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February 23, 2010

Commerzbank: Consolidated result 2009 minus EUR 4.5 bn

• Operating result minus EUR 2.3 bn
• Gross revenues EUR 10.9 bn
• Core capital ratio (Tier 1) at a high level (10.5%)
• Risk-weighted assets (RWA) down 17%, total assets dropped 19%
• Martin Blessing: "2010 will see a considerable improvement in customer-focused business"


Commerzbank in 2009 posted a full year consolidated result of minus EUR 4.5 billion (2008: minus EUR 6.5 billion). This included EUR 1.9 billion in costs resulting from the integration of Dresdner Bank as well as goodwill impairments (EUR 768 million) linked specifically to the strategic realignment of Eurohypo. In the fourth quarter, a typically weak season, the group posted consolidated earnings of minus EUR 1.9 billion (Q3: minus EUR 1.1 billion). The full year operating loss was minus EUR 2.3 billion for 2009. The full year operating loss has halved against 2008 (minus EUR 5.4 billion). Despite difficult market conditions, full year gross revenues were up by more than half to EUR 10.9 billion. Loan loss provisions for 2009 totalled EUR 4.2 billion. At EUR 5.3 billion, however, the total impact of the financial market crisis was better than expectations at the beginning of the past year. The core segments Private Customers and Mittelstandsbank posted a positive operating result both for the year (EUR 170 million and EUR 584 million respectively) as well as for the fourth quarter (EUR 20 million and EUR 78 million respectively).

"As expected, we are reporting a negative result for 2009. This is not satisfying, but is attributable to two key factors. The result reflects the effects of the ongoing economic and financial market crisis - and the crisis is not yet over, although the start of 2010 has been promising with respect to our operating performance. What is more, in 2009 we have already booked the largest part of the charges related to the integration of Dresdner Bank. We have invested into the future of the bank, and this weighed on results with around EUR 1.9 billion," said Martin Blessing, Chairman of the Board of Managing Directors of Commerzbank. "We are not where we want to be yet, but we have reduced risks and made sustainable improvements to our capital base. 2010 will see a considerable improvement in customer-focused business. Our core bank with the Private Customers, Mittelstandsbank, Central & Eastern Europe and Corporates & Markets segments, is set to achieve a positive operating result in 2010. The bottom line of the whole group will only be in the black if the development of the economy and the financial markets will be very positive in 2010. They will influence the result of Asset Based Finance and of the Portfolio Restructuring Unit, as well as investment banking. But we will return to profitability in 2011 at the latest. All other Roadmap 2012 targets remain unchanged."

Commerzbank reduced risk-weighted assets by 17% to EUR 280 billion and total assets by 19% to EUR 844 billion at end December 2009. The EU-requirement of lowering total assets including Eurohypo to approximately EUR 900 billion until 2012 has thus been achieved three years ahead of schedule. The core capital ratio (Tier 1) remained at a high level as at end of the financial year 2009 (10.5%).

Under the agreement with the Special Fund Financial Market Stabilization (SoFFin), the liquidation of reserves or special reserves (Sonderposten according to § 340g German Commercial Code) for the granting of profit-related payments on equity related instruments issued by Commerzbank AG is not permitted. The face value of the instruments, however, will not be reduced.


Substantial improvement in trading profit in the financial year 2009

Despite the continued market turbulence, charges in trading profit were reduced significantly year-on-year. Full year trading income for 2009 came in at minus EUR 358 million (2008: minus EUR 4.6 billion). Against the background of difficult markets, the continuing risk reduction and derecognition of monoline exposures led to a negative trading result of EUR 561 million in Q4 (Q3: plus EUR 659 million). Due to charges from structured products, net investment income in the fourth quarter declined by 61% to minus EUR 87 million.

Net interest income for 2009 remained stable year-on-year at EUR 7.2 billion. Over the entire year, net commission income was down 20% to EUR 3.7 billion (2008: EUR 4.7 billion), largely due to the decline in the securities business. In the fourth quarter however, net commission income advanced slightly to EUR 972 million from EUR 953 million in Q3. Operating expenses were slightly lower year-on-year at EUR 9.0 billion. Adjusted for integration expenses, the cost base was reduced by 5% to EUR 8.7 billion.


Market conditions burden, additional loan programme for corporate customers

The difficult market environment in the course of the year also affected client-focused business. Net commission income for the full year was down 16% for the Private Customers segment, 12% for Mittelstandsbank and 13% for Central & Eastern Europe (CEE). This was accompanied by higher loan loss provisions. In the Private Customers segment they rose from EUR 69 million to EUR 246 million for 2009 and in the Mittelstandsbank segment from EUR 556 million to EUR 954 million. For the CEE segment, full year loan loss provisions increased from EUR 189 million to EUR 812 million. This was mainly due to charges in Eastern Europe. Commerzbank's Polish subsidiary, BRE Bank, performed well in generally difficult market conditions.

Whilst 2009 net interest income was down in the Private Customers segment, it grew slightly by 1% in CEE and by 10% in the Mittelstandsbank. As Germany's largest bank for small and medium-sized enterprises (SME), Commerzbank had launched an additional loan programme of EUR 2.5 billion in 2009. At the beginning of 2010 a similar programme worth EUR 5 billion was set up. In 2009, the number of private customers in Germany remained high at approximately 11 million. In Central and Eastern Europe, the bank has gained around 570,000 new clients, bringing the number of Commerzbank clients to almost 15 million at the end of 2009. The Private Customers and Mittelstandsbank segments in 2009 were again positive at EUR 170 million and EUR 584 million respectively. In CEE the operating profit was minus EUR 374 million.


Capital market business on track

In its capital markets-related activities Commerzbank made substantial progress at the operating level in 2009. This already shows the successes of Roadmap 2012. In the Corporates & Markets segment the operating loss was improved from minus EUR 1.3 billion to minus EUR 421 million, despite the negative effects in the fourth quarter. Customer-focused corporate finance business showed a particularly positive development, while portfolio downsizing and credit book risks impacted results negatively. Asset Based Finance, which primarily comprises commercial real estate and ship financing, posted an operating result of minus EUR 837 million (2008: minus EUR 849 million), the Portfolio Restructuring Unit (PRU) recorded minus EUR 1.5 billion (2008: minus EUR 6.3 billion). Loan loss provisions in Asset Based Finance rose from EUR 944 million to EUR 1.6 billion year-on-year, due to valuation adjustments on the real estate portfolios in the US and Spain. In the PRU a further reduction in structured portfolios was achieved.


Outlook: "When markets pick up, we are set to reap above-average benefits"

"In the second half of 2009, the financial market crisis had reached German companies across the board. As market leader, we were inevitably affected. This is evidenced by the increased loan loss provisions. In the meantime, the economic environment has stabilized and we expect loan loss provisions to decrease again in the current year. The integration of Dresdner Bank is progressing as planned and our strategy is taking effect. Despite tough market conditions we have thus increased gross revenues by more than half in the past year. By 2012, we want to achieve over EUR 13.8 billion a year," said Eric Strutz, Commerzbank's Chief Financial Officer. "We are well placed in operating terms and costs continue to be under control. When international trade and capital markets pick up in the course of the year, we are set to reap above-average benefits." In 2010 additional operating expenses charges at about the previous year's level are to be expected from the integration of Dresdner Bank. Meanwhile, the bank wants to realize cost synergies of approximately EUR one billion (2009: EUR 661 million).



Excerpt from the consolidated profit and loss statement

in EUR m Q4 2009 Q3 2009 31.12.2009 31.12.2008
Net interest income 1,890 1,769 7,189 7,220
Loan loss provisions - 1,324 - 1,053 - 4,214 - 3,553
Net commission income 972 953 3,722 4,676
Trading profit - 561 659 - 358 - 4,633
Net investment income - 87 - 54 417 81
Other result - 68 112 - 22 - 118
Operating expenses 2,396 2,264 9,004 9,120
Operating profit - 1,574 122 - 2,270 - 5,447
Impairments (Goodwill) 52 646 768 39
Restructuring expenses 212 904 1,621 25
Taxes 73 - 375 - 26 946
Consolidated surplus attributable to Commerzbank shareholders - 1,857 - 1,055 - 4,537 - 6,539
Operating expense ratio in % 111.6 65.8 82.2 126.2

As a result of the takeover of Dresdner Bank completed on January 12, 2009, and the ensuing segment adjustments during the second half of 2009, a direct comparison between the 2009 and 2008 figures is not possible. All 2008 values are pro forma figures. 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 on January 12, 2009. A detailed reconciliation can be found here.


The annual press conference will be held at 10:30 (CEST) on February 24, 2010, in the auditorium of Commerzbank AG, Kaiserplatz, Frankfurt am Main. The press conference will be broadcasted live online (www.commerzbank.de). Images and sound will be available for use in television and radio broadcasts.


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.

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