Commerzbank is well on track with the implementation of its "Commerzbank 4.0" strategy and has further improved its Common Equity Tier 1 ratio. The Bank has already booked the whole of the announced restruc-turing charges in the second quarter and agreed a framework social plan and framework reconciliation of interests with the employee representative committees. At mid-year, the Bank has already gained a net 500,000 new customers in its Private and Small Business Customers segment in Germany. In the Asset & Capital Recovery (ACR) segment, the shipping portfolio was reduced by a significant EUR0.9 billion in the first half and now stands at EUR3.9 billion. The target is to reduce it to around EUR3 billion by the end of the year.

The operating profit in the first half of this transitional year was down year-on-year, also due to  slower markets in the second quarter, at EUR515 million (H1 2016: EUR633 mil¬lion). The operating profit for the second quarter came in at EUR183 million (Q2 2016: EUR351 million). Revenues before loan loss provisions remained stable in the first half, at EUR4,460 million (H1 2016: EUR4,563 million). Revenues excluding non-recurring items rose year-on-year by EUR93 million to EUR4,344 million (H1 2016: EUR4,251 million). Revenues for the second quarter amounted to EUR2,068 million (Q2 2016: EUR2,240 mil¬lion).

Loan loss provisions stood at EUR362 million for the first half (H1 2016: EUR335 million). The figure for the sec-ond quarter was EUR167 million (Q2 2016: EUR187 million). The Bank's non-performing loan (NPL) ratio of just 1.5%, which remains low compared to its European peers, reflects its healthy risk profile. Operating ex-penses, which amounted to EUR3,583 million in the first half, were down on the first half of 2016 (EUR3,595 million). Operating expenses for the second quarter stood at EUR1,718 million (Q2 2016: EUR1,702 million).

The Bank generated a pre-tax result of minus EUR292 million in the first half of 2017 (H1 2016: EUR593 million). This includes restructuring charges of EUR807 million. It had originally expected to book restructuring charges of around EUR1,100 million, split between 2017 and 2018. The lower figure is due to the personnel reductions already implemented, staff turnover, and expected efficiencies in staff transfers and replace¬ments.

Including tax expenses of EUR69 million and after deduction of minority interests of EUR45 million, Commerzbank posted a net result of minus EUR406 million (H1 2016: EUR384 million). The net result for the second quarter was minus EUR637 million (Q2 2016: EUR215 million).

"We have booked the provisions for the personnel reductions early and in full and have made further
prog¬ress in the implementation of our strategy. We are ahead of target for client growth, partly because we have invested. However, it will take a while for this client growth to be reflected in revenue growth. In our  two transformational years 2017 and 2018, we are thereby laying the foundations for a sustainably higher profitability", said Martin Zielke, Chairman of the Board of Managing Directors of Commerzbank.

The Common Equity Tier 1 ratio (CET 1) with full application of Basel 3 rose to 13.0%, versus 12.5% at the end of March 2017. The increase is largely attributable to the decrease in risk-weighted assets (RWA). This fall, on a Basel 3 fully-loaded basis, was due partly to active portfolio management in credit risk and favourable effects resulting from currency movements. RWA stood at EUR178.5 billion at the end of June 2017, compared with EUR186.2 billion at the end of March 2017 and EUR198.3 billion at the end of June 2016. The leverage ratio stood at 4.6%. Total assets came to EUR487 billion (end of March 2017: EUR490 billion).

"Our Common Equity Tier 1 ratio has gone up to 13.0% in spite of restructuring charges and we expect a slightly positive net result for the financial year. Despite increased investments in digitalisation we were able to reduce our costs year-on-year", commented Stephan Engels, Chief Financial Officer of Commerz¬bank.

The digital transformation of Commerzbank is on track. The Digital Campus, the hub of the Bank's  digitalisation activities, is fully staffed and 8 Journeys are being processed. The second quarter saw the launch of Commerzbank's new mortgage app and the Comdirect digital asset management service. Besides this, the Bank established its new Big Data & Advanced Analytics division which will employ some 100 data specialists.

Development of the segments

The Private and Small Business Customers segment is ahead of target in terms of growth in customer numbers and assets under control in Germany. The number of net new customers since October 2016 stands at around 522,000. 385,000 of these joined the Bank in the first half of 2017, including around 100,000 from the acquisition of Onvista by Comdirect. Assets under control rose by EUR19 billion in the first half to EUR357 billion. The volume of new mortgage lending business amounted to nearly EUR8 billion in the first half (H1 2016: EUR6.1 billion).

The operating profit, at EUR336 million, was down on the same period of the previous year (H1 2016: EUR572 mil-lion). Factors that played a part here include a positive non-recurring effect of EUR123 million in the second quarter of 2016 from the sale of Visa Europe shares and higher investments in growth initiatives. These investments are usually amortised within approximately 18 months. The operating profit for the second quarter stood at EUR142 million (Q2 2016: EUR295 million). Revenues before loan loss provisions were down slightly year-on-year in the first half, at EUR2,279 million (H1 2016: EUR2,427 million). The fall was due in large part to investments in initiatives to promote customer growth, which were funded from current revenues. The revenue figure for the second quarter was EUR1,111 million (Q2 2016: EUR1,232 million).

Loan loss provisions increased in the first half to EUR75 million (H1 2016: EUR65 million), EUR42 million of which
was booked in the second quarter (Q2 2016: EUR42 million). Operating expenses increased in the first half to EUR1,868 million (H1 2016: EUR1,790 million). In the second quarter, operating expenses amounted to EUR927 mil¬lion (Q2 2016: EUR895 million). The first-half increase is attributable to the introduction of the European bank levy in Poland (EUR28 million) and investments in future growth.

mBank recorded revenues before loan loss provisions of EUR484 million in the first half of 2017 (H1 2016: EUR493 million). Of this, EUR243 million was generated in the second quarter (Q2 2016: EUR273 million). The volume of new consumer loan business increased by more than 20% in the first half. mBank also gained roughly 200,000 net new customers in the first half, 100,000 of them in the second quarter. This means it now has approximately 5.6 million retail and business customers in Poland, the Czech Republic, and Slovakia.

In the Corporate Clients segment, the strategic realignment is under way. The operating profit for the first half stood at EUR502 million (H1 2016: EUR600 million); in a weak market environment the operating profit for the second quarter stood at solid EUR235 million (Q1 2017: EUR267 million). Revenues before loan loss provisions were down year-on-year in the first half, at EUR2,043 million (H1 2016: EUR2,240 million). Of this, EUR943 million were generated in the second quarter (Q2 2016: EUR1,095 million).

The Mittelstand and International Corporates Group divisions registered solid contribution from Corporate Finance, but saw muted client activity in Fixed Income and Currencies as well as ongoing headwinds from low interest rates. The strategic realignment and new setup of the Financial Insti¬tutions business is well on track. The Equity Markets & Commodities Group division bene¬fited from solid client activity and good demand for investment products in the first half.

The segment's loan loss provisions decreased in the first half of 2017 to EUR76 million (H1 2016: EUR128 million), of which EUR33 million was booked in the second quarter. Despite strategic investments and higher regulatory and compliance expenditure, the segment was able to lower its costs: operating expenses were reduced year-on-year to EUR1,465 million (H1 2016: EUR1,512 million).

In the Asset & Capital Recovery (ACR) segment, the ship finance and commercial real estate finance port-folios were reduced by about EUR1.5 billion in the first half. The shipping portfolio, having been run down by EUR0.9 billion in the first half, now stands at around EUR3.9 billion. The segment's operating result improved in the first half of 2017 to minus EUR115 million (H1 2016: minus EUR251 million). Its operating result for the second quarter was minus EUR82 million (Q2 2016: minus EUR132 million). Revenues before loan loss provisions increased to EUR154 million (H1 2016: minus EUR42 million). The revenue figure for the second quarter was EUR39 million (Q2 2016: minus EUR24 million). Loan loss provisions increased in the first half to EUR211 million (H1 2016: EUR145 million). In the second quarter, loan loss provisions stood at EUR92 million (Q2 2016: EUR75 million). These were booked for ship finance only. Operating expenses were reduced in the first half of 2017 to EUR58 million (H1 2016: EUR64 million). The second quarter accounted for EUR29 million of this (Q2 2016: EUR33 million).

Outlook

In the financial year 2017, the Bank will further strengthen its market position and will focus on the execution of the "Commerzbank 4.0" strategy. The Bank aims for a CET 1 ratio of around 12.5% including the IFRS 9 impact effective 1 January 2018. The cost base is expected to be below EUR7.1 billion. Loan loss provisions are expected to amount to around EUR800 million, with the ACR segment accounting for around EUR450 million of this. The result of the second half of the year will benefit from positive exceptional revenue items of more than EUR390 million stemming from sales and revaluations. The Bank is expecting a slightly positive net result for the financial year 2017.