Commerzbank sees 2023 profit 'well above' 2022 despite challenges, shares surge

Photo d'archives du logo Commerzbank à Francfort, en Allemagne
Photo d'archives du logo Commerzbank à Francfort. /Photo prise le 9 février 2017 à Francfort, en Allemagne/REUTERS/Ralph Orlowski
  • 2022 profit above consensus expectations
  • Shares rise 7.7%
  • Expected to rejoin DAX

FRANKFURT, Feb 16 (Reuters) - Germany's Commerzbank (CBKG.DE) said on Thursday that net profit rose a better-than-expected 12% in the fourth quarter, helped by higher interest rates and capping a second consecutive profitable year as it undergoes a major restructuring.

The bank said it would aim for a 2023 result that is "well above" 2022, helped by higher interest rates, despite "another demanding year in view of the challenging environment".

Commerzbank, one of Germany's best known banks, has been slashing thousands of jobs and hundreds of branches to cut costs and lift profit. The bank is a candidate to rejoin the prestigious DAX index of blue-chip companies.

Shares surged 7.7% early in Frankfurt trade in the biggest one-day gain since December. Deutsche Bank analysts told clients the 2023 outlook pointed to "upside almost across the board".

Reuters Graphics

Net profit of 472 million euros ($505.3 million) in the quarter was higher than 421 million euros a year earlier. It was above average analyst expectations of 350 million euros, according to a consensus forecast published by Commerzbank.

For the full year, Commerzbank generated net profit of 1.435 billion euros, up from 430 million euros a year earlier, and better than expectations for around 1.359 billion.

"Our turnaround is a success. Commerzbank is back," said Chief Executive Officer Manfred Knof.

Still, the bank's home market faces soaring inflation and a slowing economy, and problems at a Polish unit have continued to weigh.

Deutsche Bank analysts said in a recent note that downside risks for Commerzbank include soured loans, a big decline in loan growth, falling interest rates and delays in cost cutting.

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European banks, challenged by war, soaring inflation, and an energy crisis, are benefiting from one boost to their businesses: higher interest rates.

Commerzbank forecast net interest income "well above" 6.5 billion euros for 2023, "with clear additional upside potential". For 2022, it rose 33% to 6.5 billion euros.

Commerzbank, which focuses on medium-sized firms known as Mittelstand that form the backbone of the German economy, is a barometer of the nation's health.

It has been a tumultuous few years for the bank, which in 2018 was booted from the DAX index.

A year later, it held merger talks with Deutsche Bank (DBKGn.DE) that eventually collapsed.

In the aftermath, the then-CEO developed a new strategy, but Cerberus, a top investor, was dissatisfied and successfully launched a campaign for new leadership and massive job cuts.

Cerberus pared its stake last year, and the bank is set to get its fourth chairman in three years in 2023.

A Commerzbank subsidiary in Poland, mBank, was a drag on business last year due to a legacy issue over mortgages and a law that allows borrowers skip monthly repayments.

($1 = 0.9341 euros)

Reporting by Tom Sims and Marta Orosz; Editing by Rachel More, Stephen Coates and Jamie Freed

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Covers German finance with a focus on big banks, insurance companies, regulation and financial crime, previous experience at the Wall Street Journal and New York Times in Europe and Asia.

Thomson Reuters

Marta Orosz reports on banking and finance from the EU's financial center in Frankfurt, Germany, including major credit institutions like Deutsche Bank and European operations of US banks. Previously she tracked the wealth and investments of Germany’s billionaires for Forbes US and worked as a business editor with Business Insider Germany. Her work on cross-border investigations won her the Helmut Schmidt Journalism Award, among many others.