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Commerzbank Aktiengesellschaft (CZB)
Commerzbank: Strategy implementation progressing, operating profit for H1
2018 of EUR689m
07-Aug-2018 / 07:03 CET/CEST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
*- Net profit of EUR533m for first half of 2018 (H1 2017: minus EUR414m) *
*- Operating profit of EUR389m for second quarter (Q2 2017: EUR179m) and of
EUR689m for the first half **(H1 2017: EUR505m) *
*- Underlying revenues up by 4% at EUR4.52bn (H1 2017: EUR4.34bn)*
*- Agreement on sale of EMC business marks a strategic milestone*
*- Common Equity Tier 1 ratio of 13.0% reflects loan growth (end of March
2018: 13.3%)*
*- Outlook slightly adjusted*
Commerzbank made further progress in the implementation of its Commerzbank
4.0 *strategy* in the first half of 2018. The agreement on the sale of its
Equity Markets & Commodities business to Société Générale marks another
milestone for Commerzbank in the simplification of its business model.
Revenues excluding exceptional items rose 4% year-on-year to EUR4,515
million (H1 2017: EUR4,335 million), driven in particular by the Private and
Small Business Customers segment. Customer growth continued here at a
slightly slower rate. Assets under control already exceeded the target for
2018. The Corporate Clients segment further increased its loan volume. Since
2016, the segment has gained 7,500 net new customers. The proportion of
processes that had been digitalised stood at 56 percent at mid-year,
following the completion of three digitalisation projects ('journeys').
Group *revenues* increased to EUR4,534 million in the first half (H1 2017:
EUR4,450 million), and to EUR2,221 million in the second quarter (Q2 2017:
EUR2,064 million). *Operating expenses* in the first half stood at EUR3,684
million (H1 2017: EUR3,583 million), due to ongoing investments in strategy
implementation and digitalisation, as well as higher regulatory costs.
Operating expenses for the second quarter stood at EUR1,748 million (Q2
2017: EUR1,718 million). The *risk result* benefited from the Bank's strong
risk profile in a still benign credit environment and was minus EUR161
million in the first half. The risk result for the second quarter came to
minus EUR84 million. The Bank's non-performing loan (NPL) ratio, at just
0.9%, remained low compared to its European peers.
The *operating profit* and *pre-tax profit* for the first half of 2018
climbed to EUR689 million (H1 2017: operating profit EUR505 million; pre-tax
result minus EUR302 million). The operating profit for the second quarter
came to EUR389 million (Q2 2017: EUR179 million). After deduction of taxes
of EUR99 million and minority interests of EUR57 million, Commerzbank
achieved a *net profit* of EUR533 million in the first half (H1 2017: minus
EUR414 million). The net profit for the second quarter stood at EUR272
million (Q2 2017: minus EUR640 million). In the previous year, the net
result had been driven by restructuring charges.
'Our strategy implementation is progressing. We are growing and further
simplifying and digitalising our business', said Martin Zielke, Chairman of
the Board of Managing Directors of Commerzbank. 'Given the intense
competition, particularly in corporate clients, we have slightly adjusted
our outlook. Our growth initiatives are already working. Of course, it will
take some time for them to take full effect.'
The *Common Equity Tier 1 ratio *(CET 1) stood at 13.0% at the end of June,
versus 13.3% at the end of March 2018. This includes the net result with a
dividend accrual of 10 cents per share for the first half of the year.
Driver for the decrease of the CET 1 ratio was the loan growth in the core
business - including larger, short-term transactions in acquisition finance
- and the associated rise in risk-weighted assets (RWA) for credit risk.
Overall, RWA increased to EUR176 billion at the end of June 2018 (end of
March 2018: EUR170 billion). The *leverage ratio* stood at 4.5% (end of
March 2018: 4.6%). *Total assets* came to EUR488 billion (end of March 2018:
EUR470 billion).
'We have addressed fierce competition and margin pressure by successfully
expanding our lending. This is why our Common Equity Tier 1 ratio has moved
a bit in the second quarter. We are expecting a CET 1 ratio of at least
13,0% for year-end', said Stephan Engels, Chief Financial Officer of
Commerzbank. 'Our cost target of EUR6.5 billion for 2020 remains unchanged.
In view of investment activities, regulatory contributions and project
costs, we have slightly adjusted our cost target for the full year 2018 to
EUR7.1 billion.'
*Development of the segments*
The *Private and Small Business Customers* segment continued on its growth
path in the first half in a highly competitive market environment. Revenues
excluding exceptional items rose by EUR160 million in the first half. Total
revenues climbed to EUR2,439 million in the first half (H1 2017: EUR2,280
million). The revenue figure for the second quarter was EUR1,201 million (Q2
2017: EUR1,112 million).
In terms of Assets under Control in Germany, the segment has already met its
target for the year of over EUR385 billion: at the end of the second quarter
they amounted to EUR386 billion. The volume of mortgage lending reached
EUR72 billion at mid-2018, while the consumer finance book totalled EUR3.5
billion. Growth in customer numbers slowed in the first half, with 145,000
net new customers - partly because, for reasons of client-profitability, the
Bank will not engage in the current pricing competition for new retail
customers at any cost.
Operating expenses increased in the first half to EUR1,945 million (H1 2017:
EUR1,868 million). This is attributable to regulatory charges and further
investments in digitalisation. The segment's risk result came to minus
EUR121 million in the first half, with the second quarter accounting for
minus EUR70 million of this.
Its operating profit rose to EUR373 million in the first half (H1 2017:
EUR336 million), and to EUR171 million in the second quarter (Q2 2017:
EUR142 million).
Commerzbank's subsidiaries continued their growth trend in the first half.
mBank increased its adjusted revenues to EUR518 million (H1 2017: EUR484
million) and acquired around 167,000 net new customers in the first half,
around 88,000 of these in the second quarter. It now has about 5.5 million
retail and corporate customers in Poland, the Czech Republic and Slovakia.
Comdirect contributed revenues of EUR199 million in the first half, a
year-on-year increase of EUR15 million. Commerz-Real's revenues, at EUR119
million, were likewise higher than at mid-2017.
The *Corporate Clients* segment made good progress towards its growth
targets in the first half. The loan volume in Mittelstand and International
Corporates, including some short-term transactions, rose to EUR80 billion.
With 7,500 net new customers since 2016, the segment already also exceeded
its 2018 target of 7,000. However, continued high pressure on margins
effected revenues despite successful growth initiatives. First-half revenues
came to EUR1,914 million (H1 2017: EUR2,043 million). In the second quarter,
revenues were supported by a large transaction in Credit Portfolio
Management, and amounted to EUR948 million (Q2 2017: EUR943 million).
Operating expenses came to EUR1,502 million in the first half (H1 2017:
EUR1,466 million). The risk result stood at minus EUR56 million for the
first half, and minus EUR33 million for the second quarter.
The segment's operating profit for the first half was down on the previous
year's, at EUR357 million (H1 2017: EUR501 million). For the second quarter
operating profit stood at EUR212 million (Q2 2017: EUR234 million).
The *Asset & Capital Recovery* segment achieved a positive operating result
of EUR76 million in the first half of the year (H1 2017: minus EUR115
million, Q2 2018: EUR58 million). The revaluation of the Ship Finance
portfolio following the introduction of IFRS 9 had a positive effect here.
First-half revenues came to EUR107 million (H1 2017: EUR153 million). The
revenue figure for the second quarter was EUR62 million (Q2 2017: EUR39
million). The risk result for the first half came out at EUR13 million.
Operating expenses were down at EUR44 million (H1 2017: EUR57 million). The
second quarter accounted for EUR17 million (Q2 2017: EUR28 million). The
Bank's Ship Finance portfolio amounted to EUR1.4 billion (H1 2017: EUR5.0
billion).
*Outlook*
The outlook has been adjusted slightly. In 2018, the Bank will focus on
further growth and the implementation of its Commerzbank 4.0 strategy.
Higher underlying revenues are expected at Group level with the Private and
Small Business Customers segment exceeding and the Corporate Clients segment
being below the 2017 figures. Driven by investments and compulsory
contributions, costs are expected to be at around EUR7.1 billion. The risk
result under IFRS 9 should be below 500 million, provided the global trade
conflicts do not escalate significantly and there are no unforeseeable
larger credit events. The Bank is aiming to resume dividend payments of 20
cents per share for financial year 2018.
*Financial figures at a glance*
*H1 2018* *H1 2017* *Q2 * *Q2 * *Q1 * *H1/18
in EURm *2018* *2017* *2018* vs
H1/17
in %*
Net interest 2,207 2,053 1,162 1,004 1,045 7.5
income
Net commission 1,562 1,666 765 779 797 -6.2
income
Net fair value 625 693 268 294 356 -9.8
result
Other income 141 39 26 -13 115 -
*Revenues
before risk 4,534 4,450 2,221 2,064 2,314 1.9
result*
_Revenues
excl. 4,515 4,335 2,203 2,056 2,312 4.2
exceptional
items_
Operating 3,684 3,583 1,748 1,718 1,936 2.8
expenses
Risk result
(2017: Loan -161 -362 -84 -167 -77 55.6
loss
provisions)
*Operating
profit or 689 505 389 179 301 36.4
loss*
Impairments of - - - -
Goodwill
Restructuring - 807 - 807 -
expenses
*Pre-tax
profit or 689 -302 389 -628 301 -
loss*
Taxes 99 67 94 -13 5 46.5
*Consolidated
profit or loss
attributable 533 -414 272 -640 262 -
to Commerzbank
shareholders*
Earnings per 0.43 -0.33 0.22 -0.51 0.21
share (EUR)
Cost/income
ratio in 81.3 80.5 78.7 83.2 83.7
operating
business (%)
Operating RoTE 5.3 3.7 5.9 2.7 4.6
(%)
Net RoTE (%) 4.3 -3.2 4.3 -9.8 4.2
Net RoE (%) 3.8 -2.9 3.9 -8.9 3.8
CET 1 ratio,
Basel 3 fully 13.0 13.0 13.0 13.0 13.3
phased-in (%)
Leverage
Ratio, Basel 3 4.5 4.6 4.5 4.6 4.6
fully
phased-in (%)
Total assets 488 487 488 487 470
(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
*****
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 and Corporate Clients, the Bank offers a
comprehensive portfolio of financial services which is precisely aligned to
its clients' needs. Commerzbank finances approximately 30% of Germany's
foreign trade and is the leading finance provider 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 2017, it generated
gross revenues of EUR9.1 billion with approximately 49,300 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.
ISIN: DE000CBK1001
Category Code: IR
TIDM: CZB
LEI Code: 851WYGNLUQLFZBSYGB56
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited
reviews
Sequence No.: 5842
EQS News ID: 711389
End of Announcement EQS News Service
1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=b9e39396c3a74844c54cf2fcbf6f5173&application_id=711389&site_id=vwd&application_name=news
(END) Dow Jones Newswires
August 07, 2018 01:03 ET (05:03 GMT)
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