Commerzbank presents results semi-annually in chiaroscuro and sees the title slip to Frankfurt (-5%). The German bank closed the first half of the year with a net profit of 1,3 billion euros, up 12% compared to the same period of the previous year, marking the best half-year in the last 15 years. However, despite this positive result, the second quarter data did not meet analysts' expectations. This decline, together with the difficulties related to challenges in Poland and the uncertainty arising from the situation in Russia, negatively influenced investor sentiment. Despite this, the bank has profit target confirmed for the entire year, higher than that of 2023 and is preparing to launch a share buyback plan da 600 million euro.
Second quarter results
In the second quarter, theNet income of the German institute is dropped by 4,8%, at 538 million euros, compared to 565 million euros in the same period of 2023. However, the revenues showed growth of 1,5% in the second quarter, reaching 2,7 billion euros, compared to 2,6 billion euros in the same period last year. This increase was supported by an increase in revenue from commissions, which grew 4,5%, partially offsetting a 2,4% decline in net interest income. The Operating income was 870 million euros, slightly lower than the 888 million euros of the second quarter of 2023, but for the first half of the year it recorded an increase of 11%, reaching 1,95 million euros, against 1,76 million euros in the first six months of 2023. This increase was supported by an improvement in operational efficiency and an increase in revenues. The total of organisers' activities of the bank increased by 11,6% year on year, rising to 560 billion euros.
Commerzbank has improved its ratio Common Equity Tier 1 by 0,4 percentage points, bringing it to 14,8% of risk-weighted assets.
The bank confirmed its full-year forecast, saying it was on track to at least generate 8,1 billion euros in net interest income this year, while its cost-to-income ratio will be around 60%. The target for net fee income growth remains unchanged at 4%.
The buyback plan
The German banking institution announced that it has requested approval from the European Central Bank and national authorities for a new €600 million share buyback program, having already purchased more than €720 million since mid-2023. The bank launched its first program buyback in its history in June last year, after rising interest rates boosted its earnings, and plans to file for another later in the year, after the release of third-quarter results.
The impact of Russia and Poland
Among the negative factors, Commerzbank highlighted the difficulties related to its exposure to Russia. The bank is facing lawsuits in the country that could adversely affect its operations. In the quarter under review, Commerzbank has set aside 95 million euros to cover potential losses arising from these causes, bringing the total provisions to 395 million euros.
In an interview with Bloomberg TV, the cfo Bettina Orlopp he said the group is monitoring the situation closely and “has a very good chance of recovering the money at least in the medium term”.
In Poland, Commerzbank faced significant challenges due to Mortgage legal disputes in foreign currency via its mBank branch. Unfavorable rulings on Swiss franc-denominated mortgages and regulatory challenges have resulted in increased costs and reserves, negatively impacting the bank's financial results.
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“Our business with customers continues to develop positively. The first half of the year was the best in 15 years. Companies have increasingly requested loans for investments and private clients have been more active in the securities business. This is good news for Commerzbank – said the CEO Manfred Knof -. With our diversified, customer-focused business model and improved earning power, we are also able to fully cover expenses outside of ongoing business.”
“We are on track to achieve our goals for 2024. Our excellent business performance and comfortable CET1 ratio encourage us in our intention to return more and more capital to our shareholders – he said Orlopp – We have submitted an application to the ECB and the German Financial Agency for a third share buyback with a first tranche of 600 million euros”.
