European Central Bank Hits Pause, Commerzbank CFO Reports

The chief financial officer of Commerzbank informed CNBC on Friday that the European Central Bank (ECB) is likely pausing its rate hiking cycle.

In July, the ECB raised interest rates, completing a year of rate increases. ECB President Christine Lagarde suggested that the central bank may continue or pause rate hikes at its upcoming September meeting, but will not cut rates. The ECB’s main rate is currently at 3.75%.

Bettina Orlopp, CFO of Commerzbank, contradicted analysts’ expectations of a rate hike in September, stating that it is unlikely to occur according to their assumptions for 2024. Orlopp emphasized that the bank will stick to the current rate of 3.75%.

As the second largest lender in Germany by market capitalization, Commerzbank’s performance heavily relies on the interest rate environment.

The bank’s second-quarter results revealed a 20% increase in net profit compared to the previous year, exceeding analysts’ predictions with revenue reaching 2.6 billion euros ($2.84 billion). These positive results prompted the bank to raise its net interest income expectations for 2023 to “at least 7.8 billion euros,” up from the previous guidance of 7 billion euros.

In addition, Orlopp stated that another interest rate hike in the future would represent upside potential for the bank.

There is still uncertainty surrounding the direction the ECB will take in September, as their decision will depend on data.

“We are very close to the peak in rates, and I believe the peak will occur in the next few months,” said Akshay Singal, EMEA head of short-term interest rate trading at Citi, on CNBC’s Street Signs. He added that the September meeting will be the last rate hike for the ECB, Bank of England, and the Federal Reserve, if they choose to increase rates.