Commerzbank sees 'positive' revenue development, cuts Russia exposure further

Commerzbank AG has seen positive development in revenues in the first two months of 2022, and further cut its exposure to Russia in March.

At the beginning of March, Commerzbank unveiled more bullish 2024 financial targets for its current strategy given "expected positive developments" in its business and potentially higher interest rates in Poland. It also disclosed an exposure to Russia totaling €1.9 billion, comprised of €1.3 billion of net exposure and €600 million of related exposures consisting mostly of commodities pre-export financing.

The German bank had a "very nice start" to the year across all revenue streams in January and February, CFO Bettina Orlopp said at the Morgan Stanley European Financials Conference in London on March 16. Net commission income has not been as strong as last year but is still positive, giving the bank "a little bit of comfort" for the first quarter.

In the first quarter last year, Commerzbank generated total revenues of €2.50 billion, and net commission income of €951 million.

The bank said in February that it expects higher revenues this year than in 2021. For 2024, Commerzbank is aiming for revenues of €9.1 billion, roughly €400 million more than the initial target set when the strategy was launched, banking on a revenue boost from its mBank SA unit in Poland.

The target factored in a potential €200 million increase in revenues at mBank based on the Polish central bank's benchmark interest rate of 2.25% at the time. The benchmark is now at 350 bps but the bank will retain its forecast in anticipation of "counter effects," Orlopp said at the conference.

Since the March 1 market update, Commerzbank's exposures to Russia have been reduced by €600 million to €1.3 billion, Orlopp said, adding that the recovery rate was nearly 100%. Reduction efforts are continuing, she said.

Commerzbank has started winding down existing transactions in Russia and ceased doing new business there. Withdrawing is a "difficult" scenario, said Orlopp. "It's not [like] a shop, which you can just close down."

The group's Moscow-based Commerzbank (EURASIJA) AO unit serves Russian subsidiaries of German clients, according to Orlopp. The unit employs 130 people and has equity of about €326 million.