Commerzbank AG's announcement that it will resume dividend payments from 2018, a higher net profit and lower loan loss provisions appeared to find favor with the market despite an overall weak first-quarter performance.
The German bank's share gained more than 3% in early trading May 15 after the bank released its results, topping the risers' list in the German benchmark DAX index. The bank's stock was still the best performer in the DAX as of 12.03 p.m. Central European Time, trading up 3.34% on the prior-day close at €10.95. The DAX index itself was down 0.09% around the same time.
The group's first-quarter net profit attributable to shareholders rose to €250 million from €229 million a year earlier and loan loss provisions dropped 60.6% year over year to €77 million.
Commerzbank has announced the accrual of 5 cents per share for a 2018 dividend over the first quarter.
Since 2008, Germany's second-largest commercial bank has paid a dividend just once, for 2015, and at 20 cents per share it was well below precrisis distributions of up to €1 per share.
Commerzbank's strategic restructuring is on track and the bank expected to deliver on its 2018 targets despite higher costs and a drop in net interest and net commission income, CFO Stephan Engels said in a conference call.
The lender's first-quarter net interest income edged down 0.4% on a yearly basis to about €1.05 billion. Net commission income was down to €797 million from €887 million.
Expenses up
First-quarter operating expenses went up 3.8% year over year to €1.94 billion. This was due to upfront costs of €244 million, chiefly related to higher bank levies, and additional expenses related to the implementation in January of the new International Financial Reporting Standard, IFRS 9, and the second Markets in Financial Instruments Directive, or MiFID II, Engels told analysts, adding: "We have also seen some project costs."
Marketing spending should increase over the next few quarters as the group continues to implement its strategic plan, the CFO added.
However, Engels confirmed the full-year target to keep its cost base at some €7 billion. Although he did not provide exact guidance on the impact of IFRS 9 on loan loss provisions, Engels said the effect should be below €600 million for the full year.
"We are moving forward with the execution of our strategic agenda ... with net new customer and associated asset acquisitions," he said.
New client acquisition has been a key target in Commerzbank 4.0 strategy, launched in January 2016, as the main driver of higher revenues.
Since the launch of the new strategy, the group has acquired 712,000 net new customers in the private and small-business customers segment in Germany and around 6,500 in the corporate client segment. Both targets are in line with the plan to have acquired 1 million new customers by year-end, according to Engels.
