Commerzbank CEO says lenders are prepared for loan default risk

The chief executive of one of Germany’s biggest banks, Commerzbank, sought to reassure investors on Thursday about the prospect of non-performing loans this winter, saying banks are much better placed to weather previous crises.

“The German economy faces a difficult period ahead of us due to the Ukraine conflict, China, supply chain issues and the energy crisis,” Commerzbank CEO Manfred Knof told Annette Weisbach. from CNBC at a Handelsblatt conference in Frankfurt, Germany.

“Probably the German economy is going down [trajectory] and possibly a recession, but the good news is that there is no reason to panic.”

Asked if he expected non-performing loans to increase significantly over the winter, Knof said: “If a recession happens, it’s likely we’ll see something, but the situation is much better than in the past.”

Commerzbank announced a net loss in the second quarter due to restructuring costs and an exceptional write-off on an outsourcing project.

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“The banks have done their homework, we are all capable, we have enough reserve to help our customers through this crisis and that’s really what matters,” Knof said. “Therefore, we are worried but we are not worried and there is no reason to panic.”

Fears of a recession have been heightened by the possibility of a winter gas shortage in Europe. Lawmakers in the region are scrambling to fill underground storage facilities with gas so they have enough fuel to keep homes warm in the colder months.

Russia – traditionally Europe’s largest energy supplier – completely halted gas flows through the Nord Stream 1 pipeline earlier this month. The pipeline is Europe’s main supply route and connects Russia to Germany via the Baltic Sea. State-owned energy giant Gazprom cited technical problems for the shutdown of supplies, while the Kremlin has since said it will not reopen taps until punitive sanctions are lifted.

Germany ‘satisfied’ with development of Commerzbank

Earlier Thursday, German Finance Minister Christian Lindner sought to downplay speculation about the government’s more than 15% stake in Commerzbank.

Speaking at the Handelsblatt conference, Linder said Olaf Scholz’s administration was “very pleased with the development of Commerzbank”. Reuters reported.

Last month, Germany’s second-largest lender announced a net loss in the second quarter due to cost containment and an exceptional write-off of an outsourcing project.

Commerzbank shares rose 1.7% on Thursday morning. The Frankfurt-listed share price is up about 4% since the start of the year.

— CNBC’s Silvia Amaro contributed to this report.

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