Commerzbank CEO Says Slow Quarter Means `Challenging' 2016by
Blessing says first-quarter will likely be weaker than last
Bank had forecast `slight improvement' in full-year profit
Commerzbank AG Chief Executive Officer Martin Blessing said a “slow” first quarter will make it more difficult to match last year’s profit, just a month after the bank projected an increase in full-year earnings.
“The result for the first three months is likely to be lower than in the previous quarter,” Blessing, 52, told shareholders at the annual general meeting in Frankfurt on Wednesday. “This will also have an impact on the year as a whole -- it will be more challenging to attain the net profit posted in 2015.”
European banks are scaling back profit estimates as turbulent global markets, record-low interest rates and faltering growth across the euro region erode revenue. Germany’s second-largest lender said last month that it expects a “slight improvement” in full-year profit as it cuts costs and unwinds toxic assets at a faster pace than previously projected.
“It doesn’t come as a surprise,” said Neil Smith, an analyst at Bankhaus Lampe, with a buy recommendation on the shares. “They have a lot to sort out -- a new strategy, a new CEO, offloading non-core assets. I’m after the new strategy.”
Commerzbank shares dropped 2.7 percent to 8.23 euros at 11:35 a.m. in Frankfurt, reversing earlier gains. They have lost about 14 percent this year.
The bank said last month that it expects full-year profit to rise from 1.06 billion euros ($1.2 billion) in 2015, “provided that there are no significant changes in economic and political conditions.” Analysts at Deutsche Bank AG forecast the lender to boost its net income to 1.17 billion euros this year, according to a note on April 5.
Blessing’s warning comes a month after larger competitor Deutsche Bank said it probably won’t be profitable this year. John Cryan, that company’s co-CEO, cited his firm’s legal bills and charges tied to its restructuring.
Commerzbank had already said in February that it would probably fail to meet goals for boosting return on equity and reducing costs as a share of revenue this year.
“There are two main reasons for that,” Blessing said on Wednesday. “First, interest rates have fallen significantly since we set those goals in 2012. Second, regulatory costs have increased significantly over the last years.”
Blessing will step down as CEO at the end of the month, when he will be succeeded by Martin Zielke, who overhauled the lender’s consumer-banking unit. Commerzbank is scheduled to report first-quarter earnings on May 3.