Commerzbank AG — Earnings Release 2010

Aug 5, 2010

News Details

UK Regulatory | 5 August 2010 07:09

Commerzbank posts a net profit of EUR 1.1 bn in the first half of 2010

Commerzbank AG / Quarter Results/Forecast

05.08.2010 07:09

Dissemination of a UK Regulatory Announcement, transmitted by
DGAP - a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.

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Commerzbank posts a net profit of EUR 1.1 bn in the first half of 2010

• Operating profit of EUR 243 m in Q2, EUR 1.0 bn in the first half of
  2010

• Gross revenues in Q2 stable at EUR 3.1 bn, loan loss provisions of EUR
  639 m

• Core capital ratio (Tier 1) as at June 30, 2010 with 10.8% still at a
  high level

• In a stable environment Commerzbank expects to generate a profit in
  2010

• Blessing: 'Stability is more important to us than maximizing short-term
  earnings'

Commerzbank achieved an operating profit of EUR 243 million in the second
quarter of 2010 (Q2 2009: minus EUR 223 million). The bank's operating
profit totalled EUR 1.0 billion in the first half of 2010. Net profit
(attributable to Commerzbank shareholders) came in at EUR 1.1 billion.
Compared to the first six months of 2009, this corresponds to an
improvement of around EUR 2.7 billion. The decrease in loan loss provisions
due to the improved economic environment was particularly noticeable in the
second quarter (EUR 639 million after EUR 993 million in Q2 2009). However,
the volatile capital markets impacted the trading result. Gross revenues
(Q2 2010: EUR 3.1 billion) were stable year-on-year (Q2 2009: EUR 3.0
billion), but fell by 14% compared to Q1 2010. In the second quarter 2010,
net profit (attributable to Commerzbank shareholders) was EUR 352 million
due to the positive tax result.

For business editors

August 5, 2010

'Germany is Europe's economic engine - a fact which is also being noticed
by our clients. Overall, we performed well in the first two quarters of the
year; however, a steep road still lies ahead and we are still a fair way
from normalcy. In accordance with the 'Roadmap 2012', we are therefore
still systematically reducing risks. This is taking its toll on profits,
but stability is more important to us than maximizing short-term earnings,'
said Martin Blessing, Chairman of the Board of Managing Directors of
Commerzbank. 'We have always said that we will be profitable by 2011 at the
latest. On the basis of the pleasing development in results in the first
six months, we now assume that in a stable market environment we will
conclude 2010 as a whole with a profit.'

Net interest income stable, trading profit down

Net interest income of EUR 1.9 billion in the second quarter was stable
year-on-year (Q2 2009: EUR 1.8 billion), although Group companies have been
sold and higher credit margins did not fully compensate for significantly
lower deposit margins. Net commission income (Q2 2010: EUR 884 million)
fell by 7% year-on-year and by 10% compared to Q1 2010. Trading profit (Q2
2010: EUR 337 million) was impacted by the uncertainties concerning the
developments in individual European countries. Although it rose by EUR 266
million year-on-year, it fell by more than half compared to Q1 2010. Net
investment income in Q2 2010 amounted to EUR 60 million, compared with EUR
172 million in the second quarter of 2009. Here, gains from equity
disposals were partially neutralised by charges stemming from targeted risk
reductions in the Public Finance portfolio.

Loan loss provisions fell significantly from Q2 2009 by EUR 993 million to
EUR 639 million in Q2 2010 (minus 36%) and remained stable compared to Q1
2010. The reason for this is the ongoing success in the restructuring of
loans and the improved economy. Around half of the still high provisioning
is attributable to commercial real estate financing in the Asset Based
Finance segment. Operating expenses, which in Q2 2010 fell slightly
year-on-year (minus 2% to EUR 2.2 billion), include EUR 148 million
integration costs. Personnel expenses fell by 13% compared to the previous
year. Adjusted for integration expenses and the disposal of subsidiaries,
operating expenses fell by 5% year-on-year.

Total assets up due to market conditions

Despite the downsizing of the portfolio, Commerzbank's total assets
increased to EUR 898 billion as at the end of June 2010 (March 31, 2010:
EUR 846 billion). The reasons for this include exchange rate movements and
persistent volatility on the markets, which led to significantly higher
valuations, in particular for derivatives. Due to currency effects,
risk-weighted assets (RWA) also rose by 4% to EUR 290 billion compared to
the end of Q1 2010. At 10.8%, the core capital ratio (Tier 1) remained at a
high level as at June 30 and is still considerably above the target range
(7% to 9%).

Core bank posts operating profit

The Private Customers segment achieved an operating profit of EUR 20
million in the second quarter. This fell short of both last year's and last
quarter's figures (Q2 2009: EUR 61 million; Q1 2010: EUR 29 million) due to
declining deposit margins, dwindling securities activity among customers,
the sale of subsidiaries and an increased administrative load on branch
teams as part of the brand migration. Net interest and commission income
each declined to EUR 492 million in Q2 2010. Further progress was made on
the cost front, with operating expenses down 4% year-on-year to EUR 913
million. The customer base in the Private Customers segment is stable at 11
million.

Mittelstandsbank achieved an operating profit of EUR 383 million. This was
more than three times its operating profit in the same period last year and
a considerable 27% increase over Q1 2010. Apart from lower loan loss
provisions (EUR 94 million after EUR 236 million in Q2 2009) improved
margins contributed to this result. Trading profit increased from EUR 6
million in Q1 to EUR 62 million in the second quarter of 2010 due to higher
valuations in the credit derivative business.

The Central & Eastern Europe segment benefitted from the region's economic
recovery and recorded an operating profit of EUR 8 million (Q2 2009: minus
EUR 87 million). Loan loss provisions fell by a considerable EUR 110
million to EUR 92 million year-on-year. As a result of stable deposits and
a robust market performance in Poland, Russia and the Czech Republic, gross
revenues were at EUR 247 million thus up by 9% relative to the first
quarter (Q1 2010: EUR 226 million). In the Central and Eastern European
region Commerzbank presently has approximately 4 million customers.

Corporates & Markets significantly boosted its operating profit to EUR 114
million compared to Q2 2009 (minus EUR 2 million), but saw a decline
compared to the traditionally strong first quarter (Q1 2010: EUR 340
million). In particular, the trading result of EUR 188 million fell a long
way short of Q1 2010 (EUR 449 million) owing to the difficult situation on
the markets. Based on the pleasing performance of Corporate Finance, net
commission income in Q2 2010 was almost stable at EUR 63 million. The net
investment result rose to EUR 43 million, while operating expenses fell
considerably to EUR 395 million (minus 24% compared to Q2 2009).

ABF impacted by risk reduction, PRU expects to be profitable for the full
year

Operating income in the Asset Based Finance (ABF) segment fell to minus EUR
250 million in Q2, a considerable decrease both year-on-year (Q2 2009:
minus EUR 198 million) and compared to Q1 2010 (minus EUR 86 million). In
particular, further charges resulting from the portfolio reduction in
Public Finance led to a significantly lower net investment income (Q2 2010:
minus EUR 158 million compared to EUR 3 million in Q2 2009). Commercial
real estate financing was subject to further provisioning. Overall, loan
loss provisions in Q2 2010 remained stable year-on-year at EUR 354 million.

The Portfolio Restructuring Unit (PRU) closed the second quarter with a
positive operating profit of EUR 94 million (after EUR 162 million in Q1
2010). The divestment of holdings has recently slowed down due to low
market liquidity, but is still being pursued on a systematic basis. As at
the end of June 2010, the PRU managed portfolios with a net asset value of
EUR 16.5 billion. The segment is currently also expected to achieve a
positive result for 2010 as a whole.

Outlook: 'As it stands today, we will close 2010 with a profit'

'While the Mittelstandsbank had one of its best quarters ever, low interest
rates and the conversion of the branches to the new brand impacted the
Private Customers segment. Our operating expenses are in line with the
plan'; said Eric Strutz, Chief Financial Officer of Commerzbank. As
announced, the costs of the Dresdner Bank integration will total EUR 2.5
billion, while cost synergies will amount to EUR 2.4 billion per year. As
at the end of June 2010, more than 40% of the synergies have already been
realized and by the end of the year they will amount to over EUR 1.1
billion.

Strutz: 'In the second half of the year we will continue to reduce risks
and portfolios. In particular, against the background of the economic
development in the year as a whole, our risk provisioning will decrease
considerably compared to what we could have expected at the beginning of
the year. We currently assume that the risk provisioning for 2010 will be a
figure of up to EUR 3.0 billion. As of today we will conclude 2010 with a
profit, and thus sail into 2011 with a tail wind.' The forecast presupposes
that there is no dramatic shift on the financial markets or on the economic
front in the second half of the year. In 2009, loan loss provisions had a
negative impact of EUR 4.2 billion; the estimate for 2010 had so far been
around EUR 3.8 billion.

As of today, Commerzbank has fully covered its funding needs for the
current year. Market windows for issuance will be used in the second half
of the year, in order to initiate the funding for 2011.

Excerpt from the consolidated profit and loss statement

in EUR m H1 2010 H1 2009 Q2 2010 Q1 2010 Q2 2009

Net interest income 3,747 3,530 1,859 1,888 1,838
Provisions for loan losses - 1,283 - 1,837 - 639 - 644 - 993

Net commission income 1,867 1,797 884 983 947
Trading profit 1,187 - 456 337 850 71
Net investment income - 59 558 60 - 119 172
Other income - 8 - 66 - 30 22 5
Operating expenses 4,437 4,344 2,228 2,209 2,263
Operating profit 1,014 - 818 243 771 - 223
Impairments of goodwill - 70 - - 70
Restructuring expenses 33 505 33 - 216
Taxes - 96 276 - 151 55 269
Consolidated profit / loss 1,060 - 1,625 352 708 - 761
(attributable to Commerzbank
shareholders)
Cost / income ratio in operating
business (%) 65.9 81.0 71.6 61.0 74.6

*****

Telephone Conference
A telephone conference call will be held at 10:30 a.m. (CEST) on August 5,
2010. In the call, Eric Strutz will comment on the business performance in
the second quarter of 2010. The conference will begin at 10:30 a.m. and
last about 45 minutes. Please dial +49 (0)30 86871 703 approx. 10 minutes
before the scheduled starting time. A presentation is expected to be made
available at
https://www.commerzbank.de/en/hauptnavigation/aktionaere/vortrag/praesenta
tionen.html from 7:00 a.m. At that time you will also be able to access
broadcast-quality video and audio material, including an interview with
Eric Strutz on the Q2 figures, at www.tvservicebox.de or
www.directradio.de.

*****

About Commerzbank

Commerzbank is the leading bank for private and corporate clients in
Germany. With its core segments Private Clients, Mittelstandsbank,
Corporates & Markets, Central & Eastern Europe as well as Asset Based
Finance, the bank offers its customers an attractive product portfolio, and
is a strong partner for the export-oriented SME sector in Germany and
worldwide. With a total of some 1,200 branches, Commerzbank has the densest
network of branches among the German private banks. It has above 60 sites
in more than 50 countries and serves approximately 14 million private
clients as well as one million corporate clients. In 2009 it posted gross
revenues of EUR 10.9 billion with some 63,000 employees.

*****

Disclaimer

This release contains statements concerning the expected future business of
Commerzbank, efficiency gains and expected synergies, expected growth
prospects and other opportunities for an increase in value of the company
as well as expected future net income per share, restructuring costs and
other financial data. These forward-looking statements are based on
management's current expectations, estimates and projections. They are
subject to a number of assumptions and involve known and unknown risks,
uncertainties and other factors that may cause actual results and
developments to differ materially from any future results and developments
expressed or implied by such forward-looking statements. Commerzbank has no
obligation to periodically update or release any revisions to the
forward-looking statements contained in this release to reflect events or
circumstances after the date of this release. This release does not
constitute an offer to sell or a solicitation of an offer to buy shares of
Commerzbank. Shares of Commerzbank may not be offered or sold in the United
States of America absent registration or an exemption from registration
under the U.S. Securities Act of 1933, as amended. Commerzbank does not
intend to conduct a public offering of shares in the United States.

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

05.08.2010 Ad hoc announcement, Financial News and Press Release distributed by DGAP.
Media archive at www.dgap-medientreff.de and www.dgap.de

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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
Indices: DAX, CDAX, HDAX, PRIMEALL
Listed: Regulierter Markt in Berlin, Frankfurt (Prime
Standard), Düsseldorf, München, Hannover, Stuttgart,
Hamburg; Terminbörse EUREX; Foreign Exchange(s) London,
SIX
Category Code: IR
LSE Ticker: CZB
Sequence Number: 541
Time of Receipt: Aug 05, 2010 07:06:02

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