2020 Financial calendar 6 May 2020 Annual General Meeting 13 May 2020 Interim Report as at 31 March 2020 5 August 2020 Interim Report as at 30 June 2020 5 November 2020 Interim Report as at 30 September 2020 Annual Report Commerzbank AG Head Office Kaiserplatz Frankfurt am Main www.commerzbank.com Postal address 60261 Frankfurt am Main Tel. + 49 69 136-20 [email protected] Investor Relations Tel. + 49 69 136-21331 Fax + 49 69 136-29492 [email protected] 2019 Annual Report 2019 Key figures Income statement 1.1.-31.12.2019 1.1.-31.12.20181 Operating profit (€m) 1,258 1,242 Operating profit per share (€) 1.00 0.99 Pre-tax profit or loss (€m) 1,129 1,242 Consolidated profit or loss2 (€m) 644 862 Earnings per share (€) 0.51 0.69 Operating return on equity based on CET13 (%) 5.3 5.4 Return on equity of consolidated profit or loss8 (%) 2.3 3.1 Cost/income ratio in operating business (excl. compulsory contributions) (%) 73.0 75.4 Cost/income ratio in operating business (incl. compulsory contributions) (%) 78.3 80.3 Balance sheet 31.12.2019 31.12.2018 Total assets (€bn) 463.6 462.4 Risk-weighted assets (€bn) 181.8 180.5 Equity as shown in balance sheet (€bn) 30.7 29.4 Total capital as shown in balance sheet (€bn) 38.6 38.5 Regulatory key figures 31.12.2019 31.12.2018 Tier 1 capital ratio (%) 14.3 13.4 Common Equity Tier 1 ratio4 (%) 13.4 12.9 Common Equity Tier 1 ratio4 (fully loaded, %) 13.4 12.9 Total capital ratio (%) 16.8 16.3 Leverage ratio (%) 5.3 5.0 Leverage ratio (fully loaded, %) 5.1 4.8 Staff 31.12.2019 30.09.2019 Germany 34,584 34,728 Abroad 13,928 13,829 Total 48,512 48,557 Ratings5 31.12.2019 30.09.2019 Moody's Investors Service, New York6 A1/A1/P–1 A1/A1/P–1 S&P Global, New York7 A/A-/A–2 A/A-/A–2 Fitch Ratings, New York/London6 A-/BBB+/F1 A-/BBB+/F1 Scope Ratings, Berlin6 –/A/S–1 –/A/S–1 1 Prior-year figures restated. 2 Insofar as attributable to Commerzbank shareholders and investors in additional equity components. 3 Average Common Equity Tier 1 capital (CET 1) fully loaded. 4 The Common Equity Tier 1 ratio is the ratio of Common Equity Tier 1 capital (CET1) mainly subscribed capital, reserves and deduction items) to risk-weighted assets. The fully loaded basis anticipates full application of the new regulations. 5 Further information can be found online at www.commerzbank.com. 6 Counterparty rating and deposit rating/issuer credit rating/short-term liabilities. 7 Counterparty rating/deposit rating and issuer credit rating/short-term liabilities. 8 Ratio of net income attributable to Commerzbank shareholders after potential (completely discretionary) AT1-Coupon and average IFRS equity after deduction of goodwill and other intangible assets without additional equity components and before minorities. Due to rounding, numbers and percentages in this report may not add up to the totals provided. ufgrund von Rundungen können sich im vorliegenden Bericht bei Summenbildungen und bei der Berechnung von Prozentangaben geringfügige Abweichungen ergeben. Contents U2 Key figures U2 – U4 Contents U3 Significant subsidiaries and Commerzbank worldwide U4 Financial calendar, contact addresses 2 Letter from the Chairman of the Board of Managing Directors 2 – 20 5 The Board of Managing Directors 6 Report of the Supervisory Board 15 Committees and the Supervisory Board 18 Our share 23 Corporate governance report and declaration on corporate governance pursuant to 21 – 60 Art. 315d in conjunction with Art. 289f of the German Commercial Code (HBG) 29 Remuneration report 45 Details pursuant to Art. 315a (1) and Art. 315 (4) of the German Commercial Code (HGB) 49 Combined separate non-financial report 67 Basis of the Commerzbank Group 65 – 96 74 Economic report 82 Segment performance 82 Private and Small-Business Customers 83 Corporate Clients 84 Others and Consolidation 85 Outlook and opportunities report 99 Executive summary 2019 122 Liquidity risk 97 – 134 100 Risk-oriented overall bank management 125 Operational risk 106 Default risk 127 Other risks 119 Market risk 139 Statement of comprehensive income 135 – 302 142 Balance sheet 143 Statement of changes in equity 146 Cash flow statement 148 Notes 296 Responsibility statement by the Board of Managing Directors 297 Independent Auditor’s Report 304 Seats on other boards 303 – 314 307 Independent Auditor’s Limited Assurance report of the combined separate non-financial report 309 Information on the encumbrance of assets 312 Quarterly results by segment 314 Five-year overview 2 Commerzbank Annual Report 2019 Letter from the Chairman of the Board of Managing Directors Frankfurt/Main, March 2020 2019 was another difficult year for the banking industry. Banks are facing major challenges in the form of negative interest rates, more regulation, a weaker economy and tough competition. Nevertheless, they have to accept the situation and take advantage of the opportunities as they come along. We intend to do just that with the new “Commerzbank 5.0” strategy we presented in September 2019, which will make the Bank ready to weather the storms that lie ahead, setting it up to be successful with its customers even in a difficult market environment. This means significantly reducing our cost base, while at the same time investing heavily in sales and faster digitalisation. Above all, we want to gain even more customers by offering an attractive range of products and services. Commerzbank should be the first choice for bank customers. In the Private and Small-Business Customers segment, we will drive forward the expansion of the mobile channel and bundle our digital expertise through the planned integration of comdirect. Our branch network will remain a strong pillar of the strategy. In the Corporate Clients segment, we will strengthen our sales activities and in particular our market presence in the Mittelstandsbank. We are also targeting growth in selected international markets. We are planning large-scale investment in technology to drive forward digitalisation, improve our customer experience and ultimately generate savings by simplifying processes. A total investment volume of around €1.6bn is planned, with some €750m for additional investments in digitalisation, IT infrastructure and growth, and approximately €850m to cover restructuring costs for the required headcount reduction and planned changes in the branch network. A further Group-wide headcount reduction is unfortunately unavoidable due to the need to cut costs in the competitive environment and counter the increasing pressure on margins. Around 4,300 full-time positions in the Group are likely to be eliminated. The creation of approximately 2,000 new full-time positions is planned in strategic areas. Thus, in net terms, the reduction in Group headcount will be around 2,300 full-time positions. We will be discussing the details with the employee representative To our Shareholders Corporate Responsibility Management Report Risk Report Financial Statements Further information 3 2 Letter from the Chairman of the Board of Managing Directors 5 Board of Managing Directors 6 Report of the Supervisory Board 15 Committees and the Supervisory Board 18 Our share committees in the coming months. The aim is to make the planned headcount reduction as socially responsible as possible. The “Commerzbank 5.0” strategy also envisages the sale of Commerzbank’s majority stake in Poland’s mBank. This will enable the Bank to generate funds to permit rapid implementation of the strategy and the associated investments. However, the sale is subject to the condition that the offer price and transaction structure are suitable. The further development of the strategy should help the Bank achieve further growth in customers and assets and rising income by 2023, even in a market environment that is set to become increasingly difficult. Commerzbank is aiming to reduce costs by around €600m by 2023 compared with the current Shareholders our To year. Following the sale of mBank, a cost base of no more than €5.5bn is planned for 2023. The target capital ratio will remain unchanged at between 12% and 13%. With our strategy, we are placing long- term success above short-term return targets. This is courageous, but it is also how we will be judged. And we will work hard to achieve it. The “Commerzbank 5.0” strategy will also allow us to anchor our corporate responsibility even more firmly in our business model. For our business model to work, it depends on social acceptance, which is the basic prerequisite for our economic success. This is also what we represent as “the bank by your side” – fairness, competency and sustainability. To underpin this, in September 2019 we became one of the first signatories of the United Nations Principles for Responsible Banking, which support the goals of the Paris Agreement and the Sustainable Development Goals. A binding and unifying corporate culture lays the foundation for the entrepreneurial and individual responsibility of every employee of Commerzbank. Shared values such as customer focus, integrity, courage, performance and team spirit shape our interactions within the Bank as well as with customers, business partners and society. In 2019, Commerzbank’s income before loan loss provisions of €8.6bn was in line with the previous year. The risk result was higher in the reporting year than in the previous year at €–620m. The fourth quarter saw individual cases in the international corporate customer business in particular. Up to now, no risk concentration has been be identified in our well-diversified loan book with regard to specific industries and countries. The non-performing loans ratio further improved as at the end of 2019 to a low 0.9%, which underscores the Bank’s strong risk profile.