- "The figures for last year as a whole show
that, given its present constitution, Commerzbank is strong enough to
play a respectable role in Europe's financial concert. In order to
ensure that things stay like that, we have prescribed for ourselves a
fresh fitness programme", said Martin Kohlhaussen, chairman of the
bank's board of managing directors, outlining the bank's future
direction. At the press conference for presenting the 2000 results on
March 28, he said that through the project "CB 21 - Commerzbank in
the 21st century", the bank intends to improve its pre-tax profit by
about one billion euros within the next three years by means of a
clear target-group orientation, a focus on core competencies and cost
synergies. This will enable it to achieve a sustained after-tax
return on equity of 15%.
Mr. Kohlhaussen described the year 2000 as an extraordinary year.
On the positive side, the bank's profit was almost 50% higher than
the record result of the previous year, enabling it to pay a special
¤0.20 bonus to shareholders in addition to the dividend of Euro 0.80.
On the other hand, the unpredictability of the financial markets
meant that not everything went as the bank had imagined it would.
Strong growth momentum
Last year, Commerzbank's strong growth continued. The Group's
balance sheet expanded by 24%, or Euro 88bn, to Euro 460bn. A large
part of which was due to interbank transactions, but lending was also
substantially higher. Claims on customers increased by Euro 21bn,
mainly in the short and medium-term brackets, with small to
medium-sized enterprises well-represented.
Commissions and trading profit up considerably
Fuelled by brisk securities transactions in the first half of the
year, the strong rises in net commission income (+24%) and the
trading profit (+60%) featured prominently in the income statement.
At Euro 2.72bn, net commission income was almost as high as net
interest income after provisioning of Euro 2.83bn (+12%), underlining
the outstanding role now played by commission-bearing business.
Commerzbank made provision of altogether Euro 685m for possible loan
losses - practically as much as in the previous year.
The 22% rise in operating expenses primarily reflects further
expansion in investment banking and information technology. At the
same time, the bank's workforce continued to grow: at end-2000, the
Commerzbank Group had more than 39,000 employees worldwide. However,
a good 2,500 of last year's increase of 4,174 are attributable to the
first-time consolidation of the Polish BRE Bank, in which Commerzbank
holds an interest of 50%.
One striking feature of the income statement is the collective
item Other operating result, amounting to ¤1.13bn and mainly
representing the non-recurring income from last June's IPO of
comdirect bank, Commerzbank's direct bank subsidiary.
All told, Commerzbank achieved a pre-tax profit of Euro 2.23bn,
63% more than in 1999. Due to the bank's high earnings in Germany
last year, its taxes on income more than doubled to Euro 823m. The
remaining net profit for the year results in an after-tax return on
equity of 12.4%; its cost/income ratio improved from 68.5% in 1999 to
Segment reporting made more transparent
Reflecting its new organization with only two operative divisions
- Retail Banking and Asset Management, on the one hand, and Corporate
and Investment Banking, on the other - Commerzbank has considerably
extended its segment reporting in terms of scope and transparency.
This shows (pages 92-96 of the annual report) that, with the greater
part of the proceeds from the comdirect IPO included, Retail Banking
achieved a return on equity (ROE) of 48.2% last year, easily the best
of all the banking departments. Even without this special effect, its
ROE is still just over 16%.
With the help of selective structural improvements as part of the
CB 21 project, it is to be raised even further in the years ahead.
Major factors in this respect will be the reduction of the domestic
branch network, streamlining of the product range and above all close
strategic bancassurance cooperation with the Italian insurance
company Generali. The bank expects these measures to yield extra
earnings of Euro 470m in retail-banking business by 2005.
Despite having to shoulder special one-off expense items, Asset
Management also produced an above-average return on equity of 34.9%.
It will be raised further by bundling portfolio management and
research and by developing a pan-European distribution structure. The
profit contribution from this and other structural improvements
should amount to more than ¤300m over the next five years.
In the Corporate Customers and Institutions segment, Commerzbank
posted its best operative result, namely ¤519m, last year. However,
as a large amount of equity is tied up here, its return of 8.6% does
not yet meet the bank's expectations. In itself, the intended close
meshing of traditional branch business with investment banking should
give the bank's pre-tax profit a further boost of just over Euro 300m
This year, the focus in the Securities department is on
strengthening bond and M&A activities. Its result based on internal
accounting, including the profit contributions from business passed
on, was Euro 96m. "In view of the market downturn in the second half
of the year and the high personnel and other costs - not least for
the latest IT structures - that are typical of an expansion phase, we
must be content with this outcome," Mr. Kohlhaussen explained, adding
that "It is also clear, however, that the after-tax return on equity
of 7.1% has to be improved substantially over the next few years."
Once all these individual measures have been implemented, which
also involves the streamlining of non-European activities,
Commerzbank will have substantially increased its earnings power. It
is planning a pre-tax profit that is more than ¤500m higher even for
2002 and envisages extra income of practically ¤1.6bn for 2005.
Cautious forecasts, but basically positive
Commerzbank's banking departments got off to a lively start in the
current year. The Group's total assets expanded by a further 5% to
"The results for January and February indicate that cautious
forecasts are called for, but the prevailing mood is basically
positive," said Mr. Kohlhaussen, showing satisfaction above all with
the rise of 17% in net interest income before provisioning and 19%
after provisioning. Even the decline of less than 10% in net
commission income is acceptable in view of market conditions, he
said. The trading profit was only marginally down on its year-ago
Mr. Kohlhaussen remains cautiously optimistic for the future:
"Given the unsatisfactory development of the final quarter of 2000,
the good operative start to the current year makes us confident that
we can achieve our budgeted earnings targets."
ots Originaltext: Commerzbank AG
Tel. (069) 136-22830
Corporate Communications-Press Relations
Fax (069) 136-22008
60261 Frankfurt am Main
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