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August 29, 2006

Commerzbank to expand its CEE business with a stake in a Russian bank

Commerzbank intends to strengthen its business in the booming Russian banking market. For this reason, it has reached agreement with Moscow's Promsvyazbank to participate in a capital increase. Subsequently, Commerzbank will hold a 15.3% stake in the Russian bank. Participation in the capital increase, expected in September/October, still requires official approval. The option of a step-by-step increase to a majority position is being examined. Against this background, it was agreed not to disclose the price of the capital increase.

Promsvyazbank, with total assets of 3.7bn euros (as of mid-2006), currently ranks as the 12th largest bank in Russia and is now one of the country's fastest-growing banks. Founded in 1995, it has 115 branches throughout Russia and employs more than 4,000 people. The vast majority of its shares are privately held.

Its business focus is on its roughly 39,000 Mittelstand customers, who account for about 70% of the bank's customer credits and deposits. Recently, it also launched an ambitious retail-banking programme with the goal of establishing a universal bank with a market share of around 5% in Russia. The bank plans this capital increase in order to finance its expansion plans.

Promsvyazbank's ratings of B (S&P, Fitch) and Ba3 (Moody's) are relatively good. Its after-tax return on equity in 2005 was 18%.

Commerzbank already has a subsidiary in Russia, Commerzbank (Eurasija) SAO, which opened there in 1999.