Tuesday, Commerzbank AG (CBK:GR) (OTC: OTC:CRZBY) received a revised price target from Deutsche Bank (ETR:DBKGn), where analyst Benjamin Goy increased the target to EUR22.00, up from the previous EUR20.00. The firm continues to recommend a Buy rating on the bank's shares. The adjustment follows Commerzbank (ETR:CBKG)'s strong revenue performance throughout 2024 and notably in the fourth quarter of that year.
Goy noted that Commerzbank's 'Momentum' strategy, aimed for realization by 2028, capitalizes on the bank's solid top-line growth and seeks further profitability enhancements. The strategy includes a fresh restructuring plan and revenue initiatives, aiming to elevate the return on tangible equity (ROTFE) to 15%. While acknowledging the ambitious nature of these goals, Goy expressed approval of the bank's proactive approach to pushing past current achievements as it nears double-digit returns.
The analyst also pointed out that as Commerzbank's profitability and capital generation move closer to the sector average, there appears to be a shift in perception by regulators. This shift has translated into the possibility of full dividend payouts, with a 120% payout approved for this year. Despite higher than anticipated near-term cost inflation leading to mid-single-digit downgrades, Deutsche Bank's projections remain above consensus.
Goy highlighted that Commerzbank's valuation continues to be compelling, with a price-to-earnings (P/E) ratio of 5.7 times, an 18% total yield, and a price-to-tangible book value of 0.65x. These metrics are set against an expected ROTFE of 12% for the year 2027, which supports the bank's attractive investment profile in the eyes of Deutsche Bank.
In other recent news, Commerzbank AG's CEO, Bettina Orlopp, is set to announce significant job cuts in the bank's back office operations, according to Bloomberg News. This move is part of a strategy aimed at showcasing the bank's growth and stability potential without a takeover by UniCredit SpA (LON:0RLS). The job cuts are not anticipated to have a significant impact on revenue-generating activities, and early retirement packages are expected to be introduced as part of the implementation process.
In another development, short interest in Commerzbank has seen a substantial increase, rising from nearly 0% to 10%, as reported by short sale focus research firm, S3 Partners. This surge has led to Commerzbank becoming the second most shorted stock in the DAX. The firm has also highlighted that despite the increase in short interest, the stock has rallied by 20%, creating a potential high-risk squeeze scenario.
These are among the recent developments that investors should take note of. The upcoming investor day and the announcement of these strategic changes will be Orlopp's most significant effort to win investor support for Commerzbank's independence. Meanwhile, the rise in short interest and potential squeeze risk in Commerzbank is influencing both DAX financial stocks and the DAX index itself.
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