In the past business year, Commerzbank achieved its expected and promised return to profit. The bank’s operating profit showed a considerable improvement of more than 350m euros on 2002. In view of these figures, its chairman, Klaus-Peter Müller, said at the press conference to present the bank’s 2003 results that the current year would be one of fresh initiative with controlled expansion. As an example, he cited the talks with SchmidtBank in Hof for a takeover of its branch business. The talks are promising, he commented.
Last year, Commerzbank did its homework diligently and successfully, said Mr. Müller. It cut its costs far more strongly and rapidly than planned and has already achieved its 2004 cost target. The core capital ratio has been held steady at 7.3% and the risks contained in the balance sheet have been reduced to a minimum, he added. This has created scope for earnings-oriented growth and new initiatives to strengthen current business transactions. At the same time, non-strategic investments are to be sold on a larger scale.
2004 target: Clearly higher earnings
Following its successful consolidation, Commerzbank plans a further substantial improvement in its results, drawing support from a more favourable set of economic data. Mr. Müller expects both significantly higher net interest income and rising commission revenues, as well as a stronger trading profit. He foresees another reduction in provisioning to less than a billion euros. On the other hand, measures to boost earnings call for additional investments, which will cause operating expenses to rise slightly after two years of strict cost controls.
All in all, Commerzbank’s goal is to earn by 2005 today’s capital cost of around eight percent. Plus the Bank plans to lower its cost/income ratio nearer to its goal of 65%.
“These figures show,” Mr. Müller said, “that Commerzbank has successfully performed its radical restructuring, is well-positioned in its core areas and will be perceived as an attractive bank again by the public, analysts and rating agencies.” Mr. Müller expressed his confidence regarding the future in the words: “After a difficult adjustment phase, I can state today that, together, we have turned the ship round and are now getting under way again.”
Given this perspective, it is quite natural that Commerzbank is continuing to plan on a stand-alone basis. “However, entirely in the interest of our shareholders, customers and staff, we remain open to any reasonable solution involving others, whether at the national or international level,” said Mr. Müller, summing up his pragmatic approach to banking consolidation.
2003 figures reflect clean-up
With provision for possible loan losses lower, the income statement for last year reflects the double strike, consisting of an extensive revaluation of the investments and securities portfolio, on the one hand, and a capital increase in an amount of 760m euros, on the other. The clean-up and restructuring expenses of altogether 2.43bn euros gave rise to a negative group pre-tax profit of 1.98bn euros. As at the same time the good earnings performance of some subsidiaries caused tax expenses to soar, the net loss for the year ultimately stood at 2.32bn euros. No dividend payment will be made, therefore. However, the bearers of profit-sharing certificates will receive a full payment.
Despite the high loss, the bank’s equity rose to 9.1bn euros at year-end. For one thing, subscribed capital was lifted by the capital increase; for another, the revaluation reserve moved from its previous minus to a comfortable plus of 1.24bn euros.
New initiatives for retail and corporate customers
Last year brought progress not only for Commerzbank as a whole but also in its core competencies. The operating profit in Retail Banking, for instance, expanded sharply to 258m euros, or a return on equity of 14.3%. Mr. Müller pointed out that the result of this business line had improved by more than 500m euros since 2001.
As part of its “grow-to-win” strat