Commerzbank Aktiengesellschaft / Miscellaneous - Urgent Priority
In response to current market rumours, the Board of Managing Directors of Commerzbank AG confirms that it has presented Commerzbank's draft strategic and financial objectives until 2020 to the Supervisory Board for consideration. No decision has yet been taken with regard to the implementation of these objectives. The Board of Managing Directors will decide tomorrow on the strategic objectives after discussions with the Supervisory Board. The objectives presented are as follows:
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, digitalise 80% of relevant processes, and thereby achieve 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 merged and trading activities in investment banking scaled back. This will reduce earnings volatility and regulatory risk and will free up capital to be invested in core client businesses.
In the context of the decision of the new strategy, goodwill and intangible assets of both Corporates & Markets and Mittelstandsbank will be subjected to an impairment test. This means that most probably around 700 million euros would be written off in the third quarter of 2016. Consequently, the net result would 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 is expecting 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 shipping 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.
Commerzbank is aiming for a net return on tangible equity (RoTE) of at least 6% by the end of 2020. This target is based on the expectation that the interest rate environment will remain challenging. Should the interest rate environment improve, a net return on tangible equity of at least 8% will be achievable. Commerzbank is expecting revenues for 2020 to total between 9.8 and 10.3 billion euros. The cost base is to be reduced to 6.5 billion euros, taking the cost/income ratio to below 66%. In a normalised interest rate environment, revenues could rise to over 11 billion euros 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 expects a ratio of above 13%.
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.
To cover its restructuring costs in the region of 1.1 billion euros, Commerzbank will cease dividend payments for the time being and will retain its full earnings.
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|Time of Receipt:||29-Sep-2016 / 10:02 CET/CEST|
|End of Announcement||EQS News Service|