Commerzbank AG may end up making about €900 million ($962 million) in payouts for this year as it’s on track to produce about €1.8 billion in net income, Chief Financial Officer Bettina Orlopp said Tuesday.
(Bloomberg) — Commerzbank AG may end up making about €900 million ($962 million) in payouts for this year as it’s on track to produce about €1.8 billion in net income, Chief Financial Officer Bettina Orlopp said Tuesday.
“Assume a nice split between dividend and share buyback” for the payouts, Orlopp said at an investor conference, according to a transcript. She promised to provide details for planned payouts in 2025 through 2027 as part of a strategy update slated for November.
Commerzbank has been a key beneficiary of the European Central Bank’s interest rate increases as it relies heavily on lending to consumers and companies for income. It has started returning to cash again after a long period in which it paid little to no dividends, and it has promised more of its earnings to shareholders going forward.
The German bank reports net income including coupon payments for its AT1 securities, which is likely to be around €2 billion this year, Orlopp said on Tuesday. That was €1.44 billion in 2023.
Last month, shares in the bank dropped after it gave few details about its plans for investor payouts in an earnings presentation. Orlopp said at the time that the next share buyback would be bigger than the €122 million repurchase completed earlier this year, but stopped short of giving a concrete timeline.
“We are very well aware that probably the pages on capital return will be one of the most important ones” for investors during the next strategy update, Orlopp said on Tuesday.
Read More: Commerzbank’s Lack of Buyback Detail Takes Shine Off Outlook
Chief Executive Officer Manfred Knof said last month that the new strategy, which he will present on November 8, will target at least 10% return on tangible equity.
A key element of Commerzbank’s growth is soaring lending income on the back of higher rates. Orlopp on Tuesday raised guidance again for net interest income, saying the lender now expects the metric to hit €8 billion this year, up from at least €7.8 billion predicted just last month. That would compare with €6.3 billion in adjusted NII last year.
She said Commerzbank has been able to increase deposit beta — a measure of how much of a rate increase it passes along to savers — slower than executives initially expected, boosting its growth.
“We will end most likely this year with something around a deposit beta, a pass through rate, of average 40% or something like that,” Orlopp said, noting the full-year average so far this year has been 25%.
The strategy update in November will see the bank “further develop our digital offering” for retail clients, focusing on its digital brokerage unit comdirect, Orlopp said at the investor conference. The lender will also seek to expand its trade finance business with Germany’s Mittelstand companies.
Asked about M&A, Orlopp said Commerzbank pursues “selective opportunities” when they arise, singling out asset management as one example. She said any deals would have to be weighed against the lender’s payout promises.
(Updates with CFO comments throughout)
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