REG-Commerzbank Aktiengesellschaft Commerzbank lays foundation for further strategic plan with strong 9M net profit – targeting RoTE of more than 11% in 2027
08/11/2023 06:15
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Commerzbank Aktiengesellschaft (CZB)
Commerzbank lays foundation for further strategic plan with strong 9M net
profit – targeting RoTE of more than 11% in 2027
08-Nov-2023 / 07:05 CET/CEST
The issuer is solely responsible for the content of this announcement.
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Strategy update:
• Bank to strengthen revenue base through selective expansion of its
customer business – focus on digital banking, asset management and
sustainable finance
• Cost-income ratio to be reduced to 55% by 2027 – target net profit
around €3.4 billion
• Attractive capital return planned for shareholders
• CEO Manfred Knof: “With our refined strategy, we are strengthening our
position as a decisive player in the German banking market.”
Q3 and forecast for 2023:
• 9M net profit almost doubled to €1.8 billion (9M 2022: €963 million) –
“Strategy 2024” return target already achieved
• Q3 revenue significantly increased to €2.8 billion thanks to strong
customer business and continued tailwind from interest rates (Q3 2022:
€1.9 billion)
• For full year 2023, net profit of around €2.2 billion and RoTE of 7.5%
expected
• Share buy-back of up to €600 million applied for approval by ECB and
Finance Agency
• CFO Bettina Orlopp: “The transformation efforts in recent years are
increasingly paying off. In the first nine months of the year, we have
earned more than in the full year 2022.”
Commerzbank continued its strong business performance in the third quarter
2023 and almost doubled its net profit after the first nine months. The
Bank benefited from the interest rate environment, from a low risk result
despite the economic slowdown and from its continued strict cost
discipline. The Bank has almost achieved the key targets of its “Strategy
2024” and has laid a strong foundation for the targeted higher pay-out. It
is now embarking on its next strategic phase. By 2027, the revenue base is
to be further expanded through consistent customer orientation and
profitability is to be continuously increased.
“With ‘Strategy 2024’ we have successfully implemented difficult but
necessary restructuring measures. We have established a new business model
and brought Commerzbank back on track for success”, said Manfred Knof,
Chairman of the Board of Managing Directors of Commerzbank. “Our strategic
plan up to 2027 is built on this. We will increase our revenue base,
further improve the cost-income ratio, and boost our return on tangible
equity. This will create value for our shareholders and expand our
position as a decisive player in the German banking market.”
Net profit is to increase to €3.4 billion by 2027 and the return on
tangible equity (RoTE) is expected to reach more than 11%. This will allow
the Bank to earn its cost of capital. An increase in net commission income
is anticipated to be the major contributing factor, while net interest
income is expected to increase moderately from an already elevated level.
The Bank’s financial steering will continue to be based on the cost-income
ratio, which is planned to improve to around 55% by 2027.
The target for the Common Equity Tier 1 ratio is 13.5%. The Bank plans to
return more capital to its shareholders. For the years 2025 to 2027, a
pay-out ratio well above 50%, but not more than the net result after
deduction of AT1 coupon payments, is planned. For 2022 to 2024, the plan
is still to distribute a total of €3 billion to shareholders through
dividends and share buy-backs. For the current year, the Bank confirms its
target to distribute 50% of its net result after deduction of AT1 coupon
payments via a dividend and an applied-for share buy-back of up to €600
million. It is planned that this share buy-back takes place prior to the
Annual General Meeting in 2024. The respective pay-out ratios depend on
the economic development and business opportunities. All share buy-backs
are subject to approval by the European Central Bank and the German
Finance Agency.
The strategy until 2027 is based on three pillars: growth, excellence and
responsibility. The Bank intends to support its customers with relevant
products and solutions and to further improve the customer experience
across all channels, i.e. in branches, in the advisory centre, and via
digital access points. The revenue base will be strengthened primarily
through expanded fee business. To increase its efficiency, the Bank will
focus on simplifying digital processes. The cost-income ratio is also to
be improved on this basis. Sustainability continues to be a key component
of the strategy. The Bank will continue to actively shape the sustainable
transformation of the German economy. Employees are crucial for
successfully implementing the strategy. Therefore, the Bank will
strengthen its position as an attractive employer for its employees and
talents.
PSBC: Asset and Wealth Management as well as comdirect are drivers of
growth
In the Private and Small-Business Customer segment (PSBC), the range of
optimised and digital banking solutions will be expanded for the Bank’s
almost 11 million customers. With a holistic approach and its two brands,
Commerzbank and comdirect, all customer needs will be met – be it online
or mobile, in the advisory centre, or in the existing around 400 branches.
Commerzbank is committed to offering every customer the right model for
their daily banking needs. The Bank will also further develop its account
and card offerings as well as payment transaction solutions. As a premium
provider, Commerzbank pursues the claim to be first point of contact for
demanding customers. It will expand its portfolio with a focus on
securities and loan business. Commerzbank especially sees opportunities in
Asset and Wealth Management. Here, activities will be expanded with
tailor-made and holistic offerings for premium customers, for example
through its newly founded asset management company Yellowfin. The Bank
will use a holistic advisory tool within its Wealth Management consulting
services: In addition to liquid assets also illiquid assets will be
considered. With small-business customers, it will increase customer
growth while focussing on specific target groups. comdirect will
strengthen its position as the primary digital bank with an expanded
product offering and its excellent brokerage platform. mBank will expand
its leading position with private customers based on its attractive
digital business model.
Corporate Clients: expanding leading market position
As the leading German Mittelstandsbank, Commerzbank will continue to
closely accompany its corporate clients. The Bank will drive forward its
previous strategy in corporate banking through targeted investments in
products and digital solutions until 2027. Commerzbank will strengthen
transaction banking by investing in new systems and technologies to secure
its leading position in payment transactions and in the processing of
German foreign trade. In international business, the Bank serves clients
worldwide with a business relationship to Germany, Austria or Switzerland
or with selected future-orientated industries. In the lending business,
the focus is on growth in Germany and the financing of global green
infrastructure projects. To this end, Commerzbank will build on its
centers of competence for renewable energies in Hamburg, New York, and
Singapore. In the Capital Markets segment, the Bank wants to expand its
digital offering for FX and open up its trading platform to other asset
classes. In addition, it will grow its bonds business.
Basis for strategy until 2027 set by strong business development in 2023
In the third quarter of the current financial year, the Bank increased its
revenues by 46% to €2.755 billion (Q3 2022: €1.886 billion). The main
driver was the rise in net interest income of more than one third to
€2.166 billion (Q3 2022: €1.621 billion) which once again also improved
quarter-on-quarter. In addition, special burdens in Poland were
significantly below the previous year’s figure in the third quarter.
Despite a weaker securities business, net commission income was stable at
€831 million (Q3 2022: €849 million). In the first nine months of the
year, the Bank’s total revenues amounted to €8.052 billion (9M 2022:
€7.098 billion).
Despite inflationary pressure, costs increased only slightly in the third
quarter to €1.549 billion (Q3 2022: €1.520 billion). This includes a
decrease in compulsory contributions to €45 million (Q3 2022:
€91 million), which is mainly due to lower contributions in Poland.
Operating expenses increased to €1.504 billion (Q3 2022: €1.429 billion)
following higher accruals for variable compensation related to the
positive business development and general salary increases. Overall, the
cost-income ratio improved to 56% in the third quarter (Q3 2022: 81%).
After the first nine months of 2023, total costs were down by 1.4% to
€4.806 billion (9M 2022: €4.873 billion); the cost-income ratio was 60%
(9M 2022: 69%).
The risk result was at a low level of minus €91 million in the third
quarter despite the challenging economic environment (Q3 2022: minus €84
million). This reflects the high quality of the loan book with a
non-performing exposure (NPE) ratio of only 1.0%. For possible future
defaults due to secondary effects from supply chain problems, inflation,
and higher interest rates, the Bank still has a general risk provision
(top-level adjustment (TLA)) of €435 million available.
In the third quarter, the Bank almost quadrupled its operating result
year-on-year to €1.116 billion (Q3 2022: €282 million); in the first nine
months of the year, it has increased by 83% to €2.879 billion (9M 2022:
€1.571 billion). Net profit after tax and minority interests increased to
€684 million in the third quarter (Q3 2022: €195 million).
The Common Equity Tier 1 ratio (CET 1 ratio) increased once again to 14.6%
as of 30 September 2023 (Q2 2023: 14.4%). This already takes into account
the accrual for the planned pay-out of 50% of the net result after
deduction of AT1 coupon payments for the 2023 financial year. The buffer
to the regulatory minimum requirement (MDA threshold) of around 10.1% was
448 basis points at the end of September. Return on tangible equity (RoTE)
improved significantly in the first nine months of the year to 8.6%
(9M 2022: 4.3%).
“The transformation efforts in recent years are increasingly paying off.
In addition to the favourable interest rate environment, we are benefiting
from a low risk result and ongoing cost discipline”, said Chief Financial
Officer Bettina Orlopp. “In the first nine months of the year, we have
already earned more than in the full year 2022. We expect to increase the
return on tangible equity to 7.5%, reaching our target from ‘Strategy
2024’ one year ahead of schedule. This is a strong basis for the planned
significant increase of our pay-out.”
Segment development in Q3: successful deposit management
In the face of increasing competition for deposits, the Private and
Small-Business Customer (PSBC) segment in Germany performed well. Deposits
increased to €157 billion (end of June: €153 billion) as of the end of
September with customers increasingly reallocating funds from their
current accounts into interest-bearing products. The lending volume
increased slightly to €125 billion (Q2 2023: €124 billion). Overall,
PSBC’s net interest income in Germany rose by almost 9% to €597 million
(Q3 2022: €550 million) in the third quarter.
The securities volume declined slightly compared to the previous quarter
to €205 billion (Q2 2023: €208 billion). Year-on-year, the Bank recorded a
significant increase due to the positive development on the stock
exchanges (Q3 2022: €182 billion). Customers, however, traded
significantly less due to low market volatility. In addition, increased
interest rates on deposits prompted a reluctance to invest in securities.
As such, the segment’s net commission income fell to €436 million
(Q3 2022: €451 million). All in all, operating result of the Private and
Small-Business Customer segment in Germany decreased slightly to
€299 million (Q3 2022: €320 million).
mBank contributed €89 million to the Bank’s operating result in the third
quarter thanks to its continued very strong customer business and was able
to more than offset the additional provision of €234 million for its Swiss
franc portfolio. In the first nine months of the year, the burdens
amounted to €754 million. In the third quarter of 2022, mBank had still
reported a loss of €528 million. At that time, the provision for the Swiss
franc loans was almost €480 million, plus another special burden of €270
million for the “credit holidays”.
The Corporate Clients segment increased its revenues by almost 15% to
€1.171 billion (Q3 2022: €1.021 billion). It benefited from continued
strong deposit business across all client groups. As a result, the segment
was able to more than compensate for the slight decline in the capital
market business due to lower market volatility. With a very low risk
result of minus €4 million in Q3 (Q3 2022: plus €13 million), the
operating result increased by almost 21% to €645 million (Q3 2022: €535
million).
Outlook for 2023 increased
Following the good performance in the third quarter, Commerzbank has
improved its outlook for the full year 2023: it now expects a net profit
of around €2.2 billion (2022: €1.4 billion). Revenues are expected to
increase to around €10.6 billion (2022: €9.5 billion). Net interest income
is anticipated to be more than €8.1 billion (2022: €6.5 billion). In its
recent forecast, the Bank had projected a minimum of €7.8 billion in net
interest income. However, some offsetting effects are expected in the fair
value result in the fourth quarter as well. Net commission income is still
anticipated to be slightly below last year’s result of €3.5 billion.
The Bank confirms its cost target of €6.4 billion (2022: €6.5 billion).
The cost-income ratio as key steering indicator is now expected to be 61%,
approaching the target of 60% in 2024. The Bank now anticipates a risk
result of below minus €700 million for the full year 2023 (2022: minus
€876 million) before any potential usage of TLA. Until now, the Bank had
anticipated burdens below €800 million. The CET 1 ratio is targeted at
around 14.7% by the end of 2023. The RoTE is expected to be 7.5% (2022:
4.9%).
Financial figures at a glance
in €m Q3 2023 Q3 2022 Q3 23 Q2 2023 9M 2023 9M 2022 9M 23
vs. vs.
Q3 22 9M 22
in % in %
Net interest income 2,166 1,621 +33.6 2,130 6,242 4,500 +38.7
Net commission income 831 849 -2,1 841 2,587 2,714 -4.7
Net fair value^1 -67 172 -17 -157 594
Other income -175 -757 +76.9 -324 -621 -709 +12.5
Total revenues 2,755 1,886 +46.1 2,629 8,052 7,098 13.4
Revenues excl. 2,727 2,066 +32.0 2,621 8,003 7,112 +12.5
exceptional items
Risk result -91 -84 -8.4 -208 -367 -654 +43.9
Operating expenses 1,504 1,429 +5.2 1,481 4,449 4,291 +3.7
Compulsory 45 91 -50.9 52 357 583 -38.8
contributions
Operating profit or 1,116 282 888 2,879 1,571 +83.3
loss
Restructuring costs 6 14 -55.8 4 14 54 -73.9
Pre-tax profit or loss 1,109 267 885 2,865 1,517 +88.8
Taxes 405 228 +77.8 338 1,022 653 56.6
Minorities 20 -155 19 -14 98
Consolidated profit or 684 195 565 1,829 963 +90.0
loss^2
Cost/income ratio in 54.6 75.8 56.3 55.3 60.4
operating business
excl. compulsory
contributions (%)
Cost/income ratio in 56.2 80.6 58.3 59.7 68.7
operating business
incl. compulsory
contributions (%)
Operating RoTE (%) 14.6 3.8 11.8 12.7 7.2
Net RoTE (%) 9.6 2.2 7.9 8.6 4.3
Net RoE (%) 9.2 2.2 7.6 8.3 4.2
CET1 ratio (%)^3 14.6 13.8 14.4 14.6 13.8
Leverage ratio 4.9 4.5 4.9 4.9 4.5
Total assets (€bn) 510 536 502 510 536
1 Net income from financial assets and liabilities measured at fair value
through profit and loss.
^2 Net profit attributable to Commerzbank shareholders and investors in
additional equity components.
^3 Reduced by pay-out accrual and potential (fully discretionary) AT1
coupons.
Press contact
Kathrin Jones +49 69 136-27870
Erik Nebel +49 69 136-44986
Sina Weiß +49 69 136-27977
Contact for investors
Jutta Madjlessi +49 69 9353-47707
Michael Klein +49 69 9353-47703
About Commerzbank
Commerzbank is the leading bank for the German Mittelstand and a strong
partner for around 26,000 corporate client groups and almost 11 million
private and small-business customers in Germany. The Bank’s two Business
Segments – Private and Small-Business Customers and Corporate Clients –
offer a comprehensive portfolio of financial services. Commerzbank
transacts approximately 30 per cent of Germany’s foreign trade and is
present internationally in more than 40 countries in the corporate
clients’ business. The Bank focusses on the German Mittelstand, large
corporates, and institutional clients. As part of its international
business, Commerzbank supports clients with a business relationship to
Germany, Austria, or Switzerland and companies operating in selected
future-oriented industries. In the Private and Small-Business Customers
segment, the Bank is at the side of its customers with its brands
Commerzbank and comdirect: online and mobile, in the advisory centre, and
personally in its branches. Its Polish subsidiary mBank S.A. is an
innovative digital bank that serves approximately 5.7 million private and
corporate customers, predominantly in Poland, as well as in the Czech
Republic and Slovakia.
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,
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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Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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ISIN: DE000CBK1001
Category Code: MSCU
TIDM: CZB
LEI Code: 851WYGNLUQLFZBSYGB56
Sequence No.: 283334
EQS News ID: 1767661
End of Announcement EQS News Service
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