Frankfurt (Reuters) - The rise in interest rates in the eurozone gave Commerzbank's profits a strong boost in the spring.

The Frankfurt-based financial group generated a consolidated profit of 565 million euros in the second quarter, an increase of more than 20 percent within a year, as the DAX-listed group announced on Friday. Analysts had expected an average of only 538 million euros. Income before risk provisioning increased by 8.7 percent to 2.63 billion euros. This was driven by net interest income, which rose by 44 percent to a record EUR 2.13 billion. Commerzbank therefore raised its forecast for the year to at least 7.8 billion euros in net interest income instead of around seven billion euros.

"We are consistently implementing our strategy and have significantly increased profits thanks to strong earnings in the customer business - despite another high extraordinary charge for Swiss franc loans in Poland," explained Group CEO Manfred Knof. "We are therefore fully on track to achieve our targets for 2023 and 2024." Commerzbank expects consolidated net profit in 2023 to be significantly higher than the previous year's figure of EUR 1.4 billion.

Shares were up 1.5 percent in pre-market trading. One trader said that the figures were better than expected, with the exception of costs. Due to the expected higher variable remuneration as a result of the good business performance, the bank adjusted its cost outlook slightly and now expects total expenses of 6.4 billion euros instead of 6.3 billion this year. "This could be a problem for the share price development today," said the trader.

The European Central Bank (ECB) has already raised key interest rates nine times in a row since summer 2022 - most recently last week by another quarter of a percentage point. The key deposit rate on the financial market, which banks receive from the central bank for parking surplus funds, now stands at 3.75 percent. This is the highest level in 23 years. Other European banks, such as the Dutch bank ING, also benefited significantly from the higher interest rates in their business.

"Commerzbank's transformation is increasingly paying off," explained CFO Bettina Orlopp. The bank is benefiting from increased profitability, strict cost discipline and conservative risk management. The operating result climbed by 19.1 percent to 888 million euros in the second quarter. The number of loan defaults remained at a moderate level, the bank explained.

However, the Swiss franc loans of its Polish subsidiary mBank cost Commerzbank dearly in the quarter. The European Court of Justice (ECJ) ruled in favor of consumers in the dispute over real estate foreign currency loans, which have long been popular with Polish customers. The issue has been simmering for years. Thousands of borrowers had once taken out mortgages in Swiss francs in order to benefit from the lower interest rates in Switzerland. However, the Swiss franc appreciated against the zloty, making the loans and interest rates more expensive for customers. Thousands sued to get out of the trap.

(Report by Frank Siebelt, edited by Sabine Wollrab. If you have any queries, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)