(New: Statements from telephone press conference on yield, mBank, job cuts and construction financing, updated share price reaction, analyst opinion on share buyback).

FRANKFURT (dpa-AFX) - After an unexpectedly strong second quarter, Commerzbank believes it is on track to meet its full-year targets. Higher interest rates allowed the Frankfurt-based bank to absorb new charges from its Polish subsidiary mBank. On balance, Commerzbank earned 565 million euros, a fifth more than a year earlier, it said Friday. Investors were disappointed, however, by the planned next share buyback - because it is to come at the expense of the dividend.

Although Commerzbank performed better than the market expected in the second quarter, investors sent the share down by more than five percent at times in the morning and thus to the bottom of the Dax. Later, its price recovered a good deal. In the early afternoon, the share was still down almost two percent at 10.76 euros, around 22 percent more expensive than at the turn of the year.

CEO Manfred Knof continues to expect a consolidated profit for the full year well above the previous year's figure of 1.4 billion euros. In the first half of the year alone, the bank earned just under 1.15 billion euros. "We are systematically implementing our strategy and have significantly increased profits thanks to strong earnings in customer business - despite another high special charge for Swiss franc loans in Poland," Knof said. "This puts us fully on track to achieve our targets for 2023 and 2024."

In the first half of the year, the institution generated a return on tangible equity of 8.1 percent - more than the 7 percent it had set as its target for 2024. The management board plans to present the new strategic program for the period from 2025 when it publishes its next quarterly figures on Nov. 8. The goal then should be a return on investment of more than 10 percent, explained Chief Financial Officer Bettina Orlopp.

The controversial loan agreements of the Polish subsidiary in Swiss francs again cost Commerzbank dearly in the second quarter. Following a ruling by the European Court of Justice, which may result in compensation for Polish bank customers, the bank set aside a further 347 million euros. The Group's provisions for these loans now total 1.7 billion euros. According to Knof, 75 percent of the existing loan volume has been secured.

The Polish subsidiary had granted real estate loans in Swiss francs at significantly more favorable interest rates than loans in the domestic currency, the zloty. The rise in the franc exchange rate then caused borrowers to run into difficulties with repayments. Commerzbank is trying to resolve the disputes by reaching agreements with affected customers. According to the report, more than 8,000 settlements have been reached so far.

Commerzbank's confidence is being boosted by significantly higher interest income. In the second quarter, net interest income jumped 44 percent year-on-year to 2.1 billion euros. For the full year, the Board of Managing Directors now expects net interest income of at least 7.8 billion euros. As recently as May, the bank's top management had only assumed around 7 billion.

Earnings - i.e. total income - of the institution, which has been partially nationalized since the financial crisis, increased by 8.7 percent to a good 2.6 billion euros. In the meantime, Commerzbank sees a recovery in the mortgage lending business. "With real estate prices slowly falling and increasing acceptance for the higher interest rates, the construction financing business has picked up again in recent months," Knof reported. New business volumes in June were higher than a year earlier, he said.

In addition to higher interest rates, the cost-cutting measures of recent years are also paying off, with gross job cuts of up to 10,000. The number of branches in Germany has been shrunk from 1,000 to 400. "The job cuts are still running a bit behind, of course, but the program itself has been completed and we are now looking ahead," Knof said. At the end of June, the institute had 37,487 full-time employees, 25,004 of them in Germany.

Commerzbank set aside 208 million euros for possible loan losses in the second quarter, almost twice as much as a year earlier. For the year as a whole, the bank expects a figure of under 800 million euros. Previously, the Board of Managing Directors had assumed that the figure would be below 900 million euros.

Shareholders are to benefit from the good performance. The institute wants to buy back shares from the market again - and spend more on this than the 122 million euros from the first program in May and June. However, the bank surprised with the fact that the second buyback will count towards the payout ratio.

Thus, the Group still intends to return 50 percent of the profit attributable to shareholders for 2023 to its shareholders - but in the form of dividends and share buybacks together. This has "caused frustration among investors," wrote analyst Timo Dums of DZ Bank./stw/mar/men