Commerzbank third-quarter profit triples

Commerzbank’s profit tripled in the third quarter, beating analysts’ expectations, driven by gains at its investment bank and stronger lending to private customers.

Net income at the lender, which is still 17 per cent owned by the German government following a bailout in the financial crisis, rose to €225m in the third quarter, from €75m in the same period last year. Analysts had expected a rise to €194m.

Operating profit tripled in the third quarter to €343m, also higher than expected.

Martin Blessing, chief executive, hailed Commerzbank's recent pass in the European Central Bank’s stress tests of the eurozone's largest lenders as a sign the bank was healthy again.

“The good results of the ECB’s comprehensive assessment is testimony to the successful restructuring of Commerzbank over the past few years and confirms that we are on the right track with our efforts both to reduce our non-strategic portfolios and to expand our customer-focused business model,” he said.

A rise in operating profits to €593m in the core bank, which includes lending to private customers and Germany's small- and medium-sized companies, the Mittelstand, was offset by an operating loss in the bad bank of €250m, though this was down from a €272m loss in the third quarter last year.

The lender said it had made further progress in winding down the bad bank, comprised of shipping, commercial real estate and public finance, cutting assets slightly to €88bn – down from €92bn at the end of June.

Commerzbank pledged in August to cut assets in its non-core portfolio to €67bn by 2016, from a previous target of €75bn.

Profits at Commerzbank’s investment bank rose in line with market expectations, amid a rise in volatility and trading in the third quarter of the year driven by stronger currency movements. Operating profits rose to €158m from €85m last year.

However, the bank warned that over the first nine months of the year profitability in its investment bank fell, with “ongoing weakness in customer activity” in its fixed income division failing to offset strength in equities and commodities.

Commerzbank’s shipping portfolio also rose slightly in value to around €13bn from €12.8bn at the end of June. German shipping lenders came under scrutiny from the European Central Bank this year over concerns that the assets were being valued too highly.

The ECB last month ordered German banks to set aside an extra €1.1bn against their shipping portfolios. Commerzbank is the third-largest shipping lender in Germany, behind HSH Nordbank and NordLB.