High interest rates help Germany's Commerzbank post best results in 15 years

Commerzbank on Thursday reported a 55% hike in net profit for 2023, as high interest rates helped the German banking giant report its best results in 15 years.

Net profit for the year beat expectations to come in at 2.2 billion euros ($2.36 billion), up from 1.4 billion euros a year earlier. For the fourth quarter, net profit was 395 million euros, down over 16% on the same quarter the year before, but ahead of consensus estimates published by Commerzbank.

Investors welcomed the results, with shares rising around 4.7% by afternoon trade Thursday.

High interest rates were a driving factor behind the results, with net interest income up around 30% for 2023 as a whole, and 8.5% higher in the fourth quarter.

In its outlook, the bank recognized that "continuing economic slowdown will remain a challenge in the current financial year." However, it said it expects net profit to be above 2023 levels.

In an analyst note Thursday, Deutsche Bank's Benjamin Goy and Marlene Eibensteiner described the numbers as a "solid set of 4Q23 results" and reiterated their buy rating on the stock.

"While the pre-provision profit was modestly below expectations, the net profit was 9% ahead of consensus. More importantly, the mix was good with net interest income and costs beating expectations by 2%," they wrote.

"The 2024 guidance is in line with expectations, however for a bank that beat and raised its own 2023 net interest income guidance five times it remains to be seen whether the implied net interest income slow down is too conservative again in our view."

The results follow a major business overhaul at Commerzbank, which was bailed out by the German government during the 2008-2009 financial crisis. The bank said it had reduced costs to 6.4 billion euros in 2023, down from 6.5 billion euros the previous year.