Germany's Commerzbank said on Thursday that net profit rose a better-than-expected 12% in the fourth quarter, helped by higher interest rates and capping a second consecutive profitable year as it undergoes a major restructuring.
The bank said it would aim for a 2023 result that is "well above" 2022, helped by higher interest rates, despite "another demanding year in view of the challenging environment".
Commerzbank, one of Germany's best-known banks, has been slashing thousands of jobs and hundreds of branches to cut costs and lift profit. The bank is a candidate to rejoin the prestigious DAX index of blue-chip companies.
Net profit of 472 million euros ($505.3 million) in the quarter was higher than 421 million euros a year earlier. It was well above average analyst expectations of 350 million euros, according to a consensus forecast published by Commerzbank.
For the full year, Commerzbank generated net profit of 1.435 billion euros, up from 430 million euros a year earlier, and better than expectations for around 1.359 billion.
"Our turnaround is a success. Commerzbank is back," said Chief Executive Officer Manfred Knof.
Shares were set to start trading 1.9% higher.
Still, the bank's home market faces soaring inflation and a slowing economy, and problems at a Polish unit have continued to weigh.
Deutsche Bank analysts said in a recent note that downside risks for Commerzbank include soured loans, a big decline in loan growth, falling interest rates and delays in cost cutting.
European banks, challenged by war, soaring inflation, and an energy crisis, are benefiting from one boost to their businesses: higher interest rates.
Commerzbank forecast net interest income "well above" 6.5 billion euros for 2023, "with clear additional upside potential". For 2022, it rose 33% to 6.5 billion euros.
Commerzbank, which focuses on medium-sized firms known as Mittelstand that form the backbone of the German economy, is a barometer of the nation's health.
It has been a tumultuous few years for the bank, which in 2018 was booted from the DAX index.
A year later, it held merger talks with Deutsche Bank that eventually collapsed.
In the aftermath, the then-CEO developed a new strategy, but Cerberus, a top investor, was dissatisfied and successfully launched a campaign for new leadership and massive job cuts.