Germany's second largest private bank, Commerzbank, reported a strong increase in profits in the third quarter due to higher interest rates and lower burdens at its Polish subsidiary M-Bank. The surplus rose by 90 percent to 684 million euros. The institute also published details of its new strategy, which is oriented towards growth. According to this, Commerzbank aims to achieve a profit of 3.4 billion euros by 2027.
To achieve this goal, the focus should primarily be on increasing the surplus from commissions, while the interest surplus should grow moderately. Commerzbank plans to expand asset management and wealth management in retail banking, while strengthening digital currency business and assisting clients with bond placements in the corporate clients division.
The bank benefits particularly strongly from the interest rate turn around, as it has a large deposit business with private and corporate clients. The European Central Bank has raised the deposit rate several times since summer 2022, most recently to four percent, in order to combat high inflation. In the third quarter, the net interest income of Commerzbank increased by a third to 2.16 billion euros.
The profit and interest surplus exceeded the average expectations of analysts. Investors reacted positively to the figures and drove up Commerzbank's share by more than four percent in early trading. The institution has once again raised its forecast for the entire year and now expects an interest surplus of more than 8.1 billion euros.
The bank further specified its profit and revenue forecasts. For 2023, the institution plans an increase in revenues by twelve percent to around 10.6 billion euros and in profits by 57 percent to 2.2 billion euros compared to the previous year. Since taking office in 2021, CEO Manfred Knof has cut almost 10,000 positions and closed half of all branches in Germany. However, he continues to hold onto the remaining approximately 400 branches. Knof emphasized that the bank has successfully mastered a tough but necessary restructuring.
Almost all targets set for 2024 were already achieved this year, creating the basis for a higher distribution to shareholders. For this reason, Commerzbank has applied for approval of a share buyback program of up to 600 million euros from the ECB banking supervision and the finance agency, which is due to take place before the general meeting in May 2024.
With the new strategy, the focus is no longer on reorganizing the bank, but on growth. The institute wants to strengthen its revenue base and expand its position as a dominant force in the German banking market, explained Knof. Moreover, efficiency is to be increased through simpler processes and more digitalization. The cost-income ratio, i.e. the ratio of costs to revenues, is projected to drop to 55 percent by 2027. With this new strategy, Commerzbank is betting on growth and is securing its position as one of the leading banks in Germany.
