EMC reports rise in 'customer activities' with structured products, confirms spin-off
Commerzbank has reported that the gain from financial assets and liabilities measured at fair value through profit and loss was €1.9bn in 2017 (previous year: €1.02bn) on the back of a rise in 'customer activities' in Equity Markets and Commodities (EMC), especially the structured investment products which capitalised on the combination of a strong performance in the equity market and relatively low volatility.
According to the bank's 2017 results report, other profit or loss from financial instruments declined by €134m year on year to €259m. The bank stated that the business with investment and financial products and the associated market-making, which makes up most of EMC area, is being spun off as part of the Commerzbank 4.0 strategy. 'The business being split out comprises the established ETF brand, the associated leading platform for ETF market-making and the business in structured trading and investment products, which are in demand from both private clients and institutional investors,' stated the report. 'This will allow the unit to better concentrate on its key competencies as a leading European and Asian provider and market maker for financial products and make even more efficient use of financial resources.'
According to the report, the bank made 'intensive preparations' for the legal spin-off during 2017 including applications made to the supervisory authorities for the necessary licences. 'All strategic options for a subsequent placing in the market will be further analysed in depth,' stated the bank.
In a trading environment with low volatility and a change in correlation, the division profited from increased customer activity and was able to improve performance compared to the previous year, especially in business with investment products. 'This was in particular due to the doubling of income in electronic trading in this division,' which includes the bank's multi-issuer platform, Primegate. Commerzbank launched, in January 2017, Wunschzertifikat, an online platform to offer bespoke structured certificates to retail investors in Germany, with the platform integrated on the bank's Primegate MIP and supported by Boerse Stuttgart and financial portal Onvista.
The bank also highlighted the launch of the Commerzbank/Mattioli Woods Fund for structured products in the UK. Commerz was the fourth most active issuer and the seventh in terms of sales in Europe in 2017, with 175,052 structured products marketed with a sales volume of €3.8bn. The German bank has 648,651 live products across markets. More than half a million of those products were sold in Germany/Austria (582,198) with Belgium (24,502 products), The Netherlands (23,043), France (20,986) and Sweden (11,578) the top five markets in which Commerzbank is more active.
The bank's asset management also 'performed strongly and saw further inflows during the year', but corporate clients saw a fall in activity as a result of 'persistently low interest rates, a challenging regulatory environment, the implementation of our Commerzbank 4.0 strategy (launched in 2016) and geopolitical uncertainty factors'.
This was also reflected in the bank's earnings performance, with asset management posting an operating profit of €809m in the year under review, following the €1.2bn reported in 2016. This decline is mainly due to the negative interest rates, the effects of the business policy transformation and higher loan loss provisions, according to the bank.
Commerz also announced the launch of a fully digitised advisory process for managing interest rate and currency risks as well as investment management for its corporate clients. 'With the offer, customers can independently go through the entire consultation process for selected products,' said the bank. 'The tool allows for an individual product suggestion based on the customer's preferences and underlying business.'
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