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(Bloomberg) -- Commerzbank AG Chief Executive Officer Bettina Orlopp announced a new share buyback and vowed to keep increasing payouts as she seeks to insulate the lender against a potential takeover by UniCredit SpA.
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The German lender will start repurchasing as much as €400 million ($415 million) of its stock and propose a dividend of €0.65 per share at the next Annual General Meeting, it said in a statement Friday. That would take total payouts on last year’s profit to €1.73 billion, it said.
The bank “will further enhance capital return in the coming years,” Orlopp said in the statement.
Shares of the lender rose as much as 2.4% on the news to €18.80, the highest since August 2011. They have risen almost 20% so far this year.
Orlopp is preparing to unveil a strategy revamp on Feb. 13 as she seeks to persuade investors they’re better off supporting Commerzbank’s independence than a potential acquisition by UniCredit under CEO Andrea Orcel. The Italian bank has built a large stake in the competitor and may decide to launch a takeover bid.
“A high share price is always the best defense against a takeover,” said Andreas Plaesier, an analyst at Warburg Research. “It remains to be seen what price UniCredit is willing to offer in a potential deal.”
Commerzbank’s profit rose about 20% to €2.68 billion last year, the highest level ever, the bank said in the unscheduled earnings pre-release on Friday. That exceeded analyst expectations of a profit of €2.47 billion.
Profitability measured as return on tangible equity hit 9.2% last year, according to the statement on Friday. The lender is targeting 12.3% in 2027.
If ROTE reaches 11.5% by 2026, Commerzbank “would earn its cost of capital and, given the buybacks, its shares should then trade at about €30,” Plaesier said.
Orlopp is likely to unveil job cuts as part of her effort to drive up profitability but she’s unlikely to engage in large-scale deals, Bloomberg News has reported.
Commerzbank is “on the right track,” said Tobias Lukesch, an analyst at Kepler Cheuvreux. The lender will probably present higher targets for profitability and payouts at the investor day next month, he said.
(Updates with analyst comments and details throughout.)
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