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Banks: Turnaround in interest rates brings Commerzbank profit jump at the beginning of the year

Banks: Turnaround in interest rates brings Commerzbank profit jump at the beginning of the year

The institute, which recently returned to the Dax, is benefiting from the increased interest rates. For the year as a whole, the board is aiming for a significantly higher result than in 2022. But there are still question marks.

Buoyed by the turnaround in interest rates, Commerzbank is making big strides towards profit growth in 2023. In the first three months, the group earned EUR 580 million, almost twice as much as a year earlier (EUR 298 million). For the year as a whole, the board is aiming for a surplus “well above that of 2022”, as the money house, which recently returned to the Dax, confirmed on Wednesday.

“We started the year with a lot of momentum and are thus seamlessly continuing the strong previous year,” summed up CEO Manfred Knof. “We are right on track to achieve our goals for 2023, including a payout ratio of 50 percent.” The surplus in the first quarter was around 100 million higher than expected by analysts on average.

After a surplus of 1.4 billion euros in 2022 as a whole, Knof had already announced “a significantly higher consolidated result” for the current year when the balance sheet was presented in February. Even the 2022 profit could have been significantly higher if the Polish subsidiary mBank had not incurred more than one billion euros in charges, including in connection with Swiss franc loans.

benefited from higher interest rates

The problems at mBank made themselves felt again in the first quarter of 2023 and could remain a burden for Commerzbank for the year as a whole: 173 million additional provisions for legal risks in connection with Swiss franc loans were incurred in Poland. This also reduced Commerzbank’s income: in the first quarter, its total income was almost 2.7 billion euros, 4.5 percent below the same period last year.

Commerzbank benefited noticeably from the rise in interest rates in the first three months of the current year. Net interest income rose by almost 39 percent year-on-year to around EUR 1.95 billion. For the year as a whole, the bank now expects net interest income to rise to around EUR 7 billion – “with additional upside potential”. At the same time, risk provisions for possible loan defaults in the first quarter of EUR 68 million were well below the previous year’s figure of EUR 464 million.

Commerzbank expects additional momentum from its return to the first German stock exchange league: Commerzbank shares have been listed in the German share index again since February 27.

Better times ahead for shareholders?

Better times are about to dawn for shareholders of the money house: the general meeting on May 31 will vote on the distribution of a dividend of 20 cents per share. This third profit distribution from the institute, which has been partially nationalized to date, since the rescue with billions in taxes in the financial crisis of 2008/2009 should only be the beginning according to the will of the board.

“Our scope for distributing capital to our shareholders continues to increase,” confirmed CFO Bettina Orlopp. According to the bank, an initial share buyback program with a volume of EUR 122 million has now been approved by the supervisory authorities. As a result, Commerzbank will pay out a total of 30 percent of last year’s consolidated profit to shareholders.

Source: Stern

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