Commerzbank Reports Results in Line With Expectations but Outlook Improves

Commerzbank reported operating results of EUR 1,183 million, 6% above our own estimate for the full year, albeit driven by a lower-than-expected risk result. Other than that, performance was in line with our expectations. However, the outlook for Commerzbank has improved. Expectations for interest-rate increases in Europe have shifted Commerzbank’s rather negative outlook on net interest income toward a materially positive one. For 2022, the bank now anticipates a net result above EUR 1 billion, ahead of what we have currently in our model. We plan to update our model shortly and incorporate the more optimistic interest-rate outlook in our analysis. We anticipate an increase to our fair value estimate likely beyond 10%. We had assumed that although Commerzbank had started to implement a restructuring plan, which began to bear fruit, only macro-driven dynamics outside management’s control could lift the bank permanently from the depths of low profitability. Such a scenario is now becoming increasingly likely to manifest itself.