(Bloomberg) -- Commerzbank AG’s shares dropped as profit missed estimates even though the lender presented a new share buyback.
The German bank said it has applied for regulatory approval for a program worth €600 million ($655 million) and it’s planning another one later this year as it seeks to deliver on a promise to increase investor payouts.
Still, the German lender’s profit decreased 4.8% to €538 million in the second quarter, it said in an earnings statement Wednesday, below analyst estimates.
Shares in the bank fell as much as 6.2%, hitting the lowest level since March.
Part of the earnings miss was due to a court case in Russia, for which Commerzbank set aside €95 million. There are “really good chances” that the bank will get the money back at some point, Chief Financial Officer Bettina Orlopp said in a Bloomberg TV interview.
The lender has been riding the wave of higher interest rates that has buoyed much of European banking for the past two years, allowing it to report rising profits and boost a payout pledge.
But litigation in Russia and Poland have been headwinds. Commerzbank has previously warned that the Russian case could deal a hit to the business. The Polish unit mBank has also faced litigation, with the parent gradually setting aside about €2 billion to cover the potential costs.
“Commerzbank reported a ‘dull’ set of operational results,” KBW analyst Tom Hallett said in a note. “The extent of the provision losses will disappoint some.”
Commerzbank on Wednesday confirmed its full-year guidance of €8.1 billion in net interest income and said it sees “upside potential” for the metric. The bank is on track to achieve all its 2024 targets, Orlopp said in the TV interview.
The bank’s 2024 outlook as well as the ultimate size of the other buyback this year are contingent on developments in Russia and Poland, Orlopp said on a call with analysts.
Commerzbank intends to pay a dividend on the current year’s profit of €500 million to €600 million, she said. The rest of the €1.6 billion in total planned payouts will happen in buybacks, she said, including the €600 million applied for now.
--With assistance from Levin Stamm, Anna Edwards, Kriti Gupta and Guy Johnson.
(Adds details about payouts in last paragraph)
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