Commerzbank : Remuneration report for the financial year 2023

IX. Outstanding virtual shares from variable remuneration 38

1. Share ownership obligation (Share Ownership

1. Principles of the remuneration of the Board of Managing Directors

1. Temporary deviation from the remuneration system

1. Appropriateness of remuneration

IV. Benefits upon termination of employment

1. Reimbursement of lost variable remuneration and other compensation payments

VI. Targets and target achievement for the 2023 financial year

VII. Remuneration awarded and owed pursuant to Art. 162 AktG

C. Comparative presentation of

Review of the 2023 financial year

The 2023 financial year was very successful for Commerzbank despite a difficult environment marked by crisis. Commerzbank has now completed the restructuring of the Bank, including a gross reduction of almost 10,000 full-time positions and deep cuts in the branch network, and has achieved the principal core goals outlined in the "Strategy 2024" programme. The progress resulting from the strategic measures is demonstrated in impressive fashion in the results for the 2023 financial year. In the 2023 financial year just ended, Commerzbank earned more than it has earned at any time in the past 15 years, both in operating terms at €3.4bn, and in consolidated terms at €2.2bn. With a Core Tier 1 capital ratio of 14.7%, Commerzbank is very solidly positioned and is once again able to award its shareholders a suitable share in the Bank's success.

Revised remuneration system implemented as at 1 January 2023

The revised remuneration system has been in effect for the members of the Board of Managing Directors since 1 January 2023. This means that variable remuneration is now measured against new financial performance indicators. Operating profit and the net return on tangible equity (net RoTE) as return indicators have replaced the previous indicator, economic value added (EVA). The new indicators enable the Bank's success to be linked to the level of variable remuneration more directly and at the same time in a way that is more transparent for investors.

An overview of the specific changes to the remuneration system can be found in the "2023 remuneration system" section of

the previous year's remuneration report and in the details of the remuneration system for the Board of Managing Directors published on Commerzbank's website.

Vote on the 2022 remuneration report at the 2023 Annual General Meeting

The Annual General Meeting approved the remuneration report for the 2022 financial year, with 85.81% voting in favour. The high approval rate is evidence of investors' trust in the Bank's decisions mapping the path ahead and at the same time acts as a spur to continue working on the ongoing improvement of the remuneration system. Meanwhile, the Bank has identified further potential for improvement - including in response to suggestions from investors.

With regard to the targets for the long-term incentive (LTI) component in remuneration, investors noted that separate long-term targets are not used for the LTI, that the LTI is instead based on the same targets as the short-term incentive (STI) component. These are targets that are derived from the Bank's long-term strategy and broken down for the upcoming financial year. Investors suggested that the measurement of the LTI should be based on long-term targets that are forward-looking and extend over several years. The Supervisory Board discussed this suggestion in great detail. The Supervisory Board's main reason for using identical targets for the STI and LTI under the "Strategy 2024" programme was based on the desire to spur on the members of the Board of Managing Directors to achieve the milestones for the ongoing transformation. Achievement of the targets for the individual annual portions up to 2024 was and is of essential importance to the success of the "Strategy 2024" programme. Any dilution through longer-term targets could have jeopardised the success of the transformation.

The appropriateness of this approach was impressively demonstrated by the successful and early completion of the transformation programme. The "Strategy 2027"

programme presents an ideal opportunity to further develop the remuneration system again while also taking comments from investors into consideration. The Supervisory Board's Compensation Control Committee has already begun this process in the meantime and will strive to reconcile the complex situation that arises through the juxtaposition of requirements

• with those of regulators on one side and those of investors on the other. In 2024, specific proposals are to be elaborated and presented to stakeholders so that the Supervisory Board can then make a decision on the further development of the remuneration system, including the future structure of the LTI, and then submit its proposals to the 2025 Annual General Meeting for approval.

In addition to a reworking of the LTI structure, investors also wished to receive a detailed explanation of the remuneration terms of CEO Dr. Manfred Knof for his current period of office lasting until 31 December 2025. This related to two aspects: the temporary deviation of both the amount of his fixed remuneration and of the target amount for his variable remuneration from the remuneration system, and the contribution of a one-off payment into the company pension scheme for the 2021 financial year. The Supervisory Board had carefully examined these terms and, when making them in 2020, had taken into account the fact that Dr. Manfred Knof's remuneration at his previous employer was significantly higher than the remuneration envisaged under Commerzbank's system. For Commerzbank, the recruitment of Dr. Manfred Knof was of special strategic importance. The Supervisory Board therefore decided to offer him these terms in order to recruit him as CEO and thereby add lasting strength to the Bank for the future.

Short-term and long-term variable remuneration (short-term incentive, "STI", and long-term incentive, "LTI")

STI: 40%

1. 40% cash portion after the end of the financial year
2. 60% share-based portion after a 12-month retention period

LTI: 60%

Occurs in five regular tranches of equal amounts during and after the end of the deferral period of five years, of which

1. 40% of each tranche as a cash portion after the end of the pro-rata deferral period
2. 60% of each tranche as a share-based portion after a further retention period of 12 months

Component

Limit on the amount of variable remuneration

Description

To discourage Board members from taking inappropriate risks, variable remuneration is limited to a maximum of 140% of fixed remuneration.

Overall target achievement is also capped at a maximum of 150%, which means that the maximum total target achievement amount for ordinary members of the Board of Managing Directors - without taking into account the performance of the STI and LTI share elements - is €990,000 gross per financial year.

1. Alignment of Board of Managing Directors remuneration with strategy

The remuneration system supports the long-term development of Commerzbank's Group strategy. It is aligned with the requirements of the strategic agenda and the overall risk strategy, and is consistent with the Bank's risk, capital

and liquidity structure. To strengthen successful corporate governance and ensure it remains stable over the long term, variable remuneration is based on a multi-year assessment. The targets set annually for variable remuneration promote the long-term performance of Commerzbank.

2. Environmental targets as an essential component of the Group target

Sustainability is one of Commerzbank's key strategic objectives. The "Strategy 2027" published in November 2023 is based on the three pillars of growth, excellence and responsibility. In this context, responsibility applies to the entire range of ESG sustainability issues.

Commerzbank is aware of the growing importance of environ- mental, social and corporate governance (ESG) objectives and for several years now has been specifically aligning its targets with these objectives. With the implementation of the revised remuneration system as at 1 January 2023, ESG targets are now anchored within the Group target in a specific and binding manner for all members of the Board of Managing Directors and, with a weighting of 20% in the Group target, form a key component of variable remuneration.

max. 150% target achievement

Group targets 60%

Threshold

Op. profit ≥ 60% of the MYP

At the heart of Commerzbank's ESG strategy is the Bank's commitment to achieving net zero by 2050 at the latest. The global United Nations Sustainable Development Goals and the Paris climate target of limiting global warming to well below 2°C provide the framework for Commerzbank.

To this end, Commerzbank has set itself the following targets in particular:

• The carbon emissions of the loan and investment portfolio are to be reduced to net zero by 2050 at the latest.
• The volume of sustainable financial products is to be increased to €300bn by the end of 2025.
• Commerzbank's own banking operations are to be net zero by 2040, including a climate-neutral supplier portfolio.

By

2025

By

2040

By

2050

Volume of sustainable financial products

Loan/investment portfolio

CO₂ emissions

Banking operations

CO₂ emissions

Loan/investment portfolio

€300

bn

0

net

0

net

The individual ESG targets for the 2023 financial year and their achievement are explained in detail in the section on Group target achievement. In addition, ESG targets are included in the individual targets and departmental targets for individual Board members. Details are shown in the description of the targets. Further details on matters of sustainability can be found in the Annual Report in the section on the Combined separate non- financial report.

Outlook for ESG targets in 2024

Reducing CO2 in the Bank's own operations as well as in its loan and investment portfolio as an environmental target continues to have the same strategic importance in the current financial year and remains an essential component for the measurement of variable remuneration for the Board of Managing Directors. At the same time, the Supervisory Board has strengthened its commitment to social and governance objectives for 2024 by setting the increase in the proportion of women in management positions and the promotion of Commerzbank's corporate values and integrity as further ESG targets within the Group target.

ESG 20%

strengthening cooperation within the Board of Managing Directors

3. Core elements of the remuneration system

The core elements of the remuneration system are fixed (non-performance-related) and variable (performance-related) remuneration components.

3.1. Fixed remuneration components

The fixed remuneration components include the basic annual salary and non-monetary elements. The basic annual salary is

€990,000 for the ordinary members of the Board of Managing Directors and €1,332,000 for the Deputy Chairwoman of the Board of Managing Directors. The Chairman of the Board of Managing Directors receives €1,674,247. The basic annual salary is payable in 12 equal monthly instalments. The non-monetary elements mainly consist of the use of a company car with driver, security measures and insurance contributions, and payment of the applicable tax thereon. The Board members are also entitled to a company pension, which is regulated in pension agreements.

Non-performance-related remuneration

STILTI

40% 60%

Performance-related remuneration

3.2. Performance-related remuneration components (variable remuneration)

Variable remuneration consists of a short-term incentive and a long-term incentive. It is calculated based on (i) target achievement by the Commerzbank Group, (ii) target achievement by the departments (segments and/or shared functions) for which the member of the Board of Managing Directors in question is responsible, and (iii) achievement of individual performance targets. Target achievement for the Group and the department and individual performance can each be between 0% and 150%. Multiplying the overall target achievement by the target amount for variable remuneration purposes gives the total amount of variable remuneration based on target achievement. The total amount of variable remuneration based on target achievement is capped at a maximum of 150% of the Board member's target variable remuneration.

Short-term incentive (STI)

40% of the variable remuneration takes the form of a short-term incentive (STI). 40% of this remuneration component is payable in cash after the end of the financial year; the other 60% is payable after a 12-month retention period, also in cash but based on the share price. This part is linked to the performance of Commerzbank shares since the January following the end of the financial year.

Long-term incentive (LTI)

The remaining 60% of the variable remuneration takes the form of a long-term incentive. Until the 2022 financial year, entitlement to the LTI arose and it was paid only after the end of the regular five-year deferral period, in a process known as "cliff vesting". With the introduction of the revised remuneration system in the 2023 financial year, the LTI will now be paid out pro rata in five regular, equal annual tranches.

Before each tranche occurs, the Supervisory Board checks whether the total target achievement amount determined is still appropriate in retrospect, for example whether risks were underestimated or not recognised or whether unexpected losses were incurred, or whether the amount needs to be reduced because of misconduct. The entitlement to the LTI is therefore subject to a retrospective performance evaluation. The retrospective performance evaluation carried out by the Supervisory Board can result in the LTI being reduced or cancelled altogether.

40% of each LTI tranche is paid out in cash, and 60% is paid out, also in cash but based on share price performance, after a retention period of an additional 12 months. During the deferral period and the retention period, the value of the LTI components depends on the price of Commerzbank shares and thus on the long-term performance of Commerzbank.

The payment of the STI and LTI components of the variable remuneration is shown in the chart below for the 2023 financial year:

The target amount for variable remuneration is €660,000 for the ordinary members of the Board of Managing Directors, €888,000 for the Deputy Chairwoman of the Board and €1,116,165 for the Chairman, based on target achievement of 100%.

3.2.2. Target setting

Before the beginning of each financial year and after consultation with the Compensation Control Committee, the Supervisory Board sets targets for the members of the Board of Managing Directors. The setting of targets is based on the corporate strategy and multi-year planning and is geared towards promoting success-oriented, sustainable corporate management:

Group target The Supervisory Board sets the Group target for all members of the Board of Managing Directors uniformly. The Group target consists of three sub-targets: operating profit with a weighting of 50%, the net return on tangible equity (net RoTE) with a weighting of 30% and an ESG target with a weighting of 20%, which can include both quantitative and qualitative ESG targets. Weighted at 60%, the Group target is a decisive factor for the overall target achievement of the members of the Board of Managing Directors for the financial year. Variable remuneration is thus largely linked to the Group's business success. This is also reflected in the threshold introduced with the remuneration system in 2023:

80% of the Group target (50% operating profit and 30% net RoTE) is subject to the condition that at least 60% of the operating profit under the multi-year planning must be achieved in the financial year. If the operating profit falls below this threshold, both sub-targets, i.e. operating profit and net RoTE, will be assessed as 0% with respect to target achievement. The ESG target remains unaffected by the threshold in order not to impinge upon its incentive effect.

Departmental targets In addition to the Group target, departmental targets are set for each member of the Board of Managing Directors in accordance with the schedule of business responsibilities. A total of 30% of the departmental targets is incorporated into target achievement. The departmental targets are derived from the corporate and segment strategy and the multi-year planning. One or more targets can be defined for each department to reflect the targets for the individual areas of responsibility of the respective members of the Board of Managing Directors. The Supervisory Board sets quantitative and qualitative targets and defines the basis for their measurement, relying on a recommendation of the Compensation Control Committee. For the Private and Small-Business Customers and Corporate Clients segments, departmental target achievement is chiefly based on the operational performance of each segment. In addition, the Supervisory Board has the option of setting further key financial figures and/or qualitative targets for the segments.

Individual targets The Supervisory Board also sets individual targets for the members of the Board of Managing Directors and defines the basis for their measurement. At 10%, individual target achievement influences target achievement for a financial year to a lesser but nonetheless appreciable extent.

The system is described in more detail in the "Target achievement" section below and is also shown in the diagram.

3.2.3. Target achievement

Following the end of each financial year, the Supervisory Board decides to what extent the targets were achieved, relying on recommendations from the Compensation Control Committee. To fulfil the requirement for a multi-year measurement basis