Commerzbank Slips To Q1 Loss, Sees Stable Customer Business Revenue; Stock Down

Shares of Commerzbank AG (CRZBY.PK) were losing around 5 percent in the morning trading in Germany after the banking major reported Wednesday a loss in its first quarter, compared to prior year’s profit, hurt mainly by impacts from coronavirus or Covid-19 pandemic. Revenues declined, while net interest income increased with strong customer business.

Looking ahead, the Bank expects to keep revenues in customer business largely stable in the financial year 2020, excluding the influence of non-recurring and valuation effects. The outlook assumes that the economy will gradually gain momentum after a lockdown lasting around two months and that there is no second lockdown.

Further, the company said it will intensify cost management even more this year, and targets to achieve a cost base on the level of 2019 now also including IT investments of up to 0.2 billion euros from “Commerzbank 5.0”.

The Bank is adjusting its target for the Common Equity Tier 1 or CET1 ratio to at least 12.5 percent at the end of the year from at least 12.75 percent expected earlier. The current CET1 ratio is 13.2 percent, compared to 12.7 percent last year, and 13.4 percent at end of December 2019.

The Bank also said it has decided to not pursue the sale of the Polish mBank, citing the current market distortions and its own strong capital position.

Bettina Orlopp, Chief Financial Officer of Commerzbank, said, “Thanks to the far-reaching measures adopted by the Federal Government, we anticipate that German companies, which make up the lion’s share of our business, will come through the crisis comparatively well. We have a healthy loan book and the proportion of impaired loans has been below the average for Germany and Europe for many years now. We will therefore be able to cushion additional effects resulting from the pandemic.”

For the first quarter, net loss attributable to shareholders was 295 million euros, compared to last year’s profit of 122 million euros.

The pre-tax result was loss of 233 million euros, compared to profit of 227 million euros last year. It includes extraordinary proceeds from the EMC sale.

The operating loss was 277 million euros, compared to profit of 246 million euros a year ago. The latest results included 479 million euros negative impact from the pandemic. Excluding Covid-19 impact, operating profit would be 202 million euros.

Revenues declined to 1.85 billion euros from prior year’s 2.16 billion euros, mainly due to temporary valuation effects. However, the company reported good development in customer business. Net interest income went up by in excess of 7 percent, and net commission income grew by more than 14 percent on the back of an excellent securities business.

In Germany, Commerzbank shares were trading at 3.08 euros, down 5.32 percent.

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