Commerzbank ups NII guidance after stellar Q1

German banking group Commerzbank has raised its forecast for net interest income by €200m after a strong performance in the first three months of the year – its best quarter in more than a decade.

The company is now guiding to a full-year net interest income – the difference that banks make between interest revenues and interest expenses – of €8.1bn, up from its previous target of €7.9bn. All other full-year guidance has been maintained.

Operating profits in the first quarter rose to €1.1bn, from €875m a year earlier, with quarterly net profit rising to a more than 10-year high of €747m, from €580m previously.

First-quarter revenues increased to €2.75bn from €2.67bn due to strong customer business and a continued favourable interest environment.

Meanwhile, the Corporate Clients division achieved a record quarter, while the Private and Small-Business Customers operations were helped by a seasonally strong securities business and deposit growth.

The bank's common equity tier-1 (CET1) capital ratio increased to 14.9% by 31% March, up from 14.7% on 31 December, giving it a "very comfortable buffer" from the regulatory minimum threshold of 10.3%.

Meanwhile, the return on tangible equity (RoTE) rose to 10.5% from 8.3% a year earlier, with the company on track to achieve its RoTE target of "at least 8%" for the 2024 full year.

“The significantly improved earnings power and the high CET1 ratio underpin our plan to further increase the pay-out ratio,” said chief financial officer Bettina Orlopp.

The bank intends to return at least 70% of profit to shareholders this year, up from 50% last year.

“We will continue to focus on a combination of dividend payments and share buybacks. If the second quarter develops as expected, we plan to apply to the ECB and the German Finance Agency for the next share buyback on the basis of the first half-year results.”

The stock was up 3% at €14.76 by 1437 in Frankfurt.