DGAP-Regulatory: Commerzbank: solid operating profit of EUR 725 million in 2013 - important successes in implementation of

DGAP-Regulatory: Commerzbank: solid operating profit of EUR 725 million in 2013 
- important successes in implementation of strategic agenda

Commerzbank AG  / Quarter Results

13.02.2014 07:06

Dissemination of a Regulatory Announcement, transmitted by
DGAP - a company of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
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  - Core Bank attains operating profit of EUR 1.8 billion in difficult
    market environment - operating return on equity of 9.5%

  - Successful cost management continued: operating expenses in Group again
    reduced in 2013 to just less than EUR 6.8 billion

  - NCA portfolio lowered in 2013 by 23% to EUR 116 billion - annual target
    clearly surpassed

  - Net profit in 2013 increased to EUR 78 million - despite charges from
    restructuring expenses of EUR 493 million

  - Target for 2014 already achieved: core capital ratio CET 1 improved to
    9.0% as of 31 December 2013 with full application of Basel 3

  - Silent participations of SoFFin and Allianz repaid in full 

  - Blessing: 'In the year of transition 2013 we have attained a solid
    operating profit and achieved important successes in the implementation
    of our strategic agenda.'

In the 2013 business year, Commerzbank has increased net profit, further
reduced risks, and increased the relevant equity ratios more quickly than
planned. Despite a difficult market environment, a solid operating profit
of EUR 725 million (2012: EUR 1,170 million) was attained. The revenues
before loan loss provisions were lower, above all, as a consequence of the
weaker interest rate environment, declining to EUR 9.3 billion (2012: EUR
9.9 billion). The loan loss provisions increased as expected to EUR 1,747
million (2012: EUR 1,660 million). Despite additional investments, the
operating expenses were lowered to EUR 6.8 billion (2012: EUR 7.0 billion)
thanks to active cost management. The net profit improved to EUR 78 million
(2012: minus EUR 47 million); this sum includes restructuring expenses of
EUR 493 million.

In the Core Bank an operating profit of EUR 1.8 billion was attained in a
challenging environment in 2013 (2012: EUR 2.5 billion). The downturn was
due not only to the weaker market environment, but above all to the
increase in loan loss provisions at Mittelstandsbank. The operating return
on equity in the Core Bank was 9.5%.

'In the year of transition 2013, we have attained a solid operating profit
in both the Group and the Core Bank, also seeing important successes in the
implementation of our strategic agenda. As announced, we have invested in
our growth and, at the same time, further lowered our costs. We have been
able to implement as scheduled what we had planned for 2013. We have even
overachieved with two targets: In the reduction of the NCA portfolio we
have made progress considerably more quickly, and we have increased the
core capital ratio pursuant to Basel 3 to 9% one year earlier than
planned,' said Martin Blessing, Chairman of the Board of Managing Directors
of Commerzbank AG. 'In addition, we have repaid in full the silent
participations of the German government and Allianz, and further
strengthened the capital base of the Bank. The growth measures initiated
are taking effect, the amendment of the Private Customers segment is moving
ahead more quickly than planned. In the Core Bank we saw growth with loans
and customers in 2013 and, on the whole, have increased the revenues in the
operating segments.'

In the Private Customers segment the new strategy has already delivered
initial results in terms of customers, accounts and assets. Despite the low
interest rate environment the operating profit was stable at the same level
seen in the previous year. At Mittelstandsbank the operating profit was
lower due to higher loan loss provisions. The credit volume provided to
clients from the German Mittelstand was again increased. The Central &
Eastern Europe segment saw continued high customer growth, and it was
possible to increase the operating profit in a year-on-year comparison. In
2013, Corporates & Markets posted its best operating profit since 2010.

The net profit in the fourth quarter of 2013 was EUR 64 million (Q4 2012:
minus EUR 726 million). Significantly lower loan loss provisions of EUR 451
million (Q4 2012: EUR 614 million) also contributed to this increase. In
addition, the net profit in the same quarter of the previous year had seen
significant charges from one-off effects.

Scheduled implementation of the strategic agenda

Commerzbank made further progress with the implementation of its strategic
agenda in 2013. In the Core Bank numerous growth initiatives were started
and measures implemented. The Private Customers segment, for example,
opened its first pilot branch and successfully launched new custody account
models. Mittelstandsbank has initiated the opening of five new offices in
Switzerland as part of the expansion of its international network. In the
CEE segment BRE Bank was rebranded as mBank and an innovative mobile
banking platform was launched. Corporates & Markets started 'TradeCycle',
an integrated platform for OTC derivatives. As a consequence of these
initial growth initiatives, especially the number of customers and the
business volume were increased within the Group in 2013. In the Core Bank
the good portfolio quality was maintained: the ratio of non-performing
loans was lower than 2%. The non-performing loans in the NCA reduction
segment were lowered significantly, namely by EUR 2.6 billion.

Costs further reduced, loan loss provisions increase as expected

In the 2013 business year, the operating expenses were once again lowered,
by approximately EUR 230 million to EUR 6,797 million (2012: EUR 7,029
million). The additional growth investments were compensated for by active
cost management.

The loan loss provisions increased as expected in 2013, amounting to EUR
1,747 million (2012: EUR 1,660 million). The main reasons for this were the
higher loan loss provisions in Mittelstandsbank
after considerable reversals of loan loss provisions at Mittelstandsbank in
2012.

Risks further reduced, Common Equity Tier 1 ratio increased to 9% one year
earlier than planned

In 2013, Commerzbank again improved its stability through the continued
reduction of risks and the strengthening of the capital resources. The
risk-weighted assets were further reduced by 8.4% to EUR 191 billion (2012:
EUR 208 billion). The total assets declined year-on-year by 13.6% to EUR
550 billion (2012: EUR 636 billion), and thus for the first time since 2006
were again lower than EUR 600 billion. Together with the successful capital
increase of EUR 2.5 billion, this led to a consolidation of the core equity
ratios. The Common Equity Tier 1 ratio taking into account the transitional
regulations of Basel 3 was 11.6% as of the end of December (previous year:
10.2%). With the full application of Basel 3 the Common Equity Tier 1 ratio
as of the end of December would have been 9.0%, following on from 7.6% at
the end of 2012. The Bank was also able to improve the leverage ratio. As
of the end of 2013 this was, in accordance with the currently known
calculation logic of the EU's Capital Requirements Directive (CRD 4) and
taking into account the transitional regulations of Basel 3, 4.3% (end of
December 2012: 4.1%). The leverage ratio with the full application of Basel
3 amounted to 3.3% (end of December 2012: 2.9%).

'In 2013, we have further reduced the operating expenses and the risks. In
particular in our reduction segment we were able to lower the risk-weighted
assets to a greater degree than planned. As a consequence of this we have
also attained our target for the Common Equity Tier 1 ratio one year
earlier than planned. Thanks to the ongoing risk reduction and the
continued consolidation of our capital base we were, on the whole, able to
further increase the stability of the Bank in 2013,' said Stephan Engels,
Chief Financial Officer of Commerzbank.

Comfortable refinancing position, new forms of funding

Given the ongoing reduction of portfolios and the good deposit base,
Commerzbank continues to enjoy a very comfortable funding position. In the
framework of covering the needs in the Commerzbank branch network and for
further diversification of the funding base the Bank has, however, the
flexibility to utilise the capital market for funding on an opportunist
basis. The funds from the three-year tenders of the European Central Bank
(LTRO I and II) had already been repaid in full by Commerzbank in the first
quarter of 2013.

As part of its collateralised funding, Commerzbank issued public
Pfandbriefe and mortgage Pfandbriefe for the first time ever in 2013.
Moreover, in 2013, the Bank issued the first SME Structured Covered Bond.
This new instrument is a contractual construction that is similar to a
Pfandbrief and which is collateralised by a high-quality portfolio of
selected Mittelstand loans. Thanks to these additional capital market
instruments the Bank has expanded its long-term funding options.

Silent participations of SoFFin and Allianz repaid in full

Within the framework of a capital increase in 2013 Commerzbank raised
approximately EUR 2.5 billion, using this to repay in full and ahead of
schedule the silent participations of the Financial Market Stabilisation
Fund (SoFFin) and of Allianz. Thus Commerzbank has repaid all the elements
of state aid which it may redeem itself. At the same time SoFFin reduced
its stake in the Bank within the framework of the transaction from 25% to
approximately 17%. The successful conclusion of the capital increase thus
marks the start of the government's exit from Commerzbank. Through this
measure Commerzbank also further strengthened its capital structure.

The preliminary individual financial statements of Commerzbank AG pursuant
to the provisions of the German Commercial Code (HGB) show a net profit of
EUR 166 million for 2013. This includes distributions on the following
capital instruments: profit participation certificates of Commerzbank AG
and Class B Preferred Securities of Commerzbank Capital Funding LLCs I, II
and III. It's not planned to propose a dividend payment out of the HGB
result for 2013.

Development of the segments

In 2013, the Private Customers segment attained an operating profit of EUR
225 million, and thus approximately the same sum seen in the previous year
(2012: EUR 227 million). The revenues before loan loss provisions remained
stable. It was possible to compensate for the lower level of interest rates
in the market through, among other things, higher revenues from the
securities business. This shows that the amendment of the business model is
beginning to take effect. The loan loss provisions increased in a
year-on-year comparison to EUR 108 million (2012: EUR 95 million). In spite
of increased investment, the operating expenses remained - at EUR 3.0
billion - at the level seen in the previous year (2012: EUR 3.0 billion).
Higher material expenses were compensated for by the lower capacity-related
personnel expenses, among other things. In the fourth quarter the segment
attained an operating profit of EUR 60 million (2012: EUR 25 million).

In 2013, Mittelstandsbank posted a downturn in its operating profit to EUR
1,107 million (2012: EUR 1,642 million). Despite the ongoing low interest
rate environment, it was possible to maintain the revenues before loan loss
provisions at a virtually stable level, however. The loan loss provisions
stood at EUR 470 million. A normalisation took place in 2013, after the
loan loss provisions in 2012 had amounted to only EUR 30 million as a
result of high reversals. The operating expenses in 2013 amounted to EUR
1.3 billion and were thus at the same level seen in the previous year
(2012: EUR 1.3 billion). In the fourth quarter of 2013 the operating profit
was EUR 220 million (2012: EUR 377 million).

The Central & Eastern Europe segment increased its operating profit in a
year-on-year comparison to EUR 254 million (2012: EUR 240 million). The
revenues before loan loss provisions decreased slightly to EUR 802 million
(2012: EUR 818 million). The loan loss provisions increased to EUR 119
million (2012: EUR 105 million). Thanks in particular to the sale of Bank
Forum in 2012 it was possible to reduce the operating expenses by 9%, to
EUR 429 million (2012: EUR 473 million). In the fourth quarter the
operating profit in the segment amounted to EUR 64 million (2012: EUR 42
million).

In 2013, Corporates & Markets attained an operating profit of EUR 778
million (2012: EUR 202 million) - its best result since 2010. Even without
taking into consideration the positive effect as a consequence of the lower
market valuation of Commerzbank's own liabilities ('Own Credit Spread' -
OCS), the operating profit would have improved considerably in a
year-on-year comparison. The revenues before loan loss provisions increased
significantly to EUR 2,080 million (2012: EUR 1,601 million). With the loan
loss provisions, there were net reversals of EUR 57 million, after 2012 had
seen loan loss provisions of EUR 52 million. The operating expenses
increased slightly to EUR 1,359 million (2012: EUR 1,347 million). In this
respect it is to be borne in mind that the bulk of the former portfolio of
the Portfolio Restructuring Unit (PRU) in 2012 was not transferred to the
segment until the middle of the year, but was included in the operating
expenses throughout the whole of 2013. In the fourth quarter of 2013 the
segment attained an operating profit of EUR 166 million, adjusted for the
OCS effect and adjustments concerning counterparty risks in the derivatives
business EUR 98 million (2012: minus EUR 70 million, adjusted for the OCS
effect and adjustments concerning counterparty risks in the derivatives
business EUR 70 million).

In 2013, the Non-Core Assets (NCA) segment again achieved a significantly
improved operating profit of minus EUR 1,073 million (2012: minus EUR 1,533
million). The revenues before loan loss provisions increased to EUR 360
million (2012: EUR 220 million). The loan loss provisions declined in line
with the reduction strategy, and in 2013 amounted to EUR 1,082 million
(2012: EUR 1,374 million). The operating expenses also declined to EUR 351
million (2012: EUR 379 million). In the fourth quarter of 2013 the
operating profit of NCA was minus EUR 329 million (2012: minus EUR 448
million).

The portfolio reduction in the NCA segment has proceeded more quickly than
planned as attractive market conditions have been utilised. In 2013, it was
possible to reduce the Exposure at Default (EaD) by EUR 35 billion, to EUR
116 billion, while preserving value; thus the annual target of a reduction
to EUR 125 billion was significantly overachieved. The Commercial Real
Estate (CRE) division accounted for approximately EUR 36 billion of the EaD
as of the end of 2013; this corresponds to a downturn of EUR 19 billion, or
approximately 35%, over 2012. A major contribution to this was made by the
sale of the CRE portfolio in Great Britain. In 2013, the shipping portfolio
was reduced by EUR 4.5 billion or approximately 24%, to EUR 14 billion.
Thus the reduction target of EUR 14 billion for 2016 for the shipping
portfolio has already been attained by the end of 2013. In Public Finance
the portfolio declined over 2012 by 14% to approximately EUR 66 billion.
The successful portfolio reduction led to a net capital release of EUR 205
million in the NCA segment in 2013.

The Exposure at Default (EaD) in those areas of CRE and Ship Finance which
the Bank assesses as being associated with a greater risk ('higher risk
cluster') was reduced by 48% in 2013. Thus as of the end of 2013, the
'higher risk cluster' in the entire NCA segment still encompassed a
portfolio of EUR 7.4 billion (end of December 2012: EUR 14.3 billion).

Outlook: further growth in the Core Bank - new targets with NCA reduction
and capital ratio

Commerzbank will further increase the business volume in the Core Bank in
2014. The revenues will still probably be impacted as a consequence of the
low interest-rate environment and the low level of investment activity on
the part of companies, however. In 2014, the loan loss provisions should be
lower than the overall figure for 2013. In this respect the ongoing
normalisation in the Core Bank is likely to be more than compensated for by
lower loan loss provisions in the Commercial Real Estate division. The
operating expenses in the year as a whole should not exceed EUR 7.0
billion. The additional investments for the implementation of the strategic
agenda will be financed through ongoing cost reductions.

'We intend to post additional growth in all operating segments of the Core
Bank in 2014 - namely in terms of customers, market shares and assets. Thus
we are establishing the foundation for a sustainable increase in revenues
and profitability in the coming years. At the same time we are continuing
with our successful, value-preserving reduction strategy in the NCA
segment,' said Martin Blessing. 'After having already achieved major
objectives of our strategic agenda ahead of schedule, we are now amending
two objectives: we intend to reduce the NCA portfolio more quickly than
originally planned if the favourable market environment continues beyond
2013. The new reduction target for the end of 2016 is now approximately EUR
75 billion, after our target had been under EUR 90 billion so far. In
addition, we will further increase our core capital ratio: So far we have
been aiming for a Common Equity Tier 1 ratio pursuant to the Basel 3
transitional regulations of more than 9%. We now intend to increase our
Common Equity Tier 1 ratio to more than 10% by 2016 - namely with the full
application of Basel 3.'

 Excerpt from the consolidated profit and loss statement




In EUR m                      2013*      2012  Q4 2013*   Q3 2013   Q4 2012


Net interest income           6,148     6,487     1,680     1,483     1,728


Provisions for loan losses    1,747     1,660       451       492       614


Net commission income         3,215     3,249       775       785       764


Net trading income              -82        73      -302       -77      -383


Net investment income            17        81         7       136       250


Current income on                60        46        10        31        12
companies accounted for at
equity


Other income                    -89       -77        58       -80       -22


Income before loan loss       9,269     9,859     2,228     2,278     2,349
provisions


Operating expenses            6,797     7,029     1,688     1,686     1,775


Operating profit or loss        725     1,170        89       100       -40


Impairments of Goodwill           -         -         -         -         -


Restructuring expenses          493        43         -         -         -


Net gain or loss from sale        -      -268         -         -      -185
of disposal groups


Pre-tax profit or loss          232       859        89       100      -225


Taxes                            65       803         7         3       477


Consolidated profit or           78       -47        64        74      -726
loss attributable to
Commerzbank shareholders


Cost/income ratio in           73.3      71.3      75.8      74.0      75.6
operating
business (%)





* Unaudited figures

*****

At www.media-hoster.com you will find broadcast-ready video and audio
material with statements by Martin Blessing and Stephan Engels from
approximately 7.00 a.m. onwards.

The videos can be viewed directly using mobile end devices.
Statements Martin Blessing:
http://www.media-hoster.com/commerzbank/bpk2013mben
Statements Stephan Engels:
http://www.media-hoster.com/commerzbank/bpk2013seen

*****

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 approximately 15 million private customers, as well as 1
million business and corporate customers. In 2013, it generated revenues of
more than EUR 9 billion with approximately 54,000 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 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
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



13.02.2014 DGAP's Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Media archive at www.dgap-medientreff.de and www.dgap.de

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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
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
TIDM:               CZB
Sequence Number:    1888
Time of Receipt:    Feb 13, 2014 07:00:09
 
End of Announcement                             DGAP News-Service
 
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