Commerzbank slumped to a third-quarter loss, as the German bank was hit by rising loan loss provisions and higher restructuring costs, highlighting the challenge facing incoming chief executive Manfred Knof. 

The new chief, who will replace Martin Zielke in January, takes the top job after years in which Germany’s second-largest lender has missed its own profit and revenues targets, while weighed down by a bloated cost base.

In the three months to September, Commerzbank had €181m in loan loss provisions linked to the pandemic, up from €131m in the second quarter.

The increase stands in contrast to the picture at German rival Deutsche Bank, where the headwinds from the pandemic in the third quarter abated more quickly than expected.

Commerzbank’s overall provisions for loan losses in the quarter more than doubled to €272m from a year earlier. The bank expects a further increase in the fourth quarter, leaving provisions for bad loans at between €1.3bn and €1.5bn for the full year. 

The lender reported a net loss of €69m in the quarter, compared with a €297m profit in the same period last year. The loss was bigger than the €62m analysts expected. 

Commerzbank said the large majority of clients who deferred servicing of loans during the first phase of the pandemic had resumed payments. However, the bank warned that it may take additional hits next year should bankruptcies increase after a suspension of Germany’s insolvency law — put in place to shield companies during the pandemic — ends next year. 

Revenues at the Frankfurt-based lender were 7 per cent lower than in the third quarter a year ago and were below analysts’ expectations.

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Commerzbank’s common equity tier one ratio, a key indicator of balance sheet strength, rose to 13.5 per cent of risk-weighted assets. It was 10 basis points higher than in the second quarter, comfortably above the regulatory minimum. 

Via Financial Times