Thursday 9 February 2017 3:46 pm

Commerzbank profits tumble for 2016 as restructuring costs stack up

Commerzbank announced today that 2016 had taken a nasty chunk out of its bottom line, as restructuring costs and low interest rates took their toll. 

The figures

The German bank revealed net profits attributable to shareholders for its full year of €279m (£237.6m), down 74.3 per cent from €1.1bn the year before. Profits for the fourth quarter also slipped to €183m, down 5.2 per cent compared with €193m in the same period the year before.

Meanwhile, the lender reported interest and trading income for the full year of €5.4bn, down 13.2 per cent compared with the prior year's €6.2bn. Income for the fourth quarter was largely flat at €1.3bn.

Commerzbank's common equity tier 1 capital ratio at the end of 2016 stood at 12.3 per cent, up from 12 per cent at the end of 2015.

Shares are trading down 1.6 per cent at €7.57 at time of writing. 

Why it's important

Like many of its European peers, including UniCredit and fellow German Deutsche Bank, Commerzbank is no stranger to the need to restructure. It launched its "Commerzbank 4.0" plan last September, which will also involve shedding just shy of 10,000 jobs over the course of four years and the bank taking an axe to its dividend for the foreseeable future. 

However, the battles facing the lender are more than just a makeover of its business models. The statement from Commerzbank today also blamed low levels of interest rates for putting a squeeze on its income. 

What Commerzbank said

Martin Zielke, the bank's chairman, said:

We achieved a solid result in 2016 and further improved our capital ratio. However, we can not be satisfied with the result quality.

That is why we must resolutely implement our strategy Commerzbank 4.0. For this we have now created the necessary scope for action and can tackle the transformation as planned. We want to make Commerzbank the most competitive bank in Germany by 2020.

The goals that we have set ourselves, we are now working step by step. 

In short

Restructuring may have knocked the bank for 2016, but onwards and upwards in 2017 and beyond?