Commerzbank: first year of strategy implementation with positive net result of EUR156m despite restructuring charge

Dow Jones received a payment from EQS/DGAP to publish this press release.

 
 
 Commerzbank Aktiengesellschaft (CZB) 
Commerzbank: first year of strategy implementation with positive net result 
of EUR156m despite restructuring charge 
 
08-Feb-2018 / 07:06 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 EUR1,303m for 2017 (2016: EUR1,399m) and of EUR159m 
for Q4 2017 (Q4 2016: EUR337m) * 
 
*- Revenues excluding exceptional items rose to EUR8.61bn in 2017 supported 
by growth (2016: EUR8.57bn) * 
 
*- 502,000 net new customers acquired in German retail banking in 2017 
(around 639,000 since October 2016); assets under control up by EUR38bn to 
EUR376bn * 
 
*- Common Equity Tier 1 ratio at 14.1% (end of September 2017: 13.5%, end of 
2016: 12.3%); **leverage ratio comfortable at 5.1%, further improvement in 
very good NPL ratio to 1.3%* 
 
*- ACR Ship Finance portfolio reduced from EUR4.8bn to EUR2.6bn in 2017* 
 
*- Outlook: Focus on implementation of Commerzbank 4.0 strategy - Aiming to 
resume dividend payments for financial year 2018* 
 
In 2017, Commerzbank achieved a positive net result despite booking 
restructuring expenses of more than EUR800 million, further raised its 
capital ratio and significantly reduced its legacy portfolios. The Bank 
progressed with the implementation of its Commerzbank 4.0 strategy, 
continued on its growth path and achieved most of its strategic objectives 
for 2017. Although the *operating profit* of EUR1,303 million for 2017 was 
lower than in the previous year (2016: EUR1,399 million), it increased 
versus 2016 if exceptional items and valuation effects are excluded. At 
EUR557 million these were considerably lower than the previous year (2016: 
EUR831 million). The same applies to *revenues before loan loss provisions* 
which decreased by 2.5% to EUR9,163 million (2016: EUR9,399 million). *After 
adjustment for exceptional items, revenues before loan loss provisions* were 
higher at EUR8,607 million (2016: EUR8,568 million). Growth in customers and 
assets almost completely offset the drag from negative interest rates and of 
lower margins from pricing competition. 
 
*Loan loss provisions* stood at EUR781 million in 2017 (2016: EUR900 
million). Both of Commerzbank's operating segments profited from the 
stability of the German economy, while the run-down segment Asset & Capital 
Recovery (ACR) benefited from the accelerated reduction of the Ship Finance 
portfolio. Corporate Clients booked loan loss provisions for a large 
individual exposure in the fourth quarter. The Bank's healthy risk profile 
is reflected in the further reduced, very low non-performing loan (NPL) 
ratio of 1.3%. *Operating expenses* were down slightly at EUR7,079 million 
(2016: EUR7,100 million). Cost management compensated for higher investments 
in digitalisation and growth, and increased costs for regulatory projects, 
compliance, deposit guarantee schemes and various banking levies. In 
particular, personnel expenses decreased as a result of the personnel 
reductions. 
 
Taking into account the restructuring expenses of EUR808 million, the 
*pre-tax profit* for financial year 2017 came to EUR495 million (2016: 
EUR643 million). In the previous year, the pre-tax profit had been adversely 
affected by an impairment on goodwill and other intangible assets of EUR627 
million and restructuring charges of EUR128 million. After deducting taxes 
of EUR245 million and minority interests of EUR94 million, Commerzbank made 
a *net profit* of EUR156 million (2016: EUR279 million). 
 
In the *fourth quarter 2017* the Bank was able to increase its adjusted 
revenues both on a quarter-on-quarter and year-on-year basis. The net profit 
was down year-on-year at EUR90 million (Q4 2016: EUR182 million). Due to 
lower exceptional revenue items, the operating profit fell to EUR159 million 
(Q4 2016: EUR337 million), and revenues before loan loss provisions to 
EUR2,193 million (Q4 2016: EUR2,399 million). After adjustment for 
exceptional items, Q4 2017 revenues were up on a year-on-year basis at 
EUR2,253 million (Q4 2016: EUR2,111 million). Loan loss provisions stood at 
EUR251 million in the fourth quarter (Q4 2016: EUR290 million). They were 
booked primarily for an individual exposure in the Corporate Clients 
portfolio and for the Ship Finance portfolio. Operating expenses at EUR1,782 
million remained almost stable year-on-year (Q4 2016: EUR1,773 million). 
 
'We see the structural change in the German banking sector as an opportunity 
and intend to be among the winners of this change. That's why we are 
radically transforming the Bank. So far we made good progress in 2017: we 
have advanced the digitalisation of the Bank and have grown strongly. 
Therefore we aim to resume dividend payments for financial year 2018', said 
*Martin Zielke, Chairman of the Board of Managing Directors of Commerzbank*. 
'However, it is also clear that we still have some work ahead of us before 
we can achieve the profitability we are aiming for.' 
 
*Common Equity Tier 1 ratio up at 14.1% - healthy risk profile * 
 
The *Common Equity Tier 1 ratio *(CET 1) with full application of Basel 3 
climbed to 14.1% at the end of December 2017 (end of September 2017: 13.5%; 
end of December 2016: 12.3%). CET1 capital with full application of Basel 3 
remained stable quarter-on-quarter, at EUR24.0 billion. *Risk-weighted 
assets* (RWA) with full application of Basel 3 came down significantly 
amounting to EUR171.0 billion at the end of 2017, versus EUR176.6 billion at 
the end of September 2017 and EUR189.8 billion at the end of 2016. The 
*leverage ratio* increased to comfortable 5.1% at the end of 2017 (end of 
September 2017: 4.7%). *Total assets* came to EUR452 billion (end of 
September 2017: EUR490 billion). 
 
'In 2017 we invested in growth, digitalisation and regulation, while keeping 
our costs stable. Our CET 1 ratio stood at 14.1 percent in the fourth 
quarter', commented *Stephan Engels, Chief Financial Officer of 
Commerzbank*. 'The revaluation of our ship finance portfolio under IFRS 9 
will minimise future burdens and has resulted in a CET 1 ratio of around 
13.3 percent at the beginning of 2018. This gives us room for further 
investments in growth and for driving the digitalisation of the Bank 
forward.' 
 
*Individual financial statement of Commerzbank AG * 
 
The provisional individual financial statement of Commerzbank AG pursuant to 
the provisions of the German Commercial Code (HGB) states a net income of 
EUR176 million for 2017 (2016: EUR1,494 million). This takes into 
consideration the servicing of all profit-sharing rights in Commerzbank AG. 
The Bank intends to fully retain earnings for 2017. 
 
*Development of the segments* 
 
The *Private and Small Business Customers* segment continued its growth and 
is ahead of target in terms of customers and assets under control in 
Germany. It gained around 639,000 net new customers since October 2016, 
including around 100,000 stemming from the takeover of Onvista by Comdirect. 
Around 502,000 of the net new customers were won in financial year 2017, of 
which around 52,000 joined Commerzbank in the fourth quarter of 2017. 
Assets under control increased by EUR38 billion in 2017 to EUR376 billion. 
The volume of new mortgages reached EUR15.0 billion (2016: EUR11.9 billion). 
Consumer loans contributed revenues of EUR68 million in the first full 
quarter on Commerzbank's own balance sheet. 
 
The operating profit for 2017, at EUR867 million, was down on the previous 
year (2016: EUR1,078 million). Revenues before loan loss provisions remained 
stable year-on-year at EUR4,832 million (2016: EUR4,818 million). This was 
also the case for adjusted revenues before loan loss provisions, which came 
to EUR4,622 million in 2017 (2016: EUR4,628 million). Loan loss provisions 
rose by EUR35 million to EUR154 million in 2017 (2016: EUR119 million). 
Operating expenses went up over the same period to EUR3,811 million (2016: 
EUR3,621 million), largely as a result of higher investments in 
digitalisation and regulatory charges. 
 
In 2017 mBank saw its revenues before loan loss provisions grow by 4.8% to 
EUR998 million (2016: EUR952 million). New business volume in consumer loans 
increased by more than 15% over the same period. mBank has attracted around 
292,000 net new customers since the beginning of 2017. At the end of 2017 
mBank had a total of approximately 5.4 million retail and corporate 
customers in Poland, the Czech Republic, and Slovakia. In 2017 mBank's loan 
loss provisions rose year-on-year. Operating expenses increased due to 
higher regulatory burdens. 
 
In the fourth quarter of 2017 the operating profit for the Private and Small 
Business Customers segment totalled EUR149 million (Q4 2016: EUR232 
million). Revenues before loan loss provisions amounted to EUR1,190 million 
(Q4 2016: EUR1,174 million). 
 
The *Corporate Clients* segment progressed well in its strategic 
realignment, improved its RWA efficiency, reduced costs and achieved strong 
customer growth. Mittelstand profited from its strong market position with 
German corporate customers. In the last two years Commerzbank added almost 
5,400 new corporate customers - predominantly in the German Mittelstand - 
thereof 4,100 in 2017. Also loan volumes in Mittelstand and International 
Corporates increased slightly that year. 
 
In 2017 the segment posted an operating profit of EUR809 million (2016: 
EUR1,289 million). Revenues before loan loss provisions decreased to 
EUR3,959 million in 2017 (2016: EUR4,232 million), impacted by low market 
volatility and pricing competition. The revenues of Financial Institutions 
reflect the streamlined correspondent banking network. 
 
In 2017 the segment's loan loss provisions rose by EUR110 million to EUR295 
million (2016: EUR185 million). The increase is mainly due to one individual 
exposure. The segment reduced its operating expenses to EUR2,885 million 

(2016: EUR2,973 million) while pursuing strategic investments, thanks to 
strict cost management, and in particular due to the reduction in personnel 
expenses. 
 
In the fourth quarter of 2017, the operating profit for the Corporate 
Clients segment totalled EUR66 million (Q4 2016: EUR363 million). The 
noticeable reduction compared to the very strong fourth quarter of 2016 was 
primarily due to the EUR202 million increase in loan loss provisions. Also 
the streamlining of Financial Institutions and pricing competition in the 
SME segment contributed to this decline. However, revenues were stable 
quarter-on-quarter. Underlying Q4 2017 revenues before loan loss provisions 
amounted to EUR979 million (Q4 2016: EUR1,086 million). 
 
The *Asset & Capital Recovery* (ACR) segment reduced its Ship Finance 
portfolio significantly by a total of EUR2.2 billion, to EUR2.6 billion in 
2017. Revenues before loan loss provisions fell to EUR166 million in 2017 
(2016: EUR213 million). Loan loss provisions were reduced over the same 
period to EUR336 million (2016: EUR599 million). The operating loss improved 
to minus EUR269 million (2016: minus EUR515 million). Fourth quarter 
operating loss was at minus EUR54 million (Q4 2016: minus EUR156 million). 
 
*Outlook* 
 
In 2018 the Bank will focus on further growth and the implementation of its 
Commerzbank 4.0 strategy. Higher adjusted revenues are expected for both the 
Private and Small Business Customers and the Corporate Clients segments. 
Despite ongoing investments in digitalisation and IT, the Bank will manage 
its costs at around EUR7.0 billion. The risk result under IFRS 9 is expected 
to be below EUR600 million. The Bank aims to resume dividend payments for 
financial year 2018. 
 
*Financial figures at a glance* 
 
                *2017* *2016*      *Q4 *Q3 2017*    *Q4 *2017 
in EURm                          2017*            2016* vs. 
                                                        2016 
                                                        in %* 
Net interest     4,201  4,165    1,103     1,040  1,096     0.9 
income 
Provisions for    -781   -900     -251      -168   -290   -13.2 
loan losses 
Net commission   3,178  3,212      774       738    825    -1.0 
income 
Net fair value   1,092  1,019      169       225    129     7.2 
result 
Other income       692  1,004      146       507    350   -31.1 
*Revenues        9,163  9,399    2,193     2,510  2,399    -2.5 
before loan 
loss 
provisions* 
_Revenues excl.  8,607  8,568    2,253     2,008  2,111     0.4 
exceptional 
items_ 
Operating        7,079  7,100    1,782     1,714  1,773    -0.3 
expenses 
*Operating       1,303  1,399      159       629    337    -6.8 
profit or loss* 
Impairments of       -    627        -         -      -       - 
Goodwill 
Restructuring      808    128        0         -     31       - 
expenses 
*Pre-tax profit    495    643      159       629    305   -23.0 
or loss* 
Taxes              245    261       42       135    100    -6.1 
*Consolidated 
profit or loss 
attributable to    156    279       90       472    182   -43.9 
Commerzbank 
shareholders* 
Earnings per      0.12   0.22     0.07      0.38   0.15 
share (EUR) 
Cost/income 
ratio in          77.3   75.5     81.3      68.3   73.9 
operating 
business (%) 
Operating RoTE     4.8    5.3      2.3       9.4    5.0 
(%) 
Net RoTE (%)       0.6    1.1      1.4       7.3    2.8 
Net RoE (%)        0.5    1.0      1.3       6.7    2.6 
CET 1 ratio, 
Basel 3 fully     14.1   12.3     14.1      13.5   12.3 
phased-in (%) 
Leverage Ratio, 
Basel 3 fully      5.1    4.8      5.1       4.7    4.8 
phased-in (%) 
Total assets       452    480      452       490    480 
(EURbn) 
 
*2017 figures published in this press release are preliminary and unaudited. 
* 
 
***** 
 
From approximately 7 am onwards you can find broadcast-ready video material 
with statements by Martin Zielke and Stephan Engels at 
http://mediathek.commerzbank.de/ [1]. 
 
The press conference will be broadcast live on the internet 
https://www.commerzbank.de/en/hauptnavigation/presse/bilanzpressekonferenz/b 
pk.html [2]. 
 
***** 
 
*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 approximately 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 2017, it generated 
gross revenues of EUR9.2 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:  MSCU 
TIDM:           CZB 
LEI Code:       851WYGNLUQLFZBSYGB56 
OAM Categories: 1.1. Annual financial and audit reports 
                2.1. Home Member State 
                2.2. Inside information 
Sequence No.:   5190 
 
End of Announcement EQS News Service 
 
652547 08-Feb-2018 
 
 
1: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=b9e39396c3a74844c54cf2fcbf6f5173&application_id=652547&site_id=vwd&application_name=news 
2: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=028f6a6c8512dba7f491b4e7a2a0f1a8&application_id=652547&site_id=vwd&application_name=news 
 

(END) Dow Jones Newswires

February 08, 2018 01:07 ET (06:07 GMT)