Commerzbank Aktiengesellschaft (CZB)
- 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
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.
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).
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