Interim results: Commerzbank with best quarter in 13 years

Interim results: Commerzbank with best quarter in 13 years

A jump in profits at the start of the year strengthens the board’s confidence. The result could be even better if there were no further burdens in Poland.

After the best quarter since the start of 2011, Commerzbank is on track to achieve its targeted record profit for the current year. “We started the new year with a lot of momentum. The strong customer business and the very good results in the first quarter encourage us to achieve our goal of increasing profits in 2024,” said CEO Manfred Knof on Wednesday.

With its focus on medium-sized companies and private customers, Commerzbank is playing into its hands by ensuring that interest rates do not fall as quickly as expected a few months ago. However, the legal disputes over Swiss franc loans in Poland remain a burden.

In the first three months, earnings before taxes of almost 1.1 billion euros exceeded the level of the same period last year by almost a quarter, as the DAX group announced in Frankfurt. The bottom line was a profit of 747 million euros, around 29 percent more than a year ago. This also exceeded the expectations of analysts. Commerzbank last performed better in a quarter in the first quarter of 2011, with a surplus of 985 million euros.

Net interest income in the first quarter was a good 2.1 billion euros, close to the record value of the third quarter of 2023 (2.166 billion). The Executive Board increased the forecast for net interest income for the year as a whole by around 200 million to around 8.1 billion euros. For 2023, the balance sheet had increased by almost 30 percent to around 8.4 billion euros. Since the European Central Bank (ECB) ended the phase of zero and negative interest rates in July 2022 and subsequently increased the key interest rates ten times, banks and savings banks no longer have to pay interest when they park money at the central bank, but rather earn money from it.

Problems in Poland for years

Commerzbank had to cope with further burdens in the first three months at its Polish subsidiary mBank: further provisions amounting to 318 million euros were made there for legal risks in connection with foreign currency loans. For the second quarter, management currently expects to have to set aside a further around 80 million euros.

Problems in Poland have been troubling Commerzbank for years. The main reason is Swiss franc loans that many Poles took out years ago to finance construction. As the Polish zloty fell in value against the Swiss franc, the burdens on borrowers increased. Many then sued Polish financial institutions because of potentially illegal clauses. Commerzbank is trying to reduce legal risks in this area through out-of-court settlements.

In the past two years, charges totaling more than one billion euros in Poland have weighed on Commerzbank’s consolidated earnings. Nevertheless, the institute achieved a record profit of 2.2 billion euros in 2023 – spurred on by the interest rate turnaround. The board wants to exceed this value in the current year – even “significantly”, as can be read in the annual report for 2023. However, the outlook depends “on the development of the charges on mBank’s Swiss franc loans,” the bank said on Wednesday.

The institute’s shareholders should also benefit from the targeted increase in profits for the year as a whole: the board wants to distribute at least 70 percent of the profits to the shareholders in the form of dividends and share buybacks. Commerzbank’s largest shareholder has been the federal government since it was rescued with billions in taxes during the 2008/2009 financial crisis.

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Source: Stern

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