Commerzbank profit unexpectedly falls 8% as higher tax rates, costs weigh

By Tom Sims and Alexander Hübner

FRANKFURT (Reuters) -Germany's Commerzbank, fending off a possible takeover by Italy's UniCredit, reported an unexpected 7.9% drop in third-quarter net profit on Thursday as higher tax rates and costs weighed on earnings.

The lender reported a net profit of 591 million euros ($689.22 million) in the quarter ended September 30, compared with a profit of 642 million euros a year earlier. Analysts, on average, had expected a profit of 659 million euros, according to a consensus forecast published by Commerzbank.

The German bank said that its tax rate rose to 36% in the quarter, up from 22% a year earlier. Costs rose 5% in the third quarter, in part due to higher personnel expenses.

The bank said it had applied for an additional share buyback of up to 600 billion euros, and it increased its forecast for 2025 net interest income to 8.2 billion euros, up from 8 billion euros earlier.

Italy's UniCredit has amassed a 26% equity stake in the German lender as it pushes for a tie-up between the banks, despite resistance from Commerzbank management, employees, and the German government.

Commerzbank executives have been trying to convince shareholders of their standalone strategy by delivering healthy earnings.

"We have generated significant momentum over the past 12 months," CEO Bettina Orlopp said.

The bank announced earlier this year that it would axe 3,900 mostly local jobs to help it deliver more ambitious profit targets as part of its effort to fight off UniCredit's advances.

($1 = 0.8575 euros)

(Reporting by Tom Sims and Alexander Huebner, Editing by Friederike Heine and Rashmi Aich)