DGAP-News: Commerzbank Aktiengesellschaft / Key word(s): Half Year Results
- Group Operating profit of EUR615 m for first half 2016 (first half of 2015: EUR1,089 m), and of EUR342 m for second quarter 2016 (Q2 2015: EUR419 m)
"Commerzbank has maintained its good market position in an adverse environment and posted an operating profit of 342 million euros in Q2. In the Private Customers segment we further grew and extended our loan volumes. Furthermore, we are able to confirm our leading market position in Mittelstandsbank. We sustain a healthy risk profile with a very good NPL ratio of 1.4 per cent. Our CET1 capital ratio of 11.5 per cent is appropriate and already includes a dividend accrual of 10 cents per share for the first half of 2016. Moreover, we report a comfortable Leverage Ratio of 4.4 per cent", said Stephan Engels, Chief Financial Officer of Commerzbank.
CET 1 ratio at an appropriate level at 11.5% (Q2 2015: 10.5%)
The Common Equity Tier 1 ratio (CET 1) with full application of Basel 3 was at 11.5% at the end of June 2016 (end of March 2016: 12.0%; end of June 2015: 10.5%). As in the first half of 2015, this includes a dividend accrual of 10 cents per share for the first half of 2016. The change in the ratio is due firstly to a moderate increase of risk-weighted assets (RWA) with full application of Basel 3 to EUR198 billion as of end of June 2016 (end of March 2016: EUR195 billion); in particular for operational risks due to the consideration of new external events factored in by external databases. Secondly, deductions on pension liabilities as well as revaluation reserve increased. The total assets in the Group amounted to EUR533 billion as of the end of June 2016 (end of March 2016: EUR536 billion). The leverage ratio came in at 4.4% at the end of the second quarter of 2016, reflecting the changes in capital and on the balance sheet.
Development of the segments
In the Private Customers segment, a good Operating profit of EUR371 million was recorded in the first half of 2016. This represented a year-on-year increase of 13% (first half of 2015: EUR327 million). The figure for the second quarter was EUR180 million (Q2 2015: EUR169 million). Revenues before loan loss provisions remained steady at EUR1,869 million (first half of 2015: EUR1,875 million). This includes a positive one-off effect of EUR58 million from the sale of Visa Europe shares in the second quarter. The segment was able to offset the negative interest rate environment with targeted measures such as increasing the volume of its lending business. Its loan volume was up by a significant 8% year-on-year in the first six months of 2016. New mortgage financing business remained at a high level, with margins increasing in the second quarter of 2016. Securities business was down owing to geopolitical uncertainties and customers' resulting caution. Overall, the Private Customers segment saw continued growth. A net 62,000 new customers chose Commerzbank in the second quarter. Since 2013 the Bank has now gained a net 940,000 new customers. Loan loss provisions decreased in the first half to a very low EUR11 million (first half of 2015: EUR38 million). The segment was able to reduce its operating expenses in the first half to EUR1,487 million (first half of 2015: EUR1,510 million).
Mittelstandsbank saw its Operating profit fall from EUR679 million to EUR412 million year-on-year in the first half of 2016. In the second quarter of 2016, it generated EUR203 million, compared with EUR314 million in the second quarter of 2015. The impact of the negative interest rate environment, in particular, was evident here, and Mittelstandsbank took specific steps to offset this, for example by the reduction in deposits or price measures. This is reflected in the positive trend seen in the loan-to-deposit ratio from 80% in the first quarter of 2016 to 92% in the second quarter of 2016. Revenues before loan loss provisions - excluding adjustments for counterparty risk in derivatives business - totalled EUR1,401 million in the first half of 2016 (first half of 2015: EUR1,521 million). Core business held stable: the Mittelstand Germany division reported stable loan volumes along with higher margins. The Large Corporates & International division benefited in the first half from a 7% year-on-year increase in lending volume. The Financial Institutions division generated lower revenues, as expected. This is mainly due to more stringent risk and compliance requirements which were initiated by the Bank itself. In addition, net interest income for the first half declined by 7% year-on-year on account of the negative interest rate environment. Loan loss provisions stood at EUR146 million for the first half (first half of 2015: EUR79 million). Operating expenses were increased slightly, coming in at EUR835 million for the first half (first half of 2015: EUR805 million).
The Central & Eastern Europe segment achieved a good Operating profit of EUR186 million in the first half of 2016, of which EUR109 million was contributed in the second quarter (first half of 2015: EUR157 million; Q2 2015: EUR69 million). Revenues before loan loss provisions for the first six months were 7% higher than for the same period of the previous year (first half of 2016: EUR492 million; first half of 2015: EUR459 million). The good revenue performance was supported by a positive one-off effect from the sale of Visa Europe shares, totalling EUR65 million, in the second quarter. The figure for the first half of 2015 includes a positive one-off effect of EUR46 million from the sale of the insurance business to Axa Group. Even excluding these two one-off effects, revenues increased year-on-year. This gain resulted principally from net interest income which, excluding exchange rate effects, was up 17% on the first half of 2015. The segment continued to record organic growth. Similarly sales of consumer loans showed a sharp increase of 24% in the first six months compared to the first six months of 2015, reaching a record level in the second quarter. M-Bank continued its positive trend in attracting new customers: in the second quarter net new customers numbered around 109,000, taking M Bank's customer base to 5.2 million at the end of June. Loan loss provisions for the first half, at EUR42 million, were similar to the same period of the previous year (first half of 2015: EUR47 million). Operating expenses were higher in the first half of 2016, at EUR264 million (first half of 2015: EUR255 million). The rise is due to the EUR33 million charge for the Polish banking tax, introduced in February 2016.
In a challenging environment for equities business, the Corporates & Markets segment saw its Operating profit reduced to EUR201 million in the first half of 2016 (first half of 2015: EUR473 million). Of this, EUR119 million was for the second quarter, down from EUR176 million in the second quarter of 2015. Revenues before loan loss provisions - excluding valuation effects from own liabilities (OCS effect) and adjustments for counterparty risks in derivatives business - came to EUR837 million in the first half, which is 26% down on the same period of the previous year (first half of 2015: EUR1,133 million). In Advisory & Primary Markets (APM) the performance of the Debt Capital Markets unit resulted in a stable year-on-year showing. The Fixed Income & Currencies (FIC) division profited from the continued demand for currency products, whereas demand for interest rate and credit trading was muted by comparison due to the low interest rate environment and the European Central Bank's monetary policy activities. Equity Markets & Commodities (EMC) was hit by the high levels of uncertainty on the capital markets, which took its toll on business in structured investment products for institutional clients. The securities lending and collateral management business is also being realigned and adapted in response to the change in market conditions. Loan loss provisions remained low in the first half. Net releases of loan loss provisions came to EUR7 million for the first half (first half of 2015: net release of EUR36 million). Operating expenses were reduced in the first half of 2016 to EUR718 million (first half of 2015: EUR784 million).
The Asset & Capital Recovery (ACR) segment reported a 43% year-on-year improvement in its Operating result in the first half to minus EUR256 million (first half of 2015: minus EUR451 million). Revenues before loan loss provisions totalled minus EUR48 million in the first half of 2016, above the level for the first six months of 2015 (first half of 2015: minus EUR95 million). In the first half of 2016, loan loss provisions in ACR were reduced to EUR145 million due to the continued portfolio run-down (first half of 2015: EUR249 million), whereas Ship Finance loan loss provisions were still at a high level. Operating expenses also decreased in the first half of 2016, to EUR63 million (first half of 2015: EUR107 million).
Commerzbank will continue its strategy of further expanding its market share for its Private Customers business, and maintaining the leading position of the Mittelstandsbank. The Bank expects the negative rate environment and the adverse markets to further weigh on revenues. Furthermore, the Bank will aim to keep its very good risk profile, although loan loss provisions are likely to increase by a moderate amount due to lower releases and continuously challenging shipping markets. Commerzbank intends to keep its cost base stable with exception of additional external burdens. The Bank's ambition remains to keep the capital ratio under full application of Basel 3 above SREP-requirements.
Financial figures at a glance
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