Commerzbank AG (CRZBY)

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Commerzbank Posts Small Profit In 2Q (8/08/13)

FRANKFURT--Commerzbank AG (CBK.XE) Thursday posted a small net profit for the second quarter, as high provisions for potential losses on loans, writedowns on assets and pressured revenues overshadowed some improvements in restructuring Germany's second largest lender.

Net profit fell 84% to EUR43 million ($57 million) from EUR270 million, better than forecast, as provisions--such as for some commercial real estate and public finance assets--rose 34% to EUR537 million from EUR404 million, but were below the forecast EUR551 million. Net interest income, the main revenue driver, fell 8.7% to EUR1.63 billion from EUR1.78 billion, above the forecast EUR1.38 billion.

Commerzbank has said that 2013 will be a year of transition in its four-year restructuring plan to strengthen its four main business units by 2016, while shedding other assets that were transferred to an internal "bad bank" a year ago. In 2013, the bank expects loan loss provisions to remain above 2012 levels as it gradually reduces the bad bank's assets, which include public finance, commercial real estate finance and ship finance portfolios.

Costs will be capped at EUR7 billion, and revenues in the retail bank and in the business with German medium-sized banks will steady, the bank said. The assets in the bad bank will drop well below EUR90 billion by the end of the year, helped by the sale of a portfolio of U.K. commercial real estate loans worth around EUR5 billion in the second quarter.

Under the plan announced in November, Commerzbank plans to cut 5,200 jobs, reduce the group's costs compared with revenues and invest in retail operations to grow its customer base and revenues. Together, the retail bank, the business with German medium-sized companies, the small investment bank and the Central and Eastern European business are targeting an after-tax return on equity of above 10%, a cost-income ratio of around 60%, and a 9% key capital ratio under future regulations for European banks by 2016. The bank hopes to achieve the 9% capital ratio by the end of 2014.

In the second quarter, Commerzbank raised EUR2.5 billion in capital to wean itself off the German government aid that was needed in early 2009, by repaying the final part of non-voting shares the government held. The government now only holds a 17% equity stake in the bank.

Due to the U.K. portfolio sale, risk-weighted assets were reduced by EUR1.5 billion, but there will be charges of EUR179 million in 2013, the bank has said. Of this, around EUR134 million would be booked in the second quarter, Commerzbank said.

It also reduced the assets in the bad bank further in the three months to June, by EUR7 billion to EUR136 billion. With the U.K. portfolio sale, that number will drop to EUR131 billion.

Write to Ulrike Dauer at [e-mail]

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