Commerzbank AG (OTC:CRZBY), the prominent German banking institution, is set to distribute an estimated €900 million ($962 million) in dividends and share buybacks for this year, according to CFO Bettina Orlopp on Wednesday. This payout is projected to account for half of the bank's anticipated net income of about €1.8 billion. The bank's financial performance has been significantly bolstered by recent increases in interest rates by the European Central Bank.
Despite a period of minimal or zero dividends, Commerzbank (ETR:CBKG) is now returning to cash, pledging to share more earnings with its shareholders. The bank's net income factors in coupon payments for its AT1 securities, which are expected to total approximately €2 billion this year, marking an increase from €1.44 billion in 2023.
However, last month saw a dip in the bank's shares due to the absence of detailed information concerning its investor payout plans during an earnings presentation. Orlopp reassured investors that the next share buyback would surpass the €122 million repurchase completed earlier this year, although she did not provide a specific timeline for this action.
The CFO also revealed that the bank's strategy update scheduled for November will include details of planned payouts for 2025 through 2027. CEO Manfred Knof is poised to present a new strategy on November 8, targeting at least a 10% return on tangible equity.
A significant contributor to Commerzbank's growth has been the increase in lending income spurred by higher interest rates. Orlopp announced an upward revision of the guidance for net interest income, which is now expected to reach €8 billion this year, up from the €7.8 billion forecasted just last month. This figure stands against last year's adjusted net interest income of €6.3 billion.
Furthermore, Commerzbank has succeeded in raising its deposit beta more slowly than initially projected, which has further accelerated its growth. The bank is likely to conclude the year with an average pass-through rate of around 40%, compared to this year's full-year average of 25%.
As part of its strategy update in November, Commerzbank intends to improve its digital services for retail clients, with a special emphasis on its digital brokerage unit, comdirect. Additionally, the bank plans to expand its trade finance business with Germany’s Mittelstand companies.
Regarding mergers and acquisitions, Orlopp mentioned that Commerzbank is open to "selective opportunities," specifically citing asset management as an area of interest. However, she underscored that any potential transactions would be meticulously evaluated against the bank's commitments to shareholder payouts.
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