DGAP-Regulatory: Commerzbank: Operating Profit Up - CET 1 Capital Ratio Increased to 11.8%

 
 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 [phone] 
Karsten Swoboda [phone] 
Kathrin Wetzel [phone] 
 
***** 
 
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:           [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:   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 
 
 

1: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=b9e39396c3a74844c54cf2fcbf6f5173&application_id=517443&site_id=vwd&application_name=news 
 

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November 04, 2016 02:09 ET (06:09 GMT)