Reuters: Hot Stocks: UPDATE 2-Commerzbank stock surges after lack of negative surprises

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UPDATE 2-Commerzbank stock surges after lack of negative surprises Aug 8th 2013, 10:19 Thu Aug 8, 2013 6:19am EDT * Commerzbank says loan loss provisions in 2013 to rise from 2012 * Provisions rise due to U.K. real estate, Mittelstand business * Operating loss of non core assets unit widens to 387 mln (Adds CFO comments, details) By Arno Schuetze and Edward Taylor FRANKFURT, Aug 8 (Reuters) - Shares in struggling German lender Commerzbank AG shot up 12 percent on Thursday after its results showed a lack of feared massive losses in its shipping portfolio and a slightly better than expected performance in investment banking. The market had been expecting a sharp fall in second-quarter earnings and Commerzbank delivered on that front. Net profit fell to 43 million euros ($57 million) from 270 million in the year-earlier period, broadly in line with the 65 million expected by analysts. But there was positive news in shipping and at the investment bank, overlooking a drop in earnings at Commerzbank's traditional cash cow, its Mittelstand business that lends to small and medium-sized businesses. "We have had several audits of our shipping portfolio, that have not produced any need for further writedowns," Chief Financial Officer Stephan Engels told analysts on a call on Thursday. Last month, German financial watchdog Bafin had said some German banks had not done enough to tackle their exposure to the struggling shipping industry, and some investors feared Commerzbank may be among those needing to catch up. Commerzbank shares have underperformed this year, falling 31 percent while the DAX index of German blue chips has risen 19 percent and the STOXX Europe 600 banking index has inched up 0.9 percent over the same period. The Frankfurt-based lender received an 18 billion euro government bailout in the wake of a disastrous merger with Dresdner Bank in 2009 and has since had to cope with Greek debt writedowns, the slowing euro zone economy and demands from regulators to increase capital reserves. LOW EXPECTATIONS It is in the midst of a radical cost-cutting programme which includes shedding 5,200 of its 45,000 staff.. The German government still owns a 17 percent stake in the bank. Investors who had bet on a falling share price by selling borrowed shares, scrambled on Thursday to buy the stock to meet their obligations, trader said. "Expectations are so low that even quarterly results which are not super-bad lead to short coverage," a Frankfurt-based stock market trader said. Commerzbank shares - a large portion of which are owned by short-term oriented hedge funds - have been on a roller-coaster ride in recent months, with volatility hitting levels twice as high as that of companies listed in the DAX. A strong equities business lifted results at the investment bank, while the unit also benefited from an accounting gain for revaluing its own debt. "There was no new bad news in any segment, but a bright spot in investment banking," said LBBW analyst Ingo Frommen. Engels indicated that cut-throat competition in Mittelstand lending had hurt results in that area, saying: "We are not willing to win every margin fight." He warned that Commerzbank's revenue would remain under pressure and the bank will have to put aside more money for bad loans. "We expect to see improved earnings in 2014," he added. The bank declined to give a specific 2013 outlook, reiterating 2013 will be a year of transition. ($1 = 0.7508 euros) (Editing by David Cowell and David Holmes) Link this Share this Digg this Email Reprints

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