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FRANKFURT, Feb 15 (AFP): Commerzbank, the second-biggest bank in Germany, said Wednesday it was targeting return on equity of 15 per cent over the medium to long term after it succeeded in topping all of its main profit targets last year.
"Our goal is to achieve an after-tax return of 15 per cent over the medium to long term," Commerzbank chairman Klaus-Peter Mueller told the group's annual earnings news conference here.
"This is a realistic expectation," he added.
Commerzbank succeeded in tripling its net profit to 1.165 billion euros (1.4 billion dollars) in 2005, bringing the return on equity -- a key yardstick of profitability -- to 12.4 per cent.
Adjusted for one-off gains from the disposal of various shareholdings, the return on equity stood at a more modest 9.6 per cent, but still way above Commerzbank's self-set target of eight per cent.
And looking ahead to the current year, chairman Mueller said the bank forecasting return on equity of more than 10 per cent.
Commerzbank said was "very satisfied" with 2005 earnings figures, which underlined the turnaround it had achieved since 2001.
Net profit trebled to 1.165 billion euros, pre-tax profit more than doubled to 1.68 billion euros and underlying operating profit surged 70 per cent to 1.717 billion euros.
In the fourth quarter alone, operating profit shot up 180 per cent to 466 million euros and pre-tax profit rose even faster, tripling to 429 million euros and bottom-line net profit also rose threefold, soaring to 333 million euros.
All the main earnings components were higher, with full-year net interest income provisions rising by 5.3 per cent to 3.172 billion euros and net commission income up by 7.3 per cent at 2.415 billion euros.
Trading income jumped by 31.2 per cent to 707 million euros and the net result on investments and securities nearly doubled to 647 million euros.
The latter figure "reflected the disposal of certain equity holdings, particularly the bank's stakes in truck maker MAN, printing machinery maker Heidelberger Druck and Italian bank Banca Intesa," it said.
At the same time, operating expenses grew by just 3.8 per cent to 4.662 billion euros and Commerzbank succeeded in slashing its provisions for bad or risky loans by 32 per cent to 566 million euros.
"We hit all out targets in 2005 and produced one of our best results to date," chairman Mueller boasted. "And we did so in face of rather modest overall conditions."
In view of its success, Commerzbank said it planned to double the dividend payout to shareholders to 0.50 euros per share for 2005.
Muller said that one of the main tasks facing the bank in the current year would be the integration of real estate financier Eurohypo, which it acquired last year in a 4.6-billion-euro deal that turned it into the second-biggest bank in Germany after Deutsche Bank.
Commerzbank bought out rivals Dresdner Bank and Deutsche Bank in Eurohypo, a three-way joint venture, via a mixture of cash, asset sales and a 1.25-billion-euro capital increase.
Eurohypo would play a key role in meeting its return-on-equity targets in the coming years since it would provide a stable and "comparatively reliable" stream of earnings in future, Mueller said.
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