Commerzbank AG will pay dividends for the financial year 2018, a year earlier than planned, as it is well on track to hit its midterm profitability targets, CFO Stephan Engels said at the presentation of the German lender's 2017 results.
Since its state bailout in 2008, Commerzbank has paid a dividend only once, in 2015. The bank suspended dividend payments in 2016, when it launched a new restructuring plan aimed at improving profitability, reducing costs, becoming more efficient and focused on two core businesses: Private and small business customers, and corporate clients.
"Keeping in mind that 2018 is a starting year, [the dividend] might not reach the full payout ratio which we originally envisaged," Engels told analysts Feb. 8, adding that it would depend on the size of the profit.
For the 2017 full year, Commerzbank's profit attributable to shareholders fell to €156 million from €279 million in 2016. The dividend policy released in 2015 was based on a payout ratio of 30% to 40%, Engels said. For that year, Commerzbank distributed a dividend of €0.20 per share on a total consolidated profit of €1.06 billion. The bank's last pre-crisis dividend in 2007 stood at €1 per share.
Speaking during a media call the same day, CEO Martin Zielke said the lender could not guarantee that there would indeed be a dividend payment for 2018 because "it's February — it's still very early to make a statement." But he also said that "we are optimistic" about paying a dividend on Commerzbank's full-year 2018 earnings.
'The right strategy'
The group's 2020 restructuring plan should result in revenue growth to at least €9.8 billion, chiefly thanks to accelerated new-customer acquisition in German retail banking.
"Generating growth in a changing German retail market is possible," Engels said, adding that accelerating net new-customer growth leads to higher securities and loan volumes, which grew 14% and 9% year over year in 2017, respectively.
"Most importantly, the growing number of clients results not only in higher volumes but also in higher revenues," the CFO said. "In 2017, we generated around €150 million in additional revenues as a result of higher securities and loan volumes. With this, we have almost completely offset the drag from negative rates and pricing competition, confirming our belief that this is the right strategy."
Commerzbank recorded revenues before loan-loss provisions of €9.2 billion in 2017, down from €9.4 billion a year earlier. Revenues before loan-loss provisions in the group's private and small business customer segment remained relatively stable year over year at €4.83 billion compared to €4.81 billion in 2016. Low market volatility and pricing competition resulted in lower revenues in the corporate clients segment, which fell to €3.96 billion from €4.23 billion year over year.
In 2018, the bank expects higher revenues in both of its core businesses.
