Wednesday 7 August 2019 9:45 am

Commerzbank warns its 2019 profit target now looks ‘ambitious’

Germany’s second-biggest lender Commerzbank said its net profit was unchanged in the second quarter from a year earlier, as it described “a very challenging environment”.

Commerzbank, which was set to merge with its bigger rival Deutsche Bank this year before the deal fell through, said its target of a slight year-on-year increase in net income was now “ambitious”.

Read more: Deutsche Bank wields the axe in London as traders sent home

Shares in the bank had fallen 4.2 per cent by 9.30am UK time as it highlighted “the notable worsening of the macroeconomic situation”.

The figures

Commerzbank posted net profit of €271m (£249m) in the second quarter of 2019, compared to €272m a year earlier. The figure was boosted by an almost 80 per cent fall in the bank’s tax bill.

Yet the firm’s operating profit fell 26 per cent to €298m from €401m a year earlier.

Revenue fell slightly to €2.13bn from €2.18bn a year earlier, just missing analysts’ predictions of €2.14bn.

Commerzbank’s earnings per share stayed flat at €0.22 in the second quarter of the year.

The percentage of non-performing loans – where the borrower is in default or close to default – on the bank’s books fell to 0.8 per cent from 0.9 per cent.

The bank’s common tier-one equity ratio, which indicates how well it can withstand financial stress, was at 12.9 per cent of risk-weighted assets.

Why it’s interesting

Attention has turned to Germany’s banking sector since the country’s biggest lender Deutsche Bank said last month it would sack 18,000 employees in a brutal turnaround plan.

The struggling German economy has posed problems for the country’s banks, adding to fears that lenders could be hurt by non-performing loans.

Commerzbank reassured investors today, saying its “risk profile remains very healthy”. It said: “This reflects the bank’s prudent lending standards.”

Yet it warned that “the noticeable worsening of the macroeconomic situation and the increasingly uncertain geopolitical situation” posed challenges in the second quarter.

What Commerzbank said

“In the second quarter, we were able to further strengthen our common equity ratio as business growth continued,” said Stephan Engels, chief financial officer of Commerzbank.

Martin Zielke, chairman of the board of managing directors of Commerzbank, said: “We are continuing on our growth path and are making significant progress in our customer business.”

Read more: Deutsche Bank misses estimates as losses exceed €3bn

“Despite all the successes we have made, challenges continue to increase for the industry and for us.”

“This might require further investments. And this is exactly what we are examining and assessing in our current strategy process.”