Commerzbank’s quarterly figures: No euphoria, dividend declines

Commerzbank Tower in Frankfurt

Commerzbank today published its quarterly figures. Here are the key facts.

Earnings (sales) amounted to 2.17 billion Euros (previous year quarter 2.04). Profit (operating income) is 250 million Euros (240 in the same quarter of the previous year). For the full year 2019, the figure is 1.26 billion Euros (1.24 in the previous year).

The tier 1 ratio (CET1) is 13.4% compared to 12.9% in the previous year.

The dividend will fall from 20 to 15 cents.

Net commission income and net interest income (!) both rose slightly compared to the previous year!

Here is the outlook for Commerzbank in full:

Commerzbank will continue to pursue its growth strategy and expects adjusted revenues in 2020 to be at least at the 2019 level. It confirms its target of a cost base of EUR 6.7 billion plus up to EUR 0.2 billion for IT investments under “Commerzbank 5.0”. The burden from the risk result is expected to be more than EUR 650 million. The bank plans to pay a dividend payout ratio for 2020 comparable to that for 2019, while the bank continues to aim for a tier 1 ratio of at least 12.75 % at year-end.

Here is Commerzbank’s headline statement on the current figures:

Commerzbank has kept its operating profit stable in the 2019 financial year despite the further deterioration in the economic environment. Customer business continued to develop solidly on the basis of growth in customers and assets. The bank gained around 473,000 net private and corporate customers in Germany and increased its lending and securities volume by 16 % to EUR 261 billion. The Corporate Customers segment increased its loan volume by EUR 6 billion to EUR 88 billion and improved its earnings in direct customer business. Overall, the bank increased net interest income thanks to its growth initiatives, thus offsetting the headwind from the negative interest rate environment. On the cost side, the bank also realized further savings thanks to its strict cost management and thus achieved its cost target for 2019 of less than EUR 6.8 billion despite higher mandatory contributions. This was offset by a higher negative risk result due to individual cases in corporate customer business. At the same time, however, the portfolio quality improved even further with a ratio for problem loans (NPE ratio) of 0.9%.

Commerzbank 5.0

The bank has successfully started the implementation of its “Commerzbank 5.0” strategy and has already made tangible progress. It has raised its stake in comdirect to over 90%, thus laying the foundations for rapid integration. The sales process for the Polish mBank has begun. And with the rapid agreement of an early retirement part-time work programme, the Bank has laid the foundations for a reduction in the number of jobs in the most socially acceptable way possible. A corresponding reserve of 101 million Euros was already booked for this in the fourth quarter of 2019.

“We closed the 2019 financial year with a better operating result than we had meanwhile expected. Together with the strong capital ratio, we have created a good jump-off base for 2020. We will make use of this scope,” said Martin Zielke, Chairman of the Board of Managing Directors of Commerzbank. “We have already made tangible progress with the ‘Commerzbank 5.0’ strategy and are progressing faster than planned. This makes me more optimistic about our return expectations than I was last autumn.”

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