Spurred on by the rapid rise in interest rates in the summer, Commerzbank has achieved a leap in profits and has set itself targets for the coming years.

The Frankfurt-based bank generated a consolidated profit of 684 million euros in the third quarter, more than three times as much as a year ago, as the DAX-listed group announced on Wednesday. Analysts had expected an average of 611 million euros. Commerzbank increased its income by 46 percent to 2.76 billion euros. According to the bank, the main driver was the increase in net interest income by a good third to 2.17 billion euros. This was well received on the stock exchange. In early trading in Frankfurt, the share was up around two percent.

"We have established a new business model and put Commerzbank back on the road to success," said Group CEO Manfred Knof. "We are building on this with our strategy program until 2027: We will increase our earnings base, further improve the cost/income ratio and increase our return on equity."

The bank aims to increase its net profit to 3.4 billion euros by 2027. The return on equity (RoTE) is to increase to more than eleven percent. It wants to boost its earnings by expanding its commission business, among other things. Simple digital processes should also ensure that the bank becomes more efficient overall. Net interest income is to increase moderately. Commerzbank aims to improve its cost/income ratio to around 55% by 2027. In the first nine months of this year, it was still at around 60 percent.

STRONG NET INTEREST INCOME EXPECTED FOR THE YEAR AS A WHOLE

The profit boost in the third quarter makes Commerzbank optimistic for the year as a whole. It now expects a consolidated profit of around 2.2 billion euros for 2023 after 1.4 billion euros in 2022. Income is expected to increase from 9.5 billion euros to around 10.6 billion euros. The financial institution is targeting net interest income of more than 8.1 billion euros. CFO Bettina Orlopp had previously said in September that eight billion was a good estimate. When the business figures for the second quarter were presented at the beginning of August, at least 7.8 billion euros had been forecast. As previously predicted, net commission income is expected to be slightly below the previous year's level. The bank aims to improve its return on equity (RoTE) to around 7.5 percent. In 2022, it was still at 4.9 percent.

Like other banks in Europe, Commerzbank is currently benefiting from the significant rise in interest rates in the eurozone, which is boosting the lending business. The European Central Bank (ECB) has already raised interest rates ten times since summer 2022. The deposit rate, which sets the trend on the financial market and which banks receive from the central bank for parking surplus funds, is now at 4.00%. This is the highest level since the start of monetary union in 1999. Other European banks, such as the Spanish bank Santander and the Italian bank Unicredit, have also recently achieved leaps in profits.

(Report by Frank Siebelt and Tom Sims; Edited by Myria Mildenberger; If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets)).