Reuters: Global Markets: Commerzbank helped by investment bank and shipping results

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Commerzbank helped by investment bank and shipping results Aug 8th 2013, 13:55 The logo of Germany's Commerzbank is pictured behind a fountain in Frankfurt May 10, 2013. Picture taken May 10, 2013. Credit: Reuters/Lisi Niesner By Arno Schuetze and Edward Taylor FRANKFURT | Thu Aug 8, 2013 9:55am EDT FRANKFURT (Reuters) - Commerzbank AG (CBKG.DE) ended a series of disappointing results statements as a pickup in its investment bank and lower provisions for bad shipping loans took the sting out of a sharp fall in quarterly net profit. Shares in Germany's No. 2 lender after Deutsche Bank AG (DBKGn.DE) rallied 13 percent, hitting their highest in about seven weeks. Commerzbank's recent track record has been dismal and its shares last month fell to a record low of 5.558 euros. Earnings missed expectations in each quarter of 2012 and it further disappointed investors in this year's first quarter, warning it will not pay a dividend in 2013. The bank's second-quarter results on Thursday showed net profit slumped to 43 million euros ($57 million) from 270 million a year ago, but this was broadly in line with analysts' estimates. Positive news in shipping and at the investment banking arm offset a drop in earnings at Commerzbank's traditional cash cow, its Mittelstand business that lends to small and medium-sized businesses. Investors who had expected the worst for the second quarter and bet on a falling share price by selling borrowed shares, scrambled to buy the stock back to meet their obligations, traders said. "Expectations are so low that even quarterly results which are not super-bad lead to short coverage," a Frankfurt-based stock market trader said. Around 1 percent of Commerzbank stock was out on loan, well below levels earlier this year, figures from Markit showed. The German government, which bailed out Commerzbank in the financial crisis, still owns a 17 percent stake in the bank after two large share issues, but is unlikely to sell down its holding any time soon. Despite Thursday's surge in the shares, the stock still trades far below the roughly 26 euros at which Germany would have to sell at to avoid losses. Germany's Finance Ministry has said repeatedly it wants the government's investment to be as short-lived as possible, but no decision has been taken as to when the shares could be sold. While some investors suspected Commerzbank would have to further write down its 17 billion euro shipping portfolio - 4.6 billion of which it has classified as non-performing - the lender in the event set aside less money for bad ship loans. "We have had several audits of our shipping portfolio that have not produced any need for further writedowns," Chief Financial Officer Stephan Engels told analysts. NO TERRIBLE NEWS German financial watchdog Bafin had said last month that some German banks had not done enough to tackle their exposure to the struggling shipping industry. According to trade journal Marine Money, Commerzbank is the world's second-largest ship financier after Norway's DNB (DNB.OL). A strong equities business also lifted results at Commerzbank's investment bank, while the unit benefited in addition from an accounting gain for revaluing its own debt. "There was no really terrible news in any segment," said LBBW analyst Ingo Frommen. Shares in Commerzbank, which has not paid a dividend for five years, have fallen 31 percent this year, while the DAX index of German blue chips .GDAXI has risen 19 percent and the STOXX Europe 600 banking index .SX7P has firmed 0.9 percent. Volatility in Commerzbank shares - a large portion of which are owned by short-term oriented hedge funds - has hit levels twice as high as that of companies listed in the DAX. Engels said cut-throat competition in Mittelstand lending had hurt results in that area, saying: "We are not willing to win every margin fight." The Frankfurt-based lender, which has a stock market value of 8.6 billion euros, received an 18 billion euro government bailout in the wake of a disastrous merger with Dresdner Bank in 2009 and has since had to cope with Greek debt writedowns, the slowing euro zone economy and demands from regulators to increase capital reserves. It is in the midst of a radical cost-cutting program - its second in four years - and has announced plans to shed 5,200 of its 45,000 staff. Engels warned that Commerzbank's revenue would remain under pressure and the bank will have to put aside more money for bad loans. "We expect to see improved earnings in 2014," he added. The bank declined to give a specific 2013 outlook, reiterating 2013 would be a year of transition. Contrasting with Commerzbank's results, French peer Societe Generale (SOGN.PA) last week saw earnings double as securities trading and foreign retail banking surged. BNP Paribas (BNPP.PA) and Italy's Unicredit (CRDI.MI) also beat analysts' expectations. (Editing by David Cowell and David Holmes) Link this Share this Digg this Email Reprints

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