DGAP-Regulatory: Commerzbank: Strategy successful - net profit of over 1 billion euros and dividend


Commerzbank Aktiengesellschaft / Miscellaneous
Commerzbank: Strategy successful - net profit of over 1 billion euros and
dividend

12-Feb-2016 / 07:05 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group AG.
The issuer is solely responsible for the content of this announcement.

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  - Operating profit in 2015 more than doubled to EUR 1,909 m (2014: EUR
    689 m)

  - Operating profit in the fourth quarter was EUR 376 m (Q4 2014: EUR -260
    m)

  - Net profit in 2015 increased significantly to EUR 1,062 m after EUR 266
    m in previous year

  - Revenues before loan loss provisions improved to EUR 9.8 bn (2014: EUR
    8.8 bn)

  - Loan loss provisions at low level of EUR 696 m (2014: EUR 1,144 m)

  - NCA with further portfolio run-down to less than EUR 20 bn in CRE and
    Ship Finance - NCA run-down since Q3 2012 totals EUR 97 bn

  - Equity ratio CET 1 with full application of Basel 3 increased
    significantly as of end of 2015 to 12.0% (end of 2014: 9.3%) - core
    regulatory equity capital increased by approximately EUR 3.8 bn in the
    course of the year

  - Leverage ratio with full application of Basel 3 as of end of 2015
    improved to 4.5% (end of 2014: 3.6%)

  - Blessing: '2015 has shown that our strategy is right and that the
    implementation has been successful. For the first time in five years we
    have attained a net profit of more than 1 billion euros and have seen
    further significant strengthening of our capital base. The Board of
    Managing Directors plans to propose a dividend of 20 cents per share
    for the 2015 financial year.'

Commerzbank has further improved its profitability and capital base, while
simultaneously significantly reducing risks. The operating profit in the
Group increased to EUR 1,909 million as of the end of 2015 (2014: EUR 689
million). In the 2015 financial year the revenues before loan loss
provisions improved by EUR 1 billion year-on-year to EUR 9,762 million
(2014: EUR 8,762 million). The loan loss provisions in the 2015 financial
year were EUR 696 million and thus approximately 40% lower than in the
previous year (2014: EUR 1,144 million). This is clear testimony to the
high quality of the credit portfolio, which is also confirmed by a very low
non-performing loan ratio (NPL ratio) of 1.6%. The operating expenses
totalled EUR 7,157 million (2014: EUR 6,929 million). This increase is due
to external factors: minus expenses for the European Bank Levy (EUR 119
million) and currency effects (EUR 85 million) the operating expenses
amounted to EUR 6,953 million. Thus, the operating expenses - despite
additional strategic investments such as those in digitalisation - were
maintained at a stable level thanks to consistent efficiency measures.
Likewise, it was possible to compensate in full for additional investments
in regulatory matters and compliance, as well as a higher contribution to
the Polish deposit guarantee fund. The full year net profit improved
considerably to EUR 1,062 million (2014: EUR 266 million); this sum
includes restructuring expenses of EUR 114 million (2014: EUR 61 million).

In the fourth quarter of 2015 the operating profit increased to EUR 376
million, following on from minus EUR 260 million in the same quarter of the
previous year. The net profit improved significantly over the fourth
quarter of 2014 to EUR 187 million (Q4 2014: minus EUR 280 million). This
positive development is also due to provisions for legal risks in the
fourth quarter of 2014. The revenues before loan loss provisions increased
year-on-year by approximately 21% to EUR 2,232 million (Q4 2014: EUR 1,848
million). In the fourth quarter the loan loss provisions decreased
considerably year-on-year to a low level of EUR 112 million (Q4 2014: EUR
308 million). The operating expenses amounted to EUR 1,744 million, which
corresponds to a slight downturn of 3% over the same quarter of the
previous year (Q4 2014: EUR 1,800 million).

The Core Bank increased its operating profit to EUR 2,310 million (2014:
EUR 1,504 million) in 2015. This positive development is also reflected in
the return on equity (RoE) of the Core Bank, as well as in the return on
tangible equity (RoTE). With a net RoE of 8.1% and an operating RoTE of
12.3% of the Core Bank these were significantly better compared to the same
period in the previous year (net RoE 2014: 6.2%; operating RoTE 2014:
9.2%). The revenues before loan loss provisions in the Core Bank increased
to EUR 9,504 million, following on from EUR 8,614 million in the 2014
financial year. In the previous year accruals for a settlement in the USA
had led to charges on the revenues. The loan loss provisions decreased by
33% to EUR 330 million (2014: EUR 490 million). The operating expenses in
the Core Bank were EUR 6,864 million and thus higher, at 3.7%, in a
year-on-year comparison (2014: EUR 6,620 million). The credit volume was
again increased in this period. Compared to the previous year the Private
Customers and Mittelstandsbank segments increased their credit volumes on a
yearly average by approximately 8% and approximately 4%, respectively.

'2015 has shown that our strategy is right and the implementation has been
successful. For the first time in five years we have attained a net profit
of more than 1 billion euros. In addition, we have further strengthened our
capital base, which is at a good level compared to our competitors. The
Board of Managing Directors plans to propose a dividend of 20 cents per
share for the 2015 financial year,' said Martin Blessing, Chairman of the
Board of Managing Directors of Commerzbank AG.

Risk profile improved, equity ratio increased significantly

The risk-weighted assets (RWA) with full application of Basel 3 were
significantly reduced in the course of the fourth quarter of 2015,
something which had a positive impact on the development of the core equity
ratio. The risk-weighted assets amounted to EUR 197 billion, compared to
EUR 213 billion as of the end of the third quarter of 2015. The clear
decrease is due, among other things, to the continued portfolio run-down in
the Non-Core Assets segment and the reduction in the RWA in the credit risk
sector as a result of the application of a revised standard defined by the
European Banking Authority (EBA). Both effects reduced RWA by EUR 8.6 bn.
The Common Equity Tier 1 ratio (CET 1) with full application of Basel 3
increased considerably to 12.0%, compared to 9.3% as of the end of December
2014. This significant improvement is due to lower RWA and to an increase
in the capital base. The CET 1 ratio already includes a dividend deferral
of EUR 250 million, or 20 cents per share. The earnings per share increased
significantly to EUR 0.88 (2014: EUR 0.23). The leverage ratio improved to
4.5% as of the end of the 2015 financial year, after amounting to 3.6% as
of the end of 2014. The total assets were EUR 533 billion (2014: EUR 558
billion).

'In 2015 we have further reduced the risks and significantly increased the
stability of Commerzbank. Our regulatory capital base has increased by
approximately EUR 3.8 billion or nearly 20%. Our Common Equity Tier 1 ratio
is now 12.0%,' said Stephan Engels, Chief Financial Officer of Commerzbank.

New financial architecture 'Group Finance Architecture' launched

With the current financial reporting Commerzbank has launched a new
financial architecture for Commerzbank AG Germany. The new 'Group Finance
Architecture' platform (GFA) significantly reduces complexity and provides
the structural basis for future regulatory reporting. Permanent methodology
changes are associated with the launch of GFA; these necessitate a one-off
restatement for the preceding quarters of 2015 and for 2014. These
adjustments have been adopted for the figures published today.

'With Group Finance Architecture we are able to consolidate our financial
data on a single platform. This innovative architecture is one of the
largest investments ever made by Commerzbank. Together with my fellow board
member Frank Annuscheit and our colleagues from IT and Finance I am very
pleased with the successful launch. This makes our financial architecture
even better, even faster and even more secure,' said Engels.

Individual financial statement of Commerzbank AG 

The provisional individual financial statement of Commerzbank AG pursuant
to the provisions of the German Commercial Code (HGB) states higher annual
net income of EUR 1,693 million for 2015 (2014: EUR 282 million). This sum
takes into consideration the payment of interest on all profit-sharing
rights in Commerzbank AG. The Board of Managing Directors plans to propose
a dividend of 20 cents per share for the 2015 financial year and the
accumulation of the remaining net profit in order to further strengthen the
capital base.

Development of the segments

In the 2015 financial year the Private Customers segment successfully
continued its growth in terms of customers, assets and revenues. The
operating profit increased significantly year-on-year, by 65% to EUR 751
million (2014: EUR 455 million). This includes a one-off net effect of
approximately EUR 80 million which was booked in the third quarter. The
revenues before loan loss provisions increased to EUR 3.7 billion (2014:
EUR 3.5 billion), in particular as a consequence of the expansion of the
credit business and a rise in revenues from existing customers in
securities trading. The ratio of assets in premium and managed accounts
increased in the fourth quarter 2015 compared to the previous year from 36%
to 46%. Thus, the volatility in commission income was reduced further, as
foreseen. In total, commission income was increased by more than 11% over
the previous year. The loan loss provisions declined in the same period to
EUR 14 million (2014: EUR 79 million). The operating expenses remained
stable at EUR 2,953 million (2014: EUR 2,919 million). The number of net
new customers increased in 2015 by approximately 286,000, having risen by
819,000 since the end of 2012. New business in residential mortgage loans
grew by 18% year-on-year to more than EUR 12 billion. A volume increase of
27% was registered with consumer loans. In the fourth quarter of 2015 the
segment virtually doubled its year-on-year operating profit to EUR 160
million (Q4 2014: EUR 81 million). The revenues before loan loss provisions
amounted to EUR 894 million, higher than the level posted in the same
quarter of the previous year (Q4 2014: EUR 842 million).

Mittelstandsbank attained a solid result in a challenging market
environment. The operating profit declined in the 2015 financial year to
EUR 1,062 million (2014: EUR 1,224 million), yet remains at a high level.
The fourth quarter accounted for EUR 212 million (Q4 2014: EUR 251
million). The full year revenues before loan loss provisions declined to
EUR 2.7 billion (2014: EUR 2.9 billion). This development is due in
particular to the downturn in deposit transactions, which was driven by the
negative level of interest rates on the market as well as the depreciation
of a shareholding. Adjusted for valuation effects from counterparty risks
in the derivatives business, the fourth quarter contributed revenues of EUR
679 million (Q4 2014: EUR 731 million). The loan loss provisions declined
in the 2015 financial year to EUR 192 million (2014: EUR 342 million). The
operating expenses increased in 2015 to EUR 1,471 million (2014: EUR 1,362
million), primarily due to higher regulatory costs and the European Bank
Levy. Based on the sustained high level, the segment Mittelstandsbank
generated a credit volume growth of 4% over 2014 in the 2015 financial
year. It was also possible to improve the customer satisfaction among
Germany's SMEs to a very high level. In 2015 the segment also optimised its
client-centric business model through a more regional and focused
realignment in domestic sales.

The result in the Central & Eastern Europe segment reflects the good
business development at M Bank in spite of the increasingly challenging
market environment in Poland. In 2015 the segment generated an operating
profit of EUR 346 million, which is only slightly lower than the result
attained in the previous year (2014: EUR 364 million). The fourth quarter
accounted for EUR 81 million (Q4 2014: EUR 89 million). The revenues before
loan loss provisions in the segment increased in 2015 as a whole over the
previous year by 2% to EUR 941 million (2014: EUR 923 million) and over the
same quarter of the previous year by 12% to EUR 251 million (Q4 2014: EUR
225 million). The loan loss provisions declined in the 2015 financial year
by 21% to EUR 97 million in the 2015 financial year (2014: EUR 123
million). The operating expenses increased to EUR 498 million (2014: EUR
436 million) as a consequence of contributions to the Polish deposit
guarantee fund and to the 'Fund for Supporting Distressed Mortgage
Borrowers'. On the whole, M Bank was able to continue its operating growth
in 2015, with the credit volume increasing by 7% and the deposits volume by
17% over the course of the year. It was also able to acquire around 400,000
net new customers, meaning that M Bank now has some 5 million customers in
Poland, the Czech Republic, and Slovakia.

In 2015 Corporates & Markets achieved an operating profit of EUR 610
million (2014: EUR 675 million). After a strong start into the year,
concerns over global growth led to a weaker second half in 2015. Adjusted
for effects from the valuation of own liabilities (OCS) and counterparty
risks in the derivatives business, the operating profit in the fourth
quarter was EUR 80 million (Q4 2014: EUR 150 million). Adjusted revenues
before loan loss provisions in 2015 were EUR 1.9 billion, virtually the
same level as in the previous year (2014: EUR 2.0 billion). With revenues
of EUR 595 million (2014: EUR 592 million), Equity Markets & Commodities
(EMC) was the largest contributor to earnings. In Fixed Income & Currencies
(FIC) the strong demand for foreign exchange products was not able to
compensate for weaker client activity in interest rates and credit.
Revenues in Corporate Finance decreased year-on-year due to lower fees on
deposits on the back of the low interest rate environment. The loan loss
provisions saw net reversals of EUR 36 million, following on from EUR 55
million in 2014. Ongoing investments in the optimisation of the back-office
as part of the Centres of Competence model, the European Bank Levy and
regulatory costs lead to increased operating expenses of EUR 1,426 million
in 2015 (2014: EUR 1,352 million).

NCA: Further portfolio run-down - CRE and Ship Finance portfolio less than
EUR 20 billion

In the 2015 financial year the Non-Core Assets (NCA) segment posted a much
improved result, in both revenues as well as loan loss provisions and cost
base. The operating profit improved to minus EUR 401 million over the
previous year (2014: minus EUR 815 million). In this respect the fourth
quarter of 2015 accounted for minus EUR 61 million (Q4 2014: minus EUR 189
million). The revenues before loan loss provisions totalled EUR 258
million, following on from EUR 148 million in the previous year. The
operating expenses decreased slightly to EUR 293 million (2014: EUR 309
million).

The value-preserving portfolio run-down was successfully continued in 2015.
In total, the exposure at default (EaD) was reduced by EUR 13 billion in
the Commercial Real Estate (CRE) and Ship Finance areas. The EaD of the two
segments at the end of the year was a mere EUR 19 billion. Thus, the
objective of approximately EUR 20 billion by the end of 2016 has already
been attained. As of the end of 2015 CRE accounted for approximately EUR
10.3 billion of the EaD; this corresponds to a reduction of EUR 9.7 billion
or 49% over 2014. The EaD in Ship Finance was reduced by EUR 3.6 billion or
approximately 30% to EUR 8.4 billion in the course of the year. The
portfolios of non-performing loans at the end of the past year in both CRE
and Ship Finance were only EUR 1 billion, both meaning a reduction of
two-thirds year-on-year.

Commerzbank has reduced the portfolios in the NCA segment since the third
quarter of 2012 from EUR 160 billion to EUR 63 billion at the end of 2015.
As a result of this successful run-down, the Board of Managing Directors
has decided to dissolve NCA and implement a new structure with the
intention of transferring portfolios of higher quality and lower risk to
the Core Bank. Approximately EUR 7 billion of the some EUR 10 billion in
the portfolio of CRE will be transferred to the Core Bank segments Private
Customers and Mittelstandsbank. From Ship Finance (portfolio: approximately
EUR 8 billion) approximately EUR 3 billion are being transferred to
Mittelstandsbank. Treasury will assume approximately EUR 36 billion of the
EUR 44 billion from the Public Finance area. The remaining portions of the
respective segments correspond to approximately EUR 18 billion and thus to
less than 4% of group total assets. They will be bundled in the
newly-created 'Asset & Capital Recovery Unit' (ACR). The aim by year-end
2019 is that CRE and Ship Finance will show a combined EaD run-down to low
single digit billion exposure. ACR will be endowed with a substantial
capital buffer. The exact details, such as volumes and rating classes, will
be communicated with the figures for the first quarter of 2016 at the
latest.

Outlook 

The year 2016 will be a challenging one due to the geopolitical and
macroeconomic environment. However, this will not prevent the Bank from
consistently implementing its strategy and aiming to further increase
market shares in its Core Bank divisions. The cost base shall be kept
stable except of additional external non-influenceable burdens. Commerzbank
expects a moderate increase in loan loss provisions due to lower recoveries
from impaired loans. From today's perspective the Bank expects a slight
increase in net profit in comparison with this year's result.

Financial figures at a glance

Note: The financial reporting has been amended in accordance with IAS 8.
<pre>


In EUR m                       2015      2014   Q4 2015   Q3 2015   Q4 2014


Net interest and trading      6,278     5,953     1,276     1,486     1,428
income


Provisions for loan losses     -696   -1,144      -112      -146      -308


Net commission income         3,424     3,260       829       825       823


Net investment income            -7        82        99       -39        64


Current income on                82        44        36        15         2
companies accounted for at
equity


Other income                    -15      -577        -8        22      -469


Revenues before loan loss     9,762     8,762     2,232     2,309     1,848
provisions


Operating expenses            7,157     6,929     1,744     1,719     1,800


Operating profit or loss      1,909       689       376       444      -260


Impairments of Goodwill           -         -         -         -         -


Restructuring expenses          114        61        20        28        61


Pre-tax profit or loss        1,795       628       356       416      -321


Taxes                           618       256       138       155       -68


Consolidated profit or        1,062       266       187       230      -280
loss attributable to
Commerzbank shareholders


Earnings per share             0.88      0.23      0.15      0.18     -0.25


Cost/income ratio in           73.3      79.1      78.1      74.4      97.4
operating
business (%)

Operating RoTE (%)              7.3       2.8       5.6       6.7      -4.3


Net RoTE (%)                    4.2       1.1       2.9       3.6      -4.7


Net RoE (%)                     3.8       1.0       2.6       3.2      -4.2


CET 1 ratio B3,                12.0       9.3      12.0      10.8       9.3
fully phased-in (%)    


Leverage Ratio,                 4.5       3.6      4.5        4.1       3.6
fully phased-in (%)     


Total assets (EUR bn)           533       558      533        568       558



</pre>

2015 figures published in this press release are preliminary and unaudited.


*****
Press contact 
Alexander Cordes +49 69 136-42764 
Karsten Swoboda  +49 69 136-22339 
Kathrin Wetzel   +49 69 136-44011 

*****
About Commerzbank 
Commerzbank is a leading international commercial bank with branches and
offices in more than 50 countries. The core markets of Commerzbank are
Germany and Poland. With the business areas Private Customers,
Mittelstandsbank, Corporates & Markets and Central & Eastern Europe, its
private customers and corporate clients, as well as institutional
investors, profit from a comprehensive portfolio of banking and capital
market services. Commerzbank finances more than 30 per cent of Germany's
foreign trade and is the unchallenged leader in financing for SMEs. With
its subsidiaries Comdirect and Poland's M Bank it owns two of the world's
most innovative online banks. With approximately 1,050 branches and more
than 90 advisory centres for business customers Commerzbank has one of the
densest branch networks among German private banks. In total, Commerzbank
boasts more than 16 million private customers, as well as 1 million
business and corporate clients. The Bank, which was founded in 1870, is
represented at all the world's major stock exchanges. In 2015, it generated
gross revenues of EUR 9.8 billion with 51,300 employees.

*****
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
Europe, in the USA 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, especially due to the ongoing European debt crisis,
potential defaults of borrowers or trading counterparties, the
implementation of its strategic initiatives to improve its business model,
particularly to reduce its NCA portfolio, 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
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.


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12-Feb-2016 The EQS Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Media archive at www.dgap.de/ukreg

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   Language:           English                                            
   Company:            Commerzbank Aktiengesellschaft                     
                       Kaiserstraße 16                                    
                       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:             Regulated Market in Berlin, Dusseldorf, Frankfurt  
                       (Prime Standard), Hamburg, Hanover, Munich,        
                       Stuttgart; Terminbörse EUREX; London, SIX          
   Category Code:      MSC                                                
   TIDM:               CZB                                                
   Sequence Number:    3001                                               
   Time of Receipt:    12-Feb-2016 / 07:00 CET/CEST                       
 
 
   End of Announcement    EQS News Service  
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436811 12-Feb-2016