FRANKFURT (dpa-AFX) - After an unexpectedly strong second quarter, Commerzbank believes it is on track to meet its targets for the full year. The increased interest rates allowed the Frankfurt-based bank to absorb new burdens from the Polish subsidiary mBank. Below the line, Commerzbank earned 565 million euros, a fifth more than a year earlier, it said in Frankfurt on Friday. Thus, the Dax group did better than analysts on average expected. However, the news was met with a slide in the share price on the stock exchange.

Shortly after the start of trading, Commerzbank shares lost more than five percent, making them one of the biggest losers in the Dax. However, the share was still trading 18 percent higher than at the turn of the year.

Analysts were positively surprised by the quarterly profit and the raised forecast for this year's net interest income. However, the implied slowdown in the second half of the year will raise questions, wrote industry expert Benjamin Goy of Deutsche Bank Research.

Chief Executive Officer Manfred Knof still expects full-year net profit to be well above last year's figure of 1.4 billion euros. In the first half 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."

The Polish subsidiary's controversial loan agreements in Swiss francs again cost Commerzbank dearly in the second quarter. Following a ruling by the European Court of Justice (ECJ) in June that may entail compensation for Polish bank customers, the institution set aside a further 347 million euros. The Group's provisions for these loans now total around 1.7 billion euros.

The Polish subsidiary had granted real estate loans in Swiss francs at significantly lower interest rates than loans in the domestic currency, the zloty. The rise in the Swiss franc exchange rate then caused difficulties for borrowers in repaying the loans.

Commerzbank's confidence is being buoyed 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, it had only forecast around 7 billion.

Net interest income - the difference between what the institutions collect for loans, for example, and what they pay their customers as interest on savings, for example - is traditionally an important source of income for banks and savings banks in Germany. In addition, since July 2022, financial institutions have again been receiving interest when they park money with the European Central Bank.

Earnings - i.e. total income - of the institution, which has been partially nationalized since the financial crisis, increased by 8.7 percent to 2.629 billion euros in the second quarter.

In addition to higher interest rates, the savings drive of recent years is also paying off: Thousands of jobs were cut, and the number of branches in Germany shrank from 1,000 to 400. "We are benefiting from our increased earning power, our strict cost discipline and our conservative risk management," said Chief Financial Officer Bettina Orlopp.

However, the board cut back on its cost-cutting plans. In the current year, the bank's costs are expected to be around 6.4 billion euros, around 100 million higher than previously targeted. For possible loan losses, Commerzbank set aside 208 million euros 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. Initially, the Board of Managing Directors had assumed below 900 million euros. The bank's shareholders are to benefit from the good performance. The institute is planning a further share buyback program as part of the planned payout ratio of 50 percent, Orlopp said./stw/mar/mis