Germany's Commerzbank said on Wednesday it swung to a loss in the first quarter as the impact of the coronavirus pandemic drove up loan loss provisions and risked derailing its recovery.
The German lender has endured a rough few months as it halted its 2019 dividend plans, back-tracked on the sale of its Polish lender mBank, faced credit rating downgrades, and lost a long-standing sponsorship deal for the local soccer team to larger rival Deutsche Bank.
The 150-year-old bank, which is still partially owned by the state after a bailout during the last financial crisis, warned that its target for turning a profit in 2020 now seems "very ambitious".
The bank's shares were down more than 5% at midday in Frankfurt.
Chief executive Martin Zielke said the bank faces a difficult market environment for the foreseeable future and is focusing on additional cost cuts.
"This crisis is a profound turning point," he told shareholders at its annual shareholder meeting.
The bank reported a net loss of 295 million euros (260.10 million pounds)in the first quarter, compared with a net profit of 122 million euros last year. The quarterly numbers came in worse than a consensus forecast for a 240 million euro loss.
It said that the impact of measures to control the coronavirus hit earnings by 479 million euros in the quarter, and it expects charges for credit losses of between 1 billion and 1.4 billion euros this year.
Provisions for credit losses in the quarter were 326 million euros, compared with 78 million euros a year ago.
The ratings agency S&P said that it expects a "manageable increase" in loan loss provisions and non-performing assets during the course of the year.
The bank said it was difficult to provide an outlook for the full year, but assuming a gradual recovery after a two-month lockdown in Germany, and no second lockdown, Commerzbank will keep revenue in its customer business "largely stable" this year.
Commerzbank, the second-largest listed lender in Germany, is now looking for further cost cuts as it restructures after a failed attempt to merge with Deutsche.
It has hired consultants to identify possible cuts, which may include further trims to its branch network.
(Reporting by Tom Sims and Hans Seidenstuecker; Editing by Louise Heavens and Elaine Hardcastle)
