Commerzbank AG — Earnings Release 2009

Nov 5, 2009

News Details

Corporate | 5 November 2009 07:00

Commerzbank: Operating profit up by EUR 345 m to EUR 122 m in Q3

Commerzbank AG / Quarter Results

05.11.2009

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Commerzbank: Operating profit up by EUR 345 m to EUR 122 m in Q3

• Gross revenues up by 13% on Q2 to EUR 3.439 bn
• Trading profit increased by EUR 588 m on Q2 to EUR 659 m
• Integration charges and goodwill impairments burden, net result of minus
  EUR 1.055 bn
• At 10.9%, the core capital ratio (Tier 1) remains at a high level
• Totals assets were down 15% and risk-weighted assets dropped 14% compared
  to end-2008
• Blessing: 'The German core business is profitable, but Commerzbank will
  close 2009 with a loss'

Commerzbank significantly increased its operating profit in the third
quarter of 2009. At EUR 122 million the operating profit was EUR 345
million above the previous quarter. The result posted by the Portfolio
Restructuring Unit (PRU), which was established at the start of July,
benefited from the market recovery. A review of goodwill resulted in
write-downs of some EUR 650 million. The impairments on goodwill are mainly
due to the previously announced realignment of Eurohypo's strategy and the
respective changes in the expected revenues. These became necessary because
of the new segment allocation. Planned charges for the integration of
Dresdner Bank (EUR 904 million) and goodwill impairments led to a net
result of minus EUR 1.055 billion (Q2: minus EUR 761 million).

'The German core business is profitable. The Portfolio Restructuring Unit,
which bundles non-strategic holdings, has posted substantial write-ups.
However, the second half of the year remains difficult and Commerzbank will
close 2009 with a loss,' said Martin Blessing, Chairman of the Board of
Managing Directors of Commerzbank. According to the EU-requirements the
bank is not permitted to release any reserves in the case of an annual
loss. Thus, the bank is not allowed to service profit-related equity-like
instruments. This, however, will not result in any changes for the 'Roadmap
2012'. Blessing: 'We are systematically implementing a customer-oriented
strategy and our core business provides us with the basis for long-term and
sustainable growth.'

Commerzbank repositioned itself during the first half of 2009. In addition
to the core business, there are now the new Asset Based Finance (ABF) and
PRU segments. All information for the second quarter of 2009 thus refers to
pro-forma figures. A detailed reconciliation can be found under:
https://www.commerzbank.de/de/hauptnavigation/presse/archiv_/praesentation
en_1/praesentationen_2.html

At 10.9%, the core capital ratio (Tier 1) remains at a high level

The revaluation reserve improved by EUR 800 million to minus EUR 1.724
billion as at September 30, 2009, against the backdrop of the recovery in
the capital markets. Positive hidden reserves (fair value) from assets and
liabilities on the balance sheet totalled EUR 3.6 billion (before tax).
Total assets were down 15% compared to the end of 2008 to EUR 892 billion.
Risk-weighted assets were reduced by 14% to EUR 293 billion. At 10.9%,
compared to 11.3% as at 30 June 2009, the core capital ratio (Tier 1)
remained at a high level in the third quarter despite the integration costs
of EUR 904 million. This shows the progress being made as the group
implements 'Roadmap 2012'. Total lending to small and medium-sized
companies in Germany remained high at more than EUR 130 billion.

Net commission income slightly increases; trading profit significantly
improved

The positive trend in the capital markets has revived customers' securities
activities, with net commission income up slightly to EUR 953 million (Q2:
EUR 947 million). With respect to net interest income, outflows of funds in
investment products closely linked to the capital markets were noticeable.
Net interest income therefore slightly decreased to EUR 1.769 billion
(minus 4%). The recovery in the capital markets was also apparent in
trading profit: mainly thanks to write-ups on PRU assets and realised gains
resulting from the active reduction of the portfolio it increased
significantly during the third quarter to EUR 659 million (Q2: EUR 71
million). At minus EUR 54 million, net investment income was below the
figure for the previous quarter (Q2: EUR 172 million). The positive effects
from the disposal of ownership stakes (GEA) were counterbalanced by the
negative impact from the impairments on asset backed securities.

Loan loss provisions slightly up, operating expenses stable

In the third quarter of 2009, loan loss provisions totalled EUR 1.053
billion compared to EUR 993 million at the end of the second quarter. The
rise can mainly be attributed to the ABF segment and impairments on loans
to foreign banks in the Mittelstandsbank. Loan loss provisions increased
only moderately in the German customer business of the Private Customers
and Mittelstandsbank segments. Operating expenses amounted to EUR 2.264
billion. They remained stable compared to the previous quarter, but are
down 9% on the previous year. In comparison to year-end 2008, the number of
full-time employees (including partial retirement) has been reduced to some
55,000 (minus 7%). While personnel costs have fallen, other expenses,
especially integration costs, have increased.

Customer business in Germany with positive contribution, BRE Bank also
performed well

With more than 11 million in the Private Customers segment and
approximately 3.6 million in Central and Eastern Europe, the number of
customers remained at a high level. The Mittelstandsbank was able to extend
its market share, in particular among smaller corporate customers. The
operating profit of the Private Customers and Mittelstandsbank segments
totalled EUR 46 million and EUR 64 million respectively, coming in below
the figures for the previous quarter (Q2: EUR 62 million and EUR 124
million). Net commission income in the Private Customers segment increased
by almost 5% to EUR 562 million, while net interest income fell by 4% due
to changes in investment behaviour. Meanwhile, net interest income in the
Mittelstandsbank fell by 7% to EUR 502 million. In Central & Eastern Europe
(CEE), the operating result improved by EUR 46 million to minus EUR 36
million. While BRE Bank performed well in the stable Polish market, Russia
and the Ukraine had a negative impact.

Corporates & Markets affected by wind-down portfolios, customer-oriented
business profitable

The third quarter of 2009 saw wide-ranging changes in the structure of the
Corporates & Markets segment. Public Finance was allocated to the new Asset
Based Finance segment, while the Portfolio Restructuring Unit became a
segment in its own right. Particularly in the customer-oriented business
areas such as Corporate Finance and in the fields of Equity Derivatives &
Commodities, Corporates & Markets has developed well. Net interest income
rose by over one-third compared to the second quarter to EUR 265 million,
principally due to one-offs. At the same time, proprietary trading
activities were further cut back and non-strategic risk positions reduced.
Due to charges from the de-risking portfolios (EUR 133 million), trading
profit was at EUR 48 million (Q2: EUR 186 million). Administrative
expenditure declined, operating profit fell to minus EUR 96 m (Q2: minus
EUR 1 million). Without the charges resulting from the de-risking
portfolios, operating profit in the first nine months of the current
financial year was at EUR 454 million.

Net interest income in ABF segment down, PRU profits from market recovery

In the Asset Based Finance segment, net interest income fell by just over
25% to EUR 242 million. The reasons for this were both increased
refinancing costs and highly selective new business. By comparison with the
previous quarter, net commission income fell by EUR 9 million to EUR 66
million, reflecting the reduced new business in the area of commercial real
estate. New business in real estate financing during the first three
quarters came to EUR 1.4 billion, significantly below the volume of EUR
13.1 billion reported in the same period last year. Mainly as a consequence
of impairments on individual commercial real estate commitments in the USA
and Spain, risk provision increased slightly to EUR 367 million. Boosted by
the positive developments in the capital markets, the Portfolio
Restructuring Unit benefited from write-ups. It posted an operating profit
of EUR 497 million; this includes EUR 311 million in gains from the
divestment of holdings as part of the strategic risk reduction. In
addition, there were EUR 435 million in unrealised write-ups. When
calculated on the basis of nominal values, 15% of the structured credit
portfolio has been offloaded since the beginning of the year.

Strutz: 'Our strategy proves valid. We have strengthened our position in
customer-oriented business'

'We are consistently implementing the 'Roadmap 2012'. We are on track and
have reached many milestones ahead of schedule. The third quarter shows our
strategy proves valid. We have strengthened our position in the
customer-oriented business', said Eric Strutz, Commerzbank's Chief
Financial Officer and the member of the Board of Managing Directors
responsible for the PRU segment. 'We are also implementing the agreements
reached with the EU Commission, as announced.' By concentrating on selected
locations in Wealth Management, several subsidiaries have already been
sold. By the end of September 2009, Commerzbank had also placed some EUR
28.7 billion of its own securities in the market. Strutz: 'Our plans for
2009 envisaged a funding volume of EUR 20 billion. We achieved that as
early as the second quarter. In recent weeks we have used market windows
for additional unsecured issuances, which means that we have already
covered some of our planned funding needs for 2010. We will continue to
take advantage of opportunities in future when they arise.' Guarantees
totalling EUR 10 billion that were not required were given back to the
Federal Government in the second and third quarter respectively.

Outlook

The global economy is developing unexpectedly well in the second half of
2009, but the possibility of setbacks cannot be excluded and the
environment remains challenging. 'For the remainder of the year, we
anticipate solid performance in the core Private Customers and
Mittelstandsbank segments. The Central & Eastern Europe and Asset Based
Finance segments will continue to face difficult conditions in their
respective markets', said Strutz. At the beginning of the year, the total
of loan loss provisions and charges against earnings on account of the
financial market crisis was expected to come at 25% below the pro-forma
total for 2008 (EUR 9.7 billion). In fact, these charges will be some 38%
down. However, there have been some adjustments, as the proportion of loan
loss provisions will likely be higher, while that of the other charges
against earnings is expected to be lower. Integration costs are anticipated
to reach a total of EUR 2 billion in 2009, with EUR 1.7 billion
attributable to the cost of restructuring. Q4's integration costs are
expected to reach some EUR 300 million. Commerzbank's economists expect
German gross domestic product (GDP) to grow by some 2% in 2010. 'This will
benefit our private and corporate customer operations. Loan loss provisions
will also decrease in the medium term', said Strutz. Commerzbank remains
confident that it will be able to commence repayment of SoFFin's silent
participations from 2012 assuming normal market conditions, and as early as
2011 if market conditions are favourable.

The bank will be reporting in detail on the implementation of 'Roadmap
2012' and on the progress of the Dresdner Bank integration at the
'Investors' Day' scheduled for November 25, 2009.

Excerpt from the consolidated profit and loss statement

in EUR m Q3 2009 Q2 2009 Q3 20081)

Net interest income 1,769 1,838 1,722
Loan loss provisions 1,053 - 993 - 898
Net commission income 953 947 1,227
Trading profit 659 71 - 660
Net investment income - 54 172 - 283
Other result 112 5 - 64
Operating expenses 2,264 2,263 2,491
Operating profit 122 - 223 - 1,447
Impairments (Goodwill) 646 70 0
Restructuring expenses 904 216 0
Taxes - 375 269 -
Consolidated profit attributable
to Commerzbank shareholders - 1,055 - 761 -
Operating expense ratio in % 65.8 74.6 128.3

1) on a pro-forma basis

A telephone conference has been arranged for 10.30 am (CET) on Thursday,
November 5, 2009, during which Eric Strutz will explain developments in the
third quarter of 2009. If you would like to take part, please register at:
https://portal.meetyoo.de/auto_attendant/reg_user.php?confId=37〈=de

You will then be sent the dial-in number and access PIN by email. If you
are unable to register via the internet, please dial +49 (0) 69 247 501 892
approximately 10 minutes before the scheduled starting time, and you will
then be placed in the telephone conference. Presentation charts will be
available from approx. 7.30 a.m. onwards at
https://www.commerzbank.de/de/hauptnavigation/presse/archiv_/praesentation
en_1/praesentationen_2.html

From around 7.30 am, there will be a digital video and audio broadcast of
an interview with Eric Strutz on the figures available on
www.tvservicebox.de and www.directradio.de.

Press contact:

Reiner Roßmann: +49 69 136 46646
Simone Fuchs: +49 69 136 44910
Maximilian Bicker: +49 69 136 28696

Contact:
Commerzbank AG
Group Communications
Tel.: +49 69 136 - 22830
mediarelations@commerzbank.com

05.11.2009 Financial News transmitted by DGAP

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Language: English
Company: Commerzbank AG
Kaiserplatz
60261 Frankfurt am Main
Deutschland
Phone: +49 (069) 136 20
Fax: -
E-mail: ir@commerzbank.com
Internet: www.commerzbank.de
ISIN: DE0008032004
WKN: 803200
Indices: DAX, CDAX, HDAX, PRIMEALL
Listed: Regulierter Markt in Berlin, Frankfurt (Prime Standard),
München, Hannover, Düsseldorf, Hamburg, Stuttgart;
Terminbörse EUREX; Foreign Exchange(s) London, SWX

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