Commerzbank Shares Decline as Q2 Results Disappoint and Provisions Impact Performance

Shares of Commerzbank experienced a decline on Wednesday following the release of its second-quarter results. As of 6:29 am (1029 GMT), the stock was down 5%, trading at €12.52.

The bank reported a net profit of €538 million, slightly above the €539 million anticipated by analysts. However, the results were met with disappointment as they did not provide the expected positive surprises.

The performance presented a mixed picture. While the operating profit exceeded expectations by 2%, the fair value results and other income fell short. Commerzbank faced provisions totaling €240 million related to Swiss franc mortgages and €95 million in litigation charges associated with Russia. Additionally, loan loss provisions reached €199 million, surpassing the anticipated €161 million, according to RBC Capital Markets.

Analysts at UBS Global Research noted that while the core results were in line with expectations, the earlier-than-expected announcement of the first share buyback program (SBB) was a positive development.

Net interest income (NII) decreased by 2% from the first to the second quarter. NII from corporate clients fell by 4.5%, and from the private and small business segment in Germany, it dropped by 12%, influenced by higher deposit betas and early mortgage repayments. Although NII in the operating and corporate segment increased by €52 million, the overall decline raised concerns regarding future earnings.

Net commission income met expectations but decreased by 4% compared to the first quarter, mainly due to lower contributions from the private and small business sector as well as corporate clients.

Loan losses rose to 20 basis points from 11 basis points in the previous quarter. This included a €110 million negative adjustment due to changes in methodology, which was partially offset by an €87 million release from the transitional liquidity adjustment (TLA).

The Common Equity Tier 1 (CET1) ratio remained steady at 14.8%, aligning with expectations.

Commerzbank announced a €600 million share buyback and intends to seek approval for an additional tranche following the third-quarter results. The bank targets a payout ratio exceeding 70% for 2024, with total distributions expected to reach €1.7 billion.