Commerzbank reported a worse-than-expected 861 million euro ($1.2 billion) net loss today in the first three months of the year, weighed down by charges and writedowns of over €2.6 billion.
Germany's second-largest bank pledged to rebound from recession in three years after announcing further losses from a global crisis that forced it to turn to the German government for a bailout.
The lender has amassed a tally of writedowns and costs from the financial maelstrom of almost €17 billion since 2008, making the now partly state-owned bank one of Europe's highest profile casualties.
Nonetheless, Commerzbank pledged to return to profit no later than 2011.
Chief executive Martin Blessing wants to make an operating profit of more than €4 billion a year from 2012, despite being lumbered with an annual bill of about €1.5 billion for interest on government loans taken to salvage its finances.
Mr Blessing threw cold water on speculation that the bank might need more fresh capital.
"As it stands today we have enough capital to see us through the crisis," he told reporters. "This bank is strong enough to make it without state help in the long run."
The first-quarter loss was worse than the roughly €719 million that analysts expected and represents an earnings slump of more than €1 billion from a year ago.
But investors, already upbeat after stress tests on US banks revealed no nasty surprises, welcomed the news, relieved that it was not even worse.
"Commerzbank is in the eye of the financial storm," said Konrad Becker, an analyst with Merck Finck. "And it is conducting open heart surgery on Dresdner Bank." Commerzbank took over Dresdner Bank earlier this year.
But Becker said news of the European Union's approval of parts of the allocated state rescue for the bank and the imminent setting up of a bad bank for Germany were raising hopes of a brighter future.
"Alongside Hypo Real Estate, Commerzbank would be one of the main beneficiaries of such a (bad bank) scheme. So the figures are bad - but not bad enough to spoil the positive mood."
The lion's share of writedowns and charges in the first quarter stem from asset-backed securities, US residential mortgage-backed securities and monoline insurers.
The group, which bought Dresdner Bank on the eve of the collapse of Lehman Brothers last year, has created a restructuring unit to manage toxic assets as well as replacing its chief risk officer as part of an overhaul.
Reuters