Commerzbank Earnings: Higher Rates Continue to Drive Good Results

Commerzbank CBK had a good first half of 2023. Return on tangible equity of 8% was a strong showing considering the bank’s struggle to show any signs of structural profitability for the better part of the last decade. We maintain our EUR 11.60 per share fair value estimate and no-moat rating.

In the second quarter, Commerzbank continued to enjoy the benefits of higher interest rates in Europe. Net interest income increased to EUR 2.136 billion from EUR 1.441 billion a year ago. Also positive, the bank flagged lower-than-expected pass-through rates, meaning Commerzbank is facing less pressure to pass on higher interest rates to depositors and savers than previously anticipated. Net commission income did come in lower than a year ago at EUR 841 million versus EUR 894 million, largely because of lower activity in equity markets resulting in less securities transactions income.

Operating expenses increased to EUR 1.481 billion from EUR 1.423 billion, mostly driven by inflationary pressures. The good revenue development thanks to higher interest rates more than offsets higher operating expenses due to inflation, however. The cost/income ratio continues to improve as a result, coming in at 56% in the second quarter versus 59% in the same period last year.