DJ Commerzbank launches roll-out of 'Strategy 2024' and plans to complete first important restructuring steps this year
Commerzbank Aktiengesellschaft (CZB)
Commerzbank launches roll-out of 'Strategy 2024' and plans to complete first important restructuring steps this year
11-Feb-2021 / 07:03 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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- Closure of a further 190 branches planned in current year
- More than 80% of headcount reduction already targeted for year-end 2023
- Return to positive operating profit planned for 2021, operating profit of EUR2.7 billion planned for 2024
- Resumption of dividend payments planned for financial year 2023
- CEO Manfred Knof: 'We want to be sustainably profitable and shape our own destiny as an independent force in the
German banking market'
As early as this year, Commerzbank intends to complete key restructuring steps announced in its programme 'Strategy
2024' on 3 February 2021. The aim of the restructuring is to become the direct and advisory bank for Germany and to
further strengthen its leading position as the Bank for the German Mittelstand and a strong partner for around eleven
million private and small-business customers.
After the financial year 2020 was negatively affected by the effects of the coronavirus pandemic and the provision set
aside for the planned restructuring, the Bank is aiming to return to a positive operating result already in the current
year. Over the coming four years, costs will be substantially reduced, and profitability will be significantly
increased on the basis of a detailed implementation plan for the new strategy programme. Commerzbank is targeting an
operating profit of around EUR2.7 billion and a return on tangible equity (RoTE) of around 7% for 2024. The resumption of
dividend payments is planned for the 2023 financial year. There is the potential to return overall up to EUR3 billion to
shareholders in the years 2023 and 2024 in the way of dividends or share buybacks, subject to a successful
transformation and prior permission of the European Central Bank.
'We want to be sustainably profitable and shape our own destiny as an independent force in the German banking market,'
commented Manfred Knof, Chairman of the Board of Managing Directors of Commerzbank. 'To achieve this aim, we need to
carry out an in-depth restructuring of the Bank over the coming years. Our 'Strategy 2024' represents customer
centricity, digitalisation, sustainability, and profitability. We will consistently and rapidly implement our plan.'
As a result of 'Strategy 2024', Commerzbank is targeting a reduction in costs by EUR1.4 billion or around 20% in 2024 by
comparison with 2020. One third of the envisaged savings are already planned for implementation by 2022. At the same
time, revenues are expected to remain largely stable - mBank will continue its revenue growth.
Commerzbank will reduce approximately 10,000 full-time equivalents in gross terms as announced. At the same time, the
recruitment of around 2,500 full-time positions is planned. This will allow the Bank to further reduce its costs, among
others for external service providers. In total, the net reduction amounts to around 7,500 full-time positions. The
necessary framework agreements are expected to be concluded with the Group Works Council until the Annual General
Meeting on 5 May 2021.
Private and Small-Business Customers: Increase in profitability
Commerzbank has defined ambitious goals in both business segments for 2024. It targets a pre-tax return (RoCET) of 25%
in the Private and Small-Business Customers segment including mBank and a cost-income ratio (CIR) of 59% including
compulsory contributions.
The Bank will achieve this by further developing the segment into an attractive combination of a highly efficient
direct bank and first-class advisory offering. This will combine the strengths of comdirect with the advisory expertise
of Commerzbank. Commerzbank will reduce the number of branches from the current level of 790 to 450 locations. At these
branches, customers will receive advice on issues like account, card, and consumer credit, as well as being supported
in the use of digital offerings. Private and small-business customers with a greater requirement for advisory services
will receive comprehensive personal support and individual solutions on all issues related to investing and financing
at 220 of these locations. Commerzbank intends to significantly expand its business with affluent customers and
small-business customers in Private Banking and Wealth Management.
Corporate Clients: Significant efficiency gains
In the Corporate Clients business, Commerzbank is targeting a pre-tax return (RoCET) of 9% based on stringent RWA
management and is aiming for a cost-income ratio (CIR) including compulsory contributions of 62% in 2024.
In future, the Bank will focus on the German Mittelstand and large corporates and on international customers with
German connectivity. Commerzbank will only provide advisory services for further international corporate clients if
they are operating in selected future-oriented sectors such as mobility, sustainability, communications, life sciences,
and capital goods. The Bank will continue to maintain its responsibility as a strong financing and hedging partner for
German companies conducting import and export business around the world. Corporate clients will continue to be offered
personal advisory services and a network of regional locations. At the same time, an innovative direct bank offering
for corporate clients will gradually be established with a standardised product and advisory offering.
Fast implementation of the new strategy
'Strategy 2024' is underpinned by clearly defined measures and milestones. The implementation plan envisages the
closure of a further 190 branches over the course of 2021. The Bank will close a further 150 branches in 2022 and 2023
and establish the central advisory centres for the Private and Small-Business Customers segment. At the same time, the
Corporate Clients segment will be largely digitalised, the product offering will be streamlined and the presence
overseas will be adapted to the customer structure. More than 80% of the envisaged headcount reduction is set to be
completed by year-end 2023. The cost savings are planned to start taking full effect in 2024.
Provision for planned restructuring and coronavirus crisis negatively impacted 2020 results
In the financial year 2020, Commerzbank established the foundation for the restructuring. With a charge of EUR814
million, the Bank booked a substantial proportion of the planned restructuring expenses of around EUR1.8 billion. Apart
from the restructuring charge, the Bank incurred the impairment of goodwill and other intangible assets of around EUR1.6
billion, which, however, had no effects on the regulatory capital base. This led to a net result of minus EUR2,870
million (2019: plus EUR585 million).
In 2020, the operating business was clearly impacted by the coronavirus pandemic. Commerzbank took EUR505 million
additional provisions for coronavirus effects ('top-level adjustment') anticipated for 2021. Furthermore, legal
provisions for foreign-currency loans at mBank were increased by EUR229 million. Together with negative exceptional
revenue items, this led to an operating result of minus EUR233 million in 2020 (2019: plus EUR1,253 million).
Despite the net loss, the Common Equity Tier 1 ratio (CET 1 ratio) amounted to 13.2% at the end of 2020 (year-end 2019:
13.4%) and, with around 370 basis points, remained clearly above the minimum regulatory requirement of 9.5% (MDA
threshold).
'We have cleaned-up our balance sheet and made provision for an economic environment that continues to be uncertain,'
said Bettina Orlopp, Chief Financial Officer of Commerzbank. 'Our comfortable capital position gives us adequate
financial leeway for the implementation of our 'Strategy 2024' over the upcoming years.'
Stable underlying revenues - high quality of the loan book
Excluding the EUR229 million increase in provisions for foreign currency loans at mBank, underlying revenues continued to
remain almost stable at EUR8,447 million (2019: 8,615 million) This was in particular due to net commission income, which
the Bank increased by almost 9% thanks to a strong securities business. It more than compensated the burden from the
interest rate environment. Including negative exceptional items and valuation effects, Group revenues decreased to
EUR8,186 million (2019: EUR8,639 million).
Administrative expenses were reduced by 2.4% to EUR6,160 million (2019: EUR6,313 million) through effective cost
management. This was driven by the net headcount reduction of around 900 full-time equivalents and savings in expenses
for advertising and business travel and lower depreciation. This contrasted with a further increase of compulsory
contributions by 13% to EUR512 million. Nevertheless, costs came down overall to EUR6,672 million (2019: EUR6,766 million)
and were therefore around EUR200 million below the original expectation for 2020.
Against the background of the global pandemic, the risk result in 2020 rose to minus EUR1,748 million (2019: minus EUR620
million). This includes negative impacts from the coronavirus pandemic amounting to EUR961 million. The quality of the
loan book at year-end continues to be high with a non-performing exposure ratio (NPE ratio) of only 1.0%.
Corporate Clients negatively impacted by coronavirus crisis - Lower effects on private customers
The Private and Small-Business Customers (PSBC) segment again performed well in its customer business in 2020. Loan
volumes in the domestic market grew by EUR8 billion to EUR112 billion. The volume of mortgage lending alone increased by 7%
to EUR86 billion on the back of record high new business volumes. The securities volume experienced strong growth of EUR20
billion to EUR177 billion, of which net inflows amounted to around EUR12 billion.
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DJ Commerzbank launches roll-out of 'Strategy 2024' -2-
Thanks to the high level of customer activity, the segment increased net commission income by 12% to EUR2,151 million.
This led to stable underlying revenues of EUR4,826 million (2019: EUR4,846 million) and compensated negative impacts from
additional higher provisions for foreign-currency loans at mBank. The risk result rose to minus EUR562 million (2019:
minus EUR254 million). Overall, the operating profit for the segment amounted to EUR368 million (2019: EUR831 million) in
2020.
The development in the Corporate Clients segment was significantly impacted by the coronavirus pandemic in the past
financial year. Revenues came down to EUR3,216 million (2019: EUR3,360 million). The strict RWA management by the Bank and
lower liquidity requirements from customers on account of the coronavirus pandemic led to a reduction in loan volumes.
Furthermore, the decline in the global economy exerted a negative impact on the demand for trade finance. However,
stronger capital market business partly compensated revenue reductions in trade finance and the loan business. Due to
the pandemic, the risk result of the segment increased to minus EUR1,081 million (2019: minus EUR342 million). Of these,
EUR373 million were booked as additional provisions for expected coronavirus effects in 2021 ('top-level adjustment').
With reduced operating expenses, the operating result of the segment was minus EUR458 million (2019: plus EUR336 million).
Outlook for 2021
For the current financial year, Commerzbank expects slightly lower revenues reflecting the focus on a more efficient
use of equity capital (RWA optimisation) in the transformation. With increasing investments and initial cost measures
from the transformation, the Bank aims for a cost reduction to around EUR6.5 billion. Depending on the development of the
coronavirus pandemic, the Bank expects a risk result of between minus EUR0.8 billion and minus EUR1.2 billion. A positive
operating result is expected for 2021. Taking into account the planned additional restructuring expenses of around EUR0.9
billion, Commerzbank is targeting a Common Equity Tier 1 ratio (CET 1 ratio) of more than 12% at year-end.
Financial figures at a glance
in EURm 2020 2019 2020 vs Q4 2020 Q4 2019 Q4 20 vs Q3 2020
2019 in % Q4 19 in %
Net interest income 4,975 5,070 -1.9 1,151 1,305 -11.8 1,226
Net commission income 3,317 3,056 +8.6 837 786 +6.5 812
Net fair value* 66 244 -72.8 182 116 +56.7 25
Other income -172 270 - -142 -36 - -30
Income before risk result 8,186 8,639 -5.2 2,029 2,172 -6.6 2,033
Revenues excl. exceptional items 8,447 8,615 -2.09 2,048 2,161 -5.2 2,096
Risk result -1,748 -620 - -681 -250 - -272
Operating expenses 6,160 6,313 -2.4 1,609 1,608 +0,0 1,521
Compulsory contributions 512 453 +13.0 67 65 +2.3 72
Operating profit or loss -233 1,253 - -328 249 - 168
Impairments on intangible assets 1,578 28 - 1,578 28 - -
Restructuring costs 814 101 - 614 101 - 201
Current pre-tax profit or loss 30 -17 - -10 -9 -4.7 -11
(discontinued operations)
Pre-tax profit or loss (Group) -2,597 1,108 - -2,530 111 -43
Taxes 264 423 -37.6 199 195 +1.9 3
Minorities 9 100 -90.6 -268 13 - 15
Consolidated profit or loss** -2,870 585 - -2,702 -97 - -60
Cost-income ratio in operating business 75.2 73.1 79.3 74.0 74.8
excl. compulsory contributions (%)
Cost-income ratio in operating business 81.5 78.3 82.6 77.0 78.3
incl. compulsory contributions (%)
Operating RoTE (%) -0.8 4.7 -4.6 3.6 2.3
Net RoTE (%)*** -11.7 2.2 -43.9 -1.7 -1.5
Net RoE (%) -10.7 2.0 -40.5 -1.6 -1.3
CET 1 ratio (%)**** 13.2 13.4 13.2 13.4 13.5
Leverage Ratio, Basel 3 fully loaded (%) 4.9 5.1 4.9 5.1 4.8
Total assets (EURbn) 507 463 507 463 544
* 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 result reduced by dividend accrual - if appropriate - and from Q3 2019 onwards additionally reduced by (fully discretionary) AT 1 coupons.
The figures presented in this press release for the year 2020 are preliminary and have not been audited. The annual press conference will be broadcast live on the internet from 10.30 am onwards today. Photos will be available at around 1 pm here. Press contact Margarita Thiel +49 69 136-46646 Sascha Ullrich +49 69 136-82349 Erik Nebel +49 69 136-44986 Maurice Farrouh +49 69 136-21947
About Commerzbank Commerzbank is the leading bank for the German Mittelstand and a strong partner for around 30,000 corporate client groups and around 11 million private and small-business customers in Germany. The Bank's two Business Segments - Private and Small-Business Customers and Corporate Clients - offer a comprehensive portfolio of financial services. Commerzbank transacts approximately 30 per cent of Germany's foreign trade and is present internationally in almost 40 countries in the corporate clients' business. The Bank focusses on the German Mittelstand, large corporates, and institutional clients. As part of its international business, Commerzbank supports clients with German connectivity and companies operating in selected future-oriented industries. Following the integration of comdirect, private and small-business customers benefit from the services offered by one of Germany's most advanced direct banks combined with personal advisory support on site. Its Polish subsidiary mBank S.A. is an innovative digital bank that serves approximately 5.7 million private and corporate customers, predominantly in Poland, but also in the Czech Republic and Slovakia. In 2020, Commerzbank generated gross revenues of some EUR8.2 billion with almost 48,000 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.: 93410 EQS News ID: 1167620 End of Announcement EQS News Service =------------------------------------------------------------------------------------
(END) Dow Jones Newswires
February 11, 2021 01:04 ET (06:04 GMT)
