Commerzbank AG  / Quarter Results

07.05.2014 07:04

Dissemination of a Regulatory Announcement, transmitted by
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The issuer is solely responsible for the content of this announcement.
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- Operating profit in the Core Bank EUR 496 m (first quarter of 2013: EUR
  550 m)

- Revenues before loan loss provisions in the Group EUR 2.26 bn (first
  quarter of 2013: EUR 2.46 bn), operating expenses stable at EUR 1.7 bn

- Net profit increased to EUR 200 m (first quarter of 2013: EUR minus 98 m)

- NCA portfolio reduced year-on-year by 29 % to EUR 102 bn

- Bulk of commercial real-estate loans sold in the USA, Hypothekenbank
  Frankfurt withdraws from USA

- Basel 3 regulations effective: CET 1 ratio taking into account the
  transitional regulations 11.3 % and with full application 9.0 %

- Blessing: 'In the first quarter of 2014 we have, as announced, seen
  further growth at the Core Bank in terms of customers, the loan volume,
  and assets under management. In the strategic customer-centric business
  we have attained a robust result. This shows that we are on the right
  course.'

In the first quarter of 2014 Commerzbank increased the net profit over the
previous year and made further progress with the reduction of non-strategic
portfolios. The operating profit in the Group in the first three months of
2014 was EUR 324 million (first quarter of 2013: EUR 464 million). Overall,
the portfolio reduction in the Non-Core Assets (NCA) segment led to
declining revenues. This outweighed the positive development in loan loss
provisions and costs. In the Core Bank, which encompasses the strategically
important customer-centric business, Commerzbank attained an operating
profit of EUR 496 million (first quarter of 2013: EUR 550 million). All
respective business segments increased their operating result in a
quarter-on-quarter comparison (fourth quarter of 2013: EUR 419 million).
Compared to the previous year, the revenues remained on a comparable level
in the Core Bank despite a clear decrease in deposit margins and in spite
of the difficult environment for capital market-related business. All in
all, Commerzbank increased its net profit over the previous year to EUR 200
million (first quarter of 2013: EUR minus 98 million).

'In the first quarter of 2014 we have, as announced, seen further growth at
the Core Bank in terms of customers, the loan volume, and assets under
management. In the strategic customer-centric business we have attained a
robust result. This shows that we are on the right course,' said Martin
Blessing, Chairman of the Board of Managing Directors of Commerzbank.
Stable revenues before loan loss provisions 

The revenues before loan loss provisions saw a stable development in the
first quarter of 2014. In the Group these were EUR 2.26 billion (first
quarter of 2013: EUR 2.46 billion, fourth quarter of 2013: EUR 2.23
billion). In the Core Bank revenues before loan loss provisions of EUR 2.22
billion were generated in the first quarter, following EUR 2.28 billion in
the first quarter 2013 and EUR 2.15 billion in the fourth quarter of 2013.
In comparison to the previous year, revenues were tangibly increased in the
Private Customers and Central & Eastern Europe segments as a consequence of
the growth strategies. Compared to the fourth quarter of 2013, the Bank
increased revenues in all business segments. As expected the loan loss
provisions in the Group in the first quarter of 2014 were at a low level
which was comparable with the previous year. They stood at EUR 238 million
(first quarter of 2013: EUR 267 million). The operating expenses, at nearly
EUR 1.7 billion, remained stable at the level seen in previous quarters.
This development is testimony to ongoing strict cost management as
regulatory costs, for example for the conduct of the Asset Quality Review
of the European Central Bank, have increased considerably over the previous
year.

Key capital ratios remain at a comfortable level 

As of the end of March 2014 risk-weighted assets (RWA) increased
significantly over the end of 2013 to EUR 218 billion as a consequence of
the conversion effects with the coming into effect of the Basel 3
regulations as of 1 January 2014 (end of December 2013: EUR 191 billion).
The Basel 3 effect has thus materialised to the extent expected by the
Bank. The balance sheet total in the Group increased as of the end of March
2014 to EUR 574 billion (end of December 2013: EUR 550 billion). Taking
into account the transitional regulations of Basel 3, the Common Equity
Tier 1 ratio as of the end of March 2014 was 11.3 %. This is as a result of
the gradual introduction of the regulations as of January 2014. The ratio
thus remained at a comfortable level. With the full application of Basel 3,
the ratio as of the end of March would have been stable at 9.0 %. As of the
end of March 2014, the leverage ratio pursuant to the current known
calculation logic of the EU's Capital Requirements Directive (CRD 4) and
taking into account the transitional regulations of Basel 3 was 4.1 % (end
of December 2013: 4.3 %). The leverage ratio with full application of Basel
3 remained stable at 3.3 % (end of December 2013: 3.3 %).

Core Bank: encouraging development in the Private Customers and Central &
Eastern Europe segments, revenues in capital market-related areas under
pressure

In the Private Customers segment operating profit saw a pleasing
development in the first quarter of 2014. At EUR 112 million it was 62 %
higher in a year-on-year comparison (first quarter of 2013: EUR 69
million). The decisive factors here were the increase in revenues before
loan loss provisions and successful cost management. Thus revenues
increased to EUR 874 million (first quarter of 2013: EUR 858 million). In
this respect the share of recurring revenues in the securities business,
and thus revenue quality, improved. The Bank reduced operating expenses
again, from EUR 754 million in the first quarter 2013 to EUR 726 million in
the first quarter of 2014. In the first quarter of 2013 loan loss
provisions were EUR 36 million and therefore at a similar level to that
seen in the previous year (first quarter of 2013: EUR 35 million). All this
shows that the Private Customers strategy and the business reorganisation
which continued in the past year are bearing fruit. Furthermore, the
segment has continued its growth path in the first quarter of 2014. The
number of net new customers increased in this period by nearly 43,000. New
business in residential mortgage financing rose by 30 % to EUR 2.3 billion
in the first quarter of 2014, the assets in premium and managed accounts
increased in a year-on-year comparison by nearly 50 %, to approximately EUR
24 billion.

Mittelstandsbank increased its operating profit by 4 % to EUR 337 million
compared to the same quarter of the previous year (first quarter of 2013:
EUR 325 million). The revenues before loan loss provisions decreased
slightly to EUR 715 million as a consequence of the low level of interest
rates and lower customer activity in the current market environment. The
loan loss provisions in the first quarter of 2014 were, at EUR 57 million,
significantly lower than the level seen in the previous year, however
(first quarter of 2013: EUR 78 million). Thanks to strict cost management,
operating expenses remained stable over the first quarter of 2013 at EUR
321 million. Mittelstandsbank is also making progress on its growth path.
The Bank increased the loan volume in the first quarter of 2014 over the
previous year by EUR 4.5 billion. Of this sum approximately EUR 2.6 billion
was accounted for by loans to Germany's Mittelstand.

The Central & Eastern Europe segment attained a very good operating profit
of EUR 98 million. This is approximately 30 % more than in the previous
year (first quarter of 2013: EUR 75 million). The key factor here was the
significantly higher revenues before loan loss provisions (up 21 % to EUR
224 million). This development already reflects the successful
implementation of the 'One Bank' strategy of mBank. Loan loss provisions
increased to EUR 21 million (first quarter of 2013: EUR 6 million). In
spite of the investments in the 'One Bank' strategy and the organic growth
of mBank, it was possible to maintain operating expenses at a stable level
of EUR 105 million (first quarter of 2013: EUR 104 million). Customers also
continue to find mBank attractive: in the first quarter of 2014 the Bank
acquired nearly 60,000 net new customers.

In the Corporates & Markets segment operating profit declined year-on-year
to EUR 215 million (first quarter of 2013: EUR 272 million). The key factor
for this development was the fall in fixed income and currencies sales and
trading, which suffered from the challenging market environment. This could
only be partially compensated for by the favourable development in equities
sales & trading. Revenues before loan loss provisions in Corporates &
Markets declined by 7 %, to EUR 542 million (first quarter of 2013: EUR 584
million). Net reversals in loan loss provisions were again booked in the
first quarter of 2014 at EUR 9 million However, they were lower than in the
same quarter of the previous year (EUR 26 million). The operating expenses
remained flat at EUR 336 million (first quarter of 2013: EUR 338 million)
with a number of cost initiatives compensating for the cost burden stemming
from increased regulation.

NCA: portfolio reduction in Public Finance supported by transfer of
high-quality securities and bonds to the liquidity portfolio in the Core
Bank

The NCA segment posted an operating loss of EUR minus 172 million in the
first quarter of 2014 (first quarter of 2013: EUR minus 86 million, fourth
quarter of 2013: EUR minus 329 million). The main reason for the
year-on-year downturn was lower revenues before loan loss provisions as a
result of the ongoing portfolio run-down. In the first quarter these were
considerably lower than in the previous year and amounted to EUR 44 million
(first quarter of 2013: EUR 172 million). The loan loss provisions declined
over the previous year to EUR 134 million (first quarter of 2013: EUR 175
million). The operating expenses were reduced slightly compared to the
first quarter of 2013 to EUR 82 million.

The Bank also maintained the pace of portfolio reduction in the first
quarter of 2014: The Exposure at Default (EaD) was reduced across all areas
in a year-on-year comparison. The capital-accretive run-down amounted to
EUR 5 billion. Furthermore, the portfolio reduction in Public Finance was
supported by the transfer of high-quality securities and bonds from the NCA
portfolio to the liquidity portfolio in the Core Bank. These securities and
bonds will predominantly mature before the end of 2016. Therefore, this
transaction does not change the Bank's assumptions regarding the NCA
reduction target for the year 2016 of approximately EUR 75 billion. The
transferred securities and bonds correspond to the high regulatory
requirements placed on the liquidity portfolio. Without a transfer, the
Bank would have had to acquire equivalent instruments for the liquidity
portfolio externally. The transferred portfolio has a volume of
approximately EUR 9 billion. Thus, as of the end of March 2014 the EaD of
the NCA segment was EUR 102 billion - and therefore 12 % lower than the
previous quarter and 29 % lower compared to the same quarter of the
previous year (fourth quarter of 2013: EUR 116 billion, first quarter of
2013: EUR 143 billion).

As of the end of March 2014 the EaD in CRE was EUR 32 billion. This is 37 %
lower than in the same quarter of the previous year (first quarter of 2013:
EUR 51 billion). The Ship Finance portfolio was reduced by EUR 900 million
in the first quarter of 2014 compared to the previous quarter to EUR 13.5
billion. This is 26 % less than in the previous year (first quarter of
2013: EUR 18 billion). The EaD in Public Finance declined as of the end of
March 2014 to EUR 56 billion (end of December 2013: EUR 66 billion).

The Bank recently sold the bulk of its commercial real-estate loans in the
USA with a total volume of EUR 830 million to various American financial
investors. Following these transactions, the New York branch of
Hypothekenbank Frankfurt was closed as of the end of March 2014. It was
agreed that confidentiality be maintained on further details of the
transactions. Approximately EUR 700 million of the sold portfolios are
already included in the portfolio run-down for the first quarter. In the
first quarter of 2014 these transactions led to a minor charge on revenues.
As a consequence of the reduction of risk-weighted assets by EUR 390
million as a result of the portfolio sales, there is a positive net capital
release effect of approximately EUR 20 million for Commerzbank.
Outlook

'We will continue along our growth path in the Core Bank as announced -
despite weak demand for loans, customer reticence, and the low
interest-rate environment. At the same time we will continue with our
successful, value-preserving run-down strategy in the Non-Core Assets
segment,' said Stephan Engels, Chief Financial Officer of Commerzbank. The
Bank is also maintaining its cost target: in the year as a whole operating
expenses are not to exceed EUR 7.0 billion. The additional investments for
the implementation of the strategic agenda and increasing regulatory costs
will be financed through cost measures. The loan loss provisions in 2014
are to be lower than the total figure for 2013. Commerzbank sticks to its
target and plans to increase the Common Equity Tier 1 ratio with the full
application of Basel 3 to more than 10 % by 2016.

Excerpt from the consolidated profit and loss statement

<pre>


In EUR m                    Q1 2014   Q1 2013   Q4 2013      2013      2012


Net interest income           1,130     1,359     1,683     6,161     6,487


Provisions for loan losses     -238      -267       451     1,747     1,660


Net commission income           815       844       773     3,206     3,249


Net trading income              408       312      -302       -82        73


Net investment income           -38        -6         7        17        81


Current income on                13         8        10        60        46
companies accounted for at
equity


Other income                    -68       -62        58       -87       -77


Revenues before loan loss     2,260     2,455     2,229     9,275     9,859
provisions


Operating expenses            1,698     1,724     1,688     6,797     7,029


Operating profit or loss        324       464        90       731     1,170


Impairments of Goodwill           -         -         -         -         -


Restructuring expenses            -       493         -       493        43


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


Pre-tax profit or loss          324       -29        90       238       859


Taxes                            95        44         7        66       803


Consolidated profit or          200       -98        64        81       -47
loss attributable to
Commerzbank shareholders


Cost/income ratio in           75.1      70.2      75.7      73.3      71.3
operating
business (%)



</pre>

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*****

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



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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:      QRF
TIDM:               CZB
Sequence Number:    2038
Time of Receipt:    May 07, 2014 07:00:07
 
End of Announcement                             DGAP News-Service
 
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