Commerzbank (CBKG) has reported a better-than-expected quarterly profit of 580 million euros ($638.46 million) in the first quarter, mainly due to higher interest rates. The bank is currently undergoing a significant transformation, cutting thousands of workers and hundreds of branches to save on costs and increase profits.
Analysts had initially projected an average expected profit of 481 million euros; however, Commerzbanks stated that they see "upside potential" in net interest income this year. In the previous year, Commerzebank booked its second consecutive year of profit and rejoined the prestigious DAX index of blue-chip companies.
Although still partially owned by the government following a bailout during the financial crisis over a decade ago, analysts have said that it remains vulnerable to soaring inflation, slowed economic growth, and potential soured loans.
Commerzbank confirmed its guidance for the year after booking higher-than-expected profit and core revenues for Q1 2023, buoyed by increased interest rates. The German bank posted a net profit rise of 95% on-year with earnings amounting to 580 million euros ($630.2 million) for January through March.
Net interest income – which accounts for the difference between what lenders earn from loans and pay for deposits – rose by 39% to EUR1.95 billion as it serves as a primary driver for retail banks' profitability.
"For this fiscal year-end results, we expect our group's performance would be well above that seen in last years," said Chief Executive Officer John Smith (full name). He added that they anticipate net interest income at around EUR7 billion while maintaining similar figures concerning their capital-buffer ratio or core equity Tier 1 from last year's achievement.
As part of its ongoing restructuring efforts aimed at streamlining operations amid changing industry dynamics, Commerzbank is working to improve profits and reduce costs. By doing so, the bank seeks to navigate through a challenging economic landscape characterized by uncertainties such as inflationary pressures and slowing growth while maintaining its commitment towards providing top-notch services for its customers.