More profit than expected, significantly lower costs: The restructuring of Commerzbank under CEO Manfred Knof is progressing. However, Germany’s second-largest private bank is cautious about the outlook for business in the further course of the year. “We expect ups and downs in the second half of the year,” said Knof on Wednesday when the quarterly balance sheet was presented. With a net profit of 470 million euros in the second quarter, Commerzbank clearly exceeded analysts’ expectations. Because of the restructuring costs, she had posted a loss of 527 million euros a year ago. Both the business with private and corporate customers have developed better than expected, said Knof. However, looking ahead is fraught with uncertainty.
This is mainly due to the looming gas crisis in Germany and its effects on the economy, he said. Commerzbank set aside 564 million euros as a risk provision for loan defaults in order to cushion the negative consequences of the Russian war of aggression against Ukraine and the cut gas supplies from Russia. So far, only a few loans have defaulted. Should Russia stop supplying gas, “the German economy would probably plunge into a severe recession, similar to what happened after the financial crisis in 2009,” according to the interim report. The bank put the burden of the war in the second quarter at 228 million euros. Since the beginning of the war, it reduced its Russia-related claims by 45 percent to 1.02 billion euros net by mid-July.
Already 7700 jobs eliminated
Income – the bank’s total income – rose in the second quarter to 2.4 billion euros from 1.9 billion euros in the same quarter last year. Knof, 56, initiated a reorganization last year in order to bring the institute, which was rescued by the state during the financial crisis, back on a stable profit path. From about 1000 branches only 450 remained. 10,000 jobs are to be cut. By the end of June, 7,700 jobs had already been cut, the bank said. CFO Bettina Orlopp said there were no further downsizing programs at the moment.
For the year as a whole, the bank is still aiming for a profit of more than one billion euros, but made this dependent on the economic situation. After the first half of the year, the bottom line was a profit of 768 million euros. The high costs remain an issue. In the second quarter, expenses fell by a tenth to 1.57 billion euros, and the cost/income ratio improved from 94 to 65 percent. The bank has set itself a target of 60 percent for 2024. The figures were generally well received on the stock exchange: Commerzbank shares have meanwhile increased by more than three percent.