Commerzbank sees this year’s profit beating 2022 on rates

Bloomberg

Commerzbank AG said it expects profits for this year to be significantly above the €1.4 billion euros ($1.5 billion) earned in 2022, as rising interest rates continue to hand European lenders their best results in years.
The Frankfurt-based bank reported net income of €472 million for the fourth quarter, beating analyst expectations, and said that the result for the full year was the best in over a decade. Net interest income surged to €1.96 billion in the October to December period.
The results cap the first half of a four-year turnaround plan under Chief Executive Manfred Knof that benefited from the rates tailwind on the back of the European Central Bank’s efforts to contain inflation. The bank is now restarting investor payouts and raising profitability targets, though higher prices are also eroding expense-reduction goals.
“2022 was really, really a strong year,” Chief Financial Officer Bettina Orlopp said in an interview with Bloomberg Television’s Anna Edwards. A positive start to 2023 plus the likelihood of further official rate increases means “we will go much beyond the €1.4 billion euros” for last year, she said.
Commerzbank shares rose as much as 8.1% in early Frankfurt trading, to the highest in almost 5 years.
Commerzbank is also benefiting from a brightening economic outlook for its German home market as fears over energy blackouts recede. That scenario arose when Russia’s gas exports to Germany largely stopped in the wake of its
war on Ukraine, with Commerzbank repeatedly citing it as the biggest downside risk to its guidance.
The lender announced its intention to pay a dividend of 0.20 euro cents per share on last year’s profit, which would mark the first time in four years it’s returning money to shareholders. It also said it’s seeking regulatory approval for a share buyback as part of its pledge to pay out 30% of last year’s profits.
The dividend will total a payment of 250 million euros and buybacks are planned to be about 122 million euros, the bank said.
Commerzbank’s CET1 ratio — a key measure of capital strength — reached 14.1% in the quarter, a level the lender called “very comfortable.”
Commerzbank said it expects 2023 net interest income to rise “well above” the 6.5 billion level seen last year and
an upside scenario assumes it could hit as much as 7.1 billion euros. The guidance is “positive” news, JPMorgan Chase & Co analyst Kian Abouhossein said in a note.