Commerzbank Earnings: Russia-Related Provisions Cloud Distribution-Focused Turnaround Story

Commerzbank reported a decent second quarter with return on equity of 7.1%. Unchanged guidance and an operational performance, which supports management's outlook for 2024 were positive, but a legal provision for a Russia-related court case of EUR 95 million on top of the ongoing provisions Commerzbank is booking for foreign-exchange loans in mBank left a sour taste. The announcement of a first EUR 600 million tranche in share buybacks is in line with Commerzbank's equity story of improving performance-yielding larger shareholder payouts. However, the uncertainty around further fines related to the Russia case, which could dampen distributions this year as highlighted by management, is an unwelcome distraction. We maintain our fair value estimate of EUR 15.80 per share and no moat rating.