Commerzbank rises on decade-high quarterly earnings

Commerzbank AG upgraded its outlook for lending income this year after recording its best quarterly profit in more than 10 years.

The German bank posted net income of €747 million ($808 million) in the three months to March, Commerzbank said in a statement Wednesday, beating an analyst consensus of €656 million. The result was aided by continued higher interest rates and a brightening German economic outlook, but also from lower bank levies.

Chief Executive Officer Manfred Knof has been riding the wave of interest income that has buoyed much of European banking for the past two years, allowing him to report rising profits and bigger investor payouts. He’s now trying to strengthen the fee-generating parts of the bank as the effect has likely peaked.

The outlook for net interest income in 2024 improved slightly to around €8.1 billion, the bank said. Net interest income in the first quarter increased by 9% to €2.13 billion.

“The significantly improved earnings power and the high CET1 ratio underpin our plan to further increase the pay-out ratio,” Chief Financial Officer Bettina Orlopp said in a statement. Orlopp later added that the bank would apply to the European Central Bank for approval on its buyback plans “as quickly as possible” after first-half results.

Commerzbank shares were up 3.8% as of 10:14 a.m. in Frankfurt. CET1, a measure of capital strength, increased to 14.9% at the end of the quarter. 

Commerzbank will also continue to look out for acquisitions after buying small asset manager Aquila Capital in January. “We basically have several things on our table”, Orlopp said in an interview with Bloomberg Television’s Guy Johnson and Anna Edwards on Wednesday, adding that cross-border deals only made sense once a banking union and a capital markets union are in place.  

Commissions were flat in the first quarter and remain a much smaller contributor to revenue than lending income. Revenue was up 3% at €2.75 billion. Compulsory contributions were around 65% lower than a year earlier, mainly due to the European bank levy being significantly reduced.

However, provisions for legal risks from Swiss franc loan burdens at its Polish subsidiary mBank rose to €318 million from €173 million a year earlier, while revenue at the unit fell.

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