Commerzbank: 9M operating profit of EUR1 billion and net result of EUR751 million
- Operating profit of EUR331m for third quarter (Q3 2017: EUR623m) and of EUR1,020m after nine months (9M 2017: EUR1,128m); exceptional revenue items of EUR37m in the first nine months (9M 2017: EUR617m)
- Underlying revenues higher at EUR6.69bn in the first nine months (9M 2017: EUR6.34bn)
- Common Equity Tier 1 ratio of 13.2% (end of June 2018: 13.0%)
- More than 900,000 net new customers in German private and small business banking since October 2016 - on track for target of 1 million by end of 2018
- Dividend accrual of 15 cents per share for first nine months of 2018
- EBA stress test confirms Commerzbank's good risk profile
Commerzbank recorded continued growth in the first nine months of 2018 and increased its underlying revenues. In the Private and Small Business Customers segment, it gained around 117,000 net new customers in Germany in the third quarter. With a good 900,000 net new customers since October 2016, it is on track to achieve its target of one million net new customers by the end of 2018. The Corporate Clients segment is still ahead of its 2018 targets for new customers and volume of lending. Group revenues after adjustment for non-recurring items rose in the first nine months to EUR6,690 million (9M 2017: EUR6,338 million). In the third quarter the Bank increased its underlying revenues by nearly 9% year-on-year to EUR2,175 million (Q3 2017: EUR2,003 million). The Bank made further progress with the implementation of its strategy. In the third quarter, the migration of small business customers from the Corporate Clients segment to the Private and Small Business Customers segment was completed and the new relationship model for corporate clients established, among other things.
Group revenues stood at EUR6,727 million in the first nine months (9M 2017: EUR6,955 million). Last year's figure had been bolstered by non-recurring items amounting to EUR617 million in the first nine months. In 2018, exceptional revenues in the first nine months stood at just EUR37 million. Overall, higher revenues from customer business helped to largely offset the difference year-on-year. In the third quarter, revenues amounted to EUR2,193 million (Q3 2017: EUR2,505 million).
Operating expenses totalled EUR5,412 million in the first nine months (9M 2017: EUR5,297 million). The year-on-year increase was mainly due to investments in strategy implementation and further growth. Operating expenses for the third quarter stood at EUR1,728 million (Q3 2017: EUR1,714 million). Costs were therefore in line with expectations for 2018, as was the risk result. It stood at minus EUR295 million in the first nine months and minus EUR134 million in the third quarter. This reflects the Bank's portfolio quality and the benign credit environment. The non-performing loan (NPL) ratio remained very low, at 0.9%.
The operating profit for the first nine months came to EUR1,020 million (9M 2017: EUR1,128 million). It benefited from higher underlying revenues, a lower risk result and a positive contribution from the Asset and Capital Recovery segment. In the third quarter, the operating profit came in at EUR331 million (Q3 2017: EUR623 million). The year-on-year decline is attributable mainly to exceptional revenues of EUR502 million in the third quarter of 2017, including from real estate sales.
After deduction of taxes of EUR187 million and minority interests of EUR81 million, Commerzbank posted a net result of EUR751 million for the first nine months of 2018 (9M 2017: EUR53 million; impacted by restructuring expenses of around EUR800 million). The net result for the third quarter came in at EUR218 million (Q3 2017: EUR467 million).
"We increased our underlying revenues and steadily gain new customers. This shows that we have the right strategy: We grow in a highly competitive market. Our improved setup has also been confirmed by the European stress test. However, the environment remains challenging and although we have made a lot of progress, we still have some work to do", said Martin Zielke, Chairman of the Board of Managing Directors of Commerzbank." Chief Financial Officer Stephan Engels added: "We have significantly improved the quality of our earnings compared to last year. Our capital ratio and our leverage ratio are stable on a good level. Our outlook for the full year remains unchanged."
The Common Equity Tier 1 ratio (CET 1) stood at 13.2% at the end of September, versus 13.0% at the end of June 2018. This includes earnings for the first nine months, factoring in a dividend accrual of 15 cents per share. Risk-weighted assets (RWA) amounted to EUR178 billion at the end of September, versus EUR176 billion at the end of June 2018. This rise, resulting partly from increased lending in the core segments, was more than offset by capital build-up. The leverage ratio stood at 4.5%. Total assets came to EUR493 billion (end of June 2018: EUR488 billion). The Bank's achievements in risk reduction and improved balance sheet quality contributed to a significantly improved result in this year's European Banking Authority stress test.
Development of the segments The Private and Small Business Customers segment benefited from the continued growth in customers and Assets under Control, and increased its revenues after adjustment for non-recurring items by 7.8% year-on-year in the first nine months to EUR3,663 million. Underlying revenues were also up year-on-year for the third quarter, at EUR1,228 million (Q3 2017: EUR1,125 million). Assets under Control in Germany went up in all product categories, to stand at EUR392 billion at the end of the third quarter. The volume of mortgage lending grew by 10% year-on-year, reaching around EUR74 billion in September.
The segment's operating expenses stood at EUR2,893 million (9M 2017: EUR2,794 million). The year-on-year increase was due to higher regulatory costs and investments in growth. The risk result came to minus EUR184 million. The operating profit stood at EUR564 million for the first nine months (9M 2017: EUR712 million, including non-recurring items of EUR238 million). Operating profit for the third quarter stood at EUR188 million (Q3 2017: EUR380 million). In the previous year, non-recurring effects from the sale of the Concardis holdings and termination of the consumer finance joint venture with BNP Paribas had contributed to the segment's profit.
In the Corporate Clients segment, continued high margin pressure and competition impacted earnings. The Financial Institutions division returned to a stable profit contribution this year, following its realignment. Revenues from business with SMEs, large corporates and international companies were affected - despite some successful growth initiatives - by margin pressure, low interest rates and weak demand for hedging products. The result of the Equity Markets & Commodities division was driven by lower demand for structured products.
The Corporate Clients segment generated revenues of EUR2,836 million in the first nine months (9M 2017: EUR3,015 million), including EUR918 million in the third quarter (Q3 2017: EUR967 million). Operating expenses amounted to EUR2,189 million (9M 2017: EUR2,148 million). The risk result, which had benefited from releases in the first half of the year, normalised and stood at minus EUR124 million after nine months (Q3: minus EUR62 million). The operating profit came to EUR523 million for the first nine months (9M 2017: EUR743m) and to EUR169 million for the third quarter (Q3 2017: EUR237 million).
The Asset & Capital Recovery (ACR) segment recorded an operating profit of EUR90 million for the first nine months (9M 2017: minus EUR210 million, Q3 2018: EUR14 million). This result reflects both the reduced size of the segment's run-down portfolio and the revaluation of the Ship Finance portfolio following the introduction of IFRS 9. Revenues amounted to EUR135 million (9M 2017: EUR146 million). The revenue figure for the third quarter was EUR28 million. Operating expenses were further reduced, coming in at EUR60 million for the first nine months (9M 2017: EUR79 million). The risk result came out at EUR15 million. The Bank's Ship Finance portfolio was run down further and stood at a volume of EUR1.1 billion at the end of the third quarter (Q3 2017: EUR4.2 billion).
Outlook The outlook remains unchanged. In 2018, the Bank will focus on further growth and the implementation of its Commerzbank 4.0 strategy. Higher underlying revenues are expected at Group level with the Private and Small Business Customers segment exceeding and the Corporate Clients segment being below the 2017 figures. Driven by investments and compulsory contributions, costs are expected to be at around EUR7.1 billion. The risk result under IFRS 9 should be below EUR500 million, provided the global trade conflicts do not escalate significantly and there are no unforeseeable larger credit events. The Bank is aiming to resume dividend payments of 20 cents per share for financial year 2018.Financial figures at a glance
in EURm 9M 2018 9M 2017 Q3 2018 Q3 2017 Q2 2018 9M/18 vs 9M/17 in % Net interest income 3,405 3,091 1,198 1,038 1,162 10.2 Net commission income 2,329 2,404 767 738 765 -3.1 Net fair value result 791 914 166 222 268 -13.5 Other income 203 546 62 507 26 -62.8 Revenues before risk result 6,727 6,955 2,193 2,505 2,221 -3.3 Revenues excl. exceptional items 6,690 6,338 2,175 2,003 2,203 5.6 Operating expenses 5,412 5,297 1,728 1,714 1,748 2.2 Risk result (2017: Loan loss provisions) -295 -530 -134 -168 -84 44.3 Operating profit or loss 1,020 1,128 331 623 389 -9.6 Impairments of Goodwill - - - - - Restructuring expenses - 807 - - - Pre-tax profit or loss 1,020 321 331 623 389 - Taxes 187 202 89 134 94 -7.0 Consolidated profit or loss attributable to Commerzbank shareholders 751 53 218 467 272 - Earnings per share (EUR) 0.60 0.04 0.17 0.37 0.22 Cost/income ratio in operating business (%) 80.5 76.2 78.8 68.4 78.7 Operating RoTE (%) 5.2 5.6 5.0 9.3 5.9 Net RoTE (%) 4.0 0.3 3.5 7.3 4.3 Net RoE (%) 3.6 0.2 3.1 6.6 3.9 CET 1 ratio, Basel 3 fully phased in (%) 13.2 13.5 13.2 13.5 13.0 Leverage Ratio, Basel 3 fully phased in (%) 4.5 4.7 4.5 4.7 4.5 Total assets (EURbn) 493 490 493 490 488
From approximately 7 am onwards you can find broadcast-ready video material with statements by Stephan Engels at http://mediathek.commerzbank.de/.
*****Press contact Nils Happich +49 69 136-80529 Maurice Farrouh +49 69 136-21947 Erik Nebel +49 69 136-44986
About Commerzbank 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 and Corporate Clients, the Bank offers a comprehensive portfolio of financial services which is precisely aligned to its clients' needs. Commerzbank finances approximately 30% of Germany's foreign trade and is the leading finance provider 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 EUR9.1 billion with approximately 49,300 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.
08.11.2018 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.deLanguage: English Company: Commerzbank Aktiengesellschaft Kaiserstraße 16 60311 Frankfurt am Main
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