Commerzbank warns of a loss in 2020 as Wirecard hits loan book
German lender Commerzbank posted a 21 per cent drop in profit in the second quarter as loan loss provisions increased and warned it is set to fall to a loss in 2020.
Provisions for credit losses rose to €469m as a result of the coronavirus pandemic. Around €175m of the provision was related to scandal-hit payments company Wirecard, however, according to reports.
Nonetheless, its shares rose 4.2 per cent after its net profit came in higher than expected.
The figures
Commerzbank’s net profit in the three months to the end of June came in at €220m (£199m). That was down from €279m but higher than the €95m analysts were expecting.
For the first half of the year, Commerzbank swung to a loss of €96m. That compared to a profit of €401m a year earlier.
The bank’s revenue rose to €2.27bn in the second quarter from €2.13bn in the same period in 2019.
But is loan loss provisions wiped out any gains. They rose to €469m from €178m a year earlier. That took total provisions for the first half to €795m.
Its operating return on tangible equity – a key measure of profitability – fell to 2.9 per cent in the second quarter compared to 4.7 per cent a year earlier. Part of this was due to the European Central Bank slashing interest rates.
Yet its common equity tier one ratio, a core measure of strength, rose. It hit 13.4 per cent form 12.9 per cent in the first quarter 2019.
What Commerzbank said
Commerzbank said it expects to set aside between €1.3bn and €1.5bn to cover credit losses this year. That was higher than previously estimated.
Describing the outlook, the bank’s results statement said: “In light of the expected risk result and potential restructuring charges, the Bank anticipates a negative net result for the year.”