Commerzbank: Strategy implementation on track - Operating profit of EUR1,144m after nine months 2017

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 Commerzbank Aktiengesellschaft (CZB) 
Commerzbank: Strategy implementation on track - Operating profit of 
EUR1,144m after nine months 2017 
 
09-Nov-2017 / 07:07 CET/CEST 
Dissemination of a Regulatory Announcement, transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
*- Operating profit of EUR629m for the third quarter (Q3 2016: EUR429m); 
EUR1,144m after nine months (first nine months of 2016: EUR1,062m) * 
 
*- Adjusted revenues came to EUR6.35bn in the first nine months (first nine 
months of 2016: EUR6.46bn) - one-offs of EUR618m; segments Private and Small 
Business Customers and Corporate Clients stable quarter-on-quarter* 
 
*- Net profit after nine months of EUR66m despite restructuring expenses of 
EUR807m in the second quarter of 2017* 
 
*- Common Equity Tier 1 ratio up significantly to 13.5% (end of June 2017: 
13.0%); leverage ratio comfortable at 4.7%* 
 
*- ACR shipping portfolio reduced by more than 30% in the first nine months 
to EUR3.3bn. On track for year-end target of around EUR3bn - acceleration of 
portfolio run-down under consideration * 
 
*- Around 587,000 net new customers in German retail banking since October 
2016 - consumer loan platform fully integrated* 
 
Commerzbank continued to pursue its growth strategy in the third quarter, 
further increased its capital ratio, and made further progress in reducing 
the run-down portfolios. The business performance of client facing segments 
was stable quarter-on-quarter. In the Private and Small Business Customers 
segment, Commerzbank has gained around 450,000 net new customers and 
increased assets under control by EUR28 billion in Germany since the start 
of the year. By pursuing its growth agenda, the Bank is laying the 
foundations for future profitability. The Common Equity Tier 1 ratio stood 
at 13.5% at the end of September up from 11.8% a year earlier. In the Asset 
& Capital Recovery (ACR) segment, the shipping portfolio saw a substantial 
reduction of EUR1.5 billion in the first nine months of 2017, taking it to 
EUR3.3 billion at the end of the third quarter. 
 
The Bank also continued with the implementation of its 'Commerzbank 4.0' 
strategy in the third quarter as planned. The termination of the Commerz 
Finanz GmbH joint venture and the transfer of the consumer loan portfolio of 
around EUR3.5 billion onto the Bank's books and systems were fully completed 
in the third quarter. The transfer of this portfolio now offers an 
opportunity for Commerzbank to expand the business on its own platform. Its 
target is to increase this portfolio to over EUR10 billion by 2020. 
Investments in digitalisation and its implementation in the Digital Campus 
are running to plan. 
 
'We have made good progress in laying foundations for our transformation 
this year. In the interest of sustainable long-term profitability, we are 
focussing on growth. We have grown both in terms of clients and assets, 
having successfully reallocated RWAs and capital to our core businesses and 
strongly invested into our digitalisation and IT. We have now successfully 
transferred the consumer loan business onto our books and are now able to 
further grow this business', said Martin Zielke, Chairman of the Board of 
Managing Directors of Commerzbank. 
 
The Bank saw its *operating profit* increase by 7.7% year-on-year in the 
first nine months to EUR1,144 million (first nine months of 2016: EUR1,062 
million). Previously announced non-recurring revenue items and valuation 
effects, which sum up to EUR618 million after nine months, contributed to 
this increase (first nine months of 2016: EUR543 million). The operating 
profit for the third quarter 2017 came in at EUR629 million (Q3 2016: EUR429 
million). The exceptional revenue items which arose mainly from real estate 
sales, the sale of Concardis, and the termination of the consumer loan joint 
venture with BNP Paribas, amounted to EUR502 million in the third quarter, 
and therefore had more of an impact than the non-recurring items in the same 
quarter of last year (Q3 2016: EUR231 million). *Revenues before loan loss 
provisions* were also stable in the first nine months, at EUR6,971 million 
(first nine months of 2016: EUR7,000 million). In the third quarter they 
rose by 3.0% to EUR2,511 million (Q3 2016: EUR2,437 million). Excluding 
non-recurring items, revenues before loan loss provisions were down 
year-on-year in the first nine months, at EUR6,353 million (first nine 
months of 2016: EUR6,457 million). This shows that the Bank's growth in 
customer numbers and assets helped mitigating the negative interest rate 
environment and lower margins. In the third quarter, the Bank's underlying 
revenues came to EUR2,009 million (Q3 2016: EUR2,206 million). 
 
Net *loan loss provisions*, at EUR530 million, were lower year-on-year in 
the first nine months of 2017 (first nine months of 2016: EUR610 million). 
The figure for the third quarter was EUR168 million (Q3 2016: EUR275 
million). Therefore, the Bank recorded a non-performing loan (NPL) ratio of 
just 1.5%, which is still low compared to its European peers, reflecting its 
healthy risk profile. *Operating expenses* were down slightly for the first 
nine months at EUR5,297 million (first nine months of 2016: EUR5,328 
million). Personnel expenses decreased due to the personnel reductions, 
whereas expenses attributable to the various bank levies increased by EUR42 
million. Operating expenses for the third quarter stood at EUR1,714 million 
(Q3 2016: EUR1,733 million). 
 
Taking into account the restructuring expenses of EUR807 million booked in 
the second quarter in connection with the 'Commerzbank 4.0' strategy, the 
*pre-tax profit* for the first nine months of 2017 came to EUR337 million 
(first nine months of 2016: EUR338 million). The pre-tax profit had been 
adversely affected in the first nine months of 2016 by an impairment on 
goodwill and other intangible assets of EUR627 million and restructuring 
charges of EUR97 million. So after deduction of taxes of EUR204 million and 
minority interests of EUR67 million, Commerzbank posted a positive *net 
profit* of EUR66 million for the first nine months of 2017 (first nine 
months of 2016: EUR96 million). The net result for the third quarter stood 
at EUR472 million (Q3 2016: minus EUR288 million). *Earnings per share* came 
in at EUR0.05 in the first nine months of 2017 (first nine months of 2016: 
EUR0.08). 
 
The *Common Equity Tier 1 ratio *(CET 1) with full application of Basel 3 
rose to 13.5% at the end of September 2017, versus 13.0% at the end of June 
2017. This increase was attributable firstly to the larger CET 1 capital 
base: the Bank's CET 1 capital with full application of Basel 3 rose by 
around EUR0.7 billion due mainly to the improved net profit. Secondly, 
*Risk-Weighted Assets* (RWA) were also lower again. RWAs associated with 
planned growth in the Bank's core business and operational risks were 
higher, while there were lower RWAs for market risks and due to the 
portfolio run-down in Ship Finance. RWA with full application of Basel 3 
stood at EUR176.6 billion at the end of September 2017, compared with 
EUR178.5 billion at the end of June 2017 and EUR194.6 billion at the end of 
September 2016. The *leverage ratio* came out at 4.7% at the end of the 
third quarter of 2017. *Total assets* came to EUR490 billion (end of June 
2017: EUR487 billion). 
 
'We have increased our Common Equity Tier 1 ratio significantly to 13.5 
percent. Taking into account the IFRS 9 effect, we are aiming for a CET 1 
ratio of at least 12.5 percent as of 1 January 2018. Besides growth, cost 
management remains a top priority. Active management has enabled us to keep 
our costs stable despite the investments in digitalisation and IT', said 
Stephan Engels, Chief Financial Officer of Commerzbank. 'We are continuing 
to make good progress with the run-down of our ACR shipping portfolio. We 
are on track to achieve our target for the year of around EUR3 billion. With 
IFRS 9 due to be implemented by the turn of the year, we are currently 
considering revaluating our Ship Finance portfolio to run it down even 
faster than previously planned.' 
 
*Performance of the segments* 
 
The *Private and Small Business Customers* segment continued with its growth 
strategy and is ahead of target in terms of growth in customer numbers and 
assets under control in Germany. Commerzbank has gained approximately 
587,000 net new customers since October 2016. Around 450,000 of these were 
acquired in the first nine months of 2017, including around 100,000 as a 
result of the takeover of Onvista by Comdirect. Assets under control rose by 
EUR28 billion over the same period to EUR366 billion. The volume of new 
mortgage lending business reached EUR11.3 billion in the first nine months 
of 2017 (first nine months of 2016: EUR9.2 billion). 
 
The operating profit for the segment for the first nine months of 2017 was 
down year-on-year at EUR717 million (first nine months of 2016: EUR845 
million). The decrease is attributable primarily to an increase in operating 
expenses. In the third quarter an operating profit of EUR381 million was 
generated - also supported by non-recurring items (Q3 2016: EUR273 million). 
Revenues before loan loss provisions remained stable year-on-year in the 
first nine months of 2017 at EUR3,642 million (first nine months of 2016: 
EUR3,643 million). The revenue figure for the third quarter was EUR1,363 
million (Q3 2016: EUR1,216 million). This included non-recurring items 
totalling EUR238 million, mainly from the previously announced sale of the 
Concardis holdings and the valuation in connection with the termination of 
the consumer loan joint venture with BNP Paribas. Excluding non-recurring 
items, revenues before loan loss provisions came to EUR1,125 million, so 
were stable relative to the previous quarter (Q2 2017: EUR1,110 million). 
 
Loan loss provisions for the segment rose by 23.8% in the first nine months 

of 2017 to EUR130 million (first nine months of 2016: EUR105 million). EUR55 
million of this was booked in the third quarter (Q3 2016: EUR40 million). 
Operating expenses increased to EUR2,795 million in the first nine months 
(first nine months of 2016: EUR2,693 million). The EUR24 million increase in 
compulsory contributions in Poland was a key factor in this. Of the 
operating expenses, EUR927 million was incurred in the third quarter (Q3 
2016: EUR903 million). 
 
mBank revenues before loan loss provisions increased in the first nine 
months of 2017 to EUR738 million (first nine months of 2016: EUR721 
million). Thereof, EUR254 million were generated in the third quarter (Q3 
2016: EUR228 million). The volume of new consumer loan business went up by 
more than 15% year-on-year in the first nine months. mBank has attracted 
around 208,000 net new customers since the beginning of the year. In the 
third quarter of 2017, mBank retrospectively adjusted its customer numbers 
for authorised users of a microfirm current account. At the end of September 
2017, mBank had approximately 5.3 million retail and business customers in 
Poland, the Czech Republic and Slovakia. 
 
*Corporate Clients* had to deal with weak markets and the challenges from 
the negative interest rate environment. In the first nine months of 2017 it 
reported an operative result of EUR742 million (first nine months of 2016: 
EUR927 million). The third quarter accounted for EUR241 million of this (Q3 
2016: EUR327 million). Adjusted revenues before loan loss provisions slipped 
to EUR2,981 million in the first nine months of 2017 (first nine months of 
2016: EUR3,147 million). In the third quarter, they were slightly higher 
than in the previous quarter, at EUR961 million (Q2 2017: EUR952 million). 
 
Mittelstand saw muted loan demand, but was able to partially compensate for 
it with a good performance with capital market products. International 
Corporates grew its lending business slightly compared to the first nine 
months of the previous year. However, demand for structured capital market 
products declined over the same period. The strategic realignment and 
repositioning of Financial Institutions is on track. Revenues have now 
stabilised. Equity Markets & Commodities benefited in the first nine months 
from solid customer activity due to favourable equity markets. 
 
Loan loss provisions for the Corporate Clients segment were reduced in the 
first nine months of 2017 to EUR123 million (first nine months of 2016: 
EUR215 million). The segment saw its operating expenses for the same period 
reduced to EUR2,148 million (first nine months of 2016: EUR2,219 million). 
It managed to cut its costs despite strategic investments and higher 
expenditure on the implementation of regulatory and compliance requirements. 
 
In the *Asset & Capital Recovery* (ACR) segment, the Ship Finance and 
Commercial Real Estate Finance portfolios were reduced by about EUR2.3 
billion in the first nine months of 2017. The shipping portfolio, having 
been run down by EUR1.5 billion or more than 30% in the first nine months, 
now stands at around EUR3.3 billion. The segment's operating result improved 
in the first nine months of 2017 to minus EUR215 million (first nine months 
of 2016: minus EUR359 million). The figure for the third quarter was minus 
EUR100 million (Q3 2016: minus EUR108 million). Revenues before loan loss 
provisions increased to EUR141 million in the first nine months (first nine 
months of 2016: EUR30 million). Loan loss provisions were reduced over the 
same period to EUR277 million (first nine months of 2016: EUR292 million). 
Nearly all of these provisions were for Ship Finance. Operating expenses 
were down in the first nine months of 2017 at EUR79 million (first nine 
months of 2016: EUR97 million). 
 
*Outlook* 
 
The Bank will continue to strengthen its market position and focus on the 
implementation of the 'Commerzbank 4.0' strategy. The Bank is aiming for a 
Common Equity Tier 1 ratio of at least 12.5%, including the effect of the 
introduction of IFRS 9, from 1 January 2018. The cost base is expected to be 
below EUR7.1 billion for 2017. Loan loss provisions are likely to amount to 
around EUR800 million, with the ACR segment accounting for around EUR400 
million of this. The Bank is still expecting a slightly positive net result 
for the year as a whole. 
 
******* 
 
*Financial figures at a glance* 
 
               *9M 2017*  *9M *  *Q3 * *Q3 2016*   *Q2*  *9M'17 
in EURm                  *2016* *2017*           *2017*     vs. 
                                                          9M'16 
                                                          in %* 
Net interest       3,953  4,120  1,246     1,505  1,243    -4.1 
and trading 
income 
Provisions for      -530   -610   -168      -275   -167   -13.1 
loan losses 
Net commission     2,404  2,387    738       781    779     0.7 
income 
Net investment       365    257    300        94     34    42.0 
income 
Current income 
on companies          21    142      6        79      8   -85.2 
accounted for 
at equity 
Other income         228     94    221       -22      4   142.6 
*Revenues          6,971  7,000  2,511     2,437  2,068    -0.4 
before loan 
loss 
provisions* 
_Revenues          6,353  6,457  2,009     2,206  2,060    -1.6 
excl. 
exceptional 
items_ 
Operating          5,297  5,328  1,714     1,733  1,718    -0.6 
expenses 
*Operating         1,144  1,062    629       429    183     7.7 
profit or 
loss* 
Impairments of         -    627      -       627      -       - 
Goodwill 
Restructuring        807     97      -        57    807       - 
expenses 
*Pre-tax             337    338    629      -255   -624    -0.3 
profit or 
loss* 
Taxes                204    161    135        14    -12    26.7 
*Consolidated 
profit or loss 
attributable          66     96    472      -288   -637   -31.2 
to Commerzbank 
shareholders* 
Earnings per        0.05   0.08   0.38     -0.23  -0.50 
share (EUR) 
Cost/income 
ratio in            76.0   76.1   68.3      71.1   83.1 
operating 
business (%) 
Operating RoTE       5.7    5.4    9.4       6.5    2.7 
(%) 
Net RoTE (%)         0.3    0.5    7.3      -4.5   -9.8 
Net RoE (%)          0.3    0.4    6.6      -4.1   -8.9 
CET 1 ratio, 
B3 fully            13.5   11.8   13.5      11.8   13.0 
phased-in (%) 
Leverage 
Ratio, B3            4.7    4.5    4.7       4.5    4.6 
fully 
phased-in (%) 
Total assets         490    514    490       514    487 
(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 [phone] 
Karsten Swoboda [phone] 
Maurice Farrouh [phone] 
Erik Nebel [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. 
 
ISIN:          DE000CBK1001 
Category Code: QRT 
TIDM:          CZB 
LEI Code:      851WYGNLUQLFZBSYGB56 
Sequence No.:  4823 
 
End of Announcement EQS News Service 
 
627109 09-Nov-2017 
 
 

1: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=b9e39396c3a74844c54cf2fcbf6f5173&application_id=627109&site_id=vwd&application_name=news 
 

(END) Dow Jones Newswires

November 09, 2017 01:07 ET (06:07 GMT)