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Commerzbank says it's back in profit

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FRANKFURT, Nov 8 AFP

November 09 2012, 01:00AM

Commerzbank, Germany's second-biggest bank, says it returned to profit in the third quarter of this year, but the result fell short of analysts' expectations.

Commerzbank said in a statement it booked a net profit of 78 million euros ($A96 million) from July to September, compared with a loss of 687 million euros 12 months ago.

Analysts polled by Dow Jones Newswires had been forecasting a bigger net profit of around 141 million euros.

Already late on Wednesday, Commerzbank had said it was unlikely to pay a dividend for either 2012 or 2013 given the difficult market environment.

The loss for the third quarter of 2011 had largely been due to writedowns on the bank's holdings of Greek sovereign bonds.

Nevertheless, the market environment "will remain volatile in the coming months", said chief executive Martin Blessing.

"We are, therefore, continuing with our strict cost management, consistently reducing non-strategic portfolios further and strengthening our profitability," he said.

At a news conference, Blessing said it was clear that deep cuts in personnel costs would be inevitable.

"But the extent of those costs will depend on the outcome of talks with the responsible bodies," such as labour representatives, he said.

A breakdown of the third-quarter earnings showed that net interest income fell, commission income was down slightly and net trading income was cut in more than half.

Investment income, on the other hand, swung back to small profit after a heavy loss last year.

At the same time, the bank increased its provisions for loan losses.

Looking ahead, "the situation in the euro zone has significantly stabilised in the third quarter. At present, it cannot be foreseen, however, whether the slight recovery of the markets will continue," said chief financial officer Stephan Engels.

In view of rising capital requirements, the ongoing low interest rate levels, and the loss of trust on the part of customers, "we expect to see further charges on revenues", Engels warned.

"However, the costs lately have developed better than originally expected due to further efficiency gains."

Investors did not appear as convinced.

Commerzbank shares were the biggest losers on the Frankfurt stock exchange on Thursday, shedding 3.32 per cent in a generally firmer market.

The weekly newspaper, Die Zeit, reported in its Thursday edition that Commerzbank is preparing to axe up to 10 per cent of its workforce in the coming years, or 5000-6000 jobs.

No such plans were unveiled on Thursday. But late on Wednesday, the bank said it would invest two billion euros in its core banking businesses between now and 2016.