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May 06, 2010

Commerzbank in Q1 with an operating profit of EUR 771 m

  • Net profit with EUR 708 m clearly positive
  • Core capital ratio (Tier 1) at 10.8% remains at a high level
  • Gross revenues rise to EUR 3.6 bn (plus 56% year-on-year)
  • Blessing: "We have reached another milestone on the path to full profitability"

Commerzbank has made a successful start to the financial year 2010 with a first-quarter operating profit of EUR 771 million (Q1 2009: minus EUR 595 million). With customer-oriented business picking up, reduced loan loss provisions and markets showing a positive trend, gross revenues increased by 56% year-on-year to EUR 3.6 billion. The net profit (after minority interests) was EUR 708 million (Q1 2009: minus EUR 864 million). The core bank, comprising the segments Private Customers, Mittelstandsbank, Central & Eastern Europe (CEE) and Corporates & Markets (C&M), operated profitably. For the months of January to March, Asset Based Finance (ABF) and the Portfolio Restructuring Unit (PRU) also posted an improved result and an operating profit respectively. "We have not yet reached our targets, but the positive result shows that we are on the right track with 'Roadmap 2012'. We have significantly improved our operating performance, thereby reaching another key milestone on the path to full profitability", said Martin Blessing, Chairman of the Board of Managing Directors of Commerzbank. "The core bank will close 2010 with an operating profit as planned. By 2011 at the latest we will once again be profitable at group level. In 2012, we will be fully profitable with an operating result of more than EUR 4 billion."


Despite the sale of subsidiaries and the further reduction of assets, net interest income year-on-year increased by 12% to just under EUR 1.9 billion. Net commission income improved by 16% to EUR 983 million. This was mainly due to growth in the securities activities of Commerzbank customers, from which trading profit also benefited (EUR 850 million, Q1 2009: minus EUR 527 million). Impairments on structured products (ABS portfolio) in particular caused a decline in net investment income to minus EUR 119 million (Q1 2009: EUR 386 million). Loan loss provisions fell by 24% year-on-year and by 51% quarter-on-quarter to EUR 644 million. The decrease also reflects the improved financial situation of many Commerzbank customers. Although the Dresdner Bank integration resulted in expenses of EUR 120 million during the first quarter, operating expenses were reduced to EUR 2.2 billion (minus 8% compared to Q4 2009). Adjusted, the costs were also down year-on-year (minus 5%), which also confirms the expected synergies. The number of customers is stable at 15 million, of which approximately 11 million are in the Private Customers segment and some 3.9 million in the CEE segment (Q4 2009: 3.7 million).


"Overall, the first quarter of 2010 went better than originally anticipated. We have made considerable operational progress in all areas. This shows the successes achieved in implementing the "Roadmap 2012", which were also supported by the market recovery. In addition, we saw increasingly positive effects from the Dresdner Bank integration", said Eric Strutz, Commerzbank's Chief Financial Officer. In the first quarter the bank reduced its total assets to EUR 846 billion (minus 16% compared to Q1 2009). Risk-weighted assets came at EUR 279 billion. At the end of March 2010, the core capital ratio (Tier 1) with 10.8% remained at a high level. Including the first-quarter profit, the core capital ratio is 11.0%.



Successful customer business, loan loss provisions reduced


Due to the sale of subsidiaries the figures for 2010 in the Private Customers segment are not directly comparable with the previous year. In Q1 2010 an operating profit of EUR 28 million (Q1 2009: EUR 42 million) was reached. The decline of the net interest income by EUR 56 million to EUR 497 million is accompanied by an increase in net commission income (plus EUR 35 million to EUR 545 million). The Mittelstandsbank generated an operating profit of EUR 302 million (Q1 2009: EUR 320 million). Net interest income was down by 6% compared to Q1 2009, since - as in the Private Customers segment - deposit volume und deposit margins have been reduced due to the generally low interest rate level. The decline was also in Mittelstandsbank seen alongside a rising net commission income (plus 8% to EUR 257 million). In spite of charges relating to Bank Forum in the Ukraine, CEE posted an operating profit (EUR 6 million, Q1 2009: minus EUR 62 million).


Loan loss provisions fell significantly especially compared to Q4 2009. In the Private Customers segment, they were at EUR 66 million (Q4 2009: EUR 72 million). At Mittelstandsbank and in CEE they were down from EUR 298 million in the previous quarter to EUR 161 million and from EUR 296 million to EUR 94 million respectively. Operating expenses in the Private Customers segment lowered significantly by EUR 57 million to EUR 913 million year-on-year. In the Mittelstandsbank they increased by 8% to EUR 357 million, especially due to one-off integration-related expenses. In the CEE segment, operating expenses rose by 11% to EUR 126 million year-on-year; however, adjusted for currency effects they remained stable.



Capital markets business benefits from strategic realignment and improved economic environment


Corporates & Markets achieved an operating profit of EUR 339 million in the traditionally strong first quarter (Q1 2009: EUR 43 million). Customer business, particularly in Fixed Income & Currencies and Equity Markets & Commodities, contributed to the increase in trading profit to EUR 449 million (Q4 2009: minus EUR 124 million). The Corporate Finance area also had a very good start into the year 2010. Loan loss provisions came in at minus EUR 254 million in Q1 2009. In Q1 2010 they were plus EUR 19 million, reflecting a net reversal of loan loss provisions. Operating expenses fell from EUR 500 million to EUR 411 million thanks to the realization of cost synergies.


In the ABF segment net interest income was significantly up by 15% to EUR 296 million year-on-year, due to improved margins. Net commission income was EUR 88 million, up from EUR 63 million year-on-year. However, charges from the US commercial real estate portfolios and still high loan loss provisions - despite a significant decrease from EUR 651 million in Q4 2009 to EUR 325 million in Q1 2010 - resulted in an operating loss of minus EUR 86 million (Q4 2009: minus EUR 652 million). Operating expenses fell by EUR 16 million to EUR 152 million compared to Q1 2009.


In PRU, the recovery in the markets and returning liquidity were used to manage down portfolios with an emphasis on value maximization. In the first quarter, the segment posted a strongly improved operating profit of EUR 162 million (Q1 2009: minus EUR 1.4 billion). At the end of March, PRU managed portfolios with net total assets of EUR 16.9 billion (minus 15% compared to Q4 2009).



Outlook: "Basis for the operational turnaround further strengthened"


"We have further strengthened the basis for the operational turnaround and will continue to focus on enhancing our operating performance. Loan loss provisions are down significantly and costs are developing according to plan. The integration process is also proceeding as intended. In mid-June we will begin switching the branches over to the new brand. Then the new bank will become tangible for our customers", said Strutz. "Cost synergies in the current year will be at around EUR 1.1 billion and thus slightly above plan. However, the economic environment remains fragile and the possibility of setbacks cannot be excluded. One cannot extrapolate a good first quarter to the entire year. That is why we are sticking to our guidance: in 2010 as a whole, the group will only return to profit if the economy and financial markets remain supportive."



Excerpt from the consolidated profit and loss statement

in EUR m Q1 2010 Q1 2009 Change
Net interest income 1,888 1,692 12%
Loan loss provisions - 644 - 844 24%
Net commission income 983 850 16%
Trading result 850 - 527 -
Net investment income - 119 386 -
Other result 22 - 71 -
Operating expenses 2,209 2,081 6%
Operating profit 771 - 595 -
Impairments (goodwill) - -  
Restructuring expenses - 289 -
Taxes 55 7 -
Consolidated result attributable to Commerzbank shareholders 708 - 864 -
Cost/income ratio in operating business (%) 61.0 89.3 32%

As a result of the takeover of Dresdner Bank completed on January 12, 2009 a direct comparison between the 2009 and 2008 figures is not possible. In the interests of comparability, the segment results for 2009 include the first eleven days of January, during which Commerzbank did not own Dresdner Bank. All group figures relate to the period after the acquisition of Dresdner Bank. A detailed reconciliation can be found here.

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