Commerzbank Interest Income Jumps After Adding New Customers

(Bloomberg) --

Commerzbank AG posted a 12 percent gain in net interest income in the first quarter as aggressive client acquisitions lifted income from lending, giving a boost to Chief Executive Officer Martin Zielke after merger talks with Deutsche Bank AG collapsed.

  • First-quarter revenue fell 2.8 percent to 2.16 billion euros ($2.42 billion), as the bank revalued assets. That’s in line with the consensus estimate of analysts surveyed by Bloomberg.

Key Insights

  • Zielke is trying to increase market share by acquiring new clients, but he had to cut his growth targets amid headwinds from competition and low interest rates. That’s prompted the CEO to delay investments in information technology that are key to his strategy.
  • Interest income has been a bright spot in his turnaround effort, with bank adding 123,000 new retail clients and 800 business clients in the quarter. Commerzbank’s extensive retail network and exposure to Germany’s mid-sized companies have made it a potential acquisition target for rivals including UniCredit SpA and ING Groep NV, people familiar with the matter have said.
  • Zielke has said the bank must grow for costly investments to pay off, whether its own its own or through a deal. After the end of the talks with Deutsche Bank, he promised to update investors by the fall on strategy and targets for 2020 and beyond.

Market Reaction

  • Commerzbank has gained 34 percent this year, the best performing of the large European bank stocks, as the talks with Deutsche Bank fueled speculation that other banks may seek to bid.

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  • Operating profit was 244 million euros in the first quarter compared with 258 million euros a year earlier.
  • Operating expenses fell 4.2 percent to 1.57 billion euros. The bank has a full-year target of less than 6.8 billion euros.

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