12.02.2015 DE000CBK1001
DGAP-News: Commerzbank: Operating profit increased by 40% to more than EUR 1 bn in 2014 - implementation of strategic agenda proceeding to plan

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DGAP-News: Commerzbank AG / Key word(s): Preliminary Results Commerzbank: Operating profit increased by 40% to more than EUR 1 bn in 2014 - implementation of strategic agenda proceeding to plan 12.02.2015 / 07:00 --------------------------------------------------------------------- - Net profit increased to EUR 602 m, following on from EUR 81 m in the previous year - High quality of the loan portfolio: Loan loss provisions reduced in 2014 by over one third to EUR 1.1 bn (2013: EUR 1.7 bn) - NCA portfolio run-down stepped up by 28% in 2014 - Credit volume in the Core Bank increased year-on-year in 2014 - market shares enlarged - Core capital increased by approximately EUR 900 m in 2014, capital ratio CET 1 with full application of Basel 3 improved from 9.0% at the end of 2013 to 9.5% at the end of 2014 - Leverage ratio with full application of Basel 3 improved to 3.7% as of end of 2014 (end of 2013: 3.3%) - Blessing: "We have increased the operating profit to more than EUR 1 billion in 2014. In a challenging environment we have been able to post further growth, award more loans and win market share." Commerzbank considerably increased the net profit in the 2014 financial year, further reducing risks and significantly improving the relevant capital ratios. The operating profit was improved by 40% to EUR 1.0 billion (2013: EUR 0.7 billion). The revenues before loan loss provisions declined, above all due to the portfolio run-down in the Non-Core Assets (NCA) segment, to EUR 9.1 billion (2013: EUR 9.3 billion). The loan loss provisions were lowered considerably to EUR 1.1 billion (2013: EUR 1.7 billion), which is testimony to the high quality of the credit portfolio. Despite additional investment and higher regulatory costs, the operating expenses were maintained at a virtually stable level of EUR 6.9 billion (2013: EUR 6.8 billion) thanks to active cost management. The net profit improved to EUR 602 million (2013: EUR 81 million); this figure includes restructuring expenses of EUR 61 million (2013: EUR 493 million). In the fourth quarter of 2014 the net profit increased to EUR 77 million, following on from EUR 64 million in the same quarter of the previous year. Among the contributors to the increase were lower loan loss provisions of EUR 308 million (Q4 2013: EUR 451 million). The Core Bank attained a stable operating profit of EUR 1.8 billion (2013: EUR 1.8 billion) in the 2014 financial year. The operating return on equity in the Core Bank was 9.2%. The revenues before loan loss provisions remained stable at EUR 8.9 billion (2013: EUR 8.9 billion). While both the consolidated net interest and trading income (up 2.9% to EUR 5.8 billion) and the net commission income (up 1.0% to EUR 3.2 billion) increased, the other income declined to minus EUR 252 million (2013: minus EUR 75 million). Here there were charges as a result of special items from higher net additions to legal provisions. Without these the operating revenues of the Core Bank would have increased despite the ongoing low interest rate environment. The loan loss provisions in the Core Bank were reduced significantly, by 26.3% to EUR 490 million (2013: EUR 665 million). The operating expenses in the Core Bank were EUR 6.6 billion and thus, as a result of additional investment and higher regulatory costs, increased slightly, by 2.6%, year-on-year (2013: EUR 6.4 billion). The credit volume was again increased in this period. In comparison with the previous year the Private Customers and Mittelstandsbank segments increased their credit volumes by 3% and 8%, respectively. Thus, the credit volumes in these segments increased more sharply than in the market in general. "We have increased the operating profit to more than EUR 1 billion in 2014 and significantly improved our capital base through our own efforts. In a challenging environment we have posted further growth, have awarded more loans and increased market share. The measures in our strategic agenda have been well received by customers," said Martin Blessing, Chairman of the Board of Managing Directors of Commerzbank AG. Blessing added: "The satisfaction of our customers has risen considerably in the past two years. In the Private Customers segment we have acquired more than 530,000 new customers in this period, and at Mittelstandsbank our position as the market leader in the financing of German foreign trade has been extended. Our investment bank Corporates & Markets has expanded its international business. In the Central & Eastern Europe segment we were able to acquire 558,000 new customers thanks to our Polish subsidiary mBank." Implementation of the strategic agenda proceeding to plan In 2014 Commerzbank implemented as planned the measures on the strategic agenda. In the two years since the announcement of the new strategy, the Core Bank segments have thus been able to attain significant progress. The Private Customers segment has succeeded in considerably enhancing the trust of customers. Thanks to the high quality of advisory, attractive new products and the expansion of the digital offering, it was possible to continually increase customers' willingness to recommend the Bank to others as well as the number of customers. In total the number of net customers has been raised by 532,000 since the end of 2012. The modernisation of the branch network was initiated with the opening of pilot branches. Mittelstandsbank was likewise able to increase the satisfaction of its clients. This is demonstrated by both internal client surveys and independent external surveys. In addition, Mittelstandsbank has pushed ahead with its internationalisation in recent years. Thus, among other things, five new sites were opened in Switzerland, local corporate client business was developed in Austria, and the planned opening in 2015 of a subsidiary in Brazil was prepared. All in all, Mittelstandsbank has thus succeeded in further expanding its client base. This applies to SMEs, to clients from the upper Mittelstand and also to larger corporates. Thus 90% of all companies in Germany in the larger corporates sector now rank among the clients of Commerzbank. In the past two years Mittelstandsbank has increased its credit volume in Germany 15 percentage points more than the market in general and further extended its position as the market leader in the financing of the German export sector, increasing its market share in the financing of foreign trade in the entire eurozone in 2014 from 14% to more than 17%. In the Central & Eastern Europe segment Poland's mBank today ranks among the most innovative banks in the world. This has been aided by the new online banking platform and mobile apps which have been developed in recent years. In addition, mBank has successfully implemented its "one bank" strategy. Following the conclusion of the unification of the branding in 2013, work began on the reorganisation of the branch system in 2014. Moreover, it was possible to further diversify mBank's funding base thanks to various bond issues and private placements. The net number of customers has been increased by 558,000 since the end of 2012. The Corporates & Markets segment has expanded its international business in the past two years and even further diversified its business model. Thus it has been possible to compensate for a market-driven downturn in Fixed Income & Currencies through growth in the Equity Markets & Commodities division. The investment bank was also able to market more products and services internationally, namely in Europe, the USA and also in Asia. Thus the segment's revenues have been increased by 23% since the end of 2012. In the run-down segment NCA, the entire Exposure at Default (EaD) has been reduced by EUR 76 billion while preserving value and thus virtually halved since the starting point of the new strategy 30 September 2012. In the same period, the non-performing loans in the segment were reduced significantly, by EUR 5.4 billion or approximately 47% to EUR 6.2 billion. Risk profile improved, Common Equity Tier 1 ratio increased to 9.5% Through the run-down of risks and the consolidation of the capital base Commerzbank also improved its stability in 2014. Although the risk-weighted assets increased year-on-year as a consequence of the effects of the introduction of Basel 3, by 13.0% to EUR 215 billion (2013: EUR 191 billion), in comparison with previous quarters they have remained stable, however - despite continued growth in the Core Bank. The total assets increased slightly year-on-year, by 1.4% to EUR 558 billion (2013: EUR 550 billion). The increases in volume at the Core Bank also had an impact here. Commerzbank has further extended its comfortable equity capital position. The Common Equity Capital with full application of Basel 3 increased year-on-year by approximately EUR 900 million to EUR 20.3 billion. The Common Equity Tier 1 ratio (CET1) with full application of Basel 3 increased to 9.5%, following on from 9.0% as of the end of December 2013. As of the end of 2014 the CET 1 ratio in accordance with the provisional rules of Basel 3 improved year-on-year to 11.8% (end of December 2013: 11.6%). Since the third quarter of 2014 the leverage ratio has been stated on the basis of the amended rules of the directive on equity capital requirements of the European Union (CRD 4/CRR). Under these regulations the leverage ratio as of the end of December 2014 with full application of Basel 3 increased to 3.7%, after it had amounted to 3.3% as of the end of December 2013 pursuant to rules at that time. "In 2014 we strengthened our capital base and further reduced risks. In our run-down segment we were able to significantly lower the portfolios and the risk-weighted assets. In addition we have increased our common regulatory equity capital by approximately EUR 900 million and improved the corresponding core equity ratio to 9.5%. Last year we were also able to significantly improve the leverage ratio to 3.7%. We have now also set ourselves a target for this for the end of 2016: we intend to increase the ratio with full application of Basel 3 to approximately 4%," said Stephan Engels, Chief Financial Officer of Commerzbank. Engels added: "The Bank has continually enhanced its stability and stress resistance in recent years. This was impressively confirmed last autumn by the successful Comprehensive Assessment by the ECB and EBA." 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 higher annual net income of EUR 282 million for 2014 (2013: EUR 166 million). This sum takes into consideration the payment of interest on all profit-sharing rights in Commerzbank AG. It's planned to transfer the net profit in full to the retained earnings. Development of the segments The Private Customers segment increased its operating profit in 2014 by 87.5% to EUR 420 million (2013: EUR 224 million). The revenues before loan loss provisions were improved to EUR 3.4 billion (2013: EUR 3.3 billion). The increase in the net interest income by 5.1% to EUR 1.9 billion more than compensated for the slight downturn of 1.4% in the net commission income to EUR 1.5 billion. The loan loss provisions declined over the previous year, by 26.9% to EUR 79 million (2013: EUR 108 million). The operating expenses were lowered to EUR 2.9 billion (2013: EUR 3.0 billion). In the fourth quarter the segment increased the operating profit year-on-year to EUR 72 million (2013: EUR 60 million). Compared to the third quarter of 2014, the revenues saw charges through additional net provisions of EUR 35 million for legal risks, above all as a result of the verdict with regard to credit processing fees by Germany's Federal Court of Justice at the end of October 2014. The segment has successfully continued along its growth path in 2014; thus the number of net new customers increased by approximately 288,000. New business in residential mortgage financing grew by 31% to EUR 10.4 billion in 2014, the volume of managed accounts, and the newly launched premium accounts increased year-on-year by 51% to more than EUR 31 billion. Mittelstandsbank was able to increase its operating profit in 2014 by 9.6% to EUR 1.2 billion (2013: EUR 1.1 billion). The revenues before loan loss provisions were stable at EUR 2.9 billion (2013: EUR 2.9 billion). The loan loss provisions declined significantly year-on-year by 27.2% to EUR 342 million (2013: EUR 470 million). In particular fewer loan loss provisions had to be formed for new problematic loans than had been the case in the previous year. The operating expenses rose slightly in 2014, to EUR 1.4 billion (2013: EUR 1.3 billion), due to increases in both personnel and material expenses. In the fourth quarter of 2014 the operating profit improved year-on-year to EUR 249 million (2013: EUR 222 million). Mittelstandsbank has continued along its growth path in 2014. The credit volume was increased by 8% year-on-year, and thus saw stronger growth than the market in general. Thus the leading position in Germany's Mittelstand has again been extended. In 2014, the Central & Eastern Europe segment improved its operating profit significantly by 40.0% to EUR 364 million over the previous year (2013: EUR 260 million), with mBank attaining a record result in 2014. The revenues before loan loss provisions in the segment increased by 14.2% to EUR 923 million (2013: EUR 808 million). The loan loss provisions increased by 3.4% to EUR 123 million (2013: EUR 119 million). The operating expenses rose slightly, to EUR 436 million (2013: EUR 429 million). In the fourth quarter the segment attained an operating profit of EUR 89 million (2013: EUR 66 million). mBank further extended its strong position on the Polish market in 2014. It was able to acquire approximately 320,000 net new customers, and thus now has 4.7 million customers. Corporates & Markets achieved an operating profit of EUR 675 million (2013: EUR 777 million) in 2014 in a difficult market environment. The operating profit adjusted for effects from the valuation of own liabilities (OCS) and counterparty risks in the derivatives business, however, was EUR 694 million (2013: EUR 713 million). The revenues before loan loss provisions declined by 5.2% to EUR 2.0 billion (2013: EUR 2.1 billion). The analogously adjusted revenues before loan loss provisions remained almost stable at EUR 2 billion. Equity Markets & Commodities (EMC) attained record revenues of EUR 607 million (2013: EUR 524 million) whilst Equity Capital Markets was able to double its revenues. Fixed Income & Currencies (FIC), in contrast, was affected by the low volatility on the markets and the low interest rate environment. With respect to the loan loss provisions there were net reversals of EUR 55 million, after net reversals of EUR 57 million in 2013. The operating expenses were reduced by 0.6% to EUR 1.4 billion (2013: EUR 1.4 billion) despite higher regulatory charges. In the fourth quarter of 2014 the operating profit was EUR 119 million (2013: EUR 166 million). Adjusted for the OCS effect and effects from the measurement of counterparty risks in the derivatives business the operating profit in the fourth quarter, however, increased to EUR 150 million (2013: EUR 98 million). NCA: Run-down portfolio reduced by a further 28% or EUR 32 billion The Non-Core Assets (NCA) segment again improved its operating profit in 2014. This amounted to minus EUR 786 million, and was thus 26.7% better than the figure posted in the previous year (2013: minus EUR 1,073 million). Although the revenues before loan loss provisions declined considerably in line with the run-down strategy to EUR 182 million (2013: EUR 359 million), the decline of EUR 428 million in the loan loss provisions to EUR 654 million (2013: EUR 1,082 million) was more than able to compensate for this. In this respect, the reduction in the loan loss provisions was primarily due to the CRE portfolio, while the loan loss provisions in the Ship Finance division remained, as expected, at a high level. In addition the operating expenses decreased by 10.3% to EUR 314 million (2013: EUR 350 million). In the fourth quarter of 2014 NCA improved the operating profit year-on-year to minus EUR 182 million (2013: minus EUR 328 million). Moreover, in the fourth quarter there were restructuring expenses of EUR 61 million as the operating business is being scaled down analogously to the faster-than-expected portfolio run-down. In 2014 the NCA segment also continued with the value-preserving portfolio run-down. In total the Exposure at Default (EaD) of the portfolios was reduced in the course of the year by EUR 32 billion or approximately 28%. As of the end of 2014 the Commercial Real Estate division accounted for approximately EUR 20 billion of the EaD; this corresponds to a reduction of EUR 16 billion or approximately 44% over 2013. Approximately one third of this resulted from the sales of the CRE portfolios in Spain and Japan, as well as of the non-performing CRE credit portfolio in Portugal. The EaD in the Ship Finance division was reduced by EUR 2 billion, or approximately 16%, to EUR 12 billion in 2014. In Public Finance the portfolio holdings declined over 2013 by approximately 21% to EUR 52 billion. Outlook: Continued growth in the Core Bank The market environment in 2015 is likely to remain challenging. Nevertheless, in 2015 Commerzbank intends to bring about a further increase in the business volume as well as the revenues in the Core Bank. The operating expenses in the Group are to remain stable in the year as a whole at approximately EUR 7.0 billion. Additional charges such as the European bank levy will be balanced out by ongoing cost reductions. The loan loss provisions in 2015 are to be at the level of 2014 - with lower loan loss provisions in NCA. "In 2015 the financial sector will again face major challenges. Thus the objectives of our strategic agenda remain ambitious. For this reason we will be more aggressive in the market and intend to attain profitable growth in the Core Bank," said Martin Blessing. Excerpt from the consolidated profit and loss statement In EUR m 2014* 2013 Q4 2014* Q3 2014 Q4 2013 Net interest and trading 6,000 6,079 1,441 1,595 1,381 income Provisions for loan losses -1,144 -1,747 -308 -341 -451 Net commission income 3,205 3,206 809 799 773 Net investment income 82 17 64 15 7 Current income on 44 60 2 19 10 companies accounted for at equity Other income -239 -87 -131 -22 58 Revenues before loan loss 9,092 9,275 2,185 2,406 2,229 provisions Operating expenses 6,926 6,797 1,779 1,722 1,688 Operating profit or loss 1,022 731 98 343 90 Impairments of Goodwill - - - - - Restructuring expenses 61 493 61 - - Net gain or loss from sale - - - - - of disposal groups Pre-tax profit or loss 961 238 37 343 90 Taxes 253 66 -67 93 7 Consolidated profit or 602 81 77 225 64 loss attributable to Commerzbank shareholders Cost/income ratio in 76.2 73.3 81.4 71.6 75.7 operating business (%) * Unaudited figures ***** Press contact Alexander Cordes +49 69 136-42764 Nils Happich +49 69 136-44986 Karsten Swoboda +49 69 136-22339 ***** About Commerzbank Commerzbank is a leading international commercial bank with branches and offices in more than 50 countries. The core markets of Commerzbank are Germany and Poland. With the business areas Private Customers, Mittelstandsbank, Corporates & Markets and Central & Eastern Europe, its private customers and corporate clients, as well as institutional investors, profit from a comprehensive portfolio of banking and capital market services. Commerzbank finances more than 30 per cent of Germany's foreign trade and is the unchallenged leader in financing for SMEs. With its subsidiaries comdirect and Poland's mBank it owns two of the world's most innovative online banks. With approximately 1,100 branches and approximately 90 advisory centres for business customers Commerzbank has one of the densest branch networks among German private banks. In total, Commerzbank boasts approximately 15 million private customers, as well as 1 million business and corporate clients. The Bank, which was founded in 1870, is represented at all the world's major stock exchanges. In 2014, it generated gross revenues of more than EUR 9 billion with an average of approximately 52,000 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, particularly to reduce its NCA portfolio, 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. Contact: Commerzbank AG Group Communications Tel.: +49 69 136 - 22830 mediarelations@commerzbank.com --------------------------------------------------------------------- 12.02.2015 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. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: Commerzbank AG Kaiserplatz 60311 Frankfurt am Main Germany Phone: +49 (069) 136 20 Fax: - E-mail: ir@commerzbank.com Internet: www.commerzbank.de ISIN: DE000CBK1001 WKN: CBK100 Indices: DAX, CDAX, HDAX, PRIMEALL Listed: Regulierter Markt in Berlin, Düsseldorf, Frankfurt (Prime Standard), Hamburg, Hannover, München, Stuttgart; Terminbörse EUREX; London, SIX End of News DGAP News-Service --------------------------------------------------------------------- 322385 12.02.2015

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