Analyst Note| Niklas Kammer, CFA |
No-moat Commerzbank recorded a full-year loss of EUR 2.9 billion compared with a EUR 0.6 billion gain last year driven by loan-loss provisions, restructuring charges, and goodwill impairments. Commerzbank opted to take a bath in a year that wasn’t going to win any prizes to clean its balance sheet and set the foundation for its mammoth task to make this bank profitable. The underlying performance is less dramatic, although not good either. We believe the new strategic direction is addressing the most glaring issues, but we wouldn’t get too excited just yet. As per the bank’s plan, revenue growth will be muted and coming primarily from its faster-growing subsidiary in Poland. We think this is a result of the highly competitive German banking market, an issue we don’t see Commerzbank escaping any time soon. Shrinking the cost base is the right way forward in our mind, but salvation will not come overnight. We maintain our fair value estimate of EUR 6 per share and no-moat and stable trend ratings.