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Commerzbank Aktiengesellschaft (CZB)
Commerzbank: Strategy implementation on track - Operating profit of
EUR1,144m after nine months 2017
09-Nov-2017 / 07:07 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
*- Operating profit of EUR629m for the third quarter (Q3 2016: EUR429m);
EUR1,144m after nine months (first nine months of 2016: EUR1,062m) *
*- Adjusted revenues came to EUR6.35bn in the first nine months (first nine
months of 2016: EUR6.46bn) - one-offs of EUR618m; segments Private and Small
Business Customers and Corporate Clients stable quarter-on-quarter*
*- Net profit after nine months of EUR66m despite restructuring expenses of
EUR807m in the second quarter of 2017*
*- Common Equity Tier 1 ratio up significantly to 13.5% (end of June 2017:
13.0%); leverage ratio comfortable at 4.7%*
*- ACR shipping portfolio reduced by more than 30% in the first nine months
to EUR3.3bn. On track for year-end target of around EUR3bn - acceleration of
portfolio run-down under consideration *
*- Around 587,000 net new customers in German retail banking since October
2016 - consumer loan platform fully integrated*
Commerzbank continued to pursue its growth strategy in the third quarter,
further increased its capital ratio, and made further progress in reducing
the run-down portfolios. The business performance of client facing segments
was stable quarter-on-quarter. In the Private and Small Business Customers
segment, Commerzbank has gained around 450,000 net new customers and
increased assets under control by EUR28 billion in Germany since the start
of the year. By pursuing its growth agenda, the Bank is laying the
foundations for future profitability. The Common Equity Tier 1 ratio stood
at 13.5% at the end of September up from 11.8% a year earlier. In the Asset
& Capital Recovery (ACR) segment, the shipping portfolio saw a substantial
reduction of EUR1.5 billion in the first nine months of 2017, taking it to
EUR3.3 billion at the end of the third quarter.
The Bank also continued with the implementation of its 'Commerzbank 4.0'
strategy in the third quarter as planned. The termination of the Commerz
Finanz GmbH joint venture and the transfer of the consumer loan portfolio of
around EUR3.5 billion onto the Bank's books and systems were fully completed
in the third quarter. The transfer of this portfolio now offers an
opportunity for Commerzbank to expand the business on its own platform. Its
target is to increase this portfolio to over EUR10 billion by 2020.
Investments in digitalisation and its implementation in the Digital Campus
are running to plan.
'We have made good progress in laying foundations for our transformation
this year. In the interest of sustainable long-term profitability, we are
focussing on growth. We have grown both in terms of clients and assets,
having successfully reallocated RWAs and capital to our core businesses and
strongly invested into our digitalisation and IT. We have now successfully
transferred the consumer loan business onto our books and are now able to
further grow this business', said Martin Zielke, Chairman of the Board of
Managing Directors of Commerzbank.
The Bank saw its *operating profit* increase by 7.7% year-on-year in the
first nine months to EUR1,144 million (first nine months of 2016: EUR1,062
million). Previously announced non-recurring revenue items and valuation
effects, which sum up to EUR618 million after nine months, contributed to
this increase (first nine months of 2016: EUR543 million). The operating
profit for the third quarter 2017 came in at EUR629 million (Q3 2016: EUR429
million). The exceptional revenue items which arose mainly from real estate
sales, the sale of Concardis, and the termination of the consumer loan joint
venture with BNP Paribas, amounted to EUR502 million in the third quarter,
and therefore had more of an impact than the non-recurring items in the same
quarter of last year (Q3 2016: EUR231 million). *Revenues before loan loss
provisions* were also stable in the first nine months, at EUR6,971 million
(first nine months of 2016: EUR7,000 million). In the third quarter they
rose by 3.0% to EUR2,511 million (Q3 2016: EUR2,437 million). Excluding
non-recurring items, revenues before loan loss provisions were down
year-on-year in the first nine months, at EUR6,353 million (first nine
months of 2016: EUR6,457 million). This shows that the Bank's growth in
customer numbers and assets helped mitigating the negative interest rate
environment and lower margins. In the third quarter, the Bank's underlying
revenues came to EUR2,009 million (Q3 2016: EUR2,206 million).
Net *loan loss provisions*, at EUR530 million, were lower year-on-year in
the first nine months of 2017 (first nine months of 2016: EUR610 million).
The figure for the third quarter was EUR168 million (Q3 2016: EUR275
million). Therefore, the Bank recorded a non-performing loan (NPL) ratio of
just 1.5%, which is still low compared to its European peers, reflecting its
healthy risk profile. *Operating expenses* were down slightly for the first
nine months at EUR5,297 million (first nine months of 2016: EUR5,328
million). Personnel expenses decreased due to the personnel reductions,
whereas expenses attributable to the various bank levies increased by EUR42
million. Operating expenses for the third quarter stood at EUR1,714 million
(Q3 2016: EUR1,733 million).
Taking into account the restructuring expenses of EUR807 million booked in
the second quarter in connection with the 'Commerzbank 4.0' strategy, the
*pre-tax profit* for the first nine months of 2017 came to EUR337 million
(first nine months of 2016: EUR338 million). The pre-tax profit had been
adversely affected in the first nine months of 2016 by an impairment on
goodwill and other intangible assets of EUR627 million and restructuring
charges of EUR97 million. So after deduction of taxes of EUR204 million and
minority interests of EUR67 million, Commerzbank posted a positive *net
profit* of EUR66 million for the first nine months of 2017 (first nine
months of 2016: EUR96 million). The net result for the third quarter stood
at EUR472 million (Q3 2016: minus EUR288 million). *Earnings per share* came
in at EUR0.05 in the first nine months of 2017 (first nine months of 2016:
EUR0.08).
The *Common Equity Tier 1 ratio *(CET 1) with full application of Basel 3
rose to 13.5% at the end of September 2017, versus 13.0% at the end of June
2017. This increase was attributable firstly to the larger CET 1 capital
base: the Bank's CET 1 capital with full application of Basel 3 rose by
around EUR0.7 billion due mainly to the improved net profit. Secondly,
*Risk-Weighted Assets* (RWA) were also lower again. RWAs associated with
planned growth in the Bank's core business and operational risks were
higher, while there were lower RWAs for market risks and due to the
portfolio run-down in Ship Finance. RWA with full application of Basel 3
stood at EUR176.6 billion at the end of September 2017, compared with
EUR178.5 billion at the end of June 2017 and EUR194.6 billion at the end of
September 2016. The *leverage ratio* came out at 4.7% at the end of the
third quarter of 2017. *Total assets* came to EUR490 billion (end of June
2017: EUR487 billion).
'We have increased our Common Equity Tier 1 ratio significantly to 13.5
percent. Taking into account the IFRS 9 effect, we are aiming for a CET 1
ratio of at least 12.5 percent as of 1 January 2018. Besides growth, cost
management remains a top priority. Active management has enabled us to keep
our costs stable despite the investments in digitalisation and IT', said
Stephan Engels, Chief Financial Officer of Commerzbank. 'We are continuing
to make good progress with the run-down of our ACR shipping portfolio. We
are on track to achieve our target for the year of around EUR3 billion. With
IFRS 9 due to be implemented by the turn of the year, we are currently
considering revaluating our Ship Finance portfolio to run it down even
faster than previously planned.'
*Performance of the segments*
The *Private and Small Business Customers* segment continued with its growth
strategy and is ahead of target in terms of growth in customer numbers and
assets under control in Germany. Commerzbank has gained approximately
587,000 net new customers since October 2016. Around 450,000 of these were
acquired in the first nine months of 2017, including around 100,000 as a
result of the takeover of Onvista by Comdirect. Assets under control rose by
EUR28 billion over the same period to EUR366 billion. The volume of new
mortgage lending business reached EUR11.3 billion in the first nine months
of 2017 (first nine months of 2016: EUR9.2 billion).
The operating profit for the segment for the first nine months of 2017 was
down year-on-year at EUR717 million (first nine months of 2016: EUR845
million). The decrease is attributable primarily to an increase in operating
expenses. In the third quarter an operating profit of EUR381 million was
generated - also supported by non-recurring items (Q3 2016: EUR273 million).
Revenues before loan loss provisions remained stable year-on-year in the
first nine months of 2017 at EUR3,642 million (first nine months of 2016:
EUR3,643 million). The revenue figure for the third quarter was EUR1,363
million (Q3 2016: EUR1,216 million). This included non-recurring items
totalling EUR238 million, mainly from the previously announced sale of the
Concardis holdings and the valuation in connection with the termination of
the consumer loan joint venture with BNP Paribas. Excluding non-recurring
items, revenues before loan loss provisions came to EUR1,125 million, so
were stable relative to the previous quarter (Q2 2017: EUR1,110 million).
Loan loss provisions for the segment rose by 23.8% in the first nine months
of 2017 to EUR130 million (first nine months of 2016: EUR105 million). EUR55
million of this was booked in the third quarter (Q3 2016: EUR40 million).
Operating expenses increased to EUR2,795 million in the first nine months
(first nine months of 2016: EUR2,693 million). The EUR24 million increase in
compulsory contributions in Poland was a key factor in this. Of the
operating expenses, EUR927 million was incurred in the third quarter (Q3
2016: EUR903 million).
mBank revenues before loan loss provisions increased in the first nine
months of 2017 to EUR738 million (first nine months of 2016: EUR721
million). Thereof, EUR254 million were generated in the third quarter (Q3
2016: EUR228 million). The volume of new consumer loan business went up by
more than 15% year-on-year in the first nine months. mBank has attracted
around 208,000 net new customers since the beginning of the year. In the
third quarter of 2017, mBank retrospectively adjusted its customer numbers
for authorised users of a microfirm current account. At the end of September
2017, mBank had approximately 5.3 million retail and business customers in
Poland, the Czech Republic and Slovakia.
*Corporate Clients* had to deal with weak markets and the challenges from
the negative interest rate environment. In the first nine months of 2017 it
reported an operative result of EUR742 million (first nine months of 2016:
EUR927 million). The third quarter accounted for EUR241 million of this (Q3
2016: EUR327 million). Adjusted revenues before loan loss provisions slipped
to EUR2,981 million in the first nine months of 2017 (first nine months of
2016: EUR3,147 million). In the third quarter, they were slightly higher
than in the previous quarter, at EUR961 million (Q2 2017: EUR952 million).
Mittelstand saw muted loan demand, but was able to partially compensate for
it with a good performance with capital market products. International
Corporates grew its lending business slightly compared to the first nine
months of the previous year. However, demand for structured capital market
products declined over the same period. The strategic realignment and
repositioning of Financial Institutions is on track. Revenues have now
stabilised. Equity Markets & Commodities benefited in the first nine months
from solid customer activity due to favourable equity markets.
Loan loss provisions for the Corporate Clients segment were reduced in the
first nine months of 2017 to EUR123 million (first nine months of 2016:
EUR215 million). The segment saw its operating expenses for the same period
reduced to EUR2,148 million (first nine months of 2016: EUR2,219 million).
It managed to cut its costs despite strategic investments and higher
expenditure on the implementation of regulatory and compliance requirements.
In the *Asset & Capital Recovery* (ACR) segment, the Ship Finance and
Commercial Real Estate Finance portfolios were reduced by about EUR2.3
billion in the first nine months of 2017. The shipping portfolio, having
been run down by EUR1.5 billion or more than 30% in the first nine months,
now stands at around EUR3.3 billion. The segment's operating result improved
in the first nine months of 2017 to minus EUR215 million (first nine months
of 2016: minus EUR359 million). The figure for the third quarter was minus
EUR100 million (Q3 2016: minus EUR108 million). Revenues before loan loss
provisions increased to EUR141 million in the first nine months (first nine
months of 2016: EUR30 million). Loan loss provisions were reduced over the
same period to EUR277 million (first nine months of 2016: EUR292 million).
Nearly all of these provisions were for Ship Finance. Operating expenses
were down in the first nine months of 2017 at EUR79 million (first nine
months of 2016: EUR97 million).
*Outlook*
The Bank will continue to strengthen its market position and focus on the
implementation of the 'Commerzbank 4.0' strategy. The Bank is aiming for a
Common Equity Tier 1 ratio of at least 12.5%, including the effect of the
introduction of IFRS 9, from 1 January 2018. The cost base is expected to be
below EUR7.1 billion for 2017. Loan loss provisions are likely to amount to
around EUR800 million, with the ACR segment accounting for around EUR400
million of this. The Bank is still expecting a slightly positive net result
for the year as a whole.
*******
*Financial figures at a glance*
*9M 2017* *9M * *Q3 * *Q3 2016* *Q2* *9M'17
in EURm *2016* *2017* *2017* vs.
9M'16
in %*
Net interest 3,953 4,120 1,246 1,505 1,243 -4.1
and trading
income
Provisions for -530 -610 -168 -275 -167 -13.1
loan losses
Net commission 2,404 2,387 738 781 779 0.7
income
Net investment 365 257 300 94 34 42.0
income
Current income
on companies 21 142 6 79 8 -85.2
accounted for
at equity
Other income 228 94 221 -22 4 142.6
*Revenues 6,971 7,000 2,511 2,437 2,068 -0.4
before loan
loss
provisions*
_Revenues 6,353 6,457 2,009 2,206 2,060 -1.6
excl.
exceptional
items_
Operating 5,297 5,328 1,714 1,733 1,718 -0.6
expenses
*Operating 1,144 1,062 629 429 183 7.7
profit or
loss*
Impairments of - 627 - 627 - -
Goodwill
Restructuring 807 97 - 57 807 -
expenses
*Pre-tax 337 338 629 -255 -624 -0.3
profit or
loss*
Taxes 204 161 135 14 -12 26.7
*Consolidated
profit or loss
attributable 66 96 472 -288 -637 -31.2
to Commerzbank
shareholders*
Earnings per 0.05 0.08 0.38 -0.23 -0.50
share (EUR)
Cost/income
ratio in 76.0 76.1 68.3 71.1 83.1
operating
business (%)
Operating RoTE 5.7 5.4 9.4 6.5 2.7
(%)
Net RoTE (%) 0.3 0.5 7.3 -4.5 -9.8
Net RoE (%) 0.3 0.4 6.6 -4.1 -8.9
CET 1 ratio,
B3 fully 13.5 11.8 13.5 11.8 13.0
phased-in (%)
Leverage
Ratio, B3 4.7 4.5 4.7 4.5 4.6
fully
phased-in (%)
Total assets 490 514 490 514 487
(EURbn)
*****
From approximately 7 am onwards you can find broadcast-ready video material
with statements by Stephan Engels at http://mediathek.commerzbank.de/ [1].
*****
*Press contact*
Nils Happich +49 69 136-80529
Karsten Swoboda +49 69 136-22339
Maurice Farrouh +49 69 136-21947
Erik Nebel +49 69 136-44986
*****
About Commerzbank
Commerzbank is a leading international commercial bank with branches and
offices in almost 50 countries. In the two business segments Private and
Small Business Customers, as well as Corporate Clients, the Bank offers a
comprehensive portfolio of financial services which is precisely aligned to
the clients' needs. Commerzbank finances 30% of Germany's foreign trade and
is leading in financing for corporate clients in Germany. Due to its
in-depth sector know-how in the German economy, the Bank is a leading
provider of capital market products. Its subsidiaries Comdirect in Germany
and mBank in Poland are two of the world's most innovative online banks.
With approximately 1,000 branches, Commerzbank has one of the densest branch
networks among German private banks. In total, Commerzbank serves more than
18 million private and small business customers, as well as more than 60,000
corporate clients, multinationals, financial service providers, and
institutional clients. The Bank, which was founded in 1870, is represented
at all the world's major stock exchanges. In 2016, it generated gross
revenues of EUR9.4 billion with approximately 49,900 employees.
*****
*Disclaimer*
This release contains forward-looking statements. Forward-looking statements
are statements that are not historical facts. In this release, these
statements concern inter alia the expected future business of Commerzbank,
efficiency gains and expected synergies, expected growth prospects and other
opportunities for an increase in value of Commerzbank as well as expected
future financial results, restructuring costs and other financial
developments and information. These forward-looking statements are based on
the management's current plans, expectations, estimates and projections.
They are subject to a number of assumptions and involve known and unknown
risks, uncertainties and other factors that may cause actual results and
developments to differ materially from any future results and developments
expressed or implied by such forward-looking statements. Such factors
include the conditions in the financial markets in Germany, in Europe, in
the USA and other regions from which Commerzbank derives a substantial
portion of its revenues and in which Commerzbank holds a substantial portion
of its assets, the development of asset prices and market volatility,
especially due to the ongoing European debt crisis, potential defaults of
borrowers or trading counterparties, the implementation of its strategic
initiatives to improve its business model, the reliability of its risk
management policies, procedures and methods, risks arising as a result of
regulatory change and other risks. Forward-looking statements therefore
speak only as of the date they are made. Commerzbank has no obligation to
update or release any revisions to the forward-looking statements contained
in this release to reflect events or circumstances after the date of this
release.
ISIN: DE000CBK1001
Category Code: QRT
TIDM: CZB
LEI Code: 851WYGNLUQLFZBSYGB56
Sequence No.: 4823
End of Announcement EQS News Service
627109 09-Nov-2017
1: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=b9e39396c3a74844c54cf2fcbf6f5173&application_id=627109&site_id=vwd&application_name=news
(END) Dow Jones Newswires
November 09, 2017 01:07 ET (06:07 GMT)
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