Big profit at Commerzbank marks comeback from brink

GMT 13:12 2016 Saturday ,13 February

Arab Today, arab today Big profit at Commerzbank marks comeback from brink

Commerzbank, Germany's second biggest bank
Frankfurt - AFP

Commerzbank, Germany's second biggest bank, said Friday that its profits quadrupled in 2015, highlighting a remarkable comeback from the brink of disaster during the financial crisis.

In a rare upbeat announcement amid the current gloom gripping the European banking sector, Commerzbank also said it would resume dividend payments as it expects to see further profit growth this year.

Investors welcomed the strong 2015 showing by the lender which posted a net profit of 1.06 billion euros ($1.2 billion), compared with 266 million euros the year before.

"All's well that ends well," said Robert Halver, analyst at Baader Bank.

"The results published today are good. You get the feeling that the bank really tackled its problems head-on," he told AFP.

Frankfurt-based Commerzbank was severely hit by the financial crisis, having to be rescued by the state in 2009, and the government still holds a 15-percent stake in the bank.

It has since laid off thousands of staff and slashed costs, resulting in a turnaround.

"2015 has shown that our strategy is right and that the implementation has been successful," boasted chief executive Martin Blessing.

"For the first time in five years we have attained a net profit of more than one billion euros and have seen further significant strengthening of our capital base," Blessing said.

The profits were slightly bigger than analysts had expected and sent Commerzbank shares soaring on the Frankfurt stock exchange.

Commerzbank shares were the biggest gainers on the blue-chip DAX 30 index, jumping 18 percent to 7.54 in closing trade.

Commerzbank said in a statement that revenues totalled 9.8 billion euros last year, an increase of 11 percent year-on-year, and underlying or operating profit tripled to 1.9 billion euros.

The group said investment in its retail or high-street banking business was paying off, with underlying profits in that division doubling last year.

The retail banking division, vastly expanded by the acquisition of rival Dresdner Bank in 2008-2009, had long weighed on Commerzbank's profitability.

Commerzbank said it slashed loan risk provisions last year to 696 million euros from 1.14 billion euros in 2014, a move welcomed by analysts.

"The main surprises are the improvement in capital ratios and the reduction of risky loans," said Equinet analyst Philipp Haessler.

Commerzbank also said it had now closed an external structure, also known as "bad bank", created in 2012 to isolate the healthy part of the bank from high-risk assets, which it said had now been unwound for the most part.

On the back of the jump in profits, the management board will propose a dividend per share of 0.20 euros for 2015, the first payout since 2008.

Looking ahead, Commerzbank said that "2016 will be a challenging year due to the geopolitical and macroeconomic environment."

Commerzbank said it expected a "moderate increase in loan loss provisions. From today's perspective we expect a slight increase in net profit in comparison with this year's result."


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