DJ Commerzbank increases net profit for 2023 to EUR2.2 billion - Strategy is delivering
Commerzbank Aktiengesellschaft (CZB)
Commerzbank increases net profit for 2023 to EUR2.2 billion - Strategy is delivering
15-Feb-2024 / 07:04 CET/CEST
The issuer is solely responsible for the content of this announcement.
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-- Operating result increased by more than 60% to EUR3.4 billion in 2023 (2022: EUR2.1 billion) - net profit
increased by 55% to EUR2.2 billion
-- Strong customer business and interest rate development lead to very strong net interest income and
revenues increased to EUR10.5 billion (2022: EUR9.5 billion)
-- Costs reduced to EUR6.4 billion (2022: EUR6.5 billion) - cost-income ratio significantly improved to 61%
(2022: 69%)
-- Decreased risk result of minus EUR618 million despite economic slowdown (2022: minus EUR876 million) - low
non-performing loan ratio of 0.8%
-- Capital distribution of EUR1 billion for 2023 financial year planned - targeted dividend of around 35 cents
per share complements ongoing share buy-back programme
-- Outlook 2024: net profit above 2023 levels and pay-out ratio of at least 70% targeted, but not more than
net profit
Commerzbank increased its net profit by more than 50% to EUR2.2 billion in the 2023 financial year. As a result, the Bank
not only achieved a net profit well above that of the previous year but also generated its best result in 15 years.
Despite high special burdens in Poland of around EUR1.1 billion, the operating result rose by more than 60% to EUR3.4
billion. The Bank benefited from strong customer business and persistently high interest rates. Net interest income
climbed to EUR8.4 billion. Net commission income contributed around EUR3.4 billion to the Bank's revenues. The loan
portfolio proved to be very robust, despite the continuing difficult economic environment. The risk result fell by
around 30%, and the non-performing loan ratio was only 0.8%. The CET 1 ratio improved over the course of the year to
14.7%, which puts the Bank comfortably above of the regulatory minimum requirement.
The excellent overall annual result enables the Bank to return capital to its shareholders. Overall, the Bank is
planning a pay-out ratio of 50% of net profit after deduction of AT1 coupon payments. Currently, a share buy-back
programme with a volume of up to EUR600 million is under way. In addition, the Bank intends to distribute a dividend of
around 35 cents per share, subject to the approval of the Annual General Meeting.
"Commerzbank had an excellent financial year 2023. We delivered on the key objectives of our 'Strategy 2024' ahead of
schedule and in some areas we even exceeded them. On this basis, we will achieve a further increase in net profit for
the current year", said CEO Manfred Knof. "The goals we have set ourselves with our strategy 2027 are ambitious, but
achievable. That's why we're now moving full steam ahead with the implementation. We want to broaden our revenue base
and thus become less dependent on net interest income. In sales, we have made a very strong start to the new year in
both customer segments. This confirms our strategy and gives us additional tailwind."
The implementation of Commerzbank's strategic plan until 2027 is already showing initial signs of success. In line with
the strategic pillars of growth, excellence, and responsibility, the Bank has set itself the goal of providing each
customer with a tailor-made offering that meets their individual needs. This includes further developing its payment
transaction solutions and launching a joint venture, Commerz Globalpay GmbH, to offer digital payment products to
business customers in Germany. The product offering will include, for example, a smartphone-based payment application
that enables retailers to accept mobile payments without a separate card reader.
The Bank is also stepping up its growth in the field of sustainability. With the agreed majority stake in Aquila
Capital Investmentgesellschaft based in Hamburg, Commerzbank is significantly expanding its sustainable asset
management offerings. The investment company specialises in real asset-based investments, such as renewable energy and
sustainable infrastructure projects. This investment opens up growth opportunities for the Bank and will have a
positive impact on its commission income. The transaction is subject to the approval of the regulatory authorities.
In the Corporate Clients segment, Commerzbank has expanded its successful collaboration with ODDO BHF as an exclusive
partnership in the field of Equity Capital Markets (ECM) for the Swiss market. In Switzerland - a key part of our DACH
home market - Commerzbank will now be able to offer equity research for around 50 listed companies and provide its
customers with the full ECM product range.
Strong customer business delivers record result in 2023 financial year
Commerzbank increased its revenues in the 2023 financial year by around 11% to EUR10.461 billion (2022: EUR9.461 billion),
supported by strong customer business and a sustained tailwind from higher interest rates. Once again, this includes
high special burdens due to provisions for legal risks from Swiss franc loans at the subsidiary mBank in Poland. In
2023, these totalled EUR1.094 billion (2022: EUR650 million). Net interest income rose by a third to EUR8.368 billion (2022:
EUR6.459 billion), while net commission income was slightly down at EUR3.386 billion (2022: EUR3.519 billion).
Commerzbank continued its strict cost discipline in 2023 and reduced its total costs to EUR6.422 billion (2022: EUR6.486
billion). High inflationary pressure as well as expenses for inflation compensation payments and higher provisions for
variable compensation due to the good result were partially offset by the Bank through active cost management. As a
result, operating expenses increased to EUR6.006 billion (2022: EUR5.844 billion). In turn, compulsory contributions fell
to EUR415 million (2022: EUR642 million) due to a lower European bank levy compared to the previous year and lower
contributions to the deposit guarantee scheme in Poland. The cost-income ratio continued to improve significantly over
the full year to 61% (2022: 69%).
Despite the ongoing effects of the war in Ukraine and the weak economy with rising insolvencies, the risk result in
2023 was significantly lower than in the previous year, at minus EUR618 million due to releases (2022: minus EUR876
million). The Bank also continues to maintain an additional general risk provision (Top-Level Adjustment, TLA) of EUR453
million, which is available for expected secondary effects, such as supply chain disruptions and uncertainties due to
inflation, and the effects of the current restrictive monetary policy. The quality of the loan book continues to be
very high with a non-performing loan ratio (NPE ratio) of just 0.8% at the end of the year.
Overall, Commerzbank increased its operating result by more than 60% to EUR3.421 billion in the past financial year
(2022: EUR2.099 billion). Net profit also rose accordingly: compared to the previous year, net profit after taxes and
minority interests increased by 55% to EUR2.224 billion (2022: EUR1.435 billion).
The Common Equity Tier 1 ratio (CET 1 ratio) once again increased to a very comfortable 14.7% as of 31 December 2023
(December 2022: 14.1%). The accrual for the planned capital return is already reflected in this. The buffer to the
regulatory minimum requirement, based on SREP requirements effective from 1 January 2024, of around 10.3% was 435 basis
points. Return on equity (RoTE) improved significantly to 7.7% (2022: 4.9%) at the end of the financial year, with the
Bank already exceeding the previous target of 7.3% set for 2024.
Due to the strong business result, Commerzbank plans to return a total of around EUR1 billion of capital to its
shareholders. This corresponds to the target set out in the capital return policy of returning 50% of its net profit
for 2023 after deduction of the AT1 coupon payments. Part of the capital return is the current share buy-back programme
with a volume of up to EUR600 million. In addition, the Board of Managing Directors is planning a dividend payment of
around 35 cents per share, which is subject to approval by the Annual General Meeting at the end of April.
"We continued to significantly increase the Bank's profitability last year. Now, we need to consolidate the trust we
have earned on the capital market", said Chief Financial Officer Bettina Orlopp. "We want to be an attractive
investment. Therefore, we are planning to return around EUR1 billion to our shareholders for the 2023 financial year. For
2024, we are aiming for a pay-out ratio of at least 70%, but not more than the net result after deduction of AT1 coupon
payments. This is an integral part of our strategic plan until 2027, and we will continue to focus on a combination of
dividend payments and share buy-backs - the latter subject to the approval of the European Central Bank and the German
Finance Agency."
Development of segments: continued deposit growth
The Private and Small-Business Customer (PSBC) segment in Germany generated revenues of EUR4.139 billion in the financial
year 2023 (2022: EUR4.318 billion) and an operating result of EUR878 million (2022: EUR1.091 billion). The segment's customer
business performed well in the fourth quarter. The lower revenues of EUR896 million (Q3 2023: EUR1.046 billion) and the
operating result of minus EUR10 million (Q3 2023: EUR299 million) largely reflect an on Group level neutral adjustment in
the replication portfolio as well as the revaluation of a participation. Excluding these effects, customer revenues in
the final quarter remained stable.
The securities volume rose to EUR215 billion at the end of the year (Q4 2022: EUR189 billion). The lending volume remained
stable at EUR124 billion (Q4 2022: EUR124 billion), as did the mortgage volume at EUR94 billion (Q4 2022: EUR94 billion).
Despite intense competition, customer deposits increased to EUR166 billion at the end of the year (Q4 2022: EUR155
billion). Growth in the final quarter totalled EUR9 billion (Q3 2023: EUR157 billion).
In Poland, mBank generated revenues of EUR1.235 billion in the full year 2023 (2022: EUR948 billion) thanks to strong
customer business and high interest rates. This enabled it to compensate for the once again high special burdens of
EUR1.094 billion (2022: EUR650 million) due to provisions for legal risks in connection with Swiss franc loans. In 2023,
mBank contributed EUR146 million to the Group's operating result (2022: minus EUR90 million). Without the special burdens
due to the additional provisioning for legal risk of Swiss franc mortgages and the so-called credit holidays, mBank
would have increased its operating result to EUR1.228 billion in 2023 (2022: EUR839 million).
The Corporate Clients segment doubled its operating result to EUR2.142 billion in 2023 (2022: EUR1.065 billion). This was
due to the favourable interest rate environment, a very low risk result, and reduced costs. In the fourth quarter,
customer business remained stable across all customer groups, while valuation effects at the end of the year had a
slightly dampening effect on the result. Revenues amounted to EUR1.106 billion (Q3 2023: EUR1.171 billion); the operating
result totalled EUR508 million (Q3 2023: EUR644 million). For the financial year 2023, revenues in the Corporate Clients
business increased by 18% to EUR4.481 billion (2022: EUR3.792 billion).
Outlook 2024: Important milestones on the way to 2027 targets
The continuing economic slowdown will remain a challenge in the current financial year. Commerzbank is confident that
it will make further progress in implementing its strategic plan until 2027. The Bank targets net interest income at
around EUR7.9 billion due to a higher deposit beta and the anticipated interest rate reductions. Commerzbank aims to
increase net commission income by 4 %. The Bank is targeting a cost-income ratio of 60%. From today's perspective,
Commerzbank aims for a risk result below minus EUR800 million for the full year assuming usage of TLA. The CET 1 ratio is
expected to be higher than 14% due to planned capital return and RWA growth. The Bank aims for a net profit higher than
in 2023.
Based on its capital return policy Commerzbank targets a pay-out ratio of 70 + X% for the financial year 2024, but not
more than the net result after deduction of AT1 coupon payments. The capital will be distributed via dividend payments
and share buy-backs. All share buy-backs must be authorised by the European Central Bank and the German Finance Agency.
The outlook is based on the assumption of a mild recession in Germany and is subject to the future development of Swiss
franc loan burdens at mBank.
Financial figures at a glance
in EURm 2023 2022 2023 Q4 2023 Q4 2022 Q4 2023 Q3 2023
vs 2022 vs Q4 2022
in % in %
Net interest income 8,368 6,459 + 29.6 2,126 1,958 + 8.5 2,166
Net commission income 3,386 3,519 - 3.8 798 806 - 0.9 831
Net fair value^1 - 359 451 - 202 - 143 - 41.5 - 67
Other income - 933 - 967 + 3.5 - 313 - 258 - 21.3 - 175
Total revenues 10,461 9,461 + 10.6 2,409 2,363 + 2.0 2,755
Revenues excl. exceptional items 10,438 9,513 + 9.7 2,434 2,401 + 1.4 2,727
Risk result - 618 - 876 + 29.4 - 252 - 222 - 13.3 - 91
Operating expenses 6,006 5,844 + 2.8 1,557 1,553 + 0.2 1,504
Compulsory contributions 415 642 - 35.3 59 59 - 1.0 45
Operating profit or loss 3,421 2,099 + 63.0 542 528 + 2.6 1,116
Restructuring costs 18 94 - 80.4 4 40 - 89.1 6
Pre-tax profit or loss 3,403 2,005 + 69.7 537 488 + 10.2 1,109
Taxes 1,188 612 + 94.2 166 - 41 405
Minorities - 10 - 42 + 76.5 - 24 57 20
Consolidated profit or loss^2 2,224 1,435 + 55.0 395 472 - 16.4 684
Cost-income ratio in operating business 57.4 61.8 64.6 65.7 54.6
excl. compulsory contributions (%)
Cost-income ratio in operating business 61.4 68.6 67.1 68.2 56.2
incl. compulsory contributions (%)
Operating RoTE (%) 11.3 7.2 7.0 7.2 14.6
Net RoTE (%)^3 7.7 4.9 5.2 6.7 9.6
Net RoE (%) 7.4 4.7 5.0 6.5 9.2
CET 1 ratio (%)^3 14.7 14.1 14.7 14.1 14.6
Leverage ratio 4.9 4.9 4.9 4.9 4.9
Total assets (EURbn) 517 477 517 477 510
^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.
The figures for the year 2023 presented in this press release are preliminary and unaudited.
Today's annual press conference will be broadcast live on the Commerzbank website from 10.30 a.m. (CET) onwards.
Press contact Kathrin Jones +49 69 9353-45687 Svea Junge +49 69 9353-45691
Investors' contact 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 25,500 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 5.8 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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ISIN: DE000CBK1001 Category Code: ACS TIDM: CZB LEI Code: 851WYGNLUQLFZBSYGB56 Sequence No.: 303816 EQS News ID: 1837627 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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February 15, 2024 01:05 ET (06:05 GMT)
