Commerzbank Heads for Earnings, Flags Upside Down Following Higher Rates – Earnings Review
By Cristina Roca
Commerzbank AG released its fourth quarter results on Thursday. Here’s what you need to know:
NET PROFIT REVIEW: The German lender posted a net profit of 421 million euros ($478.9 million), beating analysts’ expectations of a net profit of 81 million euros, according to a consensus estimate compiled by the Society.
REVENUE REVIEW: Revenue was €2.1 billion, up 3.5% and ahead of analysts’ expectations of €1.82 billion. Excluding exceptional items, sales fell by 8.9% to 1.86 billion euros.
WHAT WE WATCHED:
– TURNING A CORNER: The bank said 2021, the first year of its transformation, turned out better than expected. “We are confident that we will perform significantly better this year than in 2021, although much of this difficult transformation is still ahead of us. If we achieve this, we intend to resume paying dividends – as a strong signal that things continue to improve at Commerzbank,” Chief Executive Manfred Knof said. of 430 million euros for 2021. The target is significantly higher than the consensus had expected, noted UBS analysts.
-JUMP IN NET INTEREST INCOME: The bank’s net interest income – a key profit driver for retail banks – was €1.3 billion for the quarter, up 13% year on year and slightly ahead of analyst forecasts of 1.24 billion euros, according to the consensus compiled by the company. “This is important because net interest income has been a significant drag on the group’s revenues and profitability,” Deutsche Bank analysts said in a note ahead of the earnings release. The NII rose 25% in the Polish subsidiary of Commerzbank, helped by a sharp rise in interest rates in the country. This should continue to drive underlying NII growth at the group level in 2022, Commerzbank said.
-INTEREST RATE INCREASE: Commerzbank’s 2024 targets have a significant upside if central banks raise rates as markets expect, Chief Financial Officer Bettina Orlopp said. “If market expectations are confirmed, our net interest income in 2024 will be higher than [EUR]800 million more than originally planned,” she said.
Write to Cristina Roca at [email protected]