The second German bank, Commerzbank, in the sights of the Italian Unicredit, launches a defensive strategy of repurchasing shares. The board of directors decided to start the third buyback program since 2023, as the entity has just announced. The repurchase of the first tranche, of around 600 million euros, will begin after the publication of the quarterly figures scheduled for tomorrow, Wednesday, and should be completed no later than mid-February. “We will return at least 70 percent of our profit for fiscal year 2024, but no more than the consolidated result after deducting the AT-1 coupon payments,” the new company has advanced. Commerzbank boss Bettina Orlopp.
As a result, the share price is likely to rise, thus making a potential takeover by Unicredit, Italy’s second largest bank, which has accessed 21 percent of Commerzbank shares through financial derivatives, more expensive. It has also requested to be able to increase its stake in Commerzbank up to 29.9 percent. Orlopp also aims to increase the return on capital to more than twelve percent by 2027 and refine its medium and long-term strategy, confident of maintaining its independence.
“Coba”, as German financial slang abbreviates the bank’s name, is considering making its own acquisitions. In an interview with WirtschaftsWoche, Orlopp considers that “we can also grow inorganically through acquisitions” and points to the “area of asset management, for example.” The Frankfurt institute has already expanded this segment in recent years. It bought a nearly 75 percent stake in Hamburg investment house Aquila Capital and acquired a minority stake in Munich-based Nixdorf Kapital. Orlopp specified that “in future acquisitions we will focus on offering new services to our clients.”
“At the same time, we will look for acquisitions in the corporate client business,” he said, and expressed his confidence in the direct banking subsidiary Comdirect, where “he sees potential” because “it is getting better and better at obtaining more benefits.” of existing customers. In the first half of the year alone, Comdirect gained around 100,000 new customers. With this in mind, Commerzbank is aiming for a return on equity of more than 12 percent by 2027, having recently reached just under 8 percent, a goal that could prove difficult due to the slow pace of monetary policy in the country. ECB.
As part of its defense strategy, Orlopp wants to free up capital for investments or distributions to investors, and thus demonstrate its attractiveness as an independent financial institution. The newest element of the defensive plan is a significant expansion of so-called “significant risk transfer” (SRT) agreements that free up regulatory capital. It has already received approval from the European Central Bank for its internal risk models, which could also free up capital. It plans to increase the value of activities at risk (APR) by several billion euros due to the depreciation of the value of Commerzbank in September and to expand the additional amount of regulatory capital tied up due to the expected expansion of risk-weighted assets, thus creating more margins for distributions to shareholders or investments, whom it hopes to convince that Commerzbank is a compelling investment in its own right.
Orlopp also plans to extract more benefits from existing customers: increase prices, require more guarantees or sell them more products, as well as reduce exposure to customers who are poorly performing compared to their risk profile, that is, who have low efficiency. of the so-called RWA, which represents the resumption of a program that the head of corporate clients, Michael Kotzbauer, started several years ago. Since then, higher interest rates had increased loan revenue and put the program on the back burner.
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