Commerzbank on track for 2017 after Q3 profit boost

Germany's second-largest lender Commerzbank on Thursday reported higher profits in the third quarter thanks to one-off effects, saying it was on track to meet its targets for the full year.

Net profit at the bank reached 472 million euros ($548 million) between July and September, compared with a 288-million-euro loss in the third quarter last year.

Operating, or underlying profit climbed 47 percent year-on-year to 629 million euros, on the back of revenues up 3.0 percent at 2.5 billion euros.

The group's earnings were boosted by around 500 million euros in one-off effects as it sold off its Frankfurt HQ building -- Germany's tallest skyscraper -- to lease it back.

It also sold a share in payment processor Concardis and ended consumer loan cooperation with France's BNP Paribas.

Excluding all three one-off items, revenues shrank 9.0 percent to 2.0 billion euros.

Commerzbank's renewed focus on winning fresh customers has seen it add 450,000 retail clients since the beginning of 2017.

The lender reports growing loans and deposits, but the retail banking unit saw lower profits over the first nine months despite revenues at around the same level.

Meanwhile, the group's corporate banking business, which lends to many of the "Mittelstand" small- and medium-sized business that make up the backbone of the German economy, added 3,500 new clients between January and September.

But the division complained of weak markets and historic low interest rates in the eurozone translating into lower revenues and profits.

Operating, or underlying profit at the corporate bank fell 24 percent year-on-year in the third quarter, to 241 million euros.

- Takeover talk -

Nevertheless, "we have made good progress in laying the foundations for our transformation this year," chief executive Martin Zielke said in a statement.

Commerzbank is in the throes of a restructuring dubbed "Commerzbank 4.0" designed to secure "sustainable long term profitability", which includes digitising some 80 percent of its internal processes.

Looking ahead to the full year, the group upheld its forecast of a "slightly positive" net result in 2017, after reporting 66 million euros net profit over the first nine months -- down 31 percent year-on-year.

Commerzbank's latest earnings report comes after weeks of rumours that foreign banks including France's BNP Paribas and Italy's Unicredit are eyeing it as a possible merger target.

But the lender would have to boost its performance before a sale can go ahead, as the German state is loath to lose money on the 15-percent stake it owns in the lender following a rescue in the throes of the financial crisis.

For his part, finance director Stephan Engels dismissed the merger reports as a product of the summer "silly season" in the media.

"We're concentrating on making our bank profitable for the long term and creating added value for our shareholders," he told reporters during a telephone conference.

Investors took the executives at their word, shooting Commerzbank to the top of the DAX index of German blue-chip firms as the stock gained 2.4 percent to trade at 12.01 euros around 1230 GMT.

One factor juicing the shares' popularity could have been the lender's high capital ratio, a measure of the buffer it has on hand to weather financial shocks.

By the end of the year, the figure should come in higher than the 12.5 percent recorded at the end of 2016, the bank said.

Commerzbank has also managed to pare down its stock of non-performing loans linked to shipping firms by 30 percent or 1.5 billion euros since January, faster than observers expected.

Source: AFP