But I think, first, we really need to make further progress in the transformation, and we should not forget that share buybacks are also requiring regulatory approval. And I could imagine that ECB at least wants to see a full second year of transformation, successful transformation before giving any approval, but that is a little bit of guessing.

Operator: The next question comes from Izabel Dobreva from Morgan Stanley. Izabel Dobreva : I have 3 questions, please. The first one is on NII.

So thank you very much for Slide 15. That is extremely helpful. And obviously, from that slide, that long-term revenue potential is very big. But I also wanted to ask you a question about your NII guidance in the near term. So from that slide, if I add it up, it looks like we have €200 million from mBank.

Then we have €100 million from the model deposit headwinds, which have bottomed out. So already, it looks like there is a €300 million improvement sequentially for 2022 before the ECB increases rates or 6% growth. Now again that, I know that there are some negatives. But how are you thinking about the NII growth next year? Is it fair to say that we will be seeing at least a low to mid-single-digit growth rate in the NII clean [indiscernible]? So that was the first question. Then secondly, I have a question on the cost.

So assuming the forward curve holds -- I see in the slide, you're getting that €1 billion of additional revenue upside. But how would you think about the cost in this environment? And I was wondering, could you confirm whether in that setup you would stick to a hard cost target. So looking for net cost takeout in absolute terms over the course of the plan? Or would you consider switching to a cost-to-income ratio? And then the last question is actually on the buybacks again. So very clear on the timing and on the dividend payout. But in the slide, it says that the buyback could come on top of that 50% dividend payout.

So is there a ceiling you had in mind? Or are you open to pay out 80%, 90% or even 100% of your profit in 2023 regulatory permitting, of course. Bettina Orlopp : Well, Izabel, thank you for your question. So on NII again. I mean what you see on Page 15 is clearly assuming the forward rates. So it's also for 2022, it assumes that what the markets currently expect that we will see rather shorter -- or rather sooner than later move from the ECB.

And as long as we do not see the move of the ECB, we are stuck with what we have. So the increase, which we currently assume is that we are able, in Germany, et cetera, we are able to compensate the churn, which we see by additional growth, specifically on the mortgage side, but also on the deposit pricing side. And then we see that we have clearly growth stemming from mBank. What you see here in this dark blue and yellow really depends on -- yes, we see some moves from the ECB. Second question on costs.

This is a good question. My answer would be that I think we can move in the direction of a cost-income ratio. If we, A, have a decent cost-income ratio. B, if we really see that the interest rates are moving. And I think mBank is a perfect example as I said.

I mean in mBank, we see that the interest rates are increasing. We also see the cost pressure. mBank has a very decent cost-income ratio. Therefore, we can work with the cost-income ratio. For Commerzbank itself, I would say, still we still need to wait until we see further improvements, and we see rate increases.

And then the third question, the buyback I mean, buybacks clearly normally come on top. We have shown a slide last year in the Capital Markets Day about potential scenarios. And potential scenarios and the -- sorry, I get here -- disrupted from something. So the buybacks will be on top and we will decide that on '23. And the potential you have seen in the Capital Markets Day presentation last year, and I can promise we will give an update on that during the Capital Markets Day in 2 weeks' time.

Why was I disrupted? Because I got a page that I should make clear that on Page 15, this is really additional. So the €100 million would come on top if there is a rate increase in 2022. It's not yet in our guidance, which we have provided for 2022. So that is an upside potential, just to be very clear.

Operator: The next question comes from Stuart Graham from Autonomous Research.

Stuart Graham : I had a couple, please. The first one is on the 10,000 departures. You're at 6,000 already. When do we get that 10,000 fully locked in? How long does that take, please? That's the first question. Then the second question is on share buybacks again.

Have you actually started the discussion with ECB? Are you in active discussions with the ECB on share buybacks? And related to that, you said you need to see further progress before you can do them. What exactly is being defined as further progress? What are the milestones you have to achieve so ECB would say yes to share buybacks?
Manfred Knof : Yes. On the redundancy programs, so we have more than 6,000. The rest will be coming over time over the transformation period. So we are in strong -- we are in good negotiations there, this year.

So we expect over the time of the 2-year program to [serve] all the 10,000. Stuart Graham : But that's still in line with you're expecting -- that's fully in line with your timing. There's no slippage there?
Manfred Knof : Fully in line with timing and planning. Bettina Orlopp : Basically to see the full cost effect in 2024, we need to have solutions until the end of 2023. So that is the timing this year and next year.

On the share buybacks, I can only confirm that we have aligned the capital return policy with the ECB. So it has the full support, the wording which we have published. And I would say that if we have a successful second year of transformation and deliver against our targets and the targets we have just guided, I would say, I think we made significant progress, and then it will be much easier to have a discussion also on share buybacks with the ECB. Stuart Graham : It sounded [indiscernible] answer to an earlier question, Bettina, are you guessing a little bit there? Or is that, I guess, based on informed discussions?
Bettina Orlopp : No. I mean, we are in constant debates with them, but it's clear that I mean we have now the first year of transformation.

We made great progress. I think it is valid to wait another year of good progress, which would then be reflected in net income of more than €1 billion, and I think that puts us in a very good position to have further debates on that.

Operator: The next question comes from Johannes Thormann from HSBC. Johannes Thormann : Johannes Thormann, HSBC. Two follow-up questions.

First of all, on your NII target of €5.4 billion in 2024. You elaborated on an add-on of €1.05 billion probably from the rate and curve effects. But this is still a delta versus the underlying NII in this year of €4.6 billion for taking the €1 billion away of €800 million despite the reduction of some business volumes, where do you get it, especially also in the light of the impact of the countercyclical buffer on your mortgage volumes potentially. If you could elaborate a bit on that? Secondly, also on the cost side, I have to pour some cold water on it. As you listed your '22 target by €100 million versus the plan, how can you maintain really the 2024 target despite the inflationary pressure we're seeing, especially in CE, but also in Germany as the rising rates are just a [function] of this pressure and not the first thing, but rather the reaction to it.

So difficult to understand how you can maintain the €5.3 billion. And last, if you could elaborate a bit on the success of the first 3 advisory centers, you mentioned in your speech at the beginning, which are now operational. We hear in the press [indiscernible] been doing more cases in a branch. But any comments on the revenue generation in those centers, please.?
Manfred Knof : Yes. Let me start with the first question on the advisory centers.

So we are planning to have all the advisory centers fully at -- in October, November here, up to start all the 15th, and then we will have more outbound capabilities and processes aligned. So we have the first 3 up and running, and this is just a pilot mode. And now we are building on the processes and training our employees in the inbound but also on the outbound capabilities. And then from that on, we will see also revenue impacts. But this is just the progress and there's a lot of hard work this year to do.

And we are planning for the full start of the advisory centers in the autumn of this year. Bettina?
Bettina Orlopp : Yes. First on the cost target, can that be kept or not? I mean we have only adjusted the 2022 target because of mBank. So there is no change in plan for Germany and the international locations. And I mean, the key question is, clearly, we now see in euro, a 5% inflation.

We are very confident that whatever we see as cost increases that we compensate that for 2022. And the rest really depends also on reaction of ECB and the question, do we see a permanent or a temporary inflation? And if you see a temporary inflation, I think we stick to the targets because then we most likely will also not see the rate increases we all hope for. But if ECB is moving and they would move because of a permanent inflation, then we see revenue increases and that we will also take care of potential cost increases. But that is too early to tell. I think we really need to wait how 2022 is developing.

On the NII target, I'm not so sure, Johannes, that I completely got your question. I think one part of the question was whether we think that the countercycle or the systemic buffer introduced for mortgages will slow down our mortgage business. That is not our expectations. I think it will not change anything. It will not hinder us doing business.

That's message #1. And your first part of the question, I'm not entirely sure that I got what you were targeting for. Johannes Thormann : Yes, very simple. We have a delta also in the current plan. If we completely ignore the €1 billion uplift of NII from, let's say, €4.6 billion underlying NII in 2021 to €5.4 billion in the old plan, ignoring the move of the rate curve.

So if you have a reduction of business volumes we're seeing. Can you elaborate a bit more how you're generating this in the next years? How much margin improvement is factored into this number as well, please?
Bettina Orlopp : Yes. I mean there are different effects on private client side. Yes, we expect some more churn to come in probably 2022. However, then the whole branch restructuring is finalized, and we also expect to counterbalance this churn also in the upcoming years by future growth in mortgages and new clients.

That's the one side of the story. And then most importantly, we already also reported back last year, and that was before the rate increases we saw for mBank, a strong growth for mBank. And that putting the 2 things together add up to the normal revenue increase if we leave out potential rate increase effect for the moment. That's the whole story. And we give you anyhow an update in 2 weeks' time, but it has not really changed the story for that.

Operator: Up next is Nicholas Herman from Citi. Nicholas Herman : I have 2 quick follow-ups and 1 other question, please. So in terms of the 2 follow-ups, one on net interest income. I mean can you just quickly just quantify the expected PSBC churn in 2022? And if there's any change in you're expected churn by 2024, given the encouraging progress so far? That's question one. Question two, just a follow-up on the buybacks.

You talked about how progress in the transformation is a key consideration. What about progress on FX mortgages and the exposure there? Is that also a consideration as well? And then the other question just on the TLA. So you kept that for 2022, as you said that you would. Do you have any greater visibility now on the timing about when you need to use it by -- if provisions do not materialize as you expect them to do so. Would you then have to release it by the end of 2022?
Bettina Orlopp : Yes.

Thank you, Nicholas. So on NII, and you see that slightly on the Page 15, I mean, we expect -- we have seen €100 million drag from net interest rates in 2021. For 2024, we believe if nothing would change the constant rate environment, we would see minus €300 million. We said we would compensate by additional growth. And in between, that means that you will probably -- would probably see something like a minus €200 million [of sales], let's say, for 2022.

However, it all depends on how interest rates are now developing. So we are very confident that, A, we are anyhow will compensate that by future growth plus also confident that we might some rate increases over the next months. But besides that, it's fully embedded in our plan and our guidance, we have included the -- in the [indiscernible] expected interest rate. That is important. If we guide slightly higher NII for 2022.

It means we assume that we will see a drag of approximately €200 million in the moment. Nicholas Herman : Sorry, I guess, [you couldn't] follow that. When I said the churn, I actually meant not just the NII pressure from deposits, but more of the customer churn. Bettina Orlopp : The customer churn?
Nicholas Herman : Yes. Bettina Orlopp : The customer churn is -- it's specifically honestly, NCI, where we have included something and that is also something why we believe that out of the combination of NII and NCI we see an increase.

On NCI, we believe that if you see the churn, it might be in NCI, not very high, but to a certain level. And the share buybacks, does it change by FX mortgages? I mean, I think the share buybacks really depend on our progress and transformation. I think we have shown in 2021 that we were even able to absorb the additional provisioning out of Swiss franc. We feel very comfortable now. We should not forget that we have in total now provisions of €900 million combined with the capital buffer, which we have within mBank for the Swiss franc portfolio, we are very nearby to the level which was calculated for potential KNF solution.

So in the moment, I would say we feel comfortable on that. But it clearly depends on the further development in Poland and in the different verdicts by EU court, by Supreme Court in Poland and so on. On the top-level adjustment, that is indeed the question of the year. I mean we guided on smaller than €700 million. And it's clear that it's very much dependent on what happens with the top level adjustment.

It might be that we are able to keep it, not use it and have put it in the direction of 2023. It might be that we see primary and secondary effects of the pandemic that we will use the TLA. It might be that we are not able to keep it. And then clearly, the smaller than €700 million, you will never see because we have the top-level adjustment, which we first have to use. So it is really kind of a buffer, which we have currently, and we feel pretty comfortable with that.

Nicholas Herman : Just on that last point, I mean, is there a point at which you will have a pretty strong message from the accounts -- from the accountants or whoever the auditor, excuse me, about that about when you need to buy that? Is that going to be Q2, Q3? And is it kind of then that you... Bettina Orlopp : I mean the pandemic tells us that there are always new things and pandemic is ongoing. Why we thought it should -- we should have seen already an end last year. Then Omicron was there. Therefore, I mean, we just stay cautious.

And I mean we have seen some primary and secondary effects, not really resulting in any burden for us. But it's just -- yes, we just stay cautious and we'll review the year and then decide what we do with the top level adjustment.

Operator: The next question comes from Kian Abouhossein from JPMorgan. Kian Abouhossein : The first one is related to deposit details on Page 15, which is a very helpful slide. You clearly discussed a low deposit beta after leaving negative rates.

And I just wanted to hear why you're using this particular assumption. And in your budgeting, how you do your deposit betas. I'm just trying to understand your thinking around 0 and how we should interpret that. And on Poland, you said there's quite a bit of uncertainty around deposit betas. Can you share your views how you -- again, you do your long-term budgeting in that respect so we can get a better picture.

Just coming back on cost. The second question, you mentioned should the ECB go into lift off mode you might have to revise your cost. And I'm just trying to square the two. So would you change your cost guidance once you see ECB increasing rates? I'm just trying to see what triggers a change. Bettina Orlopp : Yes.

Thank you. So on the deposit beta on Page 15. On the left-hand side, I mean, what are the underlying forward rates. They are still below 1% and our assumption was that as long as we are below 1%, there is probably not a necessity to really calculate with deposit beta. We should also not forget that, for example, on the corporate client side, we first half and will reduce in the direction of the clients, the deposit facility fee.

This is why it's so important that we made a net of deposit facility fee. So the €255 million we have seen in 2021 and which we also expect for 2022, we deducted from the €850 million. So that is net of that. So it's an important number. And therefore, we feel comfortable as long as we are going north of 1%.

On mBank, it's a different situation in Poland because we are already now at 275 basis points and we just simply expect -- it's not yet seen, but we simply expect that there will be some deposit beta increase in the coming months. And therefore, we just stay cautious on that. And that is a little bit this shadow thing. I mean, we believe that we will also benefit from further rate increases, but it's much tougher to calculate than the first numbers just given the fact that we really can't judge in the moment what happens in the market because this is also very much market dynamics. And I mean this one is now also reaching a level where you could also foresee that you see an increase on loan loss provisions at a certain point in time which we would also not expect if our interest rate level in Europe stays below 1%, that's the story.

And on costs, let me refer back to my answer to Izabel because I think that is summarizing at the best. We will stick to our cost targets, and we will not adjust the cost targets. For me, it's important that we have a decent cost-income ratio, which is competitive, and that is the overall target. And that is what we are striving for. And the rest, we will decide when we see how certain factors are developing what happens also with the negotiations with the unions this year.

It's an important factor. And on the other side, also what happens with our growth and revenues. And out of the combination, I can just say that for the time being, we stick to the cost targets. And more important, we also stick to the target of a competitive cost-income ratio.

Operator: We have another question coming from Tobias Lukesch from Kepler Cheuvreux.

Tobias Lukesch : Three questions from my side as well, please. Firstly, on the RWAs, you mentioned that there is a bit of a management potentially. Could you maybe give us again a bit an idea on how this is managed at group level. I think at the end of the day, the above 13% CET1 ratio, your target, you said it's well above. So how much of a potential RWA impact should we expect out of that modeling.

And with regards to the ForEx Polish mortgages, could you remind us, may there be even a positive capital impact on RWA in case it was settled at the level which you have basically a provision for. With regards to the buyback, I think I will not touch on that again. I think it's very clear. So even if Poland would see additional provisions, would you do not expect, we could be quite reassured of a 30% payout ratio. And if nothing happens, that would potentially fastly increase to 50% with some share buybacks on top.

Maybe you just can say this is the right interpretation of the case. And lastly, looking at the PSBC segment and the subsegment of small business customers. I have looked at that quarter-for-quarter for many years. There has been basically no growth at all. This was basically at a €200 million revenue line for many years.

Now we have seen an increase. It's up 7% basically. And I was just wondering, is that kind of deposit repricing in fact, you have with these small business customers? Or is there actual cross-selling and growth in that segment finally arriving. Bettina Orlopp : So let me start with the RWA and my well above 30%. I mean, we now are -- currently, we are at 13.6%.

And if I guide for a net income of more than €1 billion, even with the dividend payout, we should expect a capital increase. So you could wonder what happens with the RWA. That's just a cautious thing. First, we have still some model debates with the ECB that might lead to an increase. And then we should not forget, I mean we have the top level adjustment still of €523 million.

If we are -- if we need to use this for primary and secondary effects of the pandemic, it would also mean that we would see rating migrations and therefore, RWA inflation. And that's the whole thing what we have included in here. So -- and the same that I feel pretty relaxed on the €523 million I also feel pretty relaxed on the well above to say it like that. The positive capital impact, you're absolutely right. I mean we have now provisioned €900 million and we have a capital buffer of approximately -- it's probably not the right conversion but around €400 million or something like that.

It's -- I think in Polish Zloty, it's something around PLN 1.3 billion or PLN 1.4 billion. And that is clearly something that if we find a solution, which settles at [€900 million] that would be then clearly relieved. And then lastly, on the 30%, yes, I mean we announced the dividend policy which has 30% to 50% plus potential share buybacks at a certain point in time if we see that the transformation is progressing well. But I would say, let's start and let's focus on 2022. We are very committed to deliver our targets and then also have a payout of 30%.

And then lastly, on small business clients. I mean, first of all, there has been also a rest as part of the Strategy 2024 there has been a repositioning and an enforcement of the segment. We have seen very nice results actually on the NCI of the small business clients. We have been also very successful in the deposit facility fee in this segment. And the combination of the 2 things created the increase which you rightfully observed.

Operator: We have room for one last question, which comes from Jeremy Sigee from BNP Paribas.

Jeremy Sigee: Two things following on from points that have been discussed. The first one, just picking up on your last comments there, you're talking about the fee income, which I think is another interesting element we talked about net interest income. Could you talk about your outlook for both PSBC and corporate clients. So PSBC, you said obviously the growth isn't sustainable.

But can you maintain something around this level of commission income in 2022. So can you sustain that level in PSBC? And secondly, can we expect further growth in the Corporate Clients' commission income, reflecting some of the drivers that you've talked about? So that's my first question on commission income. Secondly, I just wanted to clarify on the CHF mortgages, exactly what is included in your 2022 guidance. When you say that you assume no material additional provisions, does that mean you assume 0 in terms of P&L? Or are you just saying no of the sort of €400 million size like we had in 4Q. So do we get back to the kind of €50 million to €100 million run rate that was normal for a few quarters prior to that? Or do we go back to 0? And then if it is 0, could you just talk about what gives you confidence that you've got ahead of the curve now on the Swiss franc mortgage provisioning?
Bettina Orlopp : So on your first question on NCI.

I mean on the private client side, '21 has been very strong, even stronger than 2020, that's #1. #2 is that we believe because of the churn because of the closing of the branches, we assume that we would see a reduced level in comparison to 2021. On the Corporate Client side, we rather expected flattish. I mean we have some more closures ahead of us, some foreign locations, which will be closed in 2022, and that will have an impact. However, we also have a number of growth initiatives ongoing.

So we assume that we can hold up the level with respect to NCI. On Swiss francs, I think the good guidance is as long as we do not have to go at [hock] as we have done so in January, I would say it's not extraordinary, and we can absorb that. So it's exactly as you say, the previous quarters where we have just booked €100 million or something like that, we would not talk about that. How do we feel about the provisioning. It's very tough to say.

As we all know, this is a very difficult -- yes, it's a very difficult situation. I mean we always have light and shadow there. We just got a very promising verdict actually by decision in a class action against us with more than thousands of plaintiffs, which we won. It's not unfortunately a final decision, but it is a decision where the judge has been asked twice to decide on that and he twice decided in favor of mBank. So that gives hope.

And then I would say, I mean, we have a lot of provision already in place. But we also know that we have seen other verdicts. So we really need to stay tuned. I can only repeat what I have said before, and I think that holds also true for the management team of mBank. We would welcome a solution because a quick solution would be much better than what we see currently, and we will constructively work on solutions, meaning settlements or other things.

But for the time being, I think we can feel comfortable with the €900 million booking. Manfred Knof : Yes. I would like to take the opportunity to say thank you very much for all of you joining this call this morning. Of course, our teams are ready to discuss further detailed questions with you as a follow-up. And Bettina and myself also looking forward to have a far more deep dive in 2 weeks at our Capital Markets Day.

And until then, I say thank you very much. And until then, and goodbye and have a good day. Thank you very much.