Commerzbank Decides to Lift Loan Provisions due to ‘worsening’ Economic Conditions

The German economy, which is the largest in Europe and one of the largest in the world, has been going through growing pains over the past few quarters. In such a situation, the country biggest banks have also had to go through their share of pain, and in this regard, banking giant Commerzbank has not been an exception. However, the bank today announced that it the profit warning that it had provided earlier is actually far more ambitious and reiterated that the continued deterioration of the economy is one of the major factors behind its bleak outlook. In addition to that, Commerzbank has also stated that it has also raised the risk provisions with regards to the nonperforming loans that it possesses in its books.

It is a problematic time for the German economy, and such a warning from one of the nation’s biggest banks must come as a warning for policymakers. Many commentators have suggested that policymakers should try and stimulate the economy through stimulation. Earlier Commerzbank had stated that there was only going to be a marginal rise in its net profits in 2019 and pegged the figure at 865 million Euros. However, it needs to be pointed out that at the time, market analysts had on average expected a drop-in net profit by 0.4%. The announcement made by the bank on Wednesday seemed to tally with the analysts’ estimates earlier.

The bank has been in a bit of trouble over the past months, and in 2019 alone, its stock had nosedived by as much as 38% amidst the chaos. The bank stated that in Q2 2019, the number of nonperforming loans on its books jumped two-fold and stood at 178 million Euros. However, Commerzbank did not provide any further details about the issue. Earlier this year, German’s second-biggest bank had also been talking with Deutsche Bank about a merger, which had been brokered by the German government. However, the talks eventually broke down as Deutsche Bank walked away from the table. The combined entity could have been better placed to tackle the issues being faced by both these banks.