DJ Commerzbank: 2019 operating profit stable at ?1.26bn - Common Equity Tier 1 ratio significantly increased
Commerzbank Aktiengesellschaft (CZB) Commerzbank: 2019 operating profit stable at EUR 1.26bn - Common Equity Tier 1 ratio significantly increased 13-Feb-2020 / 07:05 CET/CEST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. *- Revenues up at EUR 8.64bn (2018: EUR 8.57bn) thanks to healthy client business * *- Cost target achieved with costs reduced to EUR 6.77bn (2018: EUR 6.88bn)* *- Risk result at minus EUR 620m due to single cases (2018: minus EUR 446m )* *- Net profit of EUR 644m includes first restructuring charge of EUR 101m for personnel reduction and higher tax rate (2018: EUR 862m)* *- Common Equity Tier 1 ratio increased by 50 basis points to 13.4% in 2019 (2018: 12.9%)* *- Board of Managing Directors proposes dividend of 15 cents per share for 2019 based on previous year's pay-out ratio* Commerzbank reported a stable operating profit in the financial year 2019 despite the further deterioration in the operating environment. Customer business remained healthy growing in terms of customers and assets. The Bank gained around 473,000 net private and small business customers in Germany and grew its loan and securities volume by 16% to EUR 261 billion. The Corporate Clients segment increased its lending to corporates by EUR 6 billion to EUR 88 billion and improved its revenues in its direct customer business. Overall, the Bank's growth initiatives resulted in an improvement in net interest income which offset the headwind from the negative interest rate environment. On the cost side, the Bank made further savings through strict cost management, enabling it to meet its cost target for 2019 of below EUR 6.8 billion despite higher compulsory contributions. Meanwhile its negative risk result was higher driven by single cases in the Corporate Clients segment. At the same time the Bank's loan quality showed a further improvement with a non-performing exposure (NPE) ratio of 0.9%. Commerzbank has made a successful start to the implementation of its 'Commerzbank 5.0' strategy and has already achieved tangible progress. It has increased its stake in its online subsidiary comdirect to over 90%, thereby laying the foundation for a rapid integration. The sale process of mBank in Poland has been started. And by the fast agreement on a part-time retirement program, the Bank has laid the basis for the personnel reduction to be as socially responsible as possible. Provisions of EUR 101 million were already booked in the fourth quarter of 2019 for this purpose. 'We ended the financial year 2019 with a better operating profit than expected. Together with the strong capital ratio, this provides us with a good starting position for 2020. We will take advantage of the extra leeway,' said Martin Zielke, Chairman of the Board of Managing Directors of Commerzbank. 'We have already made tangible progress with our 'Commerzbank 5.0' strategy and are ahead of plan. So, I'm more optimistic about our return expectations than I was last autumn.' *Group revenues* rose to EUR 8,643 million in 2019 (2018: EUR 8,570 million) with a further improvement in revenue quality: the growth initiatives resulted in a rise of nearly 7% in net interest income to EUR 5,074 million (2018: EUR 4,748 million). In the fourth quarter of 2019, a higher provision for foreign currency loans at mBank had a negative impact on revenues. Nevertheless in the last quarter, revenues climbed by almost 7% to EUR 2,173 million (Q4 2018: EUR 2,035 million). This is attributable to higher net interest income in the Corporate Clients segment and in Treasury, as well as increased net commission income on the back of the improvement in securities business in the Private and Small Business Customers segment. *Operating costs* were reduced to EUR 6,313 million in 2019 (2018: EUR 6,459 million). Contributing factors included the progress made in the 'Commerzbank 4.0' personnel reduction, targeted savings and the prioritisation of and efficiency gains in strategic investments. The Bank thereby more than compensated for the further rise in compulsory contributions to EUR 453 million caused mainly by the higher European bank levy and the banking tax in Poland (2018: EUR 423 million). In total, *costs* were cut to EUR 6,766 million (2018: EUR 6,882 million). In the fourth quarter, they totalled EUR 1,673 million (Q4 2018: EUR 1,642 million). The *risk profit* was minus EUR 620 million for 2019 due to single cases (2018: minus EUR 446 million). The fourth quarter accounted for minus EUR 250 million (Q4 2018: minus EUR 154 million), mainly due to individual cases in the international corporate customer business. Overall, the diversification of the portfolio is robust enough to manage slowdowns in individual sectors. The NPE ratio improved further to a low 0.9% by the end of 2019 (end of 2018: 1.0%), underlining the Bank's strong risk profile. The *operating profit* for 2019, at EUR 1,258 million, came in slightly higher than the previous year's (2018: EUR 1,242 million). In the fourth quarter it improved to EUR 250 million despite the rise in the risk result (Q4 2018: EUR 240 million). The full-year *pre-tax profit* of EUR 1,112 million (2018: EUR 1,227 million) includes the restructuring costs of EUR 101 million booked in the fourth quarter for the first part of the personnel reduction. The *net result* attributable to Commerzbank shareholders and investors in additional equity components for 2019 came out at EUR 644 million (2018: EUR 862 million). The figure reflects the higher tax charge of EUR 369 million (2018: EUR 262 million). This fact and the provisions for the personnel reduction led to a net result of minus EUR 54 million in the last three months of the year (Q4 2018: EUR 113 million). *Capital buffer significantly strengthened * The Bank significantly improved its capital base: its *Common Equity Tier 1 ratio *(CET 1 ratio) stood at a strong 13.4% at the end of December 2019 (end of September 2019: 12.8%, end of 2018: 12.9%). This already includes the dividend accrual of 15 cents per share for the financial year 2019. The considerable improvement of the CET 1 ratio is attributable partly to the EUR 3 billion reduction in Risk-Weighted Assets (RWA) for credit risk in the fourth quarter, achieved as a result of portfolio optimisation at the end of the year. The Bank also reduced the RWA for operational risk through enhancement in its model which was approved by the regulators. Overall, RWAs decreased by almost EUR 8 billion between the end of September and end of December 2019 to almost EUR 182 billion. The *leverage ratio* rose at a comfortable 5.1% at the end of 2019 (end of 2018: 4.8%). *Total assets* rose to EUR 464 billion (end of 2018: EUR 462 billion). 'We have systematically reduced our costs, thereby meeting our cost targets. And we will remain ambitious. Further, we have improved the quality of our earnings thanks to our good customer business and we will pay a dividend again for 2019', said Bettina Orlopp, Chief Financial Officer of Commerzbank. 'Our strong capital ratio of 13.4% provides us with more flexibility in the implementation of our strategy and for focused growth.' *Development of the segments* The *Private and Small-Business Customers* segment continued on its growth trajectory last year, attracting around 473,000 net new customers in Germany - 100,000 of these in the fourth quarter. This means that, on a net basis, it has brought more than 1.5 million new customers on board since autumn 2016. It increased its loan and securities volume by EUR 35 billion to EUR 261 billion in 2019 (end of 2018: EUR 226 billion). Here, the volume of mortgage lending alone increased by a further EUR 5.8 billion to EUR 80.9 billion. The growth also enabled the segment to increase its net interest income by 5.6%. This allowed it to offset the effects of negative interest rates and the ECB's monetary policy. Overall, *revenues* increased to EUR 4,913 million (2018: EUR 4,806 million). Revenues rose to EUR 4,883 million in 2019 (2018: EUR 4,851 million) after adjustment for exceptional items such as the sale of ebase. In the fourth quarter, underlying revenues for the Private and Small Business Customers segment, impacted by the increased provision for foreign currency loans at mBank, totalled EUR 1,173 million (Q4 2018: EUR 1,185 million). *Operating costs* were lower in 2019, at EUR 3,529 million (2018: EUR 3,586 million). However, compulsory contributions were up again at EUR 285 million (2018: EUR 252 million), particularly at mBank. The *risk result* rose to minus EUR 253 million (2018: minus EUR 233 million). Here, too, the increase came from mBank. Overall, the segment saw its *operating profit* jump by a good 15% to EUR 846 million (2018: EUR 735 million). The figure for the fourth quarter was EUR 126 million (Q4 2018: EUR 172 million), largely affected by the provision for foreign currency loans booked at mBank. The *Corporate Clients* segment performed satisfactory in direct client business. It increased its lending to corporates by EUR 6 billion to EUR 88 billion in 2019 despite continued competitive pressure, and boosted revenues in its core business. Revenues with the Mittelstand and International Corporates increased by around 4 %, revenues with Financial Institutions grew by around 3%. However, the 2018 figures included profit contributions from legacy portfolios which have since been wound down. The absence of these in 2019 affected the segment's *revenues*, which totalled EUR 3,241 million (2018: EUR 3,414 million). *Underlying revenues *came to EUR 3,328 million for the full year (2018: EUR 3,457 million) and EUR 838 million in the fourth quarter (Q4 2018: EUR 845 million). The segment trimmed its full-year *operating costs* to EUR 2,453 million
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February 13, 2020 01:05 ET (06:05 GMT)
through successful cost management (2018: EUR 2,503 million). Charges
arising from single cases caused the segment's *risk result* to rise to
minus EUR 342 million (2018: minus EUR 194 million). In the fourth
quarter, these single cases occurred primarily internationally. Given the
slowdown in German and European economic growth, the Bank remains cautious
in its assessment of the risks and continues to closely monitor the
portfolio. In total, the segment generated an operating profit of EUR 328
million in 2019 (2018: EUR 597 million). The operating profit for the
fourth quarter came to EUR 42 million due to the rise in loan loss
provisions and the absence of the contribution from the discontinued legacy
portfolios (Q4 2018: EUR 110 million).
*Outlook *
Commerzbank will continue to pursue its growth strategy and targets
underlying revenues in 2020 at least at the level of 2019. It confirms its
target for a cost base of EUR 6.7 billion plus up to EUR 0.2 billion cost
to achieve IT investments as part of the Commerzbank 5.0 agenda. The risk
result is expected to be above minus EUR 650 million. The Bank is planning
to maintain a dividend pay-out ratio for 2020 at a level comparable to 2019.
It confirms its target for a Common Equity Tier 1 ratio of at least 12.75%
by year end.
*******
*Financial figures at a glance*
2019 Q4 Q4 Q4 19 vs Q3
in EUR m 2019 2018 vs 2018 2019 2018 Q4 2019
in % 18 in %
Net interest 5,074 4,748 +6.9 1,307 1,237 +5.6 1,260
income
Net commission 3,056 3,089 -1.1 786 754 +4.3 763
income
Net fair value* 244 366 -33.4 116 -121 - 15
Other income 270 367 -26.5 -36 166 - 145
*Income before 8,643 8,570 +0.9 2,173 2,035 +6.8 2,183
risk result*
_Revenues excl.
exceptional 8,619 8,649 -0.3 2,163 2,151 +0.5 2,170
items_
Operating 6,313 6,459 -2.3 1,608 1,579 +1.9 1,559
expenses
Compulsory 453 423 +7.1 65 63 +2.8 60
contributions
Risk result -620 -446 -38.9 -250 -154 -62.4 -114
*Operating 1,258 1,242 +1.2 250 240 +4.5 450
profit or loss *
Impairments on
intangible 28 - - 28 - - -
assets
Restructuring 101 - - 101 - - -
Costs
Current pre-tax
profit or loss -17 -15 -7.4 -9 -30 +69.0 -7
(discontinued
operations)
*Pre-tax profit 1,112 1,227 -9.3 112 209 -46.4 443
or loss (Group)*
Taxes 369 262 +40.5 154 75 - 104
Minorities 100 102 -2.1 13 22 -41.4 43
*Consolidated
profit or 644 862 -25.3 -54 113 - 296
loss***
Earnings per 0.51 0.69 -26.1 -0.04 0.09 - 0.24
share (EUR )
Cost/income
ratio in
operating
business excl. 73.0 75.4 74.0 77.6 71.4
compulsory
contributions
(%)
Cost/income
ratio in
operating
business incl. 78.3 80.3 77.0 80.7 74.1
compulsory
contributions
(%)
Operating RoTE 4.7 4.7 3.6 3.6 6.6
(%)
Net RoTE (%)*** 2.4 3.4 -1.1 1.8 4.4
Net RoE (%) 2.2 3.1 -1.0 1.6 4.0
CET 1 ratio 13.4 12.9 13.4 12.9 12.8
(%)****
Leverage Ratio,
Basel 3 fully 5.1 4.8 5.1 4.8 4.7
loaded (%)
Total assets 464 462 464 462 513
(EUR bn)
* Net income from financial assets and liabilities measured at fair value
through profit and loss
** Consolidated profit or loss attributable to Commerzbank shareholders and
investors in additional equity components
*** Net RoTE after deduction of potential (fully discretionary) AT 1 coupon
**** Includes net results reduced by dividend accrual and from Q3 2019
onwards additionally reduced by potential (fully discretionary) AT1 coupon
*2019 figures published in this press release are preliminary and unaudited.
*
The press conference will be broadcast live on the internet [1].
*****
*Press contact*
Nils Happich +49 69 136-80529
Erik Nebel +49 69 136-44986
Maurice Farrouh +49 69 136-21947
*****
*About Commerzbank*
Commerzbank is a leading international commercial bank with branches and
offices in nearly 50 countries. The Bank's two business segments - Private
and Small Business Customers and Corporate Clients - offer a comprehensive
portfolio of financial services precisely tailored to their customers'
needs. Commerzbank transacts approximately 30% of Germany's foreign trade
and is the market leader in German corporate banking. The Bank offers its
sector expertise to its corporate clients in Germany and abroad and is a
leading provider of capital market products. Its subsidiaries, comdirect in
Germany and mBank in Poland, are two innovative online banks. With
approximately 800 branches going forward, Commerzbank has one of the densest
branch networks in Germany. The Bank serves more than 11 million private and
small business customers nationwide and over 70,000 corporate clients,
multinationals, financial service providers, and institutional clients
worldwide. Its Polish subsidiary mBank S.A. has around 5.6 million private
and corporate customers, predominantly in Poland, but also in the Czech
Republic and Slovakia. In 2019 Commerzbank generated gross revenues of
EUR 8.6 billion with approximately 48,500 employees.
*****
*Disclaimer and Forward-Looking Statement *
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
Sequence No.: 46450
EQS News ID: 974499
End of Announcement EQS News Service
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(END) Dow Jones Newswires
February 13, 2020 01:05 ET (06:05 GMT)
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