(New: Statements from the press conference, share price, further details)

FRANKFURT (dpa-AFX) - Commerzbank promises its shareholders further growth after the highest profit in its history. "We will not rest on our laurels from 2023," assured Group CEO Manfred Knof in Frankfurt on Thursday. "After the game is before the game." The bank will "increase the Group result again in the current year" and prove that it can "grow profitably even in a less favorable interest rate environment", said Knof. "However, this will not be a sure-fire success."

Boosted by the turnaround in interest rates, the bank, which returned to the top German banking league just under a year ago, saw its net profit climb from a good 1.4 billion euros in 2022 to a record figure of just over 2.2 billion euros last year. Commerzbank achieved the highest annual profit in its history to date in 2007 with a good 1.9 billion euros - before the financial crisis and the subsequent rescue by the state.

Rising interest rates as a driver

The DAX-listed group's net interest income increased by almost 30 percent to around 8.4 billion euros in 2023. The Executive Board expects around 7.9 billion euros for the current year. Since the European Central Bank (ECB) ended the era of zero and negative interest rates in July 2022 and raised key interest rates ten times in a row, banks and savings banks no longer have to pay interest when they park money with the central bank, but earn money from it.

Commerzbank's income - i.e. total income - increased by almost eleven percent to around 10.5 billion euros within a year. At 618 million euros, risk provisions for potential loan defaults were below the previous year's figure (876 million euros) due to reversals. For the full year 2024, the Executive Board currently expects a figure of less than 800 million euros.

Business in Poland burdened by billions

Knof had tightened the savings course after taking office at the beginning of 2021. The bank cut thousands of jobs and significantly reduced its branch network in Germany from 1,000 to 400 locations. Over the next few years, more business with wealthy private customers and additional digital offerings for corporate customers should bring the bank increasing profits. The Board of Managing Directors aims to increase net profit to around 3.4 billion euros by 2027.

However, Commerzbank's profit could have already been considerably higher in 2022 had it not been for the more than one billion euros in charges from the Polish subsidiary mBank, including in connection with Swiss franc loans. Special charges in Poland amounting to almost 1.1 billion euros also depressed earnings in 2023. The bank is attempting to mitigate the legal risks in this area through out-of-court settlements. "We are not at the end of the tunnel, but we clearly see light at the end of the tunnel," said CFO Bettina Orlopp in an interview with analysts.

Dividend to increase

The Commerzbank Board of Managing Directors is promising shareholders more lucrative times: For the financial years 2022 to 2024, the Bank has earmarked a total of three billion euros for dividends and share buybacks. A dividend of 35 cents per share is planned for the 2023 financial year, 15 cents more than in the previous year. This would be the fourth profit distribution since the state took a stake in the bank in 2008/2009. In total, the bank intends to pay out around one billion euros to its shareholders for the 2023 financial year.

"We now have so much water under the keel and enough leeway that we can both invest and serve our shareholders, who admittedly have not enjoyed the shares very much in recent years," said CEO Knof.

Federal Finance Minister Christian Lindner (FDP) will be pleased to hear this message: The state had saved Commerzbank from collapse after the takeover of Dresdner Bank in the 2008/2009 financial crisis with billions in taxpayers' money and has been the largest shareholder of the Frankfurt-based institution ever since. According to media reports, the federal government's stake in Commerzbank has increased slightly because it has not sold any shares as part of the share buyback program that has been running since 10 January. As fewer Commerzbank shares will be in circulation after the end of the program, the federal government's stake will automatically increase: according to the reports, it is expected to rise from 15.75 percent to around 16.5 percent.

Is Knof seeking a second term in office?

A new appointment is in the offing on the bank's Board of Managing Directors: IT board member Jorg Oliveri del Castillo-Schulz, who has been a member of the board since January 20, 2022, will not extend his contract, which expires at the end of September. CEO Knof confirmed corresponding information in the Handelsblatt. The search for a successor has begun.

Knof, whose contract expires at the end of 2025, and Orlopp, who is said to have ambitions to become CEO, presented themselves in a decidedly harmonious manner on Thursday: Knof responded to the question of whether he would be available for a second term of office by saying that he already had "the ambition to show that growth really works here". Orlopp emphasized: "We worked extremely well together as a team and have a pretty good plan for the next few years." She herself is "a very loyal soul".

Share price rises significantly

The news was well received on the stock market. In particular, the outlook and the prospect of further dividend increases and further share buybacks helped the share price. In the early afternoon, the Commerzbank share was one of the biggest winners in the leading German index with a plus of almost four percent. In the year to date, however, the share price has only risen by around one percent, slightly less than the DAX.

In initial assessments, analysts spoke of a "good mix" with a view to the final quarter of 2023. Net interest income and costs were better than expected, wrote Benjamin Goy from Deutsche Bank. Kian Abouhossein from JPMorgan also attested to the bank's "good management of costs". Anke Reingen from the Canadian bank RBC wrote that the outlook for net interest income this year was encouraging./ben/zb/DP/zb