* 2016 operating profit up 10 pct to 2.1 bln euros
* Terms of VW's bond market return key for 2017 result
* VW finance arm eyes bond market return before end-June
(Adds CFO comment, detail on bond market return and background)
FRANKFURT, March 23 Volkswagen's
finance division reported record earnings last year, despite the
carmaker's emissions scandal, and held out the prospect of
another strong result in 2017.
Operating profit at Volkswagen Financial Services, which
handles dealer and customer financing as well as the group's
banking and leasing business, jumped 10 percent to 2.1 billion
euros ($2.3 billion). This compares with group underlying
operating profit of 14.6 billion euros last year.
Volkswagen (VW) admitted in September 2015 to cheating U.S.
emissions tests on diesel engines, prompting speculation the
resale, or residual, value of its vehicles might fall.
However, the finance division said on Thursday the residual
values of leased cars had held up, thanks in part to its
inclusion of more servicing and maintenance in its contracts.
Frank Fiedler, the division's finance chief, told a news
conference its ability to match last year's performance would
depend in part on the outcome of the group's planned return to
bond markets to reduce its reliance on more costly bank loans.
Europe's largest automaker is expected to raise more than
7.5 billion euros on Thursday through its first euro unsecured
bond issue since the emissions scandal.
The Braunschweig-based finance division, whose operations
exclude the Scania and Porsche brands and the Porsche Holding
Salzburg distributor, also plans to issue bonds this year,
likely before the end of June, to help refinance between 3-5
billion euros of borrowings this year, Fiedler said.
Separately, the company plans to join its European lending
and deposit operations from the autumn to Volkswagen Bank, whose
total assets will increase to about 80 billion euros from 50
billion as a result.
($1 = 0.9274 euros)
(Reporting by Alexander Huebner; Writing by Andreas Cremer;
Editing by Arno Schuetze and Mark Potter)