Commerzbank Outlook in Doubt as Profit Drops

FRANKFURT—Commerzbank AG cast further doubt over its full-year outlook Tuesday as first-quarter net profit more than halved, with the German bank battling ultralow interest rates and sluggish activity in capital markets.

"In view of the subdued nature of the first quarter, it will be more challenging to reach the net profit [of €1.06 billion ($1.22 billion)] posted in 2015," Germany's second-largest lender said. Former Chief Executive Martin Blessing last month told shareholders the goal was increasingly ambitious.

In the first quarter, net profit fell to €163 million from €338 million a year earlier. Revenue dropped to €2.31 billion from €2.8 billion. Analysts polled by The Wall Street Journal on average expected €2.33 billion in revenues and a net profit of €156 million.

On more positive note, Commerzbank kept its core tier capital ratio stable at 12%. The ratio is a measure of how well the bank can absorb potential financial shocks. The lender also set aside 5 cents a share for a dividend payment.

Commerzbank last week decided to resume a dividend payment at €0.20 a share for 2015, after last paying a dividend for 2007. The bank's earnings have stabilized in recent years after it had incurred billions of euros of losses during the financial crisis, which prompted it to take €18 billion in government aid in late 2008 and early 2009. The German government still holds a stake of around 15% in the bank.

Commerzbank's weaker first-quarter performance was in-line with rivals. Deutsche Bank AG's net income fell by 58% following a 22% revenue decline. All but one of the six largest U.S. banks reported declining revenue and profit in the first quarter amid difficult trading conditions, a pause in big M&A deals and stubbornly low interest rates.

Commerzbank said it would intensify efforts to mitigate the effects of negative interest rates, saying that it aims to keep costs stable this year. Tuesday's statement didn't include a comment from its new CEO, Martin Zielke.

The bank's retail operations, which Mr. Zielke oversaw before becoming CEO, bucked the weaker trend and boosted operating profit to €191 million from €157 million in the first quarter last year on higher lending business, lower costs and fewer provisions for souring loans.

That trend contrasts with profit declines in the unit that serves midsize corporate clients, Commerzbank's Polish operations and its investment banking activities.

A weak performance in capital markets due to a "high degree of uncertainty with regard to capital markets" led to lower demand for investment solutions in the first quarter, Commerzbank said.

Write to Eyk Henning at [e-mail]

(END) Dow Jones Newswires

May 03, 2016 02:55 ET (06:55 GMT)

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