09.02.2017
Commerzbank Aktiengesellschaft DE000CBK1001
DGAP-News: Commerzbank: Operating Profit of EUR1.4bn and Improved Capital Ratio
DGAP-News: Commerzbank Aktiengesellschaft / Key word(s): Final Results
Commerzbank: Operating Profit of EUR1.4bn and Improved Capital Ratio
09.02.2017 / 07:00
The issuer is solely responsible for the content of this announcement.
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- Operating profit of EUR1,399m for 2016 (2015: EUR1,942m)
- Operating profit of EUR337m for fourth quarter 2016 (Q4 2015: EUR384m)
- Net profit of EUR279m for 2016 (2015: EUR1,084m)
- Revenues before loan loss provisions in 2016 of EUR9.4bn (2015:
EUR9.8bn)
- Loan loss provisions increased to EUR900m in timely response to the
deterioration in the shipping markets (2015: EUR696m); non-performing
loan ratio still very low at 1.6%
- CET 1 ratio with full application of Basel 3 up at 12.3% as of end of
2016 (end of 2015: 12.0%), exceeding all regulatory requirements
- Improved leverage ratio with full application of Basel 3 of 4.8% as of
end of 2016 (end of 2015: 4.5%)
- Zielke: "In 2016 we achieved a solid profit and further improved our
capital ratio. However, we cannot yet be satisfied with the quality of
our earnings and that's why we will put every effort into the
implementation of our strategy. We have now given ourselves the room
for manoeuvre needed for this and can proceed with the transformation
as planned. We want to make Commerzbank the most competitive bank in
Germany by 2020. We will now work to achieve, step by step, the targets
we have set ourselves."
Commerzbank generated a solid operating profit and further improved its
Common Equity Tier 1 ratio in 2016. The implementation of the "Commerzbank
4.0" strategy announced in autumn last year has begun on schedule. The
operating profit for financial year 2016 fell to EUR1,399 million as of the
end of 2016 (2015: EUR1,942 million). This was due mainly to challenging
market conditions and the continued negative interest environment, which
had an adverse impact on net interest income. Revenues before loan loss
provisions fell year-on-year to EUR9,399 million (2015: EUR9,795 million).
They also include some positive one-off effects, for example in the second
quarter as a result of the sale of the Visa Europe shares, and in the
fourth quarter in connection with the Heta exposure. Loan loss provisions
stood at EUR900 million in financial year 2016 (2015: EUR696 million). The
year-on-year increase in loan loss provisions was the result of high loan
loss provisions for ship finance due to the difficult situation on the
shipping markets. The Bank's non-performing loan ratio of just 1.6%, which
remains very good compared to its European peers, reflects the Bank's
healthy risk profile. Operating expenses were reduced to EUR7,100 million
despite the charges arising from the new Polish banking tax and the
European Bank Levy (2015: EUR7,157 million). The pre-tax profit, taking
into account the impairment on goodwill and other intangible assets of
EUR627 million in the third quarter and restructuring costs of EUR129
million, came in at EUR643 million for 2016. So after deduction of taxes of
EUR261 million and minority interests of EUR103 million, Commerzbank posted
a net profit of EUR279 million for 2016 (2015: EUR1,084 million). Earnings
per share came in at EUR0.22 in financial year 2016 (2015: EUR0.90).
In the fourth quarter of 2016, the net profit fell year-on-year to EUR183
million (Q4 2015: EUR193 million). An operating profit of EUR337 million
was recorded, versus EUR384 million in the fourth quarter of 2015. Revenues
before loan loss provisions increased year-on-year to EUR2,399 million (Q4
2015: EUR2,240 million). This increase was attributable to the
reinstatement of the value of the Heta exposure and revenues from the
Bank's sales of real estate, among other things. Loan loss provisions rose
sharply year-on-year in the fourth quarter to EUR290 million (Q4 2015:
EUR112 million). This development was due to the loan loss provisions on
the ship finance portfolio, as was the case for the year as a whole.
Operating expenses remained almost stable year-on-year, at EUR1,772 million
(Q4 2015: EUR1,744 million).
"In 2016 we achieved a solid profit and further improved our capital ratio.
However, we cannot yet be satisfied with the quality of our earnings and
that's why we will put every effort into the implementation of our
strategy. We have now given ourselves the room for manoeuvre needed for
this and can proceed with the transformation as planned. We want to make
Commerzbank the most competitive bank in Germany by 2020. We will now work
to achieve, step by step, the targets we have set ourselves", said Martin
Zielke, Chairman of the Board of Managing Directors of Commerzbank AG.
Common Equity Tier 1 ratio up at 12.3% - risk profile remains good
Risk-Weighted Assets (RWA) with full application of Basel 3 were further
reduced in the fourth quarter of 2016 by active portfolio management. They
stood at EUR190 billion at the end of 2016, compared with EUR195 billion at
the end of the third quarter and EUR197 billion at the end of 2015. The
Common Equity Tier 1 ratio (CET 1) with full application of Basel 3 rose to
12.3%, versus 12.0% at the end of December 2015. The increase was due to
lower RWA. The level of the CET 1 ratio gives the Bank scope to absorb the
forthcoming charges arising from restructuring costs and regulatory and
accounting requirements. The leverage ratio improved to 4.8% at the end of
financial year 2016, from 4.5% at the end of 2015. Total assets came to
EUR480 billion (2015: EUR533 billion).
"Our Common Equity Tier 1 ratio has gone up to 12.3 per cent and exceeds
all regulatory requirements. It means we are ready for the forthcoming
charges arising from restructuring costs and regulatory obligations. And
the CET 1 ratio is set to remain at or above 12 per cent for the rest of
the year", explained Stephan Engels, Chief Financial Officer of
Commerzbank. Engels added: "We kept our costs stable in 2016 and were able
to fully offset additional external charges."
Implementation of Commerzbank 4.0 strategy under way
The implementation of the Commerzbank 4.0 strategy announced at the end of
September 2016 is under way and running to plan. 300 staff are now on-site
on the Digital Campus working on the digitalisation of 6 of the 14 end-to-
end processes, known as "journeys". One example of an end-to-end process is
the Digital Instalment Loan platform, which will be started for the
customers this year. Our target is to digitalise 80% of relevant processes
within the Group by 2020. In retail banking a new type of branch was
introduced: the "city branch". The new sales platform, "One", was also
rolled out at the end of November. The unified user interface means
customers and advisors have access to the same information - in the branch,
in online banking, and in future at the customer centre as well. In the
Corporate Clients segment, a new management structure has been agreed and
already put in place to a large extent. Moreover, we have put in place
teams of experts for all key industries, allowing us to offer our clients
the combined expertise of Corporate Finance, Risk Management and Research.
We are expanding this business.
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 net income of
EUR1,494 million for 2016 (2015: EUR1,693 million). This sum takes into
consideration the payment of interest on all profit-sharing rights in
Commerzbank AG. The Bank intends to retain full earnings.
Development of the segments
Under the new strategy unveiled at the end of September, which includes the
restructuring of the segments, Commerzbank will now concentrate on two
operating segments: the new Private and Small Business Customers segment
and the new Corporate Clients segment.
The Private and Small Business Customers segment achieved continued growth
in the 2016 financial year, both in Germany and at mBank. Its operating
profit rose slightly year-on-year by 3% to EUR1,079 million (2015: EUR1,051
million). The figure includes several positive one-off effects which offset
the adverse impact of the negative interest rate environment in Germany. In
a tough market environment, revenues before loan loss provisions remained
stable at EUR4.8 billion (2015: EUR4.8 billion). In Germany the loan volume
was 8% up on the previous year, exceeding the market growth rate.
Volatility in net commission income was further reduced according to plan
by increasing the volume of securities in premium custody accounts and
managed accounts. Loan loss provisions decreased by 29% over the same
period to EUR119 million (2015: EUR167 million). Operating expenses
remained stable at EUR3,621 million (2015: EUR3,627 million). This includes
a rise in costs at mBank due largely to the Polish banking tax.
In Germany the segment attracted approximately a net 321,000 new customers
in 2016. Since the end of 2012 it has gained 1.1 million customers. This
means the retail business has met or surpassed all the essential targets it
had set itself for the end of 2016. Especially the targets for the
operating profit and assets under management have been significantly
overachieved. The volume of new business in mortgage lending was roughly
the same in 2016 as in the previous year, with a slightly higher margin.
Sales of consumer loans increased by 31% in volume terms.
mBank also saw further business growth in financial year 2016, and was able
to raise its revenues before loan loss provisions compared to the previous
year. New business volume in consumer loans increased by more than 20% over
the same period. mBank also gained a good 400,000 net new customers, so
that it now has around 5.4 million customers in Poland, the Czech Republic
and Slovakia. In the fourth quarter of 2016 the operating profit for the
new Private and Small Business Customers segment totalled EUR235 million
(Q4 2015: EUR227 million). Revenues before loan loss provisions amounted to
EUR1,177 million (Q4 2015: EUR1,190 million).
The results of the Corporate Clients segment in financial year 2016 were
adversely affected by the negative interest rate environment and the
reorientation of business operations, though business with SMEs and German
large corporates remained stable. Its operating profit was down year-on-
year, at EUR1,287 million (2015: EUR1,695 million). The figure for the
fourth quarter was EUR360 million (Q4 2015: EUR258 million). The
improvement versus the same quarter of the previous year was due in
particular to the fact there was a net release of loan loss provisions in
the fourth quarter of 2016, whereas in the fourth quarter of 2015 loan loss
provisions were still being added to on a net basis. Revenues before loan
loss provisions, after adjustments for valuation effects from own
liabilities (OCS) and for counterparty risk in the derivatives business,
decreased to EUR4.3 billion in 2016 (2015: EUR4.7 billion). The fourth
quarter contributed EUR1,083 million in revenues, after adjustments (Q4
2015: EUR1,120 million). The segment registered a marked fall in revenues
in financial year 2016 due to the strategic adjustments to the business
model. These adjustments are aimed at both improving the segment's risk
position and focussing more on core competencies and client needs. By
contrast the Mittelstand Group division succeeded in maintaining its strong
market position with overall stable revenues despite the negative interest
rate environment. In International Corporates, clients were reluctant to
engage in capital market activities, and ECB purchases of corporate bonds
reduced fees for bond issuance and margins on corporate loans, while
revenues from commercial banking as a whole remained stable. However,
despite the tough market environment, capital market business was able to
contribute to profits on the debt capital side as well, where stable
revenues were recorded. The segment's loan loss provisions rose to EUR185
million in 2016 (2015: EUR108 million). Operating expenses were down
slightly at EUR2,973 million (2015: EUR3,030 million).
In the Asset & Capital Recovery (ACR) segment, the portfolios were run down
further again in 2016. Exposure at Default (EaD) fell by EUR2.3 billion,
taking it to EUR16.2 billion at the end of the year. The operating result
was worse than the previous year at minus EUR514 million (2015: minus
EUR466 million) on account of the steep increase in loan loss provisions in
Ship Finance. The fourth quarter accounted for minus EUR155 million of this
operating result (Q4 2015: minus EUR67 million). Revenues before loan loss
provisions came out at EUR213 million for 2016 as a whole (2015: EUR76
million), supported by the reinstatement of the value of the Heta exposure
in the fourth quarter. Loan loss provisions increased in 2016, due almost
entirely to the further deterioration on the shipping markets, to EUR599
million, compared with EUR361 million the previous year. Operating expenses
were reduced over the same period to EUR128 million (2015: EUR181 million).
Outlook
In financial year 2017 the Bank will further strengthen its market position
and will focus on the implementation of the Commerzbank 4.0 strategy.
Investments, P&L including restructuring costs, capital and RWA will be
managed in such a way as to keep the CET 1 ratio stable at 12% or above.
Commerzbank will aim to keep the cost base stable and book the first part
of restructuring charges for Commerzbank 4.0. The Bank expects loan loss
provisions for segments Private and Small Business Customers as well as
Corporate Clients to be on the level of 2016, while loan loss provisions in
Ship Finance are expected to be in a range of EUR450 million to EUR600
million.
Financial figures at a glance
in EUR m 2016 2015 Q4 2016 Q3 2016 Q4 2015 Net interest and 5,397 6,221 1,277 1,505 1,270 trading income Provisions for loan -900 -696 -290 -275 -112 losses Net commission 3,212 3,430 825 781 835 income Net investment 344 -7 87 94 99 income Current income on 150 82 8 79 36 companies accounted for at equity Other income 296 69 202 -22 - Revenues before 9,399 9,795 2,399 2,437 2,240 loan loss provisions Operating expenses 7,100 7,157 1,772 1,733 1,744 Operating profit or 1,399 1,942 337 429 384 loss Impairments of 627 - - 627 - Goodwill Restructuring 129 114 32 57 20 expenses Pre-tax profit or 643 1,828 305 -255 364 loss Taxes 261 629 100 14 140 Consolidated profit 279 1,084 183 -288 193 or loss attributable to Commerzbank shareholders Earnings per share 0.22 0.90 0.15 -0.23 0.15 (EUR) Cost/income ratio 75.5 73.1 73.9 71.1 77.9 in operating business (%) Operating RoTE (%) 5.3 7.5 5.0 6.5 5.8 Net RoTE (%) 1.1 4.3 2.8 -4.5 3.0 Net RoE (%) 1.0 3.9 2.6 -4.0 2.7 CET 1 ratio B3, 12.3 12.0 12.3 11.8 12.0 fully phased-in (%) Leverage Ratio, B3 4.8 4.5 4.8 4.5 4.5 fully phased-in (%) Total assets (EUR 480 533 480 514 533 bn)2016 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/. ***** Press contact Margarita Thiel +49 69 136-46646 Alexander Cordes +49 69 136-42764 Karsten Swoboda +49 69 136-22339 ***** 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, as well as Corporate Clients, the Bank offers a comprehensive portfolio of financial services which is precisely aligned to the clients' needs. Commerzbank finances 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 17.5 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 2016, it generated gross revenues of EUR9.4 billion with approximately 49,900 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. --------------------------------------------------------------------------- 09.02.2017 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 --------------------------------------------------------------------------- Language: English Company: Commerzbank Aktiengesellschaft Kaiserstraße 16 60311 Frankfurt am Main Germany Phone: +49 (069) 136 20 Fax: - E-mail: [email protected] Internet: www.commerzbank.de ISIN: DE000CBK1001 WKN: CBK100 Indices: DAX, CDAX, HDAX, PRIMEALL Listed: Regulated Market in Berlin, Dusseldorf, Frankfurt (Prime Standard), Hamburg, Hanover, Munich, Stuttgart; Regulated Unofficial Market in Tradegate Exchange; London, SIX End of News DGAP News Service --------------------------------------------------------------------------- 543099 09.02.2017
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