Thursday 7 November 2019 3:08 pm

Commerzbank forecasts profit drop amid challenging conditions

Commerzbank has warned that its profit for the year will be below previous expectations, as lower for longer interest rates take their toll on the German banking giant.

Citing the negative impact of monetary policy and geopolitical uncertainty, the lender said that net profit for the year would be lower than last year.

Read more: Pound sinks as Bank of England comes closer to interest rate cut

“Consolidated net income for the 2019 financial year is expected to be lower than in the previous year,” the bank said.

Despite the outlook, the firm posted net profit in the third quarter of €294m, rising from €218 in the same period last year.

Like its peer Deutsche Bank, the German lender has struggled amid higher costs and tough trading conditions.

Read more: BoE: Brexit deal and trade wars will hold back growth

“The European banking sector continues to remain challenging as Commerzbank once again downgraded its profit outlook, the second time the bank has done in this in a matter of weeks,” said Michael Hewson, chief market analyst at CMC Markets,

He added: “CEO Martin Zielke also unveiled a raft of new cost cutting measures. Zielke reiterated his plan to sell off its Polish bank MBank, an incomprehensible decision when you consider the challenges the bank faces domestically.

“MBank is one of the areas where margins are good, and while a sale would improve cash flow in the short term, its hardly conducive to improving the banks long term future.”