FRANKFURT (Reuters) - Commerzbank on Thursday reported a 51 percent jump in fourth-quarter net profit, beating analysts’ expectations but also scaled back profit and revenue goals.
The bank’s finance chief said the group was now unlikely to achieve a return on tangible equity - a key profitability measure - of 6 percent by 2020.
Chief Financial Officer Stephan Engels told analysts that recent earnings reports showed lower expectations among companies in Germany and Europe this year and next, resulting in “less tailwind than we would have hoped for.”
The bank officially pared back its previously stated 2020 revenue projection of 9.8 billion euros to around 9.2 billion euros, a move it had flagged last year.
Germany’s second-largest listed bank, still partly owned by the government, is overhauling its business by cutting staff, streamlining its back office and expanding its retail customer base.
There has been persistent speculation about a potential merger with larger rival Deutsche Bank and this has heated up over the past few months.
On Thursday, Commerzbank’s Chief Executive Officer Martin Zielke said recent merger speculation was understandable given weak profits for German banks but said he would not comment further.
Deutsche Bank has been struggling to improve its performance which could make a merger more likely, but German Finance Minister Olaf Scholz has dismissed this view as speculation.
Earlier this month, Deutsche Bank reported a bigger-than-expected loss for the fourth quarter and its investment bank had a weak quarter, overshadowing its first annual profit in four years.
Commerzbank reported that net profit attributable to shareholders of 113 million euros ($127.43 million), which was above the 75.7 million euros expected by analysts in a Reuters poll, and 75 million euros a year earlier.
The bank said that it would cut more costs this year and next and is targeting a 3 percent growth in revenue a year.
The bank’s shares were trading 4 percent higher at 0900 GMT.
“Our strategy is right and is working. We are growing in terms of customers, lending volume and underlying revenues. We are making progress,” CEO Zielke said in a statement.
The restructuring program, announced in 2016, is due to be completed in 2020.
Reporting by Tom Sims; Editing by Tassilo Hummel/Subhranshu Sahu/Jane Merriman