Commerzbank Posts Unexpected Profit Surge While Holding Off UniCredit

FRANKFURT: Commerzbank, resisting a potential acquisition by Italy's UniCredit, announced on Friday that net profit increased nearly 12 per cent in the first quarter, surpassing forecasts despite significant challenges for the German economy. The earnings pave the way for next week's annual shareholder meeting, where Commerzbank's management will seek investor support for a sustained independent strategy. Commerzbank's performance benefited from higher-than-anticipated interest and commission earnings, along with lower-than-forecasted provisions for non-performing loans. The lender reported a net profit of 834 million euros ($936 million) for the quarter, exceeding the consensus estimate of 698 million euros from a survey conducted by Commerzbank. Net profit was 747 million euros in the same period last year.

"We recorded the largest quarterly profit since 2011, proving that we can thrive even during tough economic conditions," Commerzbank CEO Bettina Orlopp remarked in a statement. Stocks rose by 2.5 per cent during midmorning trading. UniCredit, holding close to 10 per cent, ranks as Commerzbank's second-largest shareholder, following the German government. It initiated a campaign for a possible pan-European bank merger last year, surprising Germany's business and political leaders. The interest quickly raised worries among employees, Commerzbank management, and senior German government officials. "We concentrate on our independent strategy," Orlopp informed analysts while updating them on the earnings.

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UniCredit’s CEO Andrea Orcel's effort to acquire Commerzbank poses a challenge for Germany to demonstrate its determination to ward off foreign bidders and protect its financial hub in Frankfurt from losing one of the last large commercial banks.  The German economy has been flat, but bankers and leaders are optimistic that a spending initiative by newly appointed Chancellor Friedrich Merz will aid in fostering a recovery. In a presentation on Friday, Commerzbank cautioned that rising U.S. tariffs "are complicating access for German firms to their key export market."

The country's central bank chief has cautioned that Germany might encounter a minor recession in 2025, potentially impacting bank profits and resulting in loan defaults from corporate borrowers. Earlier this week, Germany's financial authority, BaFin, stated that uncertainty will continue to be elevated. Orcel mentioned he would hold off on taking any further steps until a new German government is established. He mentioned that the bank might have to postpone a final decision until 2027. Last month, UniCredit obtained the approval of German antitrust regulators for a nearly 30 per cent stake in Commerzbank. It came after a comparable approval from the European Central Bank earlier this year.

($1 = 0.8908 EUR)