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Commerzbank Aktiengesellschaft / Half-yearly Results
Commerzbank: Strategy Implementation well on Track - 500,000 Net New
Customers Won
02-Aug-2017 / 07:11 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group AG.
The issuer is solely responsible for the content of this announcement.
*- Full restructuring charges of EUR807m booked *
*- Net result for H1 2017 at minus EUR406m (H1 2016: EUR384m) - slightly
positive result for 2017 expected*
*- Despite restructuring charges Common Equity Tier 1 ratio at 13.0% (Q1
2017: 12.5%); **leverage ratio remains comfortable at 4.6 %*
*- Revenues in H1 excluding exceptional items up EUR93m at EUR4.34bn in 2017
transformation-year **(H1 2016: EUR4.25bn)*
*- Operating profit of EUR515m for first half 2017 (H1 2016: EUR633m);
EUR183m for Q2 (Q2 2016: EUR351m)*
*- Accelerated run-down of the ACR shipping portfolio by EUR0.9bn to
EUR3.9bn in first half - target of around EUR3bn by end of 2017*
Commerzbank is well on track with the implementation of its 'Commerzbank
4.0' strategy and has further improved its Common Equity Tier 1 ratio. The
Bank has already booked the whole of the announced restructuring charges in
the second quarter and agreed a framework social plan and framework
reconciliation of interests with the employee representative committees. At
mid-year, the Bank has already gained a net 500,000new customers in its
Private and Small Business Customers segment in Germany. In the Asset &
Capital Recovery (ACR) segment, the shipping portfolio was reduced by a
significant EUR*0.9* billion in the first half and now stands at EUR*3.9*
billion. The target is to reduce it to around EUR3 billion by the end of the
year.
The *operating profit* in the first half of this transitional year was down
year-on-year, also due to slower markets in the second quarter, at EUR515
million (H1 2016: EUR633 million). The operating profit for the second
quarter came in at EUR183 million (Q2 2016: EUR351 million). *Revenues
before loan loss provisions* remained stable in the first half, at EUR4,460
million (H1 2016: EUR4,563 million). Revenues excluding non-recurring items
rose year-on-year by EUR93 million to EUR4,344 million (H1 2016: EUR4,251
million). Revenues for the second quarter amounted to EUR2,068 million (Q2
2016: EUR2,240 million).
*Loan loss provisions* stood at EUR362 million for the first half (H1 2016:
EUR335 million). The figure for the second quarter was EUR167 million (Q2
2016: EUR187 million). The Bank's non-performing loan (NPL) ratio of just
1.5%, which remains low compared to its European peers, reflects its healthy
risk profile. *Operating expenses*, which amounted to EUR3,583 million in
the first half, were down on the first half of 2016 (EUR3,595 million).
Operating expenses for the second quarter stood at EUR1,718 million (Q2
2016: EUR1,702 million).
The Bank generated a *pre-tax result* of minus EUR292 million in the first
half of 2017 (H1 2016: EUR593 million). This includes restructuring charges
of EUR807 million. It had originally expected to book restructuring charges
of around EUR1,100 million, split between 2017 and 2018. The lower figure is
due to the personnel reductions already implemented, staff turnover, and
expected efficiencies in staff transfers and replacements.
Including tax expenses of EUR69 million and after deduction of minority
interests of EUR45 million, Commerzbank posted a *net result *of minus
EUR406 million (H1 2016: EUR384 million). The net result for the second
quarter was minus EUR637 million (Q2 2016: EUR215 million).
'We have booked the provisions for the personnel reductions early and in
full and have made further progress in the implementation of our strategy.
We are ahead of target for client growth, partly because we have invested.
However, it will take a while for this client growth to be reflected in
revenue growth. In our two transformational years 2017 and 2018, we are
thereby laying the foundations for a sustainably higher profitability', said
Martin Zielke, Chairman of the Board of Managing Directors of Commerzbank.
The *Common Equity Tier 1 ratio *(CET 1) with full application of Basel 3
rose to 13.0%, versus 12.5% at the end of March 2017. The increase is
largely attributable to the decrease in *risk-weighted assets* (RWA). This
fall, on a Basel 3 fully-loaded basis, was due partly to active portfolio
management in credit risk and favourable effects resulting from currency
movements. RWA stood at EUR178.5 billion at the end of June 2017, compared
with EUR186.2 billion at the end of March 2017 and EUR198.3 billion at the
end of June 2016. The *leverage ratio* stood at 4.6%. *Total assets* came to
EUR487 billion (end of March 2017: EUR490 billion).
'Our Common Equity Tier 1 ratio has gone up to 13.0% in spite of
restructuring charges and we expect a slightly positive net result for the
financial year. Despite increased investments in digitalisation we were able
to reduce our costs year-on-year', commented Stephan Engels, Chief Financial
Officer of Commerzbank.
The digital transformation of Commerzbank is on track. The Digital Campus,
the hub of the Bank's digitalisation activities, is fully staffed and 8
Journeys are being processed. The second quarter saw the launch of
Commerzbank's new mortgage app and the Comdirect digital asset management
service. Besides this, the Bank established its new Big Data & Advanced
Analytics division which will employ some 100 data specialists.
*Development of the segments*
The *Private and Small Business Customers* segment is ahead of target in
terms of growth in customer numbers and assets under control in Germany. The
number of net new customers since October 2016 stands at around 522,000.
385,000 of these joined the Bank in the first half of 2017, including around
100,000 from the acquisition of Onvista by Comdirect. Assets under control
rose by EUR19 billion in the first half to EUR357 billion. The volume of new
mortgage lending business amounted to nearly EUR8 billion in the first half
(H1 2016: EUR6.1 billion).
The operating profit, at EUR336 million, was down on the same period of the
previous year (H1 2016: EUR572 million). Factors that played a part here
include a positive non-recurring effect of EUR123 million in the second
quarter of 2016 from the sale of Visa Europe shares and higher investments
in growth initiatives. These investments are usually amortised within
approximately 18 months. The operating profit for the second quarter stood
at EUR142 million (Q2 2016: EUR295 million). Revenues before loan loss
provisions were down slightly year-on-year in the first half, at EUR2,279
million (H1 2016: EUR2,427 million). The fall was due in large part to
investments in initiatives to promote customer growth, which were funded
from current revenues. The revenue figure for the second quarter was
EUR1,111 million (Q2 2016: EUR1,232 million).
Loan loss provisions increased in the first half to EUR75 million (H1 2016:
EUR65 million), EUR42 million of which was booked in the second quarter (Q2
2016: EUR42 million). Operating expenses increased in the first half to
EUR1,868 million (H1 2016: EUR1,790 million). In the second quarter,
operating expenses amounted to EUR927 million (Q2 2016: EUR895 million). The
first-half increase is attributable to the introduction of the European bank
levy in Poland (EUR28 million) and investments in future growth.
mBank recorded revenues before loan loss provisions of EUR484 million in the
first half of 2017 (H1 2016: EUR493 million). Of this, EUR243 million was
generated in the second quarter (Q2 2016: EUR273 million). The volume of new
consumer loan business increased by more than 20% in the first half. mBank
also gained roughly 200,000 net new customers in the first half, 100,000 of
them in the second quarter. This means it now has approximately 5.6 million
retail and business customers in Poland, the Czech Republic, and Slovakia.
In the *Corporate Clients* segment, the strategic realignment is under way.
The operating profit for the first half stood at EUR502 million (H1 2016:
EUR600 million); in a weak market environment the operating profit for the
second quarter stood at solid EUR235 million (Q1 2017: EUR267 million).
Revenues before loan loss provisions were down year-on-year in the first
half, at EUR2,043 million (H1 2016: EUR2,240 million). Of this, EUR943
million were generated in the second quarter (Q2 2016: EUR1,095 million).
The Mittelstand and International Corporates Group divisions registered
solid contribution from Corporate Finance, but saw muted client activity in
Fixed Income and Currencies as well as ongoing headwinds from low interest
rates. The strategic realignment and new setup of the Financial Institutions
business is well on track. The Equity Markets & Commodities Group division
benefited from solid client activity and good demand for investment products
in the first half.
The segment's loan loss provisions decreased in the first half of 2017 to
EUR76 million (H1 2016: EUR128 million), of which EUR33 million was booked
in the second quarter. Despite strategic investments and higher regulatory
and compliance expenditure, the segment was able to lower its costs:
operating expenses were reduced year-on-year to EUR1,465 million (H1 2016:
EUR1,512 million).
In the *Asset & Capital Recovery* (ACR) segment, the ship finance and
commercial real estate finance portfolios were reduced by about EUR1.5
billion in the first half. The shipping portfolio, having been run down by
EUR0.9 billion in the first half, now stands at around EUR3.9 billion. The
segment's operating resultimproved in the first half of 2017 to minus EUR115
million (H1 2016: minus EUR251 million). Its operating result for the second
quarter was minus EUR82 million (Q2 2016: minus EUR132 million). Revenues
before loan loss provisions increased to EUR154 million (H1 2016: minus
EUR42 million). The revenue figure for the second quarter was EUR39 million
(Q2 2016: minus EUR24 million). Loan loss provisions increased in the first
half to EUR211 million (H1 2016: EUR145 million). In the second quarter,
loan loss provisions stood at EUR92 million (Q2 2016: EUR75 million). These
were booked for ship finance only. Operating expenses were reduced in the
first half of 2017 to EUR58 million (H1 2016: EUR64 million). The second
quarter accounted for EUR29 million of this (Q2 2016: EUR33 million).
*Outlook*
In the financial year 2017, the Bank will further strengthen its market
position and will focus on the execution of the 'Commerzbank 4.0' strategy.
The Bank aims for a CET 1 ratio of around 12.5% including the IFRS 9 impact
effective 1 January 2018. The cost base is expected to be below EUR7.1
billion. Loan loss provisions are expected to amount to around EUR800
million, with the ACR segment accounting for around EUR450 million of this.
The result of the second half of the year will benefit from positive
exceptional revenue items of more than EUR390 million stemming from sales
and revaluations. The Bank is expecting a slightly positive net result for
the financial year 2017.
*******
*Financial figures at a glance*
in EURm *H1 2017* *H1 * *Q2 * *Q2 *Q1* *H1 '17
*2016* *2017* 2016* *2017* vs. H1
'16 in
%*
Net interest 2,707 2,615 1,243 1,272 1,464 3.5
and trading
income
Provisions for -362 -335 -167 -187 -195 8.1
loan losses
Net commission 1,666 1,606 779 783 887 3.7
income
Net investment 69 163 34 131 31 -60.1
income
Current income 15 63 8 14 7 -76.2
on companies
accounted for
at equity
Other income 7 116 4 40 3 -94
*Revenues 4,460 4,563 2,068 2,240 2,392 -2.3
before loan
loss
provisions*
_Revenues excl. 4,344 4,251 2,060 2,083 2,284 2,2
exceptional
items_
Operating 3,583 3,595 1,718 1,702 1,865 -0.3
expenses
*Operating 515 633 183 351 332 -18.6
profit or loss*
Impairments of - - - - - -
Goodwill
Restructuring 807 40 807 40 - -
expenses
*Pre-tax profit -292 593 -624 311 332 -
or loss*
Taxes 69 147 -12 58 81 -53.1
*Consolidated -406 384 -637 215 231 -
profit or loss
attributable to
Commerzbank
shareholders*
Earnings per -0.32 0.31 -0.50 0.18 0.18
share (EUR)
Cost/income 80.3 78.8 83.1 76.0 78.0
ratio in
operating
business (%)
Operating RoTE 3.8 4.8 2.7 5.4 4.9
(%)
Net RoTE (%) -3.1 3.0 -9.8 3.4 3.6
Net RoE (%) -2.8 2.7 -8.9 3.0 3.2
CET 1 ratio, B3 13.0 11.5 13.0 11.5 12.5
fully phased-in
(%)
Leverage Ratio, 4.6 4.4 4.6 4.4 4.6
B3 fully
phased-in (%)
Total assets 487 533 487 533 490
(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*
Alexander Cordes +49 69 136-42764
Karsten Swoboda +49 69 136-22339
Maurice Farrouh +49 69 136-21947
*****
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.
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: IR
TIDM: CZB
Sequence No.: 4489
End of Announcement EQS News Service
597981 02-Aug-2017
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