(Bloomberg) -- Commerzbank AG posted better-than-expected profit in the second quarter, with the German lender receiving a boost from rising interest rates.
Income from lending rose 26%, compared with a consensus forecast for 16%, pushing net income to 470 million euros ($479 million), the bank said in a statement on Wednesday.
Commerzbank also raised its revenue outlook for the year while saying that costs will be higher than previously expected, meaning the bank continues to anticipate net income of more than 1 billion euros for 2022, it said.
Chief Executive Officer Manfred Knof unveiled an ambitious restructuring last year. He benefited from the global rise in trading during the first year of his strategy while growing interest income on the back of rising rates is providing support now. At the same time, a darkening macroeconomic outlook has been pushing up credit provisions.
The worst hit could come if Russia were to implement a complete stop of gas supplies to Europe, which would likely plunge Germany into a severe recession and lead to losses across Commerzbank’s loan portfolio.
Knof’s strategy has also run into several cost headwinds as inflation is leading to higher wages for employees, especially at Commerzbank’s Polish subsidiary mBank. A Polish payment holiday on mortgages has exacerbated the situation and will lead to a third-quarter revenue hit, while contributions to a newly created voluntary bank bailout fund in the country added 83 million euros in costs between April and June, the bank has disclosed previously.
Read More: Foreign Banks Count Cost of Poland’s Move to Ease Rate-Hike Blow
A botched IT outsourcing project last year and a potential decision to keep the front-end applications of its digital brokerage unit Comdirect have removed cost savings that Knof had in his initial plan. The bank has already weakened its cost target for 2024 once since presenting it last year, though it raised the profitability goal at the same time as it expects stronger revenue growth to more than offset the effect from lower expense savings.
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