Commerzbank: Strategy Implementation well on Track - 500,000 Net New Customers Won

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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 [phone] 
Karsten Swoboda [phone] 
Maurice Farrouh [phone] 
 
***** 
 
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:         [phone] 
Fax:           - 
E-mail:        [e-mail] 
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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(END) Dow Jones Newswires

August 02, 2017 01:11 ET (05:11 GMT)