By Tom Sims and Matthias Inverardi
FRANKFURT (Reuters) -Germany's Commerzbank (ETR:CBKG) posted its biggest profit in 15 years in 2023 as it benefited from higher interest rates, and the lender said on Thursday it was aiming for another profit rise in 2024, sending its shares up 5%.
Full-year net profit was 2.224 billion euros ($2.39 billion), a 55% increase from 1.435 billion euros a year earlier and ahead of expectations for 2.191 billion euros.
The bank, however, warned that the sluggish economy "will remain a challenge".
Commerzbank, one of Germany's best known banks and partially held by the government after a bailout more than a decade ago, spent much of the past three years in a major overhaul, slashing its workforce and branch network to restore profits.
"We will achieve a further increase in net profit for the current year," Chief Executive Officer Manfred Knof said.
Like many banks, Commerzbank is benefiting from a rise in interest rates and the income that generates. Net interest income rose 8.5% in the fourth quarter to 2.126 billion euros, better than expectations for 2.081 billion euros.
As Germany goes through its biggest real estate crisis in decades, Commerzbank disclosed it had 9 billion euros in exposure to commercial property loans, of which around 4% was non-performing.
The bank said it would be cautious on such lending, with "strong restraint in the non-food retail sector".
Shares in Commerzbank were up 5.01% at 1520 GMT, against a 0.1% rise in a European banks index.
Commerzbank also said it was proposing a dividend of 35 cents per share for 2023, making for 1 billion euros in dividends and buybacks for the year.
The German lender has been in the process of buying back 600 million euros in shares after it got approval from the European Central Bank.
The bank has flagged bigger capital returns to shareholders, and in September said that it was revamping its payout policy for investors, aiming for a return of least 70% of profit for 2024.
For the fourth-quarter, net profit fell 16% but it was better than analysts had expected.
Net profit of 395 million euros in the quarter compared with a profit of 472 million euros a year earlier. Analysts had on average expected profit of 361 million euros, according to a consensus forecast published by Commerzbank.
($1 = 0.9321 euros)