Commerzbank emphasizes own strong despite profit slump

Commerzbank emphasizes own strong despite profit slump

Commerzbank is not letting a slump in profits at the start of the year deter it from its independent course. After the cancellation of a merger with deutsche bank, the partially nationalized institution must prove that it is still strong enough on its own.

"Through growth, we are strengthening our earnings base and counteracting the low interest rates and the decline in margins," said group ceo martin zielke. "Of course, we will continue to work in a focused manner to increase our earning power."

In the fall, the commerzbank board of managing directors plans to explain how the bank, which focuses on private customers as well as smes and corporate customers, is to be further developed after 2020. Then the strategy in place since fall 2016 will expire. Low interest rates, digitalization and regulation demand answers.

Two weeks ago, after nearly six weeks of talks, commerzbank and deutsche bank had come to the conclusion that a merger of the two major frankfurt banks would entail too many risks. According to unconfirmed media reports, the competition is already in the starting blocks: allegedly, the dutch ING and the italian unicredit have their eyes on commerzbank. Commerzbank CFO stephan engels said in a conference call on wednesday that so far no one had knocked on the door of the frankfurt-based institution: "if they had, I had to tell them."

At the start of 2019, falling earnings and a higher tax burden caused commerzbank’s profits to plummet. The bank’s bottom line was 120 million euros in the first quarter, down by more than half from 262 million euros a year earlier.

Lower administrative costs only partially offset the drop in earnings. At the same time, commerzbank is massively courting customers. According to the bank, 123 new customers were acquired in the private and corporate customer segment in germany between january and march.000 additional customers gained – largely thanks to online subsidiary comdirect.

In the fall of 2016, commerzbank set itself the goal of attracting two million additional customers by 2020. The group, which currently has a good 13 million private and corporate customers in germany, expects a broader customer base to generate more profit in the long term.

The segment’s assets under control rose to 402 billion euros. "We will have to grow even more strongly in terms of the volume of customer assets under management in order to compensate for the price erosion in the market," head of private customer business michael mandel told the news agencies dpa and dpa-AFX. However, this is not a self-runner: "the german market will remain difficult."

The bank also sees progress in the embattled corporate customer business. Both the number of customers and the volume of lending in this segment had grown. "The direction is right, customer business continues to develop positively," said CFO engels.

After the dream of a rough banking marriage had been dashed, zielke had repeatedly emphasized the strength of his house. The institute, whose largest shareholder is the german government with a good 15 percent, is "strong enough on its own," zielke said in several interviews shortly after the talks with the deutsche bank ended at the end of april.

For 2019 as a whole, zielke is aiming for "a slightly higher consolidated net profit than in the previous year", according to earlier statements. In 2018, the company, which has been listed on the mdax since the fall, reported a profit of 865 million euros – almost seven times as much as in the previous year.

For 2018, shareholders are to receive a profit distribution of 20 cents per share certificate – to be voted on at the annual general meeting in two weeks’ time. It was the second time commerzbank has paid a dividend since it was bailed out with billions in taxpayers’ money during the financial crisis ten years ago. Shareholders can hope for a comparable payout in 2019.