Comdirect: Good half-year result for 2018

Quickborn, 01.08.2018

• 2018 half-year result at €48.0m before taxes
• Over 100k new B2C customers in the first half of the year
• Clear focus on the core business with the agreed sale of subsidiary ebase

Quickborn, Frankfurt/Main, Germany, 1 August 2018. comdirect group concluded the first half of 2018 with pre-tax profit of €48.0m (previous year: €50.9m). The pre-tax return on equity stood at 15.5% (previous year: 17.4%). 'We have generated a good result,' comments Arno Walter, CEO of comdirect bank AG. 'At the same time, we greatly accelerated our growth in the core B2C business in the first half of the year with over 100k new customers. This shows that we are being received well as a smart financial companion for the mobile generation and as a top address for saving, investing and trading with securities. This is exactly as it should continue. With the agreed sale of ebase, we are focusing even more intensively on the growth and further development of our core business. For the year as a whole we are working towards a pre-tax profit of around €145m, including investments into growth as well as the expected one-off gain from the sale of ebase', says Walter. This would be then equivalent to an ROE before taxes of around 22 percent.

comdirect is Germany's first provider of transfers with Google Assistant

On its way towards becoming a smart financial companion for the mobile generation, comdirect has brought further smart products and services to the market over recent months. comdirect has been allowing transfers with Google Assistant, Google's speech assistant, since July - the first bank in Germany to do so. In addition, comdirect customers can call up their account and custody account balances quickly and easily using Google Assistant. Traders now receive push alerts via Amazon's Alexa when one of their selected securities exceeds or falls below a certain price limit.

comdirect has also further extended its pioneer role in the area of mobile payments. For example, comdirect is one of the few banks to have introduced Google Pay on its launch in Germany at the end of June. Android users can now pay easily and in just a few seconds with their smartphones. In the context of the innovation partnership with the German Volleyball Association, comdirect is also testing a payment function with wearables. Contactless payment will be possible using a wrist band at the German beach volleyball championships at Timmendorfer Beach. Visa is a partner and joint initiator of this campaign. Walter notes, 'As a smart financial companion, we want to offer our customers solutions that make their lives easier and more simple in dealing with all financial topics. We have now taken a major step forward here with the expansion of our services in voice banking and mobile payment.'

Sale of ebase expected to be concluded in 2018

On 10 July 2018, comdirect contractually agreed the sale of its subsidiary ebase (European Bank for Financial Services GmbH) to the FNZ Group. The reason for the sale is a stronger focus on the fast-growing B2C core business. The transaction is still subject to the approval of the banking supervisory authorities and antitrust authorities and fulfilment of the contractually agreed closing conditions. The sale is expected to be concluded in the current year. In this event there would be a one-off gain before taxes of at least €85m for comdirect in 2018. Furthermore, comdirect plans to invest up to €30m into growth through new smart products and services, new technologies as well as into new customer and asset growth during 2018. The remaining total from the non-recurring income forms the foundation for further growth in the subsequent years. In connection with the agreed sale, ebase will be reported in the interim financial statements for the first half of 2018 as a discontinued activity pursuant to IFRS 5 (cf. table page 4).

Greatly accelerated customer and custody account growth in the core business

The customer base in the B2C business segment (comdirect bank AG including onvista bank division) increased by over 100k to 2.39m compared with the end of 2017. In the previous year's period, the rise stood at 42k net new customers (excluding inorganic growth as a result of the acquisition of onvista bank customers in April 2017). With a rise of 89k to 1.29m, the number of custody accounts also increased significantly. The number of current accounts grew by 48k to 1.48m. Assets under Control (AuC) went up to €62.6bn, compared with €59.0bn at the end of 2017. The portfolio volume grew 1.6bn to €38.7bn, despite the market price losses on the securities markets. According to Walter, 'The figures demonstrate that comdirect - the top address for saving, investing and trading with securities - is a growth company. We are particularly pleased that customers invested their money mostly in custody accounts in the first half of the year. At €3.1bn, net fund inflows to customers' custody accounts are higher than ever. More and more comdirect customers are taking responsibility for their own asset accumulation and investing regularly in securities.'

Increased growth investment in the core business in the first half-year

Income in the core business in the first six months of the year amounted to €171.6m, 10% above that of the same period in the previous year (€155.4m). Net commission income rose compared with the previous year (€91.6m) by 18% to €107.9m. The integration of onvista bank and onvista media GmbH across the entire 2018 reporting period also contributed to the increase. At 10.9m, the number of B2C trades in the first half of 2018 was 37% above the previous year (7.9m). The significant increase in trades is primarily due to the more volatile first quarter.

Despite the persistent zero-interest environment, net interest income after provisions for possible loan losses rose 17% from €48.3m in the previous year to €56.5m. Other income stood at €7.2m. The previous year's figure of €15.5m was influenced by realisation gains.

The 17% rise in administrative expenses from €111.4m in the previous year to €130.1m was primarily the result of growth. Alongside increased costs resulting from more business and the integration of onvista across the entire 2018 reporting period, this also included increased mandatory contributions to the deposit insurance scheme. In addition, comdirect pushed forward growth initiatives in its core business around the end of the second quarter.

The income in the core B2C business in the first half of 2018 came to €41.4m (previous year: €44.0m). The discontinued activities (ebase) generated pre-tax profit of €6.5m (previous year: €6.9m).

Overview*

€k	Q1 17	Q2 17	Q3 17	Q4 17	Q1 18	Q2 18
Net interest income after provisions	24,671	23,586	24,939	23,077	26,262	30,218
Net commission income	44,757	46,885	47,451	55,142	59,247	48,644
Other income	5,894	9,639	6,504	8,019	3,423	3,768
Administrative expenses	51,285	60,154	60,500	67,385	63,032	67,087
Pre-tax profit from continued activities	24,037	19,956	18,394	18,853	25,900	15,543
Pre-tax profit from discontinued activities	3,390	3,529	3,147	3,555	3,399	3,109
Pre-tax consolidated profit	27,427	23,485	21,541	22,408	29,299	18,652
Consolidated net profit	20,372	20,340	15,476	15,356	21,697	13,618

€k	H1 17	H1 18	H1 18 vs. H1 17
Net interest income after provisions	48,257	56,480	17.0 %
Net commission income	91,642	107,891	17.7%
Other income	15,533	7,191	-53.7 %
Administrative expenses	111,439	130,119	16.8%
Pre-tax profit from continued activities	43,993	41,443	-5.8%
Pre-tax profit from discontinued activities	6,919	6,508	-5.9%
Pre-tax consolidated profit	50,912	47,951	-5.8%
Consolidated net profit	40,712	35,315	-13.3%

*In connection with the agreed sale, the business of ebase is reported as 'discontinued activity'. The previous year's figures were adjusted accordingly.