Commerzbank Aktiengesellschaft (CZB)
Commerzbank generates profit for quarter in spite of corona - costs and
capital on track
05-Aug-2020 / 07:03 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
*Commerzbank generates profit for quarter in spite of corona - costs and
capital on track
- Underlying revenues in second quarter of 2020 increased to EUR 2.3bn (Q2
2019: EUR 2.1bn) - significant growth in net commission income *
*- Operating costs continue to fall to EUR 1.53bn despite IT investments
(Q2 2019: EUR 1.58bn)*
*- Risk result at EUR -469m (Q2: 2019: EUR -178m) includes impact of
EUR -175m from single case and coronavirus effects of EUR -131m *
*- Ongoing low NPE ratio of 0.8% reflects good quality of loan book*
*- Operating profit at EUR 205m (Q2 2019: EUR 309m) - net result at
EUR 220m (Q2 2019: EUR 279m)*
*- Common Equity Tier 1 ratio increased to 13.4% without usage of regulatory
transitional rules*
In the second quarter of 2020 Commerzbank generated an operating profit of
EUR 205 million in spite of significantly higher negative impact from the
risk result. Overall, client business was stable. The Corporate Clients
segment slightly increased revenues thanks to good capital market business.
In the Private and Small-Business Customer segment, the Bank reported
further growth in customers and in loan and securities volume primarily on
the back of its digital offerings. Overall, the Bank increased revenues by
almost 7% year-on-year. This reflects a significant increase in net
commission income and reversals of valuation effects. The latter had a
significant negative effect on the previous quarter. In Q2 valuation effects
partly recovered in line with expectations. The Bank brought down operating
costs by 3.3%. This contrasted with a significantly higher risk result of
minus EUR 469 million. It included additional effects of minus EUR 131
million resulting from the coronavirus and an impact of EUR 175 million
from a single case. Although the Bank did not make use of the new regulatory
transitional rules, the Common Equity Tier 1 ratio increased from 13.2% in
the previous quarter to 13.4% and is clearly above all requirements.
'In the second quarter, we achieved a positive result in spite of the
coronavirus and we were able support our customers in overcoming the
consequences of the pandemic. That is the top priority in times like this,'
said Martin Zielke, Chairman of the Board of Managing Directors of
Commerzbank. 'We have benefited from the fact that in recent years we have
positioned the Bank to be much more robust and more digital.'
Since the beginning of the coronavirus crisis, Commerzbank has received
around 21,000 loan applications with a volume of EUR 20 billion and the
Bank has approved KfW-loans in the amount of around EUR 7 billion. This
puts the Bank's market share for KfW loans up to EUR 100 million at around
15 %. Furthermore, the Bank granted payment holidays for more than 33,000
loans with a volume in excess of EUR 3.4 billion. The digital offerings of
the Bank gained additional momentum. As a consequence, the number of active
users of the online banking portal and the banking app achieved a new record
with 2.7 million in June. The banking app of Commerzbank alone had almost
1.6 million active participants in June. Approximately every two weeks, the
offering was expanded by new functions, such as the possibility to order
securities on the app or to use Apple Pay without a credit card. The virtual
debit card necessary for this has already been ordered more than 100,000
times following its introduction in the middle of June.
*Group revenues *increasedby 6.8% to EUR 2,273 million (Q2 2019: EUR 2,129
million) in the second quarter. They benefited from robust growth of 7% in
net commission income, primarily thanks to strong securities business. The
first reversals of negative valuation effects from the first quarter made a
positive contribution to the increase in revenues. The venture capital fund
of Commerzbank, Commerz Ventures, made a positive contribution of around
EUR 50 million. Excluding exceptional items, revenues grew by EUR 184
million to EUR 2,278 million (Q2 2019: EUR 2,095 million).
*Operating costs *continued their downward trajectory by EUR 53 million to
EUR 1,526 million (Q2 2019: EUR 1,579 million) in spite of IT investments,
as a result of sustained cost management in the second quarter. The ongoing
programme of headcount reductions also contributed to this. At the end of
June 2020, the number of full-time positions in the Group was around 39,700,
which is around 1,000 FTEs less year-on-year. The reduced operating costs
contrasted with compulsory contributions amounting to EUR 73 million, which
went up once again with an increase of EUR 10 million year-on-year (Q2
2019: EUR 63 million).
The *risk result *increasedsignificantly in the second quarter to minus
EUR 469 million (Q2 2019: minus EUR 178 million). Of this, minus EUR 175
million are due to a large single case. The effects of the coronavirus also
had a negative impact on the risk result totalling EUR 131 million. This
includes a provisional recognition of EUR 84 million for potential
corona-related effects. The quality of the loan book remained high thanks to
the massive reduction of risk over past years with a ratio of non-performing
loans continuing to be low at 0.8%.
Overall, the Bank generated an *operating profit* of EUR 205 million (Q2
2019: 309 million) in the second quarter. The pre-tax profit amounted to
EUR 211 million (Q2 2019: EUR 329 million). The Bank therefore generated a
*net result* attributable to shareholders of EUR 220 million (Q2 2019:
EUR 279 million). This also reflects a low tax ratio because, among other
things, the valuation gain of Commerz Ventures does not trigger a tax
expense.
The *Common Equity Tier 1 ratio* (CET 1 ratio) improved to 13.4% at the end
of June (end of March 2020: 13.2%; end of June 2019: 12.9%), while the Bank
did not use the new regulatory transitional rules. The increase in Risk
weighted Assets was overcompensated by capital build as a result of the net
profit in Q2, lower regulatory deductions, and positive effects from the
revaluation reserve. As at 30 June 2020, the Bank was more than 300 basis
points above the regulatory requirement for Common Equity Tier 1 ('MDA
threshold'), which could be reduced from 10.8% to 10.1% by the successful
issuance of AT 1 and Tier 2 capital instruments in the second quarter. The
leverage ratio was 4.7% (June 2019: 4.5%) and hence also clearly above the
requirements.
'We increased our revenues and our CET 1 ratio in the second quarter, but
the operating profit was negatively impacted by the risk result,' commented
Bettina Orlopp, Chief Financial Officer of Commerzbank. 'It is all the more
important that we reduce our costs in order to be able to cushion future
burdens. We are working on this and have stepped up the cost target for this
year.'
*Development of the segments*
The *Private and Small-Business Customers* (PSBC) segment continued its
growth in the second quarter and gained 103,000 net new customers in Germany
primarily through digital channels. The segment now totals around 11.5
million customers. At the end of June, the loan and securities volume rose
to EUR 262 billion (end of March: EUR 239 billion). The volume of mortgage
lending grew by 7% to EUR 84 billion on the back of strong new business.
The volume of consumer loans remained stable at EUR 3.8 billion (end of
March 2020: EUR 3.8 billion) as a consequence of the brake on consumer
spending imposed by the coronavirus. The higher securities volume reflects
the recovery in the equity markets and net inflows of EUR 4.2 billion.
Comdirect contributed strongly. The legal merger of Comdirect with
Commerzbank is currently in its final phase and is likely to be completed at
the beginning of the fourth quarter.
Total revenues for the segment fell back slightly to EUR 1,194 million (Q2
2019: EUR 1,222 million). This includes an increase in the legal provision
for foreign currency loans at mBank by EUR 42 million. While net commission
income rose by 9% thanks to the high level of securities activities and the
recovery in the stock markets, net interest income came down. Aside from
reduced consumption in the corona crisis, this is also due to lower
contributions from deposits. In addition, mBank was affected by a reduction
of interest rates in Poland. The negative impact arising from the risk
result of the segment amounted to EUR 153 million (Q2 2019: minus 48
million) in the second quarter of this year, with EUR 77 million of this
being attributable to mBank. The operating costs were reduced to EUR 864
million (Q2 2019: EUR 873 million). Overall, the operating profit for the
segment decreased to EUR 112 million (Q2 2019: EUR 248 million).
The *Corporate Clients* segment slightly increased revenues to EUR 791
million in the second quarter (Q2 2019: EUR 776 million). The driver for
this development was the International Corporates division, which benefited
from strong capital market business for debt products. In particular, the
Bank's bonds business achieved its strongest quarter in the last five years.
Primarily at the beginning of the quarter, there was also a high demand for
loans from international large corporates which had a positive effect. On a
quarterly average, the loan volume in Mittelstand and International
Corporates was EUR 95 billion (Q1 2020: EUR 89 billion). This enabled the
segment to more than compensate for the effects of the lower level of
economic activities and reduced international trade resulting from the
coronavirus pandemic in the segment's Mittelstand and Institutionals
divisions.
The risk result of the Corporate Clients segment was minus EUR 289 million
(Q2 2019: minus EUR 127 million) mainly owing to the mentioned single case.
The segment reduced operating costs by almost 6% to EUR 583 million (Q2
2019: EUR 619 million). The total operating result of the segment was
therefore minus EUR 89 million (Q2 2019: EUR 21 million). Before risk
provision, earnings amounted to EUR 201 million and were therefore EUR 53
million higher year-on-year.
In the *Others and Consolidation *segment, Commerzbank reported an operating
profit of EUR 181 million (Q2 2019: EUR 2 million) in the second quarter
of the current year. The main reason here is the partial reversal of
negative Q1 effects from long-term hedging transactions. Furthermore, the
Bank reported the valuation gain of Commerz Ventures here.
*Outlook*
On the assumptions that there will be no second lockdown, economic
activities gradually recover, and the government support programmes prove to
be effective, the Bank expects largely stable customer revenues for the
Private and Small-Business Customers segment over the course of this year.
For Corporate Clients, the Bank expects a stronger impact from the
coronavirus. The Bank continues its cost management and is now targeting a
cost base including IT investments slightly below the level of 2019. The
risk result for the year 2020 is expected between EUR 1.3 billion and
EUR 1.5 billion. In light of the expected risk result and potential
restructuring charges, the Bank anticipates a negative net result for the
year. The target for the Common Equity Tier 1 ratio continues to be at least
12.5% in line with reduced regulatory requirements.
*******
*Financial figures at a glance*
H1
Q2 2020 2020
in EUR m Q2 2020 Q2 vs Q1 H1 H1 vs
2019 Q2 2019 2020 2020 2019 H1
in % 2019
in %
Net interest 1,278 1,274 +0.3 1,320 2,597 2,505 +3.7
income
Net 739 1,507
commission 791 +7.0 877 1,668 +10.7
income
Net fair 163 28 - -304 -141 113 -
value*
Other income 42 87 -51.9 -42 - 160 -
*Revenues * *2,273* *2,129 *+6.8* *1,851 *4,125 *4,28 -3.7
* * * 5*
_Revenues
excl. 2,278 2,095 +8.8 2,024 4,303 4,285 +0.4
exceptional _
_items_
Operating 1,526 1,579 -3.3 1,503 3,030 3,146 -3.7
expenses
Compulsory 73 63 +16.3 301 374 328 +14.0
contributions
Risk result -469 -178 - -326 -795 -256 -
*Operating *309* *555*
profit or *205* *-33.8* *-278* *-74* *-*
loss *
Impairments - -
on intangible - - -
assets
Restructuring - - - -
costs
Current
pre-tax
profit or 6 19 -69.3 44 50 -
loss
(discontinued
operations)
*Pre-tax *-234
profit or *211* *329* *-35.9* * *-24* *555* *-*
loss (Group)*
Taxes -22 20 - 74 52 110 -53.2
Minorities 13 30 -56.6 8 21 44 -51.6
*Consolidated *401*
profit or *220* *279* *-21.2* *-316* *-96* *-*
loss***
Cost/income
ratio in
operating
business 67.1 74.2 81.2 73.5 73.4
excl.
compulsory
contributions
(%)
Cost/income
ratio in
operating
business 70.4 77.1 97.4 82.5 81.1
incl.
compulsory
contributions
(%)
Operating 2.9 4.7 -4.0 -0.5 4.2
RoTE (%)
Net RoTE 3.1 4.4 -5.2 -1.0 3.2
(%)***
Net RoE (%) 2.9 4.0 -4.7 -0.9 2.9
CET 1 ratio 13.4 12.9 13.2 13.4 12.9
(%)****
Leverage
Ratio, Basel 4.7 4.5 4.7 4.7 4.5
3 fully
loaded (%)
Total assets 551 518 517 551 518
(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 dividend accrual and (fully discretionary)
AT 1 coupon.
**** Includes net results reduced by dividend accrual and from Q3 2019
onwards additionally reduced by (fully discretionary) AT1
coupons.
*****
*Press contact*
Margarita Thiel +49 69 136-46646
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 around 11.5 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 5.7 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*
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.: 79985
EQS News ID: 1110199
End of Announcement EQS News Service
(END) Dow Jones Newswires
August 05, 2020 01:03 ET (05:03 GMT)
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