Commerzbank: Strategy implementation progressing, operating profit for H1 2018 of EUR689m (711389)

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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 [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 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)