FRANKFURT (Reuters) - Commerzbank (CBKG.DE) beat forecasts with a 28 percent rise in first-quarter net profit, as a one-off boost at its asset run-off business offset lower earnings from its core corporate and retail operations.
The 11 percent rise in group operating profit at Germany’s second-biggest listed bank compared with a fall of 20 percent at its two main businesses.
Banks across Europe have been struggling with ultra-low interest rates while they battle to clean up their balance sheets in the wake of the global financial crisis.
“It is clear that it will take some time for our growth to be sufficient to significantly outweigh the burden resulting from the negative interest rate environment”, Chief Executive Martin Zielke said in a statement on Tuesday.
Earnings at Commerzbank’s cash cow corporate clients unit, which caters to Germany’s prized small and medium-sized companies and includes the lender’s investment banking activities, were down on a weak capital market business.
The lender has launched a 6 billion euro (£5 billion) loan offering for small- and medium-sized companies as it seeks to benefit from growing loan demand in anticipation of rising interest rates.
The retail bank saw profit decline due to pressure on its deposits business, where negative interest rates weighed, and a higher banking tax in Poland.
Despite an increase in provisions for bad ship loans, Commerzbank’s Asset & Capital Recovery unit posted a sharp increase in operating earnings as the value of a hedge for an infrastructure financing, which had been written off, recovered.
The bank’s shares were indicated to open 0.5 percent higher, according to pre-market data from brokerage Lang & Schwarz.
The 217 million-euro first-quarter net profit at Commerzbank, Germany’s No.2 listed lender after Deutsche Bank (DBKGn.DE), was ahead of analysts’ expectations for 107 million euro euros.
Commerzbank said it aimed to keep its cost base stable and book the first part of charges related to its current restructuring programme this year, with stable loan loss provisions in its core business.
“We expect a similar consolidated net profit to the previous year in 2017,” the bank said.
Reporting by Arno Schuetze; Editing by Maria Sheahan and Mark Potter