DGAP-News: Commerzbank Aktiengesellschaft / Key word(s): 9-month figures
- Operating profit of EUR629m for the third quarter (Q3 2016: EUR429m); EUR1,144m after nine months (first nine months of 2016: EUR1,062m)
- Adjusted revenues came to EUR6.35bn in the first nine months (first nine months of 2016: EUR6.46bn) - one-offs of EUR618m; segments Private and Small Business Customers and Corporate Clients stable quarter-on-quarter
- Net profit after nine months of EUR66m despite restructuring expenses of EUR807m in the second quarter of 2017
- Common Equity Tier 1 ratio up significantly to 13.5% (end of June 2017: 13.0%); leverage ratio comfortable at 4.7%
- ACR shipping portfolio reduced by more than 30% in the first nine months to EUR3.3bn. On track for year-end target of around EUR3bn - acceleration of portfolio run-down under consideration
- Around 587,000 net new customers in German retail banking since October 2016 - consumer loan platform fully integrated
The Bank also continued with the implementation of its "Commerzbank 4.0" strategy in the third quarter as planned. The termination of the Commerz Finanz GmbH joint venture and the transfer of the consumer loan portfolio of around EUR3.5 billion onto the Bank's books and systems were fully completed in the third quarter. The transfer of this portfolio now offers an opportunity for Commerzbank to expand the business on its own platform. Its target is to increase this portfolio to over EUR10 billion by 2020. Investments in digitalisation and its implementation in the Digital Campus are running to plan.
The Bank saw its operating profit increase by 7.7% year-on-year in the first nine months to EUR1,144 million (first nine months of 2016: EUR1,062 million). Previously announced non-recurring revenue items and valuation effects, which sum up to EUR618 million after nine months, contributed to this increase (first nine months of 2016: EUR543 million). The operating profit for the third quarter 2017 came in at EUR629 million (Q3 2016: EUR429 million). The exceptional revenue items which arose mainly from real estate sales, the sale of Concardis, and the termination of the consumer loan joint venture with BNP Paribas, amounted to EUR502 million in the third quarter, and therefore had more of an impact than the non-recurring items in the same quarter of last year (Q3 2016: EUR231 million). Revenues before loan loss provisions were also stable in the first nine months, at EUR6,971 million (first nine months of 2016: EUR7,000 million). In the third quarter they rose by 3.0% to EUR2,511 million (Q3 2016: EUR2,437 million). Excluding non-recurring items, revenues before loan loss provisions were down year-on-year in the first nine months, at EUR6,353 million (first nine months of 2016: EUR6,457 million). This shows that the Bank's growth in customer numbers and assets helped mitigating the negative interest rate environment and lower margins. In the third quarter, the Bank's underlying revenues came to EUR2,009 million (Q3 2016: EUR2,206 million).
Net loan loss provisions, at EUR530 million, were lower year-on-year in the first nine months of 2017 (first nine months of 2016: EUR610 million). The figure for the third quarter was EUR168 million (Q3 2016: EUR275 million). Therefore, the Bank recorded a non-performing loan (NPL) ratio of just 1.5%, which is still low compared to its European peers, reflecting its healthy risk profile. Operating expenses were down slightly for the first nine months at EUR5,297 million (first nine months of 2016: EUR5,328 million). Personnel expenses decreased due to the personnel reductions, whereas expenses attributable to the various bank levies increased by EUR42 million. Operating expenses for the third quarter stood at EUR1,714 million (Q3 2016: EUR1,733 million).
Taking into account the restructuring expenses of EUR807 million booked in the second quarter in connection with the "Commerzbank 4.0" strategy, the pre-tax profit for the first nine months of 2017 came to EUR337 million (first nine months of 2016: EUR338 million). The pre-tax profit had been adversely affected in the first nine months of 2016 by an impairment on goodwill and other intangible assets of EUR627 million and restructuring charges of EUR97 million. So after deduction of taxes of EUR204 million and minority interests of EUR67 million, Commerzbank posted a positive net profit of EUR66 million for the first nine months of 2017 (first nine months of 2016: EUR96 million). The net result for the third quarter stood at EUR472 million (Q3 2016: minus EUR288 million). Earnings per share came in at EUR0.05 in the first nine months of 2017 (first nine months of 2016: EUR0.08).
The Common Equity Tier 1 ratio (CET 1) with full application of Basel 3 rose to 13.5% at the end of September 2017, versus 13.0% at the end of June 2017. This increase was attributable firstly to the larger CET 1 capital base: the Bank's CET 1 capital with full application of Basel 3 rose by around EUR0.7 billion due mainly to the improved net profit. Secondly, Risk-Weighted Assets (RWA) were also lower again. RWAs associated with planned growth in the Bank's core business and operational risks were higher, while there were lower RWAs for market risks and due to the portfolio run-down in Ship Finance. RWA with full application of Basel 3 stood at EUR176.6 billion at the end of September 2017, compared with EUR178.5 billion at the end of June 2017 and EUR194.6 billion at the end of September 2016. The leverage ratio came out at 4.7% at the end of the third quarter of 2017. Total assets came to EUR490 billion (end of June 2017: EUR487 billion).
"We have increased our Common Equity Tier 1 ratio significantly to 13.5 percent. Taking into account the IFRS 9 effect, we are aiming for a CET 1 ratio of at least 12.5 percent as of 1 January 2018. Besides growth, cost management remains a top priority. Active management has enabled us to keep our costs stable despite the investments in digitalisation and IT", said Stephan Engels, Chief Financial Officer of Commerzbank. "We are continuing to make good progress with the run-down of our ACR shipping portfolio. We are on track to achieve our target for the year of around EUR3 billion. With IFRS 9 due to be implemented by the turn of the year, we are currently considering revaluating our Ship Finance portfolio to run it down even faster than previously planned."
The operating profit for the segment for the first nine months of 2017 was down year-on-year at EUR717 million (first nine months of 2016: EUR845 million). The decrease is attributable primarily to an increase in operating expenses. In the third quarter an operating profit of EUR381 million was generated - also supported by non-recurring items (Q3 2016: EUR273 million). Revenues before loan loss provisions remained stable year-on-year in the first nine months of 2017 at EUR3,642 million (first nine months of 2016: EUR3,643 million). The revenue figure for the third quarter was EUR1,363 million (Q3 2016: EUR1,216 million). This included non-recurring items totalling EUR238 million, mainly from the previously announced sale of the Concardis holdings and the valuation in connection with the termination of the consumer loan joint venture with BNP Paribas. Excluding non-recurring items, revenues before loan loss provisions came to EUR1,125 million, so were stable relative to the previous quarter (Q2 2017: EUR1,110 million).
Loan loss provisions for the segment rose by 23.8% in the first nine months of 2017 to EUR130 million (first nine months of 2016: EUR105 million). EUR55 million of this was booked in the third quarter (Q3 2016: EUR40 million). Operating expenses increased to EUR2,795 million in the first nine months (first nine months of 2016: EUR2,693 million). The EUR24 million increase in compulsory contributions in Poland was a key factor in this. Of the operating expenses, EUR927 million was incurred in the third quarter (Q3 2016: EUR903 million).
mBank revenues before loan loss provisions increased in the first nine months of 2017 to EUR738 million (first nine months of 2016: EUR721 million). Thereof, EUR254 million were generated in the third quarter (Q3 2016: EUR228 million). The volume of new consumer loan business went up by more than 15% year-on-year in the first nine months. mBank has attracted around 208,000 net new customers since the beginning of the year. In the third quarter of 2017, mBank retrospectively adjusted its customer numbers for authorised users of a microfirm current account. At the end of September 2017, mBank had approximately 5.3 million retail and business customers in Poland, the Czech Republic and Slovakia.
Corporate Clients had to deal with weak markets and the challenges from the negative interest rate environment. In the first nine months of 2017 it reported an operative result of EUR742 million (first nine months of 2016: EUR927 million). The third quarter accounted for EUR241 million of this (Q3 2016: EUR327 million). Adjusted revenues before loan loss provisions slipped to EUR2,981 million in the first nine months of 2017 (first nine months of 2016: EUR3,147 million). In the third quarter, they were slightly higher than in the previous quarter, at EUR961 million (Q2 2017: EUR952 million).
Mittelstand saw muted loan demand, but was able to partially compensate for it with a good performance with capital market products. International Corporates grew its lending business slightly compared to the first nine months of the previous year. However, demand for structured capital market products declined over the same period. The strategic realignment and repositioning of Financial Institutions is on track. Revenues have now stabilised. Equity Markets & Commodities benefited in the first nine months from solid customer activity due to favourable equity markets.
Loan loss provisions for the Corporate Clients segment were reduced in the first nine months of 2017 to EUR123 million (first nine months of 2016: EUR215 million). The segment saw its operating expenses for the same period reduced to EUR2,148 million (first nine months of 2016: EUR2,219 million). It managed to cut its costs despite strategic investments and higher expenditure on the implementation of regulatory and compliance requirements.
From approximately 7 am onwards you can find broadcast-ready video material with statements by Stephan Engels at http://mediathek.commerzbank.de/.
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