CORRECTED - UPDATE 3-Commerzbank hints at new outlook, strong Q1

Thu May 6, 2010 9:50am EDT

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(Corrects in fourth bullet point and second-to-last paragraph to show PIIGS exposure totals 26.5 billion euros including (not additional to) 5 billion to banks)

* Net profit 708 mln eur vs Reuters poll avg 473 mln eur

* Loan loss provisions 644 mln eur vs poll avg 749 mln eur

* Trading result swings to 850 mln eur vs poll avg 737 mln

* Has 26.5 bln eur PIIGS exposure, 3.1 bln to Greece

* Shares gain as much as 5.6 pct

(Adds CFO comments, details)

By Arno Schuetze and Edward Taylor

FRANKFURT, May 6 (Reuters) - Commerzbank AG (CBKG.DE) hinted it might revise its outlook later this year after it posted better-than-expected first-quarter results thanks to strong trading and lower risk provisions, which drove up its shares.

Germany's second largest bank said the first quarter was better than expected, but stopped short of saying it would post a net profit in 2010. Chief Financial Officer Eric Strutz said the bank would update its outlook with the publication of its second-quarter results.

"In 2010 as a whole the group will only return to profit if the economy and financial markets remain supportive," CFO Strutz added.

Chief Executive Martin Blessing struck a more confident tone, saying: "The core bank will close 2010 with an operating profit as planned. By 2011 at the latest we will once again be profitable at group level. In 2012, we will be fully profitable with an operating result of more than 4 billion euros."

These comments combined with a solid first-quarter performance helped lift Commerzbank's shares as much as 5.6 percent and at 1232 GMT they were up 3.5 percent at 5.92 euros. The STOXX Europe 600 Banks index .SX7P was 0.1 percent higher. Net profit swung to 708 million euros from a loss of 864 million a year before, beating an average estimate of a 473 million euro profit in a Reuters poll.

A swing in trading results contributed almost 1.4 billion euros to the bank's earnings, CFO Strutz said. It swung to a trading profit of 850 million euros from a trading loss of 523 million the previous year but missed a mean estimate for a trading profit of 737 mln in the Reuters poll.

The bank also benefited from revaluation gains on toxic assets held in a restructuring division and from lower provisions to cover risky loans.

PROVISIONS DOWN

Loan loss provisions fell to 644 million euros, down 24 percent from the previous year and below the 1.3 billion in the fourth quarter.

But analysts questioned the sustainability of earnings.

"The bank is making progress, there is a clear operative improvement", LBBW analyst Olaf Kayser said. "But the strong first quarter cannot be extrapolated for the whole year as the trading result is not sustainable and I expect significantly lower revenues in the next quarters."

Commerzbank has a smaller investment bank than big rivals Deutsche Bank AG (DBKGn.DE), Goldman Sachs (GS.N) and Morgan Stanley (MS.N), which crimped its ability to post a similarly steep rise in earnings as they did in the quarter. [ID:nN04142093] [ID:nLDE63P28J]

Commerzbank sees no threat at this stage from its exposure to Greece, CFO Strutz said, adding that 90 percent of Commerzbank's Greek bonds have a maturity of at least 10 years.

He also said the bank would not sell the Greek bonds, worth 3.1 billion euros, and would participate in Greek rescue efforts whenever it appeared sensible. [ID:nLDE6431LT]

The Frankfurt-based lender is backing a Franco-German private sector aid initiative for Greece and said speculators should not be the beneficiaries of "an attack on the euro".

Commerzbank has a public finance exposure of 26.5 billion euros -- including 5 billion in loans to banks -- to the so-called PIIGS group of highly indebted euro zone countries of Portugal, Italy, Ireland, Greece and Spain.

Commerzbank, now 25-percent state owned after a bailout during the crisis, said operating profit -- defined by the bank as earnings before impairments, restructuring and tax -- hit 771 million euros after an operating loss of 595 million a year earlier. (Editing by Karen Foster) ($1=.7453 Euro)

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