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Commerzbank AG

Financial Services
CBK.DE: 

Research

  • Buy by micke (04/10/2023)
    • 14.00 +39.31% on 25/04/2024

    Commerzbank has for some years successfully executed a restructuring program, and is now a profitable bank with my long term estimated EPS €2/year. Based on current price €10.4 (2023-09-29) PE24=5. I think a reasonable long term valuation is PE25=10, which at EPS of 2 would mean a share price of €20. Commerzbank owns a significant part of Polish mBank, approximately 70%, which grows with high profit but mBank has given Polish house owners Swiss franc loans which is a risk.
    2023-09-29 Commerzbank announced that they will increase returns to shareholders for 2024 to 70% of earnings and well above 50% the years after. With an estimated EPS of €2 this would be €1.4/share. The share price increased very significantly on this news +10% to €10.61 at AM10:00.

  • Valuation (1)

    • Potential drivers for higher valuation
      The banks has ambitions plans to improve profitability. If the improvement plans continue to be successful, in some years the bank will be a stable (potentially growing) high dividend company.
      Resolution of issues relating to Swiss franc loans in mBank.

      12/04/2024 by MICKE｜
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  • People (1)

    • The CEO and CFO give a very good impression and have been able to deliver on restructuring plan.

      06/10/2023 by MICKE｜
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  • Financial (4)

    • 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,

      16/04/2024 by MICKE｜
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    • 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 during 2025H1.

      2025-2027 capital return with a pay-out ratio well above 50% but not more than the net result. The taget CET1 ratio is 13.5% which is lower than the 14.6% in 2023Q3, which I assume implies that all earnings will be invested in growth or be distributed to shareholders.

      06/03/2024 by MICKE｜
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    • Net result forcast made 2023Q3

      (2022: €1.4bn), 2023: €2.2bn, 2027: €3.4bn

      12/11/2023 by MICKE｜
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    • 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.

      04/10/2023 by MICKE｜
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  • Risks (2)

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

      29/09/2023 by MICKE｜
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    • 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.

      29/09/2023 by MICKE｜
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