Frankfurt — In the midst of a major overhaul, Germany’s Commerzbank posted higher-than-expected third-quarter net income on Thursday, forecasting full-year profits and contrary to analysts’ forecasts for 2021 losses Did.
Quarterly results were supported by reduced provisions reserved to mitigate fallout from the pandemic and reduced costs.
Germany’s positive tone has echoed in many of the European banking sectors suffering from negative interest rates and the effects of COVID-19 over the past few years.
Societe Generale and ING also reported higher-than-expected profits on Thursday. This was helped by the release of reserves reserved for unrealized bad debt losses.
Commerzbank shares rose 6.4% in early transactions, while SocGen rose 3.6% and ING rose 2.3%.
Germany’s second bank’s outlook comes from the new CEO Manfred Knof, who joined the bank earlier this year, undertook a € 2 billion restructuring, including the closure of hundreds of branches and a reduction of 10,000 jobs. It’s a victory. The road to profit.
“Despite the cost of restructuring, we expect positive net performance for the whole year,” Knof said.
Prior to Thursday, analysts expected Commerzbank to lose more than € 100 million in 2021 and return to profits only next year. Banks posted a sharp loss of € 2.9 billion in 2020 due to restructuring costs.
For Commerzbank, it was a rocky year. The merger negotiations with Deutsche Bank failed and were excluded from the highest DAX index of the best German stocks. Last year, a major investor, Cerberus, launched a campaign for change. This facilitated top leadership turmoil and plans for significant headcount reductions.
Commerzbank, partially owned by the state after the bailout of the financial crisis more than a decade ago, lost about € 2 billion between 2009 and last year.
Banks said they were in the process of reducing positions, but as they do, they are also facing higher wage demands as inflation soars.
Workers will go on strike one day next week as unions are demanding a 4.5% salary increase from industry bankers.
Commerzbank Chief Financial Officer Betina Aurop told analysts that the bank is still out of the woods, despite quarterly reserves dropping from € 272 million in the previous year to € 22 million. Said not.
She said corporate defaults would increase in the next quarter after the government’s efforts to support a pandemic are over.
Jeffreys said in a memo that Societe Generale’s reserve was about half what analysts expected.
($ 1 = 0.8633 euros)
Tom Sims and Frank Sievert