Commerzbank: Strategy implementation progressing, operating profit for H1 2018 of €689m

August 07, 2018

• Net profit of €533m for first half of 2018 (H1 2017: minus €414m)
• Operating profit of €389m for second quarter (Q2 2017: €179m) and of €689m for the first half (H1 2017: €505m)
• Underlying revenues up by 4% at €4.52bn (H1 2017: €4.34bn)
• Agreement on sale of EMC business marks a strategic milestone
• Common Equity Tier 1 ratio of 13.0% reflects loan growth (end of March 2018: 13.3%)
• Outlook slightly adjusted

Commerzbank made further progress in the implementation of its Commerzbank 4.0 strategy in the first half of 2018. The agreement on the sale of its Equity Markets & Commodities business to Société Générale marks another milestone for Commerzbank in the simplification of its business model. Revenues excluding exceptional items rose 4% year-on-year to €4,515 million (H1 2017: €4,335 million), driven in particular by the Private and Small Business Customers segment. Customer growth continued here at a slightly slower rate. Assets under control already exceeded the target for 2018. The Corporate Clients segment further increased its loan volume. Since 2016, the segment has gained 7,500 net new customers. The proportion of processes that had been digitalised stood at 56 percent at mid-year, following the completion of three digitalisation projects (“journeys”).

Group revenues increased to €4,534 million in the first half (H1 2017: €4,450 million), and to €2,221 million in the second quarter (Q2 2017: €2,064 million). Operating expenses in the first half stood at €3,684 million (H1 2017: €3,583 million), due to ongoing investments in strategy implementation and digitalisation, as well as higher regulatory costs. Operating expenses for the second quarter stood at €1,748 million (Q2 2017: €1,718 million). The risk result benefited from the Bank’s strong risk profile in a still benign credit environment and was minus €161 million in the first half. The risk result for the second quarter came to minus €84 million. The Bank’s non-performing loan (NPL) ratio, at just 0.9%, remained low compared to its European peers.

The operating profit and pre-tax profit for the first half of 2018 climbed to €689 million (H1 2017: operating profit €505 million; pre-tax result minus €302 million). The operating profit for the second quarter came to €389 million (Q2 2017: €179 million). After deduction of taxes of €99 million and minority interests of €57 million, Commerzbank achieved a net profit of €533 million in the first half (H1 2017: minus €414 million). The net profit for the second quarter stood at €272 million (Q2 2017: minus €640 million). In the previous year, the net result had been driven by restructuring charges.

“Our strategy implementation is progressing. We are growing and further simplifying and digitalising our business”, said Martin Zielke, Chairman of the Board of Managing Directors of Commerzbank. “Given the intense competition, particularly in corporate clients, we have slightly adjusted our outlook. Our growth initiatives are already working. Of course, it will take some time for them to take full effect.”

The Common Equity Tier 1 ratio (CET 1) stood at 13.0% at the end of June, versus 13.3% at the end of March 2018. This includes the net result with a dividend accrual of 10 cents per share for the first half of the year. Driver for the decrease of the CET 1 ratio was the loan growth in the core business – including larger, short-term transactions in acquisition finance – and the associated rise in risk-weighted assets (RWA) for credit risk. Overall, RWA increased to €176 billion at the end of June 2018 (end of March 2018: €170 billion). The leverage ratio stood at 4.5% (end of March 2018: 4.6%). Total assets came to €488 billion (end of March 2018: €470 billion).

“We have addressed fierce competition and margin pressure by successfully expanding our lending. This is why our Common Equity Tier 1 ratio has moved a bit in the second quarter. We are expecting a CET 1 ratio of at least 13,0% for year-end”, said Stephan Engels, Chief Financial Officer of Commerzbank. “Our cost target of €6.5 billion for 2020 remains unchanged. In view of investment activities, regulatory contributions and project costs, we have slightly adjusted our cost target for the full year 2018 to €7.1 billion.”