Commerzbank on Thursday reported a 51 percent jump in fourth-quarter net profit, beating analysts' expectations but also scaled back profit and revenue goals. The bank's finance chief said the group was now unlikely to achieve a return on tangible equity - a key profitability measure - of 6 percent by 2020.
Chief Financial Officer Stephan Engels told analysts that recent earnings reports showed lower expectations among companies in Germany and Europe this year and next, resulting in "less tailwind than we would have hoped for." The bank officially pared back its previously stated 2020 revenue projection of 9.8 billion euros to around 9.2 billion euros, a move it had flagged last year.
Germany's second-largest listed bank, still partly owned by the government, is overhauling its business by cutting staff, streamlining its back office and expanding its retail customer base. There has been persistent speculation about a potential merger with larger rival Deutsche Bank and this has heated up over the past few months.
On Thursday, Commerzbank's Chief Executive Officer Martin Zielke said recent merger speculation was understandable given weak profits for German banks but said he would not comment further. Commerzbank reported that net profit attributable to shareholders of 113 million euros ($127.43 million), which was above the 75.7 million euros expected by analysts in a Reuters poll, and 75 million euros a year earlier. The bank said that it would cut more costs this year and next and is targeting a 3 percent growth in revenue a year.