New strategic plans
Commerzbank wants to pay out more
September 22, 2023, 7:47 p.m
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Commerzbank apparently wants to distribute a larger share of its profits to shareholders in the future. There should be concrete figures when the new strategy is presented. In the end, the federal government also benefits from this, as it is in no hurry to sell its shares in the bank.
According to a report, Commerzbank wants to further increase its payout ratio. Part of the new strategy is to distribute at least half of their profits to shareholders. The board is aiming for a minimum payout of 50 percent, reported the “Handelsblatt” citing insiders. In addition, the return on equity is expected to increase: to more than eight percent in 2024, to more than nine percent in 2025 and to more than ten percent in 2026. Commerzbank did not want to comment on the report.
Investors on the stock exchange were not enthusiastic: Commerzbank shares extended their losses in the Dax and closed with a loss of 3.5 percent. CFO Bettina Orlopp had already announced that the bank was aiming for a double-digit return in order to earn its cost of capital. The current “Strategy 2024” envisages a return on tangible equity (ROTE) of 7.3 percent and a payout ratio of 30 to 50 percent of consolidated earnings.
It also said that the branch network, which has been halved to around 400 in recent years, should essentially remain as it is. No major workforce reduction programs are planned, the newspaper continued. In the private customer business, the institute wants, among other things, to expand its business with wealthy customers. To this end, the bank wants to hire more staff and also keep an eye out for acquisitions.
Citing financial circles, the “Handelsblatt” also wrote that the new strategy had not yet been decided. The board of directors and supervisory board would discuss this next week, and the plans should then be presented on November 8th.
Federal government without concrete exit plans
Federal Finance Minister Christian Lindner had praised Commerzbank just the day before. The state has held a stake in the DAX company since the global financial crisis around 15 years ago. “The federal government is very satisfied with the bank’s development,” he said at a “Handelsblatt” event. The federal government supports the strategy of the Frankfurt credit institution. In the long term, the government wants to privatize unnecessary state investments. “But no concrete decisions have been made at Commerzbank.” The federal government is Commerzbank’s largest shareholder with 15.6 percent.
The rise in interest rates in the euro area boosted the bank’s profit in the second quarter to 565 million euros – an increase of more than 20 percent within a year. “We are well on the way to achieving our goals for 2023 and 2024,” explained CEO Manfred Knof at the beginning of August. Commerzbank expects consolidated earnings in 2023 to be significantly higher than the previous year’s figure of 1.4 billion euros.
A few days earlier, CFO Orlopp had described net interest income for the year as a whole of eight billion euros as “a good estimate for this year”. In the second quarter of the year, the bank increased its net interest income by 44 percent to a record level of 2.13 billion euros.
At the same time, Orlopp pointed to asset management and trade finance as areas with untapped potential. This will be shown when the bank’s new corporate strategy is presented in November. Commerzbank also wants to expand its digital offerings, especially for brokerage customers.