DGAP-UK-Regulatory: Commerzbank: operating profit of EUR 103 m in third quarter

DGAP-UK-Regulatory: Commerzbank: operating profit of EUR 103 m in third quarter

DGAP-UK Regulatory Service: Commerzbank AG / Quarter Results
Commerzbank: operating profit of EUR 103 m in third quarter

07.11.2013 / 07:05

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- Revenues before loan loss provisions almost stable at EUR 2.3 bn
  despite seasonal effects

- Annual target for portfolio reduction in the NCA segment in 2013
  already achieved: NCA portfolio reduced by EUR 12 bn to EUR 124 bn in
  Q3, portfolio reduced by 18% since beginning of year

- Risks reduced considerably: RWA lowered to EUR 197 bn (end of June
  2013: EUR 206 bn) - total assets reduced to EUR 593 bn (end
  of June 2013: EUR 637 bn)

- Capital ratios improved: CET 1 ratio with full application of Basel 3
  increased to 8.6% and with phase-in regulations to 11.0%

- Debt ratio improved: Leverage ratio (pursuant to CRD 4, phase-in
  regulations to Basel 3) increased to 4.1%

- Net profit in the third quarter of 2013 increased to EUR 77
  m

- Blessing: 'We have already achieved very much with our strategic
  agenda: We have increased the capital ratios, lowered costs,
  considerably reduced risks and non-strategic portfolios, and
  successfully launched our growth initiatives. Thus we have further
  enhanced the stability of the Bank.'

As a result of its growth initiatives Commerzbank Group has attained almost
stable revenues in the seasonally weak third quarter of 2013, and at the
same time considerably reduced risks and improved the capital ratios. The
operating profit was EUR 103 million (third quarter of 2012: EUR 208
million). The reasons for the decline compared to the previous year are
primarily the expected increase in loan loss provisions and a weaker
trading result. In contrast, the operating profit increased by 32% compared
to the second quarter of 2013, primarily due to improved results in
Mittelstandsbank and the Non-Core Assets (NCA) segment. The net profit in
the third quarter of 2013 was EUR 77 million, and thus higher than in the
previous year (third quarter of 2012: EUR 67 million).

In the first nine months of 2013 the Bank posted an operating profit of EUR
650 million (first nine months of 2012: EUR 1,226 million). The main
reasons for the decrease were the weaker interest rate environment compared
to the previous year and the expected increase in loan loss provisions. In
the first nine months of 2013 the net profit was EUR 26 million (first nine
months of 2012: EUR 692 million). The year-on-year decline in profit is due
above all to special items in the framework of the implementation of the
strategic agenda, such as the restructuring expenses and the implementation
of the sale of the Commercial Real Estate (CRE) portfolio in Great Britain.
These two effects alone represented a one-off charge of EUR 656 million.

'One year after the presentation of our strategic agenda we have already
achieved very much: We have further increased the capital ratios of the
Bank, reduced the costs, lowered risks, and reduced the non-strategic
portfolios considerably. Thus we have further enhanced the stability of the
Bank,' said Martin Blessing, Chairman of the Board of Managing Directors of
Commerzbank. 'Our growth initiatives are beginning to take effect: For this
reason, in a typically seasonally weaker third quarter we were able to
maintain our revenues above all in the Private Customers segment and at
Mittelstandsbank at a stable level. This is a very good basis for
successfully fulfilling the further objectives on the strategic agenda.'

Revenues before loan loss provisions almost stable despite seasonal effects
in the third quarter

In the third quarter of 2013 the Group generated revenues before loan loss
provisions at almost the same level as in the previous quarter, despite the
seasonally weaker capital market-related revenues and the effects from the
sale of the CRE portfolio in Great Britain. At the Core Bank the revenues
before loan loss provisions also remained almost stable at EUR 2.2 billion.
There, the interest and commission income were EUR 1.4 billion and EUR 780
million, respectively, in the third quarter of 2013 and thus at the levels
of the previous quarter. Year-on-year the revenues before loan loss
provisions at the Core Bank declined slightly. With regard to the loan loss
provisions a lower sum of EUR 492 million was booked in the Group in the
third quarter of 2013 compared to the previous quarter (second quarter of
2013: EUR 537 million). Although the loan loss provisions in the Core Bank
increased as expected in the third quarter of 2013 as a result of
individual cases in the corporates portfolios, this development was more
than compensated for by the improvement in the NCA segment. In NCA, high
loan loss provisions for the CRE portfolio in Great Britain had been booked
in the second quarter. In a year-on-year comparison, however, the Group
loan loss provisions have increased as expected (third quarter of 2012: EUR
430 million) as a result of the rise in the Core Bank. As of the end of
September, the operating expenses in the Group were less than EUR 1.7
billion for the second consecutive quarter. Year-on-year the costs were
lowered by 3% in the third quarter of 2013. This reflects the success of
the efficiency measures implemented as part of the strategic agenda and of
the balanced investment approach of the Bank.

Stability of the Bank further improved: reduction of risk-weighted assets
and increase of capital ratios

The Bank has considerably reduced risks, improved its core capital ratio
and thus further improved its stability. Thus the risk-weighted assets
(RWA) were lowered by 4% to EUR 197 billion compared to the previous
quarter (end of June 2013: EUR 206 billion). The Common Equity Tier 1 ratio
was improved in the third quarter of 2013 to 8.6% with full application of
Basel 3 (end of June 2013: 8.4%). The Common Equity Tier 1 ratio taking
into consideration the phase-in regulations of Basel 3, which is decisive
for the comprehensive assessment of the balance sheets of the European
banks to be conducted by the European Central Bank, was improved compared
to the previous quarter to 11.0% (end of June 2013: 10.3%). The Bank also
attained an improvement with the leverage ratio. As of the end of September
2013, pursuant to the current calculation logic of the EU's Capital
Requirements Directive (CRD 4) and taking into account the
phase-in-regulations of Basel 3, it was 4.1% (end of June 2013: 4.0%). The
leverage ratio under the full application of Basel 3 still amounted to 3.2%
(end of June 2013: 3.2%). The Bank lowered the total assets as of the end
of September 2013 to less than EUR 600 billion for the first time since
2006. In the third quarter they were reduced by 7% to EUR 593 billion
compared to the previous quarter (end of June 2013: EUR 637 billion). In a
year-on-year comparison the reduction in the total assets was 12% (end of
September 2012: EUR 676 billion).

Core Bank: Private Customers segment on course, Corporates & Markets
affected by market conditions

The Private Customers segment remains on course with an operating profit of
EUR 42 million in the third quarter. It has increased the profit by a
pleasing 20% compared to the previous year (third quarter of 2012: EUR 35
million). In a year-on-year comparison, the revenues before loan loss
provisions were only slightly lower at EUR 825 million (end of September
2012: EUR 832 million). With the loan loss provisions a sum of EUR 31
million was booked in the third quarter. This is a year-on-year reduction
of 31%. As a result of the continued cost discipline and despite the
investments in products, service, and the brand, the operating expenses
remained constant at EUR 752 million year-on-year. Compared to the previous
quarter, both the operating profit and the revenues before loan loss
provisions declined, but it can be seen that already implemented strategic
measures are taking effect. Thus the positive trend was continued with the
acquisition of new customers. In the third quarter Commerzbank acquired a
net total of 82,000 new customers (second quarter of 2013: up 79,000)
helped by its brand positioning and new products. Since the beginning of
the year the net number of new customers has thus increased by
approximately 180,000. This also reflects the improvement in customer
satisfaction. Moreover, in the third quarter of 2013 the Bank posted the
strongest growth in the area of payment transaction accounts since the
beginning of 2011.

In the third quarter Mittelstandsbank generated an operating profit of EUR
349 million, developing very positively compared to the previous quarter
with a plus of more than 60%. In this period the segment has maintained the
revenues from direct customers at a stable level and has also been able to
post positive one-off effects from the pre-payment of a corporate loan. As
a consequence, the revenues before loan loss provisions rose considerably
by 13% to EUR 789 million. The loan loss provisions were, at EUR 106
million, below the level of the previous quarter, which had been charged by
individual cases (second quarter of 2013: EUR 147 million). The credit
volume stabilised at the improved level of the second quarter. As a result
of the clear increase in loan loss provisions and the ongoing low level of
interest rates, Mittelstandsbank was not able to entirely reproduce the
successes seen in the same quarter of the previous year (operating profit
in the third quarter of 2012: EUR 395 million). In the third quarter of
2012 net reversals of EUR 9 million had been booked in the loan loss
provisions; this compares with net additions of EUR 106 million in the
third quarter of 2013. The operating expenses were maintained at a stable
level in both comparative periods, totalling EUR 334 million in the third
quarter.

The Central & Eastern Europe segment continued to develop positively in the
third quarter. Thus the operating profit increased quarter-on-quarter by
21% to EUR 63 million (second quarter of 2013 and third quarter of 2012:
both EUR 52 million). The revenues before loan loss provisions increased in
the third quarter compared to the previous quarter by 8% to EUR 209
million. Above all this reflects the strong growth in the acquisition of
new customers and the management of the interest margin. The launch of the
new mBank online platform has already been implemented. The revenues before
loan loss provisions also increased in a year-on-year comparison (third
quarter of 2012: EUR 201 million). The loan loss provisions increased
slightly in the third quarter to EUR 41 million (second quarter of 2013:
EUR 36 million, third quarter of 2012: EUR 28 million). In a
quarter-on-quarter comparison the operating expenses remained stable before
the launch of the new brand mBank in the fourth quarter of 2013.

In the third quarter, Corporates & Markets was impacted by the unfavourable
market conditions which affected in particular debt and currencies sales &
trading. The operating profit declined to EUR 85 million (third quarter of
2012: EUR 191 million). This includes a negative effect of minus EUR 25
million from the market valuation of the Bank's own liabilities ('Own
Credit Spread') and from adjustments concerning counterparty risks in the
derivatives business. The operating profit was thus considerably lower than
the strong EUR 253 million seen in the second quarter. The revenues before
loan loss provisions decreased in the seasonally weaker third quarter to
EUR 459 million, also as a consequence of the uncertainty in connection
with the US debt crisis (second quarter of 2013: EUR 568 million).
Corporate Finance saw stable revenues but considerably increased its
revenues both quarter-on-quarter and year-on-year due to positive one-off
effects from the pre-payment of a corporate loan. The loan loss provisions
were at EUR 43 million and considerably higher both quarter-on-quarter and
a year on year, which both had profited from reversals of loan loss
provisions. The operating expenses remained stable, compared to the
previous quarter, at EUR 331 million and were only slightly higher in a
year-on-year comparison.

NCA: Exposure at Default classified as 'higher risk' reduced by 44% since
the beginning of the year

The NCA segment continued its successful portfolio reduction in the third
quarter of 2013. In total, the Exposure at Default (EaD) was reduced by EUR
12 billion, which corresponds to 9%, to EUR 124 billion. Since the
beginning of the year the portfolio has been reduced by 18 %. Thus it is
already lower than the reduction target of EUR 125 billion for 2013 as a
whole. The CRE business area accounted for approximately EUR 9 billion;
this corresponds to a clear decrease of 19% compared to the second quarter
of 2013. The CRE portfolio could thus be reduced by a much greater amount
than the EUR 5 billion from the sale of the CRE portfolio in Great Britain.
The sale was concluded in the third quarter and is now entirely reflected
on the balance sheet and on the profit and loss account. The ship portfolio
declined in the third quarter of 2013 by approximately EUR 1 billion, or
6%, to approximately EUR 16 billion. Thus the EaD in ship finance is
already close to the target value of EUR 14 billion which had actually only
been formulated for the end of 2016. In Public Finance the portfolio
declined by 4% to approximately EUR 68 billion compared to the previous
quarter.

When it comes to risk reduction the Bank is also consistently continuing
the path it has already to take several years ago. As a consequence of the
sale of the CRE portfolio in Great Britain, the EaD in CRE and ship
finance, which the Bank classifies as having a higher risk ('higher risk
cluster'), has been reduced by 44% since the beginning of this year. Thus
as of the end of September 2013 the 'higher risk cluster' encompasses a
portfolio of EUR 8 billion (end of December 2012: EUR 14.3 billion).

As a consequence of the risk reduction the segment's operating profit for
the third quarter was minus EUR 272 million. The result improved
considerably quarter-on-quarter, however, by 30% (second quarter of 2013:
minus EUR 387 million). In a year-on-year comparison the result increased
by as much as 43% (third quarter of 2012: minus EUR 477 million). In both
cases a considerable contribution to this was made by the lower loan loss
provisions, with a sum of EUR 243 million booked in the third quarter. The
successful portfolio reduction in the NCA segment led to a net capital
release of EUR 208 million in the third quarter of 2013. In the first nine
months of 2013 a total of EUR 278 million of capital was thus released.

Outlook

The outlook remains unchanged: As a consequence of the portfolio reduction
and the ongoing weak interest rate environment, the revenues before loan
loss provisions are likely to remain under pressure for the Group. The
strict cost management is being continued. For 2013 as a whole the costs
are not to exceed EUR 7 billion. Commerzbank continues to stand by its
expectations for the loan loss provisions. As a result of the accelerated
portfolio reduction in the NCA segment and the higher loan loss provisions
in the Core Bank, for 2013 it continues to assume that these will be at a
higher level than in the previous year (2012: approximately EUR 1.7
billion).

'We began at an early stage with the strengthening of the capital ratios of
Commerzbank and the reduction of portfolio risks. We have also consistently
continued this strategy in the third quarter. We continue to attach high
priority to achieving a Common Equity Tier 1 ratio of 9% under the full
application of Basel 3 by the end of 2014, and beyond that to always keep
the capital resources well above the regulatory minimum requirements. We
continue to be determined to implement the measures to increase revenues in
the framework of the strategic agenda. In this respect we will maintain a
stable cost base despite the investments in our growth and will
consistently continue the portfolio reduction in NCA,' said Stephan Engels,
Chief Financial Officer of Commerzbank.

*****

Excerpt from the consolidated profit and loss statement 




In EUR m                   Q3 2013   Q3 2012   9M 2013   9M 2012   Q2 2013


Net interest income        1,483     1,281     4,468     4,759     1,629


Provisions for loan losses 492       430       1,296     1,046     537


Net commission income      785       852       2,440     2,485     808


Net trading income         -74       224       234       472       -9


Net investment income      136       30        10        -169      -120


Current income on          31        16        50        34        11
companies accounted for at
equity


Other income               -80       -33       -147      -55       -5


Income before loan loss    2,281     2,370     7,055     7,526     2,314
provisions


Operating expenses         1,686     1,732     5,109     5,254     1,699


Operating profit or loss   103       208       650       1,226     78


Impairments of Goodwill    -         -         -         -         -


Restructuring expenses     -         -         493       43        -


Net gain or loss from sale -         3         -         -83       -
of disposal groups


Pre-tax profit or loss     103       211       157       1,100     78


Taxes                      3         118       60        329       12


Consolidated profit or     77        67        26        692       43
loss attributable to
Commerzbank shareholders


Cost/income ratio in       73.9      73.1      72.4      69.8      73.4
operating
business (%)





*****

You will find broadcast-ready video material with statements by Stephan
Engels from approximately 7 am onwards at www.media-hoster.com.

The videos can be viewed directly using mobile end devices.
Statements Stephan Engels: www.media-hoster.com/commerzbank/q3en.

*****

Press contact 
Simon Steiner           +49 69 136-46646
Nils Happich            +49 69 136-44986
Karsten Swoboda         +49 69 136-22339

*****

About Commerzbank 

Commerzbank is a leading bank in Germany and Poland. It is also present
worldwide in all markets for its customers as a partner to the business
world. With the business areas Private Customers, Mittelstandsbank,
Corporates & Markets and Central & Eastern Europe, it offers its private
and corporate customers as well as institutional investors the banking and
capital market services they need. With approximately 1,200 branches
Commerzbank has one of the densest branch networks among German private
banks and is on its way to become a modern multichannel bank. In total,
Commerzbank boasts nearly 15 million private customers, as well as 1
million business and corporate customers. In 2012, it generated revenues of
just under EUR 10 billion with approximately 56,000 employees on average.

*****

Disclaimer

This release contains forward-looking statements. Forward-looking
statements are statements that are not historical facts. In this release,
these statements concern 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 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 Poland,
elsewhere in Europe 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, potential defaults of borrowers or trading
counterparties, the implementation of its strategic initiatives to improve
its business model, particularly to reduce its public finance portfolio in
Private Customers, 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 periodically 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


End of UK-Regulatory news

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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           
Category Code:      MSC                                                 
LSE Ticker:         CZB                                                 
Sequence Number:    1746                                                
Time of Receipt:    Nov 07, 2013 07:01:26                               
 
 
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