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November 10th, 2022 | 13:32 CET

Commerzbank, Aspermont, Munich Re - Financial stocks on the upswing

  • Investments
  • Banking
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The end of the ultra-loose monetary policy and several larger interest rate steps already showed up positively in the half-year report of the major German banks. Should the ECB follow its big brother overseas, this promises further significant earnings potential. Financing platforms that combine the supply of scarce, promising commodity projects for the energy transition with demand from the capital market also hold great promise.

time to read: 4 minutes | Author: Stefan Feulner

Table of contents:

    Commerzbank- Above average

    The forecast of achieving a profit of more than EUR 1 billion for the full year is still being adhered to. Despite the weak third quarter due to high write-downs at the Polish subsidiary mBank amounting to EUR 747 million, the Frankfurt-based bank remains fully on target operationally. At EUR 195 million, net profit fell by 52% but still exceeded the consensus of analysts, who were expecting a profit of EUR 116 million. Positive drivers, which pushed revenues to a total of EUR 7.1 billion, were growth in customer business in addition to the interest rate turnaround. Due to the interest rate effect alone, CEO Manfred Knof expects net interest income to rise to more than EUR 6 billion this year.

    The financial house also reaffirmed the key financial targets of its "Strategy 2024". The bank aims for a return on equity of more than 7.3% and a cost/income ratio of 60%. Due to the good development of customer business and boosted by the turnaround in interest rates, the earnings forecast for 2024 has been raised to EUR 10 billion, compared with the previous target of EUR 9.1 billion. The cost-cutting program will also be systematically continued, but total expenses have been increased from EUR 5.4 billion to EUR 6.0 billion due to persistently high inflation. Commerzbank now expects an operating profit of around EUR 3.2 billion for 2024, compared with a previous forecast of EUR 3.0 billion. In addition, the Frankfurt-based bank intends to propose a distribution of 30% of the consolidated profit after the deduction of AT-1 coupon payments for the 2022 financial year.

    The reaction of investors after the publication of the figures was rather sobering. The share lost over 7% to a level of EUR 7.65. The opinions of the various analyst houses were also mixed. After the quarterly figures, the analyst firm Warburg Research reiterated its price target of USD 8.20, and the investment rating was also left at "buy". In contrast, DZ Bank raised its target from EUR 7.70 to EUR 8.00, and the rating was left at "hold".

    Aspermont - Long-term commodity hype expected

    Due to the economy's slowdown, most commodities came back from their all-time highs into more moderate territory in recent months. Copper, for example, fell in price by around 25%. In the long term, however, there is already excess demand for the red metal, and new projects are few and far between. Should a promising company nevertheless find its way to the capital market, it is usually financed by large institutional investors, leaving the private investor out in the cold. The newly launched financing platform "Blu Horseshoe" now paves the way for qualified customers and access to the lucrative secondary market on the Australian Stock Exchange.

    The formation of a joint venture with established and high-profile partners Aspermont, International Pacific Capital (IPC) and Spark Plus sealed an association that is unique due to its decade-long network. It will likely enjoy a unique selling point within the commodity and financial markets on the Australian Stock Exchange (ASX). After only about 5 months, the platform is already leading the way. In this context, Blu Horseshoe serves as a pilot project in Australia and could be transferred to other geographic markets at any time.

    Operationally, things continue to run smoothly at Aspermont, the B2B service provider for the mining industry. The target of at least 20% annual growth in all sectors continues to be met, and the figures presented for Q3 2022 confirm this once again. The annual order value of AUD 9.85 million was 4% higher than the previous quarter and 13% higher than the same period last year. The average revenue per unit is now over AUD 1,500, up 7.2% from the previous quarter and 27.5% over the last 12 months. Over AUD 7 million is in the bank account of the Australians, so investments in interesting projects are possible at any time. Aspermont's market capitalization is AUD 64.25 million.

    Munich Re - With thanks to ERGO

    Munich Re shares have outperformed the market in a class of their own since their low for the year at the beginning of March. Despite the Ukraine conflict, high inflation and heavy losses caused by Hurricane Ian in the third quarter, the reinsurer's share price rose by around 38% and is thus on the verge of reaching a new all-time high, which is likely to generate additional investor appetite.

    The damage caused by Ian was significantly mitigated by the strong US dollar. While the Group posted a charge of EUR 1.6 billion due to the hurricane in the US, the greenback, in particular, mitigated against the euro, with currency gains of almost EUR 850 million. In the third quarter, Munich Re posted a profit of EUR 527 million, compared with EUR 366 million in the same period last year; in the first nine months, the profit amounted to EUR 1.90 billion.

    The strong results of the primary insurance subsidiary ERGO also made a significant contribution to the positive result. The Düsseldorf-based company posted a leap in profits of EUR 446 million, compared with just EUR 134 million a year earlier. This very significant increase was also positively supported by a one-off effect in the ERGO Life/Health Germany segment. In Q3, premium growth continued in all segments, with total premium income rising to EUR 4.72 million from June to September.

    Based on the positive business development in the first nine months of 2022, Munich Re raised its forecast for gross premiums in the reinsurance segment to EUR 48 billion and the ERGO segment to EUR 19 billion. Munich Re thus expects gross premiums to increase from EUR 64 billion to EUR 67 billion. The consolidated result is expected to remain unchanged at EUR 3.3 billion.

    Banks and insurers are benefiting from the end of the loose monetary policy with high interest rate steps. The restructuring process at Commerzbank is progressing according to plan. Munich Re benefited from the strong growth of its subsidiary ERGO and is close to a new all-time high. In addition to its growing core business, Aspermont is expected to generate rising revenues through the Blu Horseshoe financing platform.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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