Commerzbank shares soar as provisions fall

 
City A.M. Reporter
COMMERZBANK shares soared by 15.6 per cent to €7.66 yesterday as a pickup in its investment bank and lower provisions for bad shipping loans took the sting out of a sharp fall in quarterly net profit.

The bank’s second-quarter results showed net profit slumped to €43m (£37m) from €270m a year ago, but this was broadly in line with analysts’ estimates.

The German government, which bailed out Commerzbank in the financial crisis, still owns a 17 per cent stake, but is unlikely to sell down its holding any time soon as the shares remain well below the €26 break-even mark.

Investors who had expected the worst for the second quarter and bet on a falling share price by selling borrowed shares, scrambled to buy the stock back to meet their obligations, traders said.

“Expectations are so low that even quarterly results which are not super-bad lead to short coverage,” a Frankfurt-based trader said.

Around one per cent of Commerzbank stock was out on loan, well below levels earlier this year, figures from Markit showed.

The bank declined to give a specific 2013 outlook, reiterating 2013 would be a year of transition. It is in the midst of a radical cost-cutting programme – its second in four years.