Commerzbank is hoping to announce a second, bigger share buyback after its half-year outcomes at the beginning of August, the financial institution’s chief monetary officer has advised the Monetary Instances.
Germany’s second-largest listed lender greater than tripled internet revenue to €1.4bn final yr and in June started the primary buyback in its 153-year historical past. Nonetheless, at €122mn, the scheme represents simply 1 per cent of its €12bn market capitalisation. It has additionally paid out €250mn in dividends this yr.
Bettina Orlopp mentioned in an interview that further buybacks “make excellent sense” as a result of Commerzbank shares are closely undervalued, buying and selling at lower than half its ebook worth.
“Buybacks successfully cut back capital and enhance the [return on tangible equity], which is just advantageous for our shareholders,” she mentioned.
“We will definitely ponder [a second one] as quickly as we all know how our half-year outcomes look,” Orlopp mentioned.
The buyback would require approval from the supervisory board, regulators and the German authorities, which is Commerzbank’s largest shareholder, proudly owning a stake of greater than 15 per cent stake because it bailed out the financial institution in 2009 through the monetary disaster.
Analysts anticipate on common that Commerzbank’s annual revenue will rise by greater than 50 per cent to €2.2bn this yr due to rising rates of interest and a multiyear cost-cutting plan that has concerned closing half of its German branches and axing a 3rd of its home workers.
The financial institution’s frequent tier one fairness ratio — a key measure of stability sheet power — is 14.2 per cent, or 40 per cent above the regulatory minimal. Orlopp instructed that it may comfortably be some 200 foundation factors decrease.
She wouldn’t be drawn on the precise dimension of any second buyback, however burdened that it might be “considerably bigger” than the present one. She hinted that it might be greater than €200mn however beneath the higher restrict of round €1bn as set out by shareholders.
The primary supply of uncertainty for first-half outcomes, which the financial institution will report on August 4, is its Polish mortgage portfolio, mentioned Orlopp.
Commerzbank’s Polish subsidiary mBank is considered one of many banks that offered Swiss franc denominated mortgages to households within the early 2000s with out hedging overseas alternate threat.
Purchasers had been later uncovered to very large losses and have efficiently been suing their mortgage suppliers. The sector is anticipating a judgment from the European Courtroom of Justice that will rule that banks need to refund all curiosity funds to shoppers.
In a worst-case state of affairs, this might expose Commerzbank to a “three digit million euros quantity,” mentioned Orlopp. This is able to be along with the €1.7bn that Commerzbank has thus far paid out or provisioned for the difficulty.
The financial institution is providing to settle the case with a remaining 40,000 shoppers in Poland with energetic Swiss-franc loans. It has paid out a complete of €300mn already and provisioned one other €1.4bn.