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Commerzbank Aktiengesellschaft (CZB)
Commerzbank: 9M operating profit of EUR1 billion and net result of EUR751
million
08-Nov-2018 / 07:05 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 EUR331m for third quarter (Q3 2017: EUR623m) and of
EUR1,020m after nine months (9M 2017: EUR1,128m); exceptional revenue items
of EUR37m in the first nine months (9M 2017: EUR617m)*
*- Underlying revenues higher at EUR6.69bn in the first nine months (9M
2017: EUR6.34bn)*
*- Common Equity Tier 1 ratio of 13.2% (end of June 2018: 13.0%) *
*- More than 900,000 net new customers in German private and small business
banking since October 2016 - on track for target of 1 million by end of
2018*
*- Dividend accrual of 15 cents per share for first nine months of 2018*
*- EBA stress test confirms Commerzbank's good risk profile*
Commerzbank recorded continued growth in the first nine months of 2018 and
increased its underlying revenues. In the Private and Small Business
Customers segment, it gained around 117,000 net new customers in Germany in
the third quarter. With a good 900,000 net new customers since October 2016,
it is on track to achieve its target of one million net new customers by the
end of 2018. The Corporate Clients segment is still ahead of its 2018
targets for new customers and volume of lending. Group revenues after
adjustment for non-recurring items rose in the first nine months to EUR6,690
million (9M 2017: EUR6,338 million). In the third quarter the Bank increased
its underlying revenues by nearly 9% year-on-year to EUR2,175 million (Q3
2017: EUR2,003 million). The Bank made further progress with the
implementation of its strategy. In the third quarter, the migration of small
business customers from the Corporate Clients segment to the Private and
Small Business Customers segment was completed and the new relationship
model for corporate clients established, among other things.
*Group revenues *stood at EUR6,727 million in the first nine months (9M
2017: EUR6,955 million). Last year's figure had been bolstered by
non-recurring items amounting to EUR617 million in the first nine months. In
2018, exceptional revenues in the first nine months stood at just EUR37
million. Overall, higher revenues from customer business helped to largely
offset the difference year-on-year. In the third quarter, revenues amounted
to EUR2,193 million (Q3 2017: EUR2,505 million).
*Operating expenses* totalled EUR5,412 million in the first nine months (9M
2017: EUR5,297 million). The year-on-year increase was mainly due to
investments in strategy implementation and further growth. Operating
expenses for the third quarter stood at EUR1,728 million (Q3 2017: EUR1,714
million). Costs were therefore in line with expectations for 2018, as was
the *risk result*. It stood at minus EUR295 million in the first nine months
and minus EUR134 million in the third quarter. This reflects the Bank's
portfolio quality and the benign credit environment. The non-performing loan
(NPL) ratio remained very low, at 0.9%.
The *operating profit* for the first nine months came to EUR1,020 million
(9M 2017: EUR1,128 million). It benefited from higher underlying revenues, a
lower risk result and a positive contribution from the Asset and Capital
Recovery segment. In the third quarter, the operating profit came in at
EUR331 million (Q3 2017: EUR623 million). The year-on-year decline is
attributable mainly to exceptional revenues of EUR502 million in the third
quarter of 2017, including from real estate sales.
After deduction of taxes of EUR187 million and minority interests of EUR81
million, Commerzbank posted a *net result* of EUR751 million for the first
nine months of 2018 (9M 2017: EUR53 million; impacted by restructuring
expenses of around EUR800 million). The net result for the third quarter
came in at EUR218 million (Q3 2017: EUR467 million).
'We increased our underlying revenues and steadily gain new customers. This
shows that we have the right strategy: We grow in a highly competitive
market. Our improved setup has also been confirmed by the European stress
test. However, the environment remains challenging and although we have made
a lot of progress, we still have some work to do', said Martin Zielke,
Chairman of the Board of Managing Directors of Commerzbank.' Chief Financial
Officer Stephan Engels added: 'We have significantly improved the quality of
our earnings compared to last year. Our capital ratio and our leverage ratio
are stable on a good level. Our outlook for the full year remains
unchanged.'
The *Common Equity Tier 1 ratio *(CET 1) stood at 13.2% at the end of
September, versus 13.0% at the end of June 2018. This includes earnings for
the first nine months, factoring in a dividend accrual of 15 cents per
share. *Risk-weighted assets* (RWA) amounted to EUR178 billion at the end of
September, versus EUR176 billion at the end of June 2018. This rise,
resulting partly from increased lending in the core segments, was more than
offset by capital build-up. The *leverage ratio* stood at 4.5%. *Total
assets* came to EUR493 billion (end of June 2018: EUR488 billion). The
Bank's achievements in risk reduction and improved balance sheet quality
contributed to a significantly improved result in this year's European
Banking Authority stress test.
*Development of the segments*
The *Private and Small Business Customers* segment benefited from the
continued growth in customers and Assets under Control, and increased its
revenues after adjustment for non-recurring items by 7.8% year-on-year in
the first nine months to EUR3,663 million. Underlying revenues were also up
year-on-year for the third quarter, at EUR1,228 million (Q3 2017: EUR1,125
million). Assets under Control in Germany went up in all product categories,
to stand at EUR392 billion at the end of the third quarter. The volume of
mortgage lending grew by 10% year-on-year, reaching around EUR74 billion in
September.
The segment's operating expenses stood at EUR2,893 million (9M 2017:
EUR2,794 million). The year-on-year increase was due to higher regulatory
costs and investments in growth. The risk result came to minus EUR184
million. The operating profit stood at EUR564 million for the first nine
months (9M 2017: EUR712 million, including non-recurring items of EUR238
million). Operating profit for the third quarter stood at EUR188 million (Q3
2017: EUR380 million). In the previous year, non-recurring effects from the
sale of the Concardis holdings and termination of the consumer finance joint
venture with BNP Paribas had contributed to the segment's profit.
In the *Corporate Clients* segment, continued high margin pressure and
competition impacted earnings. The Financial Institutions division returned
to a stable profit contribution this year, following its realignment.
Revenues from business with SMEs, large corporates and international
companies were affected - despite some successful growth initiatives - by
margin pressure, low interest rates and weak demand for hedging products.
The result of the Equity Markets & Commodities division was driven by lower
demand for structured products.
The Corporate Clients segment generated revenues of EUR2,836 million in the
first nine months (9M 2017: EUR3,015 million), including EUR918 million in
the third quarter (Q3 2017: EUR967 million). Operating expenses amounted to
EUR2,189 million (9M 2017: EUR2,148 million). The risk result, which had
benefited from releases in the first half of the year, normalised and stood
at minus EUR124 million after nine months (Q3: minus EUR62 million). The
operating profit came to EUR523 million for the first nine months (9M 2017:
EUR743m) and to EUR169 million for the third quarter (Q3 2017: EUR237
million).
The *Asset & Capital Recovery* (ACR) segment recorded an operating profit of
EUR90 million for the first nine months (9M 2017: minus EUR210 million, Q3
2018: EUR14 million). This result reflects both the reduced size of the
segment's run-down portfolio and the revaluation of the Ship Finance
portfolio following the introduction of IFRS 9. Revenues amounted to EUR135
million (9M 2017: EUR146 million). The revenue figure for the third quarter
was EUR28 million. Operating expenses were further reduced, coming in at
EUR60 million for the first nine months (9M 2017: EUR79 million). The risk
result came out at EUR15 million. The Bank's Ship Finance portfolio was run
down further and stood at a volume of EUR1.1 billion at the end of the third
quarter (Q3 2017: EUR4.2 billion).
*Outlook*
The outlook remains unchanged. 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 EUR500 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*
*9M 2018* *9M 2017* *Q3 * *Q3 * *Q2 * *9M/18
in EURm *2018* *2017* *2018* vs
9M/17
in %*
Net interest 3,405 3,091 1,198 1,038 1,162 10.2
income
Net commission 2,329 2,404 767 738 765 -3.1
income
Net fair value 791 914 166 222 268 -13.5
result
Other income 203 546 62 507 26 -62.8
*Revenues
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