Commerzbank AG Reports Strong Revenues

Investing.com — Commerzbank AG (ETR:CBKG) on Wednesday reported revenues that surpassed consensus estimates by about €55 million, driven by stronger net interest income (NII) and other income sources.

Key Financials

• Net Interest Income: 2% above expectations, adding €39 million, despite a 1% decline from the previous quarter.
• Analyst Insight: Barclays (LON:BARC) noted the results met expectations but urged a review of cost drivers and loan losses into 2025.
• Performance by Segment: Declines noted in both Corporate Clients and Private & Small Business Customers in Germany due to lower ECB rates and higher deposit beta, along with reduced deposits.
• mBank Performance: Positive results in Poland due to effective customer deposit management and loan growth.

Operating Costs and Ratios

• Cost Control: Operating costs were slightly under expectations, improving the cost-to-income ratio to 58%, down two percentage points from the prior quarter.
• Credit Costs: Exceeded estimates by €39 million, with a quarterly cost of risk at 25 basis points. Credit charges totaled €255 million, influenced by three major cases and risk assessment updates.
• Pre-Tax and Net Profit: Pre-tax profit surpassed consensus by 2%, and net profit beat estimates by 21% at €113 million, aided by a lower-than-expected tax rate of 22%.

Capital Position

• CET1 Ratio: Strong at 14.8%, slightly above estimates, stable quarter-over-quarter, bolstered by a decrease in risk-weighted assets.
• Regulatory Effects: Decrease in assets partly due to regulatory adjustments. CET1 capital experienced slight dips from foreign exchange reserves and prudential valuation deductions but remains solid.

Financial Guidance Updates

• 2024 Projections: NII targeted at approximately €8.2 billion (up from €8.1 billion), with non-interest income growth exceeding 5% and credit costs below €800 million.
• Cost-to-Income Ratio: Expected around 60%, with CET1 capital near 15% and net profit forecasted at €2.4 billion.
• Long-Term Outlook: For 2025, NII is estimated between €7.6 billion and €7.9 billion, stabilizing at €8.4 billion by 2027, factoring in modest loan and deposit growth.
• Downside Risks: Anticipated drop in mBank's NII, expected to be €200 million to €300 million lower in 2025 compared to 2024.