Analyst Note| Niklas Kammer, CFA |
No-moat Commerzbank reported a loss of EUR 527 million in the second quarter versus a profit of EUR 133 million last quarter. This poor performance was driven by multiple one-off items affecting profitability negatively on balance as well as restructuring charges. Commerzbank decided to end a securities settlement outsourcing project, which materially affected results this quarter. Within other income, Commerzbank booked a loss of EUR 222 million compared with a EUR 73 million loss last quarter, primarily driven by provisions related to this event. Additionally, the bank wrote off EUR 200 million flowing through its cost base. On an underlying basis, results were OK, but not great. Net interest income was flat at EUR 1.1 billion. Net commission income declined 10%, but off an out-of-trend strong performance last quarter. Loan losses came in at EUR 87 million versus EUR 149 million a quarter ago. The bank now expects loan losses below EUR 1 billion for the full year, suggesting another EUR 765 million in second-half 2021. Finally, Commerzbank booked another EUR 511 million in restructuring charges. On a positive note, however, Commerzbank has now done most of the heavy lifting in terms of restructuring-related charges. Out of the EUR 2.1 billion anticipated to achieve its 2024 strategic goals, only EUR 170 million remains. As such, below-the-line pressure on Commerzbank’s earnings should start to ebb materially over the next few quarters. We maintain our fair value estimate of EUR 6 per share.