"We are a more courageous Bank"

• CFO Carsten Schmitt emphasises that the increase in Unicredit’s shareholding to around 20 percent has no impact on Commerzbank's strategic direction or ambitions and reaffirmed the implementation of the "Momentum" strategy for profitable growth.
• Regarding the capital return, he explains that Commerzbank plans to return 100 percent of its net result to shareholders, after deducting AT coupon payments, in the coming years to create value for its stakeholders.
• With regard to the declining interest rates, Schmitt expects that the bank’s net interest income will remain stable, although last year's level is not likely to be fully reached again. Interest rate risks are effectively managed through hedging measures.
• According to Schmitt, acquisitions are not currently a priority. Potential acquisitions would be carefully considered and must be aligned with Commerzbank's strategic goals.

Mr. Schmitt, Unicredit announced that it now holds 20 percent of Commerzbank's shares. What does this mean for Commerzbank?
The increase in shareholding by Unicredit has no impact on our strategic direction or our ambitions. We remain focused on implementing our "Momentum" strategy, which aims for profitable growth and value creation. The unanimous stance of our stakeholders reassures us that we are on the right path.

The Unicredit CEO has made it clear with his move that they are not letting go of Commerzbank. What does this mean for the defence strategy?
Even though the move wasn’t coordinated with us, it doesn't change anything for now. There is nothing concrete for us to evaluate or "defend" against. We'll continue as before and deliver what we have promised. We’re very successful at this.

As a former handball player in Hamburg's Billstedt district, you know how important a good defence line is. Does Commerzbank need to readjust its defensive strategy now that Unicredit is the largest shareholder in the ownership group?
A good handball team is primarily focused on scoring goals, and offence is the best defence. You can see that we have the right line-up from our current positioning: Our share price has more than doubled since September 2024 and has outperformed all relevant indices.

The planned distribution to shareholders in the form of dividends and share buybacks is considered part of the Bank’s defence measures, isn’t this the case?
This is not a defensive measure. The plan is part of our strategy to create value for all stakeholders, including our shareholders. This value is also generated by returning capital. We have committed to returning 100 percent of our net result, after a deduction of AT-1 coupon payments (bank capital instruments), to our shareholders in the coming years. With this capital return and business growth, we will reach our target capital ratio by 2028.

Isn’t buying back your own shares a bit unimaginative? By doing so, you leverage the return on equity while maintaining the same profit. Is Commerzbank really overcapitalised?
We believe that our core capital ratio, which is currently 15.1 percent, can indeed move towards the target of 13.5 percent, so that the bank is adequately capitalized. And on that basis, a reasonable return can be generated.

You are shrinking the equity base with share buybacks. Yet there is so much talk about European resilience – including in banking. Commerzbank could be part of a European champion through Unicredit. Why are you resisting this? Size is important in banking, isn't it?
I certainly see the argument for having large, strong players not only at the national level but perhaps also at the continental level. This is an absolutely valid point, especially in comparison to the really large financial institutions worldwide. We need consolidation, but that only works if we have a banking union. And we don’t have that yet. Essentially, a merger with Unicredit would therefore only be a consolidation within Germany. Ultimately, it must make sense for all parties involved.

Wouldn't it?
I experienced the integration of Dresdner Bank into Commerzbank in the years after 2009. Bank mergers, in general, mean the institutions involved are very focused on internal topics for years. Our employees are then not able to focus on customers as intensively as necessary.

Is that your primary concern?
I wouldn't be afraid of that, but it would clearly have disadvantages for our ongoing business and our stakeholders. The German economy needs stimulus for growth and requires banks and financial institutions that can reliably provide financing. Is it sensible at this stage to remove one or two players from the market for an extended period and have them focus on themselves? I have my doubts.

How should we imagine your dual role? On the one hand, as the Chief Financial Officer since February, you have been fighting a defensive battle against the major shareholder Unicredit. On the other hand, you have your day-to-day business to manage. What’s it like to work in this dual role?
Honestly, I don't see it as a dual role. For me, it is a single role that is entirely focused on our strategy and its implementation. We have established a growth and transformation strategy. That is where my full attention lies. The other topics fall almost naturally into place. My job is to be the Chief Financial Officer of Commerzbank in the ongoing business, and that’s my focus.

But your job also involves talking to investors who may have questions about the independence plan from the Commerzbank Board.
In the investor conversations that I conduct, the strategy is clearly the focus. It's about how we intend to achieve our ambitious but realistic goals, such as a return on equity of 15 percent and a cost-income ratio of 50 percent. The discussions are positive because, as a bank, we have set out to achieve something that we haven’t dared to undertake in the past. Of course, topics like revenues, costs, capital, regulation, and the market situation are also addressed, as well as the inevitable question about potential interest from investors.

Some might say it's sad that the bank is only taking on the challenge as there’s an external threat from Unicredit. How do you see this?
The bank has established a strong position through its own efforts in recent years and is highly competitive. The impulse to set ambitious goals comes from within the bank itself. The change of CEO provided the opportunity for management to focus on further developing the strategy. Since last summer, more than ever, the bank has demonstrated its unity, its willingness and ability to achieve its goals.

A few years ago, there was a similar external stimulus with Cerberus, which caused unrest. As a result, CEO Martin Zielke and Chairman of the Supervisory Board Stefan Schmittmann were forced to leave. Why is it different this time?
At that time, the bank was in a different phase, characterised by the aftermath of the financial crisis, a low-interest environment and a business model in transition. Today, we have a more customer-oriented business model and a unified workforce. We are a more courageous and more entrepreneurial bank, with a different starting position.

At that time, Commerzbank, like the entire banking sector, was eagerly awaiting the interest rate turnaround. It eventually came and net interest income surged. Now, interest rates are falling again. Are you worried about your business?
I'm not worried, but we are monitoring the situation closely. Our interest income will remain stable, even though we will not quite match last year’s level. Our hedging measures are working well, so we are confident. We have already demonstrated this by slightly raising the net interest income targets for the full year 2025 in the first quarter.

Do you simulate different interest rate scenarios to prepare?
We have savings deposits that our customers can essentially withdraw at any time, and we have issued long-term loans, some of them during the low-interest phase. When these loans expire, we can reissue them at higher interest rates or invest in the capital market. This is part of the hedging that ultimately makes us more stable. We calculate interest rate change risks with models and smooth out actual outliers in net interest income somewhat over the years. Therefore, I cannot understand concerns about a sharp decline in net interest income in the coming years.

You mentioned earlier that the Board is showing more courage than before. A truly bold move would be to acquire a large asset management company like Allianz Global Investors (AGI) and thereby increase fee income!
Acquisitions are possible, but they must make sense for our stakeholders and for us as a bank. That means they must fit the business model and contribute to our goals, helping to achieve the mentioned 15 percent return on equity and 50 percent cost-income ratio by 2028. Recently, we have made smaller strategic acquisitions in asset management. I can well imagine that we will soon be evaluating interesting acquisitions in the area of technological solutions.

How do you plan to further reduce the CIR?
We have announced measures such as investments in our IT infrastructure and digitalisation as well as adjustments to our personnel structure. This involves a gross reduction of up to 3900 positions, but also relocations and the creation of positions in other areas. At the same time, we plan annual revenue growth of four percent by 2028. These steps are intended to help us reduce the cost-income ratio from 59 percent in 2024 to 50 percent.

Would you describe the transformation of Commerzbank as complete?
In the dynamic economic and technological environment in which we operate, standing still is not an option. For the current strategy phase until 2028, we are well-positioned. We have set clear growth targets and want to expand our product portfolio to support the growth of our customers.

What does that mean exactly?
Organic growth is a priority. We aim to increase our loan portfolio by four percent annually by 2028, thereby supporting the growth of our customers and the economy. We are continuously expanding our range of products. Additionally, we are increasingly operating in the interbank market with innovative instruments such as securitisations. We have already done this in recent years and are now intensifying these efforts even further.

During the financial crisis, innovative financing did not fare particularly well. In particular, securitisations have had a very bad reputation since then. Now there’s a lot of talk about t them again – largely in vain.
It feels like this is changing and the market is slowly picking up again. However, the securitisation markets are still very nationally regulated. As a result, the market lacks the necessary depth. Investors are currently dependent on the respective country-specific securitisation structures. Standardisation would be helpful for investors.

You’re not the only bank courting corporate clients. How can you differentiate yourself from others in this segment?
The products offered by banks are often similar, but our distinguishing feature is the depth of our customer relationship. We have known our clients and their sectors for decades and have supported them through ups and downs. Our clients greatly appreciate this in-depth market knowledge.

Many others would claim the same about themselves.
I clearly state that many others cannot deliver this the way we do.

Commerzbank has long relied on quick customer growth in the private customer business, even offering welcome bonuses that ultimately did not pay off for the bank in many cases.
On the retail side, we have clearly moved towards a more conscious structuring of our customer groups and more targeted engagement over the past few years. We are focusing on upscaling retail banking, namely asset management within Private Banking and Wealth Management. Additionally, with Comdirect as the main digital bank and performance broker, we are employing a two-brand strategy. This will remain core for us in the coming years to further strengthen fee income.

What would be a reasonable ratio of interest income to fee income and expenses, and what is the ratio of these revenue streams at the moment?
Currently, we stand at two-thirds net interest income and one-third fee income. We feel comfortably positioned with this distribution. However, our aim is to further reduce interest rate dependency and to increase the fee income disproportionately. But most importantly, the income streams need to be stable and aligned with our customers’ interests.

Are there signs of an increase in non-performing loans?
Our portfolio is robust, and we don’t anticipate any unexpected changes. Our risk managers are there and have a deep understanding of our customers and sectors. This helps us manage risks in the portfolio.

Are you sensing any reluctance due to global uncertainties? You want to grant loans, but are clients also taking them out?
We’ve noticed that companies are postponing investments due to uncertainties such as geopolitical tensions or tariffs. At the same time, we see that confidence is slowly returning, as evidenced by rising indices such as the Ifo index. We expect this to translate into higher demand in the coming quarters. However, I find it interesting that the perception of foreign investors is quite different. They tend to question whether Germany is underestimating the potential of investment pacts.

How much more credit can Commerzbank lend? How heavily have companies drawn on the committed lines?
We still have considerable capacity within our risk budget, measured by risk-weighted assets (RWA) currently at 173 billion euros. We aim to increase RWA utilisation by 2028. For this year, I expect RWA utilisation to increase to 178 billion euros. This means we still have a lot of capacity available.

How stressful is the ECB banking supervision stress test?
It is indeed a significant effort. We need to complete it every two years. We have teams that are very experienced in this and yet are busy for weeks calculating the risks for various scenarios. It is a complex exercise, and we approach it seriously.

Do you already know Commerzbank's result in the stress test?
We’ve filled out and submitted numerous templates multiple times. We know partial results and are now waiting for the supervisory authority to publish them. This isn’t something that keeps me up at night.

And Unicredit? When you signed your contract in September to return to Commerzbank from Danske Bank in Denmark, you were aware of this threat. Have you made contractual provisions and already have a follow-up role in mind?
What Commerzbank can achieve on its own is impressive. When I was offered the role of CFO, which was also an opportunity to take on more responsibility, I didn’t have to think for long. Of course, there are uncertainties. But I’m not thinking about follow-up roles; I'd rather extend my contract here in a few years.

The interview was conducted and published in German. We received the permission to translate it into English from the German F.A.Z.