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Commerzbank has set out to launch its third share buyback since 2023 despite a drop in quarterly profits, as it seeks to boost payouts to shareholders in the face of financial hits it has suffered in Poland and Russia.
Germany’s second-largest listed lender said it had asked the European Central Bank and German government — its largest shareholder — for approval to buy back another €600mn in shares, having purchased more than €720mn since mid-2023.
The bank launched the first buyback in its 154-year history in June last year and on Wednesday said it was also planning to apply for another later this year. The uptick in payouts follows a radical cost-cutting plan and a windfall from higher rates, boosting the lender’s fortunes after decades of lacklustre performance marked by multiple crises.
The update comes after Commerzbank’s larger rival Deutsche Bank disappointed investors in July when it shelved its buyback plans for the year after taking a €1.6bn litigation hit in the second quarter.
Commerzbank’s profit in the second quarter fell 4.8 per cent to €538mn, as its Polish unit mBank took another hit from litigation over mortgages and a court case in Russia “caused burdens”.
Revenue rose 1.5 per cent year on year in the second quarter, to €2.7bn, compared with a 2.9 per cent increase in operating expenses.
However, Commerzbank’s chief executive Manfred Knof hailed the first half of the year as “our best in 15 years”, with profits up 12 per cent year on year.
Knof, who joined Commerzbank in 2021 from Deutsche, kicked off a radical restructuring that included cutting one in three jobs in Germany and closing half of the bank’s branches in the country.
He also vowed to make Commerzbank less dependent on interest income and increase the bank’s asset and wealth management operations. In June, Commerzbank closed its acquisition of a majority stake in Aquila Capital, a Hamburg-based investment firm that invests in wind and solar parks and other green assets.
Shares in Commerzbank fell more than 5 per cent in morning trading. Its stock has almost tripled since early 2021.
In the second quarter, a 2.4 per cent fall in net interest income was partly offset by rising fee income, which increased by 4.5 per cent. The bank’s total assets shot up by 11.6 per cent year on year to €560bn.
Its common equity tier one ratio — a key benchmark of balance sheet strength — improved by 0.4 percentage points to 14.8 per cent of risk weighted assets.
The bank confirmed its full-year outlook, saying it was on track to generate at least €8.1bn in net interest income this year while its cost-income ratio will be about 60 per cent.