“We are on track to achieve our targets for 2024. Our very good business performance and comfortable CET1 ratio are encouraging us in our intention to return more and more capital to our shareholders,” said CFO Bettina Orlopp. “We have applied to the ECB and the German Finance Agency for a third share buyback with a first tranche totalling €600 million.”
Segment development: Credit demand in the Corporate Clients segment is picking up
The Corporate Clients segment continued its strong business performance in the second quarter. Revenues increased by around 6% to €1,199 million (Q2 2023: €1,127 million). The segment’s success was once again based on a broad foundation: all client groups contributed to the strong result. After the challenging economic environment had dampened loan demand in recent quarters, the lending volume of the Corporate Clients segment rose to €99 billion in the second quarter (Q2 2023: €94 billion; Q1 2024: €96 billion). Demand for investment loans in particular picked up again. As expected, net interest income fell slightly to €678 million (Q2 2023: €696 million) because of the rising deposit beta against the backdrop of stable volumes, while net commission income increased by around 3% to €330 million (Q2 2023: €321 million).
At minus €121 million, the risk result was lower (Q2 2023: minus €169 million). The cost-income ratio improved further to 44% (Q2 2023: 45%). The segment’s operating result increased by around 22% to €551 million in the second quarter (Q2 2023: €450 million). The half-year result also increased significantly to €1,211 million (H1 2023: €992 million).
The Private and Small-Business Customers segment in Germany generated revenues of €1,067 million in the second quarter (Q2 2023: €1,050 million). Supported by the segment’s strong deposit business, net interest income rose slightly to €581 million (Q2 2023: €571 million). The segment benefited from the adjustment of the deposit models (replication portfolio) at the end of last year. Compared to the previous quarter, the inflows in call money partially offset the increased deposit beta. Additionally, early repayments of mortgage loans and the day count effect, which are neutral at Group level, led to lower net interest income. Overall, net interest income declined compared to the previous quarter (Q1 2024: €661 million). Net commission income increased significantly in the second quarter, improving by around 5% to €475 million (Q2 2023: €450 million). This was largely driven by the strong securities business. The volume of securities and the number of transactions both increased. Overall, the segment’s operating result in Germany improved by 4% to €311 million (Q2 2023: €299 million).
In Germany, the securities volume of our customers rose by a further €3 billion in the second quarter to €233 billion at the end of June (end of March: €230 billion). The net new money totalled €1.1 billion. The segment’s deposit volume increased to a quarterly average of €174 billion (Q1 2024: €166 billion). This was mainly due to the inflow of call money as a result of continued attractive offers, while the shift from sight deposits to interest-bearing products slowed. The lending volume was stable at €125 billion (Q1 2024: €125 billion). At €96 billion, the volume of mortgage loans also remained almost stable on the previous quarter (Q1 2024: €95 billion). New business in the second quarter exceeded last year’s figure by 23%. Coming from low levels, Commerzbank’s growth in mortgage business was above the market average.
The Polish subsidiary mBank continued its excellent development. Revenues increased by more than 80% to €413 million in the second quarter (Q2 2023: €226 million). Despite further burdens from provisions for legal risks from FX loans and the “Credit Holidays” totalling €300 million, mBank contributed €147 million (Q2 2023: minus €14 million) to the operating result. Both net interest income and net commission income continued to grow in the second quarter. Fuelled by the strong deposit business, net interest income increased to €596 million (Q2 2023: €547 million). Driven by strong customer business and currency effects, net commission income rose by around 9% to €87 million (Q2 2023: €80 million). Without the special burdens, the operating result would have climbed to a new record of €447 million in the second quarter (Q2 2023: €335 million).
Outlook: Targets for 2024 confirmed
Following the strong first half of the year, Commerzbank is confirming its targets for the financial year 2024: the Bank is still aiming for a net profit above the previous year, subject to the future development of burdens from Russia and FX loans at mBank. The Bank continues to target a net interest income of around €8.1 billion with upside potential for the full year 2024. The target for net commission income growth remains unchanged at 4%. Commerzbank targets a cost-income ratio of around 60%. It targets for a risk result below minus €800 million for the full year assuming usage of TLA. The CET1 ratio will be higher than 14%.
In accordance with its capital return policy, Commerzbank plans to return at least 70% of its profit for the current financial year to its shareholders, but no more than the net profit after deduction of AT1 coupon payments. The Bank will continue to rely on a combination of dividend payments and share buybacks. Based on the half-year results, the Bank has applied to the ECB and the German Finance Agency for a further share buyback with a first tranche totalling €600 million. The Bank plans to apply for a second tranche on the basis of the third-quarter results.
Journalists can dial in to the press conference call on the results of the second quarter, which begins at 10.30 a.m. CET today using the telephone number +49 30 233225775 . From 9.00 a.m. CET, you can also follow the conference call for analysts in English live at https://www.webcast-eqs.com/registration/commerzbank-2024-q2 . The financial publications and the recording of the conference call for analysts are available at https://investor-relations.commerzbank.com/quarterly-results/ .
