Commerzbank has posted an operating profit of €615m for the first half of 2016 (first half of 2015: €1.08bn) with the figure for the second quarter standing at €342m (Q2 2015: €419m), according to the German bank's half-year results.
The bank reported that revenues before loan loss provisions stood at €4.5bn (first half of 2015: €5.2bn), a fall due in particular to 'the negative interest rate environment and customer caution in the wake of adverse developments on the macroeconomic and geopolitical front'.
In what it was described as a challenging environment for the equities business, the Corporates & Markets division, the business housing the bank's structured products business, saw its operating profit reduced to €201m in the first half of 2016 (first half of 2015: €473m). Of this, €119m was for the second quarter, down from €176m in the second quarter of 2015.
According to Commerzbank, equity markets & commodities (EMC) 'was hit by the high levels of uncertainty on the capital markets, which took its toll on business in structured investment products for institutional clients', and as a result the securities lending and collateral management business is being realigned and adapted in response to the change in market conditions. Loan loss provisions remained low in the first half at €7m (first half of 2015: net release of €36m) while operating expenses were reduced in the first half of 2016 to €718m (first half of 2015: €784m).
The bank's fixed income & currencies (FIC) division profited from the continued demand for currency products, whereas demand for interest rate and credit trading was subdued by comparison due to the low interest rate environment and the European Central Bank's (ECB) monetary policy activities.
SRP data shows that Commerzbank has been the most active issuer of retail structured products in Europe year to date with over 123,000 products marketed worth €2.8bn giving the German bank a 4% market share (in terms of sales) in Europe. YTD Commerzbank has been active in nine European markets with Germany/Austria driving most of the activity. Investment (and leverage certificates was the most utilised vehicle to bring products to market followed by warrants (11,335) and structured notes (3,279).
SRP data also shows that the Eurostoxx 50 index (6,527 products) has been the most popular underlying followed by German blue chips such as Deutsche Bank (4,336), Deutsche Telekom (2,962), and Basf (2,102); and a number of non-equity underlyings such as WTI Crude Oil (1,709) Brent Crude Oil (1,643) and the price of gold (1,393).
In addition, Commerzbank launched at the end of April the Commerzbank Supreme Diversified Multi Asset Fund ER Index, a new proprietary tradable index linked to the performance of six well-established mutual funds with "good track record". The index, which has been designed to be diversified in terms of assets and regions as well as being market neutral, is comprised of low correlated funds to reduce maximum drawdown and maintain stable volatility.
Revenues before loan loss provisions - excluding valuation effects from own liabilities (OCS effect) and adjustments for counterparty risks in derivatives business - came to €837m which is 26% down on the same period of the previous year (first half of 2015: €1.1bn). In Advisory & Primary Markets (APM) the performance of the bank's debt capital markets unit resulted in a stable year-on-year showing.
According to the report, Commerzbank was able 'to compensate for strategic investments in digitisation, regulatory enhancements, and compliance by means of ongoing efficiency measures'. Operating expenses amounted to €1.7bn in the second quarter (Q2 2015: €1.7bn), with personnel expenses down due to FTE reduction, sourcing, and lower accruals for variable compensation. Net profit came in at €372m for the first six months of 2016, of which €209m was generated in the second quarter (first half of 2015: €645m; Q2 2015: €307m).
Stephan Engels (pictured), chief financial officer of Commerzbank, stated that the bank said it will continue its strategy of further expanding its market share for its private customers business, and that expects the negative rate environment and the adverse markets to further weigh on revenues.
Commerzbank has 157 products open for subscription in Germany/Austria, according to SRP data.
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