Commerzbank AG

The stable outlook reflects our view that Commerzbank's multiyear restructuring will succeed and that it will largely achieve its financial targets. We anticipate steady improvement in structural profitability and efficiency over the coming 12-24 months and continued sound capital levels. We see the most likely downgrade scenario for Commerzbank as one in which our economic forecasts weaken materially, implying depressed fee income and far weaker asset quality including higher risk provisioning needs than expected. While less likely, we could also downgrade the bank if its transformation seemed likely to fail to improve structural profitability, for example due to failure to realize cost savings or if it becomes evident that the revenue potential is significantly weaker after the restructuring. While currently

...Commerzbank AG's transformation program is on track and execution risk has reduced. We are now more positive on revenues than a year ago, thanks to tailwinds from rising interest rates but also because of more resilient operating performance through the early phase of the bank's restructuring. We acknowledged the reduced execution risk by revising the outlook back to stable in May 2022 (see "Commerzbank Outlook Revised To Stable On Improving Revenue Prospects, Reduced Transformation Risk; '###+' Affirmed," published May 23, 2022). Drastic cuts to the bank's cost base are core elements of the transformation and we see the measures as largely on track. We think cost benefits will become visible from 2023, when many employees leave the bank. However, we expect that the Swiss franc portfolio of mBank, the bank's Polish subsidiary, and the Polish government's actions to mitigate the impact of rising rates for customers will continue to incur sizeable costs, but not to the extent that it threatens...

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