Dhe DZ Bank contrasts sharply with the high annual loss of Deutsche Bank and the decline in profit at Commerzbank. The top institute of the Volks- und Raiffeisenbanken doubled its profit in 2019. With 2.7 (previous year: 1.4) billion euros before taxes and 1.9 (0.9) billion euros after taxes, no other German bank should have earned more than DZ Bank – at most the state-owned KFW, which April announced their profit.
Uwe Fröhlich and Cornelius Riese, who have headed DZ Bank as obviously a well-coordinated double head of the board since early 2019, dampened expectations for 2020 on Thursday. The start of the year went well. However, they expect strongly fluctuating capital markets and more write-downs on loans. “In 2020, we expect earnings within our sustainable earnings margin of 1.5 to 2 billion euros before taxes – but rather at the lower end.” However, it would not be the first time that the new top management team was deeply stacked. Although the group had already earned almost 1.5 billion euros in the first half of 2019, it only raised its forecast in November.
Basically comparable to Helaba
The fact that DZ Bank achieved the highest group profit since the merger with WGZ-Bank in 2016 is due to its broad base: as a commercial and Verbundbank that operates lending and capital market business alone (with large companies) and works together with the VR- Sufficient loans to banks (to smaller companies), DZ Bank is comparable to central banks of the Sparkasse like Helaba. In the meantime, it has come closer to the goal of achieving a market share of 25 percent in the domestic corporate customer business with 22 percent. The goal is to be achieved through further digitalization of the credit processes. There is room for improvement in the joint lending business with VR banks, which only makes up 14 billion euros. After DZ Bank had outsourced its payment transactions to Equens, the WGZ payment system has now been upgraded for real-time payments. It is “in prospect also for foreign business”, said Fröhlich.
Beautiful daughters bring a lot of profit
DZ Bank is also a control holding company for nine subsidiaries. The insurer R + V contributed the lion’s share of the group’s pre-tax profit with 1117 (413) million euros, followed by the fund company Union with 648 (502) million euros. Schwäbisch Hall, on the other hand, suffered a sharp 36 percent drop in profits to 189 million euros. Of all the DZ subsidiaries, the building society suffered the most from the low interest rate phase, as Riese reported. It will be counteracted with cost reductions, a throttling of the building society business and an expansion of the building loan business. Riese expects the interest surplus to fall two or three years, but Schwäbisch Hall will not slide into the red. In 2019, there was the transport finance provider DVB with 108 (130 million euros), which is now being managed on its own.
In 2019, DZ Bank AG earned 293 (362) million euros, which corresponds to a return on equity of between 5 and 6 percent. This makes DZ Bank as profitable as Helaba, whose consolidated profit is largely borne by the real estate business. This is operated in the DZ Group by its own real estate company DZ Hyp, which contributed 687 (232) million euros to the consolidated profit.