✂ Fed’s first rate cut since 2020: Use our free Stock Screener to find new opportunities fastExplore for FREE

Commerzbank shares fall as risk provisions spook investors

Published 08/07/2024, 01:09 AM
Updated 08/07/2024, 08:16 AM
© Reuters. FILE PHOTO: A company logo is pictured at the headquarters of Germany's Commerzbank AG during the annual results news conference in Frankfurt, Germany, February 13, 2020.  REUTERS/Ralph Orlowski/File Photo
CBKG
-

By Tom Sims and Frank Siebelt

FRANKFURT (Reuters) - Shares of Germany's Commerzbank (ETR:CBKG) fell as much as 6% on Wednesday after it reported larger than expected loan loss provisions in the second quarter.

The stock price drop came despite the bank announcing plans for a 600 million euro ($654.48 million) share buyback as it met net profit expectations. S&P also upgraded the lender's credit rating.

Commerzbank, one of Germany's best-known banks, is partially held by the government after a bailout more than a decade ago, since when it has spent much of the time undergoing a major overhaul, slashing its workforce and branch network to restore profit.

Analysts at Deutsche Bank and JPMorgan called the results, which showed a 4.8% drop in net profit from a year earlier, solid.

"However, the extent of the provision losses will disappoint some," analysts at KBW wrote in a client note.

The bank reported provisions for loan losses in the second quarter of 199 million euros, more than the 161 million euros analysts had been expecting and a figure it said was influenced by troubles at a handful of clients. It didn't identify them.

At the same time, the bank's leadership signalled economic headwinds in its home market.

"We expect GDP to pick up a bit later than originally expected," said CEO Manfred Knof.

Second quarter net profit of 538 million euros compared with 565 million euros a year earlier and average analyst expectations of 539 million euros, according to a July consensus forecast published by the German lender.

The drop came as net interest income fell and as the bank booked expenses related to a long-standing issue with mortgage loans at its Polish unit and litigation in Russia.

The bank nevertheless confirmed its forecast for a full-year profit of more than last year's 2.2 billion euros.

Shares were 4% lower in early afternoon trading. Global stock markets have been volatile in recent sessions amid concerns that the U.S. economy could fall into recession.

S&P meanwhile upgraded the bank to A/A-1 from A-/A-2, saying it was "delivering stronger and more consistent" profits.

© Reuters. FILE PHOTO: A company logo is pictured at the headquarters of Germany's Commerzbank AG during the annual results news conference in Frankfurt, Germany, February 13, 2020.  REUTERS/Ralph Orlowski/File Photo

The bank said it had sought approval with its regulators for a first tranche of a share buyback programme, and said it plans to apply for a second tranche with its third-quarter results later this year.

($1 = 0.9168 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.