Tags: EU | Germany | Earns | Commerzbank

Commerzbank Posts Better-Than-Expected Earnings

Thursday, 05 Aug 2010 11:21 AM

German lender Commerzbank AG reported Thursday that it earned 352 million euros ($464 million) in the second quarter thanks to a tax gain and lower loan-loss provisions, and said it expects a full-year profit.

The bank's better-than-expected April-June net earnings compared with a loss of 761 million euros a year earlier.

Commerzbank attributed the gain to a positive tax result and also said loan-loss provisions were down to 639 million euros in the quarter from 993 million euros a year earlier thanks to an improving economy and restructuring of loans.

It reported an operating profit of 243 million euros, compared with last year's 223 million euro loss.

Still, Commerzbank said volatile markets affected its trading result. It said gross revenues were stable at 3.1 billion euros in year-on-year terms but were down 14 percent from this year's first quarter.

Looking ahead, chief financial officer Eric Strutz said that, thanks to better-than-expected economic developments, "our risk provisioning will decrease considerably compared to what we could have expected at the beginning of the year."

Commerzbank currently assumes that risk provisioning for the full year will amount to up to 3 billion euros, he said. That compared with a previous estimate of about 3.8 billion euros and last year's total of 4.2 billion euros.

"We have always said that we will be profitable by 2011 at the latest," CEO Martin Blessing said. "On the basis of the pleasing development in results in the first six months, we now assume that in a stable market environment we will conclude 2010 as a whole with a profit."

Commerzbank shares were 0.2 percent higher at 7.21 euros in morning Frankfurt trading. Analysts had forecast net earnings of 109 million euros.

Commerzbank took aid during the financial crisis from the German government, which now owns 25 percent of the bank.

Strutz said the bank is sticking to its pledge to start paying back the aid by 2012. On Monday, Economy Minister Rainer Bruederle told the Handelsblatt newspaper he hopes that the government "can withdraw fully from the bank in three years at the latest."

"Overall, we performed well in the first two quarters of the year," Blessing said. "However, a steep road still lies ahead and we are still a fair way from normalcy."

He acknowledged that an effort to reduce risks "is taking its toll on profits, but stability is more important to us than maximizing short-term earnings."

Commerzbank's core capital ratio, a key measure of a bank's health, was 10.8 percent at the end of June, up from 10.5 percent a year earlier.

The bank's total assets were up to 898 billion euros from 846 billion euros at the end of the first quarter, due in part to exchange rate movements and market volatility that led to higher valuations of derivatives.

The bank was one of 14 in Germany which underwent recent European stress tests to examine how they would cope with extra strain. It passed easily, with the survey finding its core capital ratio would sink to 9.1 percent in a worst-case scenario.

Commerzbank's first-half net earnings came in at 1.06 billion euros, compared with a loss of 1.63 billion euros for January-June 2009. Operating profit was 1.01 billion euros, compared with a loss of 818 million euros.

Loan-loss provisions declined to 1.28 billion euros from 1.84 billion euros.

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German lender Commerzbank AG reported Thursday that it earned 352 million euros ($464 million) in the second quarter thanks to a tax gain and lower loan-loss provisions, and said it expects a full-year profit.The bank's better-than-expected April-June net earnings compared...
EU,Germany,Earns,Commerzbank
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2010-21-05
Thursday, 05 Aug 2010 11:21 AM
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