Commerzbank profit more than doubles on retail banking

Commerzbank's second-quarter net profit more than doubled on the back of strong retail banking and the German bank plans to pay a dividend for this year, in a sign of its recovery from the aftermath of the financial crisis. Germany's second biggest bank by market value is more than half way through a four-year revival plan. The bank, which finances more than a third of the country's exports, has cut costs and shrunk its balance sheet. It has not paid a dividend since 2007.
"The substantially improved operating profit in the first six months of the year is clear testimony to the successful turnaround," Chief Executive Martin Blessing said in a statement.
"The fact that Commerzbank is planning to pay a dividend was not the only good news. Results came in ahead of consensus with the retail bank being a key area of good performance, showing strong revenues," Bankhaus Lampe analyst Neil Smith said.
Retail banking activities benefited from a strong mortgage financing business in a booming German real estate sector. It also attracted 68,000 new customers.
The bank's main cash cow, dubbed Mittelstandsbank, which caters to Germany's medium-sized companies, produced a 9 percent increase in operating profit as it put aside less money to cover potential bad loans.
Earnings at Commerzbank's investment bank fell reflecting reduced trading activity and low interest rates.
Chief Financial Officer Stephan Engels said the group was still aiming to increase revenues and market share in 2015.
"We have played a good first half and continue to fight for our 2016 guidance. But one should not forget that the market environment has changed compared to when we set out targets," he said, referring to low interest rates.
The bank's capital strength as measured by the core tier 1 ratio improved by one percentage point quarter-on-quarter, reaching 10.5 percent, including money set aside for the dividend payment.
That was helped by its 1.4 billion euro cash call in April, after it agreed to pay $1.45 billion to settle an investigation into alleged violations of US sanctions against countries such as Iran and Sudan. "Until now, the situation de facto has not changed, sanctions are still in place. So it is too early to comment on potential changes (of Commerzbank's business activity in Iran)," Engels said.
Commerzbank reported a 280 million euro ($307 million) net profit for the three months through June on August 03, ahead of expectations. It also announced a dividend of 10 cents per share for the first half of the year, in line with an earlier guidance.