DGAP-News: Commerzbank Aktiengesellschaft / Key word(s): Miscellaneous
Commerzbank to increase profitability through focus and digitalisation
30.09.2016 / 10:30
The issuer is solely responsible for the content of this announcement.
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- "Commerzbank 4.0" strategy with three main thrusts: focused growth,
digital transformation and increased efficiency
- Concentration on future-proofing customer business in two segments:
"Private and Small Business Customers" and "Corporate Clients"
- Trading activities in investment banking to be scaled back, freed-up
capital reallocated and balance sheet structure further improved
- Evolution into a digital enterprise - "Digital Campus" to speed up
implementation
- Focusing and digitalisation will lead to staff reductions amounting to
9,600 full-time positions
- Strategy implementation to be financed by targeted deployment of
resources and retention of profits
- Zielke: "Our business model will be simpler, more efficient and fully
digitalised, enabling us to sustainably increase our profitability."
By the end of 2020 Commerzbank will have sustainably increased its
profitability. As part of the "Commerzbank 4.0" strategy, it will
concentrate on its core businesses and digitalise 80% of relevant
processes, thereby achieving significant efficiency gains. Its business
will be focused in two customer segments, "Private and Small Business
Customers" and "Corporate Clients". The Mittelstandsbank and Corporates &
Markets segments will be consolidated into a single unit and trading
activities in investment banking scaled back. The downsizing of the trading
activities will reduce earnings volatility and regulatory risk, and will
free up capital to be invested in the core businesses.
Commerzbank is aiming for a net return on tangible equity (RoTE) of more
than 6% by the end of 2020. This target is based on the expectation that
the interest rate environment will remain challenging. Should interest
rates improve, a net return on tangible equity of more than 8% will be
achievable. Commerzbank is expecting revenues for 2020 to total between
EUR9.8 and 10.3 billion. The cost base is to be reduced to EUR6.5 billion,
taking the cost/income ratio to below 66%. In a normalised interest rate
environment, revenues could rise to over EUR11 billion and the cost/income
ratio could fall to around 60%.
The Common Equity Tier 1 (CET 1) ratio, after full application of Basel 3,
is expected to stay at around 12% and will be above 12% in 2018 taking into
account currently foreseeable regulatory developments. For 2020 the Bank is
expecting a ratio of above 13%.
To cover its restructuring costs of around EUR1.1 billion, Commerzbank will
cease dividend payments for the time being and will retain its full
earnings.
The focus on the core business, with some business activities being
discontinued, and the digitalisation and automation of workflows will lead
to staff reductions amounting to around 9,600 full-time positions. The Bank
will shortly begin preparatory discussions with the relevant employee
representative committees. At the same time, around 2,300 new jobs will be
created in areas of business growth. Hence the net number of jobs shed will
amount to around 7,300 full-time positions.
"Job cuts are a painful process for the Bank and for each individual
affected. But they are necessary to make the Bank fit for the future.
Although Commerzbank is stable, it is not profitable enough", said Martin
Zielke, Chairman of the Board of Managing Directors of Commerzbank. "We
have achieved a great deal in the last few years: we have improved the
quality of our balance sheet, reduced risk and significantly strengthened
our capital base. Now, with the general business climate as challenging as
ever, we need a bold rethink and a real transformation of the Bank. For
this, we will be concentrating solely on our strengths, automating our
processes and thereby laying the foundations for profitable growth at lower
costs. The new Commerzbank 4.0 is focused, digital and efficient."
Concentrating on strengths
With its two segments, "Private and Small Business Customers" and
"Corporate Clients", Commerzbank will in future be even more focused on its
core businesses. "We are focusing on the areas where we deliver particular
added value to our customers, thereby setting ourselves apart from the
competition. And we are systematically giving up businesses in which we
can't see any future for us", said Martin Zielke. This relates in
particular to the investment bank, where trading activities will be
simplified and aligned with the needs of the Bank's core customers. The
existing Corporates & Markets segment will be integrated into the Corporate
Clients segment. Services that are important to corporate clients such as
primary issuance and distribution and risk management will remain key to
the Commerzbank's offering. The technology-intensive structured equities
business in Equity Markets & Commodities (EMC), geared towards market-
making and the manufacturing of securitised products, will be ringfenced in
a separate legal entity. The exotic structured rates business will cease,
while flow credit and bond trading in Fixed Income & Currencies (FIC) will
be scaled back. The capital freed up by this withdrawal will be reinvested
in the "Private and Small Business Customers" segment. By 2020 the Bank
wants to achieve cost savings of EUR1.1 billion by focusing, eliminating
redundancy, simplifying the infrastructure and by digitalisation.
Private and Small Business Customers: building on our strong position
The new Private and Small Business Customers segment encompasses
Commerzbank's private and small-business customers as well as the
subsidiaries Comdirect, Commerz-Real and M-Bank. The customer group "Small-
Business Customers" comprises commercial clients and smaller SMEs.
The Bank wants to gain a net two million new customers in Private and Small
Business Customers in the German market by 2020. Growth will be driven, in
particular, by the expansion of digital multichannel banking and innovative
products like a new digital instalment loan platform and digital asset
management including Robo-Advice. Commerzbank will also maintain a dense
branch network. Besides the large flagship branches in the main population
centres, Commerzbank will introduce a new type of small, modern branch, the
"city branch".
"For years now, our retail business has posted sustainable, profitable
growth in a stagnating market. We will continue this success story and
extend it to small business customers", said Zielke. The Bank is planning
to substantially increase its market share among small business customers
to 8% over the next four years, thanks to good regional accessibility,
tailored product portfolios, digital solutions and its ability to offer
private and business services in one place. The aim is for these measures
to generate revenue growth of at least EUR1.1 billion in the new Private
and Small Business Customers segment by the end of 2020.
Corporate Clients: national and international growth from a leading
position
In corporate banking, the Bank wants to further extend its leading position
in trade financing. To achieve this it is looking for focused growth in the
most important trade corridors for German and European corporate clients.
With its deep penetration of the key German industries - automotive and
transport, chemicals and pharmaceuticals, engineering, energy and
infrastructure, consumer and retail - Commerzbank possesses comprehensive
sector expertise which sets it apart from the competition. In future it
will increasingly offer this expertise to its international clients in
Europe as well. Among SMEs with turnover of between EUR15 and 50 million as
well, Commerzbank plans to further expand its market position with the aid
of its international expertise and digitalisation. To achieve this it will
further develop its offering and introduce new digital products and
services.
Collaboration between client relationship managers and product experts will
be further strengthened by the consolidation of Mittelstandsbank and
Corporates & Markets. "The Corporate Clients segment builds on the
strengths of the Mittelstandsbank and incorporates the products and
services from the capital markets business that are relevant to our
clients", Zielke said. The aim is for these measures to generate revenue
growth of over EUR300 million in the new segment by the end of 2020.
Evolution into a digital enterprise
Commerzbank wants to evolve into a digital enterprise in the next four
years. The Bank will invest approximately EUR700 million per year in
digitalisation and IT by reallocating existing funds, without increasing
its overall investment expenditure. In future, agile project teams working
on a "Digital Campus" will drive forward digitalisation projects and
automate and optimise processes. By 2020 80% of relevant business processes
will be digitalised. The Bank expects significant cost reductions and
efficiencies as a result.
The first milestone will come in October when Commerzbank rolls out its
integrated digital sales interface, "One". This will enable sales personnel
and customers to view information and conduct transactions on the same
platform at any time. In addition, the Bank will put in place a flexible
smart data architecture to enable customers to be addressed in a targeted
way. An integrated cloud-based customer relationship management system for
private, small business and corporate clients will then be introduced in
the second half of 2017.
Outlook
Due to the reduction in trading activities, Commerzbank will write off
goodwill and intangible assets of approximately EUR700 million in the third
quarter of 2016. Consequently, the net result will be negative in the third
quarter. The write-offs do not affect the Common Equity Tier 1 (CET 1)
ratio. In terms of Operating profit, Commerzbank expects revenues to be
approximately the same as in the second quarter. Loan loss provisions will
be considerably higher than in the first two quarters due to ongoing
weakness in the ship markets. Despite the goodwill write-offs, Commerzbank
is expecting a small net profit for 2016 as a whole.
The CET 1 ratio after full application of Basel 3 will be higher in the
third quarter of 2016 than in the previous quarter. The Bank is expecting
its Common Equity Tier 1 ratio to stand at nearly 12% at the end of the
year, provided no significant market distortions occur.
"Efficient use of our capital is our top priority. Our capital ratio will
remain comfortably above the foreseeable regulatory requirements", said
Commerzbank's Chief Financial Officer, Stephan Engels. "We are financing
the implementation of our strategy through the targeted use of our
resources and by retaining profits. Therefore we are also ceasing dividend
payments. We also have the necessary leeway by managing our risk-weighted
assets."
*****
Press contact
Margarita Thiel +49 69 136-46646
Alexander Cordes +49 69 136-42764
*****
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 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 EUR9.8 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 ACR 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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30.09.2016 Dissemination of a Corporate News, transmitted by DGAP - a
service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
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Language: English
Company: Commerzbank Aktiengesellschaft
Kaiserstraße 16
60311 Frankfurt am Main
Germany
Phone: +49 (069) 136 20
Fax: -
E-mail: pressestelle@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; Regulated
Unofficial Market in Tradegate Exchange; London, SIX
End of News DGAP News Service
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507649 30.09.2016
DGAP-News: Commerzbank to increase profitability through focus and digitalisation
| Source: EQS Group AG