On Wednesday, Citi analyst Borja Ramirez Segura adjusted the price target for Commerzbank AG (CBK:GR) (OTC: OTC:CRZBY) to €17.80, up from the previous €16.20, while maintaining a Neutral stance on the stock. The revision comes ahead of the bank's Capital Markets Day (CMD) scheduled for February 13, 2025.
Segura anticipates that Commerzbank (ETR:CBKG) may raise its net interest income (NII) targets due to favorable eurozone interest rates and its performance in Poland. Moreover, the bank is expected to present further efficiency measures affecting both costs and capital. The report also incorporates updated estimates based on the latest forward curve.
The new forecasts by Citi suggest that Commerzbank's net profit from 2025 to 2028 could be roughly 2% higher than the consensus average, primarily because of enhanced NII. Despite this, the bank's net profit estimate for 2024 is about 1% below the Visible Alpha consensus, partially due to loan loss provisions (LLPs).
Commerzbank's current price-to-earnings ratio for the fiscal year plus two is approximately 6.6 times, which is about an 11% discount compared to its long-term average. This valuation, combined with the potential for consensus outperformance, has led Citi to adopt a positive short-term view on the stock. However, the firm notes that the 2024 net profit estimate is slightly below consensus.
Citi has projected a payout ratio of roughly 75% for 2024 and approximately 90% between 2025 and 2027, with market attention focused on the potential for increased capital returns. The new target price of €17.80 reflects these considerations.
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