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Despite Difficulties, CommerzBank Anticipates A Profit "Well Above" That Of 2022

Despite Difficulties, CommerzBank Anticipates A Profit "Well Above" That Of 2022
Commerzbank reported on Thursday that net profit increased by 12% in the fourth quarter, helped by higher interest rates, capping a second consecutive profitable year as it undergoes a major restructuring.
Despite "another demanding year in view of the challenging environment," the bank said it would aim for a 2023 result that is "well above" 2022, aided by higher interest rates.
Commerzbank, one of Germany's most well-known banks, has been laying off thousands of employees and closing hundreds of branches in order to reduce costs and increase profits. The bank is a candidate for re-entry into the prestigious DAX index of blue-chip companies.
The net profit in the quarter was 472 million euros ($505.3 million), up from 421 million euros the previous year. According to a Commerzbank consensus forecast, it was well above the average analyst expectation of 350 million euros.
Commerzbank earned 1.435 billion euros in net profit for the full year, up from 430 million euros the previous year and exceeding expectations of around 1.359 billion.
"Our turnaround is a success. Commerzbank is back," said Chief Executive Officer Manfred Knof.
Shares were expected to open 1.9% higher.
Even so, the bank's domestic market is struggling with high inflation, a faltering economy, and ongoing issues at a Polish subsidiary.
Downside risks for Commerzbank, according to analysts at Deutsche Bank, include soured loans, a significant drop in loan growth, falling interest rates, and delays in cost-cutting initiatives.
High interest rates are helping European banks, which are struggling due to the conflict, skyrocketing inflation, and an energy crisis.
Net interest income is expected to be "well above" 6.5 billion euros in 2023, according to Commerzbank, with "clear additional upside potential." It increased 33% to 6.5 billion euros for 2022.
A gauge of the state of the country is Commerzbank, which focuses on Mittelstand companies, the foundation of the German economy.
The bank has had a turbulent few years; in 2018, it was removed from the DAX index.
A year later, it engaged in unsuccessful merger negotiations with Deutsche Bank.
After that, the then-CEO came up with a new plan, but top investor Cerberus wasn't happy with it and successfully started a campaign for new management and significant job cuts.
The bank will elect its fourth chairman in three years in 2023 after Cerberus reduced its stake in the organization last year.
Due to a legacy issue with mortgages and a law that permits borrowers to forego monthly repayments, mBank, a Commerzbank subsidiary in Poland, struggled with business last year.

Christopher J. Mitchell

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