Commerzbank Aktiengesellschaft / Miscellaneous - Urgent Priority
Commerzbank: Operating Profit Up - CET 1 Capital Ratio Increased to 11.8%
04-Nov-2016 / 07:08 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group AG.
The issuer is solely responsible for the content of this announcement.
- *Operating profit of EUR429 m for third quarter 2016 compared to EUR351 m
for second quarter 2016 *
*(Q3 2015: EUR452 m)*
- *CET 1 capital ratio increased to 11.8% as of end of September 2016 (end
of June 2016: 11.5%; *
*end of September 2015: 10.8%), leverage ratio at 4.5% *
- *Higher loan loss provisions of EUR610 m in the first nine months (first
nine months of 2015: EUR584 m); non-performing loan ratio still very low at
1.7% *
- *Operating expenses down slightly at EUR5,328 m in the first nine months
(first nine months of 2015: EUR5,413 m), more than compensating for the new
Polish banking tax*
- *New strategy and structure will result in balanced profit contributions
from the two operating segments Private and Small Business Customers and
Corporate Clients *
- *Goodwill write-off of EUR627 m results in net profit of EUR96 m in the
first nine months (first nine months of 2015: EUR891 m), and of minus EUR288
m for the third quarter (Q3 2015: EUR235 m)*
- *Zielke: 'Commerzbank has a strong market position in corporate banking.
We have seen further growth in retail banking and at our Polish subsidiary
mBank. These are good prerequisites for the implementation of our
Commerzbank 4.0 strategy, which will enable us to sustainably increase our
profitability. We are pursuing our growth targets ambitiously, consistently,
and forcefully.'*
Commerzbank improved its operating profit in the third quarter compared to
the previous quarter, and increased its Common Equity Tier 1 ratio to 11.8%.
The *operating profit* for this period stood at EUR429 million versus EUR351
million in the second quarter (Q3 2015: EUR452 million). The figure for the
first nine months of 2016 was EUR1,062 million (first nine months of 2015:
EUR1,558 million). *Revenues before loan loss provisions* were EUR2,437
million in the third quarter (Q3 2015: EUR2,317 million) and EUR7,000
million in the first nine months (first nine months of 2015: EUR7,555
million). *Loan loss provisions* increased to EUR610 million in the first
nine months of 2016 (first nine months of 2015: EUR584 million). This was
due to the fact that, as expected, loan loss provisions were considerably
higher, at EUR275 million, in the third quarter of 2016 than in the same
quarter of last year (Q3 2015: EUR146 million) on account of the further
deterioration in the shipping markets. Apart from that, loan loss provisions
remain low, reflecting the Bank's healthy risk profile. Its good risk
profile is also evident from its non-performing loan ratio of just 1.7%,
which is very low compared to its European peers. *Operating expenses* were
down slightly year-on-year at EUR5,328 million for the first nine months of
2016 (first nine months of 2015: EUR5,413 million). The Bank's ongoing
efficiency measures more than compensated for strategic investments in
digitalisation, regulatory, and compliance enhancements as well as the new
Polish banking tax. Operating expenses amounted to EUR1,733 million in the
third quarter of 2016 (Q3 2015: EUR1,719 million). The *pre-tax profit*,
taking into account an impairment on goodwill and other intangible assets of
EUR627 million and restructuring costs of EUR97 million, came in at EUR338
million for the first nine months of 2016. So after deduction of taxes of
EUR161 million and minority interests of EUR81 million, Commerzbank posted a
*net profit* of EUR96 million for the first nine months of 2016 (first nine
months of 2015: EUR891 million). The net result for the third quarter of
2016 came out at minus EUR288 million (Q3 2015: EUR235 million), due mainly
to the aforementioned impairment on goodwill and other intangible assets,
which was already announced at the time of the unveiling of the new
Commerzbank strategy.
'Commerzbank has a strong market position in corporate banking. We have seen
further growth in retail banking and at our Polish subsidiary mBank. These
are good prerequisites for the implementation of our Commerzbank 4.0
strategy, which will enable us to sustainably increase our profitability. We
are pursuing our growth targets ambitiously, consistently, and forcefully,'
said Martin Zielke, Chairman of the Board of Managing Directors of
Commerzbank.
*CET 1 ratio of 11.8% *
The *Common Equity Tier 1 ratio (CET 1)* with full application of Basel 3
stood at 11.8% at the end of September 2016 (end of June 2016: 11.5%; end of
September 2015: 10.8%). The improvement in the CET 1 ratio is attributable
in particular to a reduction in *risk-weighted assets (RWA)*.RWA with full
application of Basel 3 were reduced by approximately EUR4 billion, through
active risk management, to EUR195 billion as of 30 September 2016 (end of
June 2016: EUR198 billion). The *total assets* in the Group amounted to
EUR513 billion as of the end of September 2016 (end of June 2016: EUR533
billion). The *leverage ratio* stood at 4.5% at the end of September 2016
(end of June 2016: 4.4%).
'We have reconfirmed our very good risk profile and increased our Common
Equity Tier 1 ratio to 11.8 percent. It should rise to around 12 percent by
the end of the year,' said Stephan Engels, Chief Financial Officer of
Commerzbank.
*Development of the segments*
The restructuring of the segments announced as part of the new strategy
decided at the end of September will mean that the two new operating
segments will contribute fairly equally to the Bank's comprehensive income.
Under the new structure and based on a preliminary calculation, the *Private
and Small Business Customers* segment generates an operating profit of
EUR0.8 billion and revenues before loan loss provisions of EUR3.6 billion
for the first nine months of 2016. The *Corporate Clients *segment generates
an operating profit of EUR0.9 billion and revenues before loan loss
provisions of EUR3.4 billion for the same period. The new reporting
structure will come into effect in the fourth quarter of 2016, and the
results will be presented in this format for the first time with the annual
press conference on 9 February 2017.
The results under the former structure were as follows:
The *Private Customers* segment saw its operating profit climb to EUR580
million in the first nine months of 2016 (first nine months of 2015: EUR555
million). The third quarter accounted for EUR209 million of this (Q3 2015:
EUR228 million). In the period under review, as in the first nine months of
the previous year, non-recurring effects were recognised which, overall, had
a positive impact on the operating profit. Revenues before loan loss
provisions slipped slightly to EUR2,823 million in the first nine months
(first nine months of 2015: EUR2,870 million). The segment worked to counter
the ongoing pressure on its deposit business caused by the negative
interest-rate environment with the help of targeted measures, aimed in
particular at increasing the volume of the lending business. Its loan volume
rose by 8% year-on-year in the third quarter of 2016. New mortgage financing
was up on the previous quarter and year-on-year. The securities business
also improved slightly over the previous quarter. In addition, there was a
further improvement in the composition of securities revenues. The
proportion of the securities volume in premium custody accounts and managed
accounts increased from 43% to 48% in the first nine months in a
year-on-year comparison. Overall, the Private Customers segment saw
continued growth. The Bank has attracted a total of 994,000 net new
customers since 2013, so it is already close to its target of 1 million net
new customers by the end of the year. Loan loss provisions decreased in the
first nine months to a very low level of EUR11 million (first nine months of
2015: EUR51 million). Operating expenses were down slightly for the first
nine months at EUR2,232 million (first nine months of 2015: EUR2,264
million).
*Mittelstandsbank* saw its operating profit reduced year-on-year in the
first nine months of 2016 to EUR640 million due largely to lower revenues
and much higher loan loss provisions (first nine months of 2015: EUR910
million). The third quarter accounted for EUR229 million of this (Q3 2015:
EUR231 million). Hence, Mittelstandsbank continued to show a solid
performance overall. Revenues before loan loss provisions - excluding
adjustments for counterparty risk in the derivatives business - amounted to
EUR2,078 million in the first nine months of 2016 (first nine months of
2015: EUR2,195 million). The negative interest rate environment, especially,
had an adverse effect on deposit margins. In addition, net commission income
was lower, particularly in Financial Institutions, due to the strategic
focussing. However, revenues before loan loss provisions held stable in
Large Corporates & International over the same period. Loan loss provisions
for the segment rose substantially in the first nine months of 2016 to
EUR213 million (first nine months of 2015: EUR110 million). Operating
expenses were up over the same period - due primarily to investments in
Compliance and IT - at EUR1,238 million (first nine months of 2015: EUR1,195
million).
The *Central & Eastern Europe* segment posted a good operating profit of
EUR243 million for the first nine months of 2016 (first nine months of 2015:
EUR254 million). Of this, EUR57 million were contributed in the third
quarter (Q3 2015: EUR97 million). The new Polish banking tax introduced in
February 2016 resulted in a charge of EUR54 million, which was partly offset
by the positive revenue trend in the first nine months. Revenues before loan
loss provisions climbed to EUR720 million in the first nine months of 2016
(first nine months of 2015: EUR687 million). The good revenue performance
was supported by a positive one-off effect from the sale of the One Visa
shares, totalling EUR65 million, in the second quarter. The revenues for the
first nine months of 2015 also included a positive one-off effect of EUR46
million from the sale of the insurance business to the Axa Group. Even
excluding these two one-off effects, revenues increased year-on-year. This
was due to continued organic growth at mBank, which is reflected
particularly in the positive trend in net interest income. There was an
improvement both in volume terms and in the interest margin, for example the
volume of consumer loans increased by 15% over this period. mBank also
continued its positive trend in attracting new customers. In the third
quarter around 104,000 net new customers in Poland, the Czech Republic and
Slovakia joined mBank, taking its customer total to around 5.3 million
customers at the end of September. Loan loss provisions of the segment
remained virtually unchanged at EUR74 million in the first nine months of
2016 (first nine months of 2015: EUR75 million). Operating expenses
increased in the first nine months, as a result of the Polish banking tax,
to EUR403 million (first nine months of 2015: EUR358 million).
The *Corporates & Markets* segment, continuing to operate in a difficult
market environment, saw its operating profit for the first nine months of
2016 reduced to EUR147 million after adjustments for valuation effects from
own liabilities (OCS effect) and adjustments for counterparty risk in the
derivatives business (first nine months of 2015: EUR410 million). This
decrease was due mainly to a weaker first half in 2016. Its adjusted
operating profit for the third quarter was at EUR22 million (Q3 2015: EUR25
million). Revenues before loan loss provisions - excluding the OCS effect
and adjustments for counterparty risk in the derivatives business - fell to
EUR1,210 million in the first nine months (first nine months of 2015:
EUR1,514 million). Fixed Income & Currencies (FIC) and Advisory & Primary
Markets (APM) saw their revenues remain virtually stable over this period,
while Equity Markets & Commodities (EMC) and Credit Portfolio Management
(CPM) registered a dip in revenues. EMC in particular was hit by the high
level of uncertainty on the capital markets, which took its toll on business
in structured investment products for institutional clients. Loan loss
provisions in the segment totalled EUR22 million in the first nine months,
versus net releases of loan loss provisions amounting to EUR25 million in
the first nine months of 2015. Operating expenses were down sharply in the
first nine months of 2016 at EUR1,041 million (first nine months of 2015:
EUR1,129 million).
The *Asset & Capital Recovery* (ACR) segment reported a year-on-year
improvement in its operating result in the first nine months of 2016 to
minus EUR359 million (first nine months of 2015: minus EUR399 million). The
third quarter accounted for minus EUR108 million of this (Q3 2015: EUR52
million). Revenues before loan loss provisions slipped to EUR30 million in
the first nine months of 2016 (first nine months of 2015: EUR62 million).
Loan loss provisions for the same period were lower, at EUR292 million
(first nine months of 2015: EUR311 million), with only Ship Finance
reporting a net addition to loan loss provisions in 2016. Operating expenses
were down sharply in the first nine months of 2016 at EUR97 million (first
nine months of 2015: EUR150 million).
*Outlook *
Including the goodwill impairments, Commerzbank is expecting a positive net
result for the full year 2016. The CET 1 ratio after full application of
Basel 3 should rise to around 12% by the end of the year. Commerzbank
intends to keep its cost base for full year 2016 stable compared to last
year. The Bank will fully offset additional external burdens to achieve
this. Loan loss provisions should be under EUR1 billion despite the
continuously challenging situation on the shipping markets.
*Financial figures at a glance*
in EUR m *9M 2016* *Q3 2016* *Q2 2016* *9M 2015* *Q3 2015*
Net interest 4,126 1,508 1,274
and trading 4,951 1,469
income
Provisions for -610 -275 -187 -584 -146
loan losses
Net commission 2,379 777 781 2,595 825
income
Net investment 257 94 131 -106 -39
income
Current income
on companies 142 79 14 46 15
accounted for
at equity
Other income 96 -21 40 69 47
*Revenues 7,000 2,437 2,240
before loan 7,555 2,317
loss
provisions*
Operating 5,328 1,733 1,702 5,413 1,719
expenses
*Operating 1,062 429 351
profit or 1,558 452
loss*
Impairments of 627 627 - - -
Goodwill
Restructuring 97 57 40 94 28
expenses
*Pre-tax 338 -255 311
profit or 1,464 424
loss*
Taxes 161 14 58 489 158
*Consolidated
profit or loss
attributable 96 -288 215 891 235
to Commerzbank
shareholders*
Earnings per 0.08 -0.23 0.17 0.75 0.19
share (EUR)
Cost/income
ratio in 76.1 71.1 76.0 71.6 74.2
operating
business (%)
Operating RoTE 5.3 6.4 5.3 8.1 6.8
(%)
Net RoTE (%) 0.5 -4.5 3.4 4.8 3.7
Net RoE (%) 0.4 -4.0 3.0 4.3 3.3
CET 1 ratio
B3, fully 11.8 11.8 11.5 10.8 10.8
phased-in (%)
Leverage
Ratio, B3 4.5 4.5 4.4 4.1 4.1
fully
phased-in (%)
Total assets 513 513 533 568 568
(EUR bn)
*****
From approximately 7 am onwards you can find broadcast-ready video material
with statements by Chief Financial Officer Stephan Engels at
http://mediathek.commerzbank.de/ [1].
*****
*Press contact*
Alexander Cordes +49 69 136-42764
Karsten Swoboda +49 69 136-22339
Kathrin Wetzel +49 69 136-44011
*****
About Commerzbank
Commerzbank is a leading international commercial bank with branches and
offices in more than 50 countries. With 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 more than 30 per cent of Germany's
foreign trade and is the unchallenged leader in financing for SMEs. The
Commerzbank subsidiaries Comdirect in Germany and M Bank 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 boasts more than 16 million private
customers, as well as 1 million business and corporate clients. The Bank,
which was founded in 1870, is represented at all the world's major stock
exchanges. In 2015, it generated gross revenues of almost 9.8 billion Euro
with approximately 51,300 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.
The EQS Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Archive at www.dgap.de/ukreg
Language: English
Company: Commerzbank Aktiengesellschaft
Kaiserstraße 16
60311 Frankfurt am Main
Germany
Phone: +49 (069) 136 20
Fax: -
E-mail: pressestelle@commerzbank.com
Internet: www.commerzbank.de
ISIN: DE000CBK1001
WKN: CBK100
Indices: DAX, CDAX, HDAX, PRIMEALL
Listed: Regulated Market in Berlin, Dusseldorf, Frankfurt
(Prime Standard), Hamburg, Hanover, Munich,
Stuttgart; Regulated Unofficial Market in
Tradegate Exchange; London, SIX
Category Code: MSCU
TIDM: CZB
Sequence Number: 3565
Time of Receipt: 04-Nov-2016 / 07:00 CET/CEST
End of Announcement EQS News Service
517443 04-Nov-2016
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