Commerzbank (CRZBY) reports fourth-quarter earnings Thursday, bringing focus back onto the beleaguered bank's bottom line and the costs associated with its latest restructuring program.
The lender is expected to report pre-tax income of €226 million ($239 million), according to Factset estimates, on revenue of €2.2 billion.
Net income is seen at €163 million as the once-mighty bank swings back into the black following a writedown-driven third quarter loss of €288 million. Although this is still 20% lower than the fourth-quarter result of 2015 due to the pressures on the top line and the ongoing presence of restructuring charges in the bottom line.
Management have guided for a total of €1.1 billion of additional restructuring charges during the years to the end of 2020.
Commerzbank shares were down more than 3% on Wednesday, to €7.62, on a generally weak day for the European banking sector. Although they have gained 20.9% over the last three months, outpacing the 15% return of the Stoxx Europe 600 Banks Index.
In September, Germany's second largest bank cited low interest rates, regulation and competition as being behind increasing pressure on its profitability - before unveiling a broad revision of its corporate strategy.
The bank chopped its dividend for the foreseeable future and also said that it will take the axe to 7,300 employees over the coming years, in addition to simplifying its corporate structure.
Under the new structure there will be just two reporting segments as opposed to four, with corporate customers and all things investment banking related sitting on one side of the institution, while SMEs and private customers sit on the other.
Management said at the time that the changes will help bring the bank's cost-income ratio down to the target 66% level and boost returns on equity. The bank is targeting a return on tangible equity of at least 6% by 2020.
Commerzbank also told investors that it can grow revenue by nearly 10%, to €9.8 billion, over the coming years regardless of what happens with interest rates.
However, its plan and proclamations met with a tepid response from many investors, some of whom were unconvinced of its ability to grow revenues or to meaningfully boost its bottom line.
"Revenue headwinds, strategic plan execution risks and zero capital return in the near term make Commerzbank an unattractive investment for now, in our view," said Adam Barrass, an analyst at Berenberg, in response to 2016's restructuring announcement.
With inflation returning toward more normal levels right the way across Europe, as the effect of past declines in energy prices wanes, some have more recently begun to speculate that interest rates might soon begin to rise.
Such an about turn from the European Central Bank would help the lender to deliver on its pledges to investors.
A rising rate environment could see the lender's revenues grow as high as €11.3 billion by 2020 and push its ROTE as high as 8%, according to internal forecasts.