Potential drivers for higher valuation
The banks has ambitions plans to improve profitability. They have good track record of improvement, it is becoming a stable (potentially growing) high dividend company.
Resolution of issues and still significant costs relating to Swiss franc loans in mBank should be ended in 2025.

Presentation February 2025

2024Q4 report, outlook:
"Strategy “Momentum”: significant increase in financial targets until 2028
With its upgraded strategy “Momentum”, Commerzbank has set significantly more ambitious targets than
before. The RoTE is expected to improve to 15% by 2028. This means that the Bank will earn significantly more than its cost of capital and be a well-established player amongst the successful banks in Europe. It is aiming to increase its net result to €4.2 bn by 2028. With only a moderate rise in costs, revenues are expected to increase significantly: The Bank anticipates a compound annual growth rate (CAGR) of 4% excluding provisions for legal risks for FX loans at mBank to €14.2 bn by 2028. The main driver will be net commission income, while a moderate increase in net interest income is expected despite ongoing interest rate cuts. The Bank plans to continue to significantly improve its cost-income ratio to around 50% – an internationally competitive level."

My general view is P/E should be around 10 for a well managed EU bank. Current (2025-02-15) market cap is 23.2bn. (4.2*10)/23.2=1.8 i.e. a share price of 19.6*1.8=35 euro (+81%) at the end of 2028. In addition to this we will get dividend and buy backs, i.e. > 100% return in less than 5 years.

The CEO Betina Orlopp (former CFO) gives a very good impression and have been able to deliver on restructuring plan. CFO first report was 2024Q4.

Capital return
2022: 30% (€0.4bn),

2023: 50% (~€0.9bn), in 2024Q1 the bank will probably do buybacks of €0.6bn which was slightly higher than initially planned. At share price €10.6 that would obe 4.6% of the shares.

2024: 70 + X%, 2024 return consists of share buy-back applied for after H1 2024 results and dividend approved at AGM in 2025.

2022-24 total: ~€3bn. Where of 3-1.3 = €1.7bn remaining for 2024, €0.6bn in dividend (€0.7/share) and €1bn in buy back.

2025-2027 >90%, but not more than the net result, with the exception of 2025 where it is planned to be 100% excluding restructuring costs. The taget CET1 ratio is 13.5% which is lower than the 15.1% in 2024Q4.

Indications 14 March 2024 Morgan Stanley European Financials Conference,

Bertina CFO mentioned that the first 2 months 2024 started very well. I interpret that as NII is on a good level, probably the same level as 2023, while cost an other income are better than 2023Q4. Bertina said that Q1 is normally a good quarter.
https://cc.webcasts.com/morg007/031224a_js/?entity=12_OG0QWG0,

Finances have improved very significantly due to the new managements execution of a restructuring plan. During 2021 the banks goals as well as analysts' estimates where set for operational profit 2021 (net -500MEUR), net profit 2022=500MEur, 2023=1000MEur, and 2024=1500MEur. With increases in ECB’s rates and good execution the outcome and expectations are now higher.

As with all banks there are risks for additional taxes, regulations and legal risks relating to potential wrongdoings in this heavily regulated industry.

Swiss franc loans in Polish mBank is a risk, was previously a high risk, but with recent court rulings the cost are high but the risk for unexpected result is lower. There is a path forward and significant parts of the problem loans are now resolved. But there are still risks for additional costs and other legal problems related to this.