Commerzbank Preview: Improving Trends?

Commerzbank (CMZB: Baa2 pos/BBB- pos) results are due 15-May. After some positive mgmt comments during the quarter, alongside improved newsflow from peers, spreads and the equity have performed pretty well. Non-performers and real estate are likely to be key features.

• Results last time (15-Feb) missed consensus marginally but on lower trading income (so, a “good miss”) and non-performers were a little better than expected. Mgmt comments at a subsequent conference (14-Mar) indicated the potential for some upgrade after a strong start to the year.
• The bank raised EUR750m of Tier 2 sub debt (8-Apr) tight of our fair value with strong cover, indicative of positive investor sentiment, we feel. Deutsche Bank results (25-Apr) gave mixed indications with some upticks in NPLs but DePfa’s results today saw spreads tighten meaningfully.
• CMZB spreads are 44bp tighter YTD (peers: -44bp) and 12bp better over the last month (2bp better than peers). The equity is up 32% YTD (SX7P +20%) with much of that outperformance coming since Deutsche’s results.
• Earnings estimates are up 3% for FY25 (unchanged for this year) since the last results with revenues for next year static but FY24 expectations are quite a bit lower, implying better loan loss expectations offsetting.

Results are due at 0600 (London time) with conf call at 0800 at: https://www.webcast-eqs.com/login/commerzbank-2024-q1