merzbank AG(US:CRZBY)2024-08-07 22:33Financial Data and Key Metrics Changes - The half-year net result reached almost €1.3 billion, translating to a return on tangible equity (RoTE) of 8.9% despite pre-tax burdens exceeding €700 million [2][9] - The CET1 ratio stands at 14.8%, supporting capital distribution plans for 2024 and beyond [3][25] - The operating result for Q2 was €870 million, nearly matching the previous year's level despite higher burdens [9][21] Business Line Data and Key Metrics Changes - Corporate Clients' loan book grew by 5% year-on-year, outperforming the overall loan market in Germany [4][5] - Fee income increased by 4.5% year-on-year, with all customer segments contributing positively [6][15] - The net interest income (NII) outlook for 2024 remains unchanged at around €8.1 billion, with expectations of around €3.9 billion in the second half of the year [14][26] Market Data and Key Metrics Changes - German GDP showed a slight contraction in Q2, with expectations for 0% growth in 2024 [3] - Core inflation is expected to stabilize above 2%, impacting monetary policy decisions by the ECB [4] Company Strategy and Development Direction - The company aims to increase fee income by 4% in 2024 as part of its Strategy 2027 [6][8] - A focus on reducing complexity and improving efficiency through process simplification is emphasized [7] - The acquisition of Aquila is expected to contribute positively to the P&L in the second half of the year [6] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about business momentum despite a challenging economic environment [2] - The company is closely monitoring credit risks and maintaining strict cost discipline to manage wage pressures [4][5] - Future burdens from Poland and Russia are acknowledged as potential risks, but management is confident in the overall resilience of the business [2][10] Other Important Information - The company has applied for a €600 million share buyback as part of a planned total capital return of €1.6 billion for 2024 [6][25] - Employee wages are set to increase by 5% in January 2025 and another 4% in January 2026, which will require careful cost management [8] Q&A Session Summary Question: Clarification on deposit growth and negative contributions - Management clarified that deposit growth remains favorable, with no negative impact on NII despite rising deposit beta [28] Question: NII bridge to 2027 target - The NII is expected to drop due to negative rate moves but will recover through deposit growth and the replication portfolio [32][34] Question: Fee income potential from Globalpay - Globalpay is expected to add revenue without attrition to existing payment services, targeting SMEs with new solutions [35] Question: Polish FX mortgages and cost expectations - Management remains cautious but optimistic about settling FX mortgage cases, expecting burdens to be below last year's levels [36][59] Question: Credit quality and asset quality concerns - The increase in provisions is linked to single cases, with no overall deterioration in asset quality expected [54] Question: Cost growth and mitigation - The 5% cost growth guidance includes continuous cost improvements, with a focus on maintaining a cost/income ratio below 60% [57][58]