DGAP-News: Commerzbank: first year of strategy implementation with positive net result of EUR156m despite restructuring charge
08.02.2018 (www.4investors.de) -
DGAP-News: Commerzbank Aktiengesellschaft / Key word(s): Final Results
Commerzbank: first year of strategy implementation with positive net result of EUR156m despite restructuring charge
08.02.2018 / 07:00
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
Net interest income
Provisions for loan losses
Net commission income
Net fair value result
Revenues before loan loss provisions
Revenues excl. exceptional items
Operating profit or loss
Impairments of Goodwill
Pre-tax profit or loss
Consolidated profit or loss attributable to Commerzbank shareholders
Earnings per share (EUR)
Cost/income ratio in operating
Operating RoTE (%)
Net RoTE (%)
Net RoE (%)
CET 1 ratio, Basel 3 fully phased-in (%)
Leverage Ratio, Basel 3 fully phased-in (%)
Total assets (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/.
The press conference will be broadcast live on the internet https://www.commerzbank.de/en/hauptnavigation/presse/bilanzpressekonferenz/bpk.html.
Nils Happich +49 69 136-80529
Karsten Swoboda +49 69 136-22339
Maurice Farrouh +49 69 136-21947
Erik Nebel +49 69 136-44986
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.
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.
08.02.2018 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.The issuer is solely responsible for the content of this announcement.The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Archive at www.dgap.de
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