- Commerzbank earns slightly less - forecast confirmed
Commerzbank remains on track for a higher profit this year despite a waning tailwind from interest rates. The bank aims to significantly surpass last year's result by 2024, as stated in its interim report published on Wednesday. In 2023, the bank earned a record 2.2 billion euros thanks to rising interest rates and increased income from deposits and loans.
Manfred Knof, CEO of the partially state-owned bank since the financial crisis, believes the bank is financially well-positioned and capable of continuing to buy back its own shares. However, investors are concerned about the bank's risk provisions. The bank's stock, which had performed well so far this year, fell significantly, making it one of the biggest losers in the DAX with a decline of around four percent. Despite this, the stock is still up around 17 percent year-to-date.
"Our customer business continues to develop positively. The first half was our best in 15 years," said Knof. "Companies have increasingly demanded loans for investments, and private customers have been more active in securities." Thanks to the strong core business, the bank can continue to offset special burdens such as the costs of legal disputes involving its Polish subsidiary mBank and in Russia.
The bank's strong core capital ratio confirms its intention to continue returning capital to shareholders, according to CFO Bettina Orlopp. "Therefore, we have applied for the first tranche of our third share buyback, amounting to 600 million euros, with the ECB and the Federal Agency for Real Estate."
In the second quarter, profit fell by five percent to 538 million euros, in line with expert expectations. However, as the bank had earned significantly more in the previous quarter, half-year profit still increased by a double-digit percentage. In the second quarter, the bank felt the impact of waning interest rates, with the interest margin falling slightly to just under 2.1 billion euros. However, the commission margin increased by around five percent to 879 million euros.
Despite the challenging economic environment, the bank managed to keep its risk provisions stable at around 200 million euros compared to the same period last year. In the first quarter, risk provisions were still well below the 100 million euro mark. The bank also reduced its buffer for risks from major events (Top-Level Adjustments (TLA)) by 87 million euros to 336 million euros in the past three months. This means the bank has less capital available to cover potential secondary effects of geopolitical crises, inflation-related uncertainties, and the impacts of tighter monetary policy.
The Commerzbank's financial analysts are closely monitoring the forecasted interest rate trends, as they could significantly impact the bank's future earnings. Regardless of the interest rate forecast, the bank remains optimistic about surpassing its 2024 profit goal, as stated in the interim report.
