Commerzbank Earnings: Good Full-Year Results; We See More Upside to Increase Distributions

We raise our fair value estimate for Commerzbank to EUR 19.60 per share from EUR 15.80 after lifting our income growth and shareholder distribution assumptions. The German bank published its full-year 2024 results, albeit limited, ahead of its scheduled Feb. 13 earnings release and investor day. Results were ahead of consensus estimates collected by the bank itself as a result of better-than-expected net interest income (0.9% versus consensus) and net commission income performances (1.5% versus consensus). A cost/income ratio of 59%, below its 60% target for the year, was also positive. The announced EUR 0.65 dividend per share and share buyback worth EUR 400 million are below our estimates of what we believe Commerzbank can reasonably distribute to shareholders in 2025. Moreover, we believe an improving payout ratio and annual buybacks of around EUR 1 billion are feasible over the next five years. The bank has the potential to deliver further upside if it announces a new set of cost cuts at its investor day such as branch closures and employee reductions.