Investors Day Commerzbank Securities Review and Strategy. Mehmet Dalman Member of the Board of Managing Directors

Transcription

1 Investors Day 2003 Commerzbank Securities Review and Strategy Mehmet Dalman Member of the Board of Managing Directors Glashütten/Taunus, September 10, 2003

2 / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / investors / / / / / / / / / / day / / / / september / / / / / / / / / / 10, / / / 2003 / / / / / / / / 1/ / / / / / / Table of Contents Contents 1 Market Environment 2 Strong Performance Year to Date 3 Review of the Franchise

3 / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / investors / / / / / / / / / / day / / / / september / / / / / / / / / / 10, / / / 2003 / / / / / / / / 2/ / / / / / / Section 1 Market Environment

4 Market recovery delayed Jittery markets to persist for at least 6 months, before US starts to pull global economy up in Conflicting signals from Fed have delayed market recovery Ideal H2 scenario: stimulative monetary/fiscal stance and weak dollar generate sustainable low-inflation US recovery Likely H2 scenario: premature hopes of recovery strengthen dollar and raise interest rates

5 Rates are the key Overshoot on US rates to persist, as tax cuts produce temporary surge in demand Risk of slackening in growth as these higher rates close down the refinancings that have sustained household spending Positioned for market disappointment on growth and further Fed easing 4

6 Scenario for 2004 After disappointed expectations in H2, sustainable US recovery comes through in spring Combination of tax cuts, rate cuts and benign neglect of exchange rate must eventually be effective Dollar depreciation augurs export growth, and thereby stimulates investment spend - companies willing to expand capacity But short-term term impact will be to depress market expectations for Europe 5

7 Global recovery hangs on US Export growth yoy % chg (LHS) yoy % chg in Euro RHS Inv Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 ECB to cut rates by further 50bp - at last triggers move to European reflation and absorption of excess capacity Japan to emerge painfully from recession - assuming dollar forces policymakers to target inflation Equity markets recover, anticipating coordinated global expansion Global sectors: banks, oils, technology

8 / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / investors / / / / / / / / / / day / / / / september / / / / / / / / / / 10, / / / 2003 / / / / / / / / 7/ / / / / / / Section 2 Strong Performance Year to Date

9 Strong financial performance year to date Revenues and Returns EURmm 1,400 1,200 1, B 1H03A plus 2H03B Gross Revenues RoE Headcount Movements 40% 30% 20% 10% - (10%) 35.5% Integration of ZCF/FX 7.8% 25.3% 15% 10% 5% 0% -5% -10% -15% H ZGS performed strongly in 1H03 Gross revenues were 12% ahead of budget on annualised basis, 1H03A was 40% ahead of 2002 these results were achieved in spite of reduced headcount RoE performance up from H03A plus 2H03B, and 1H03A annualised, both have ROE above 10% using benchmark allocated costs would generate post-tax RoE of 23% in 1H03A 8 (20%) (30%) ZGS restructuring program (18.7%)

10 Major contributor to AG performance Revenues 19% 7% 6% 5% 33% Retail Banking Corporates and Institutions Securities Asset Management Group Treasury Mortgage Banking ZGS is integral to the Bank s recent recovery Investment Bank generated 19% of the Group s gross revenues in H % Headcount 6% 7% 0% 1% 46% Retail Banking Corporates and Institutions Securities Asset Management Group Treasury But ZGS accounts for only 6% of the Group s front office headcount Revenue per head is at or above industry benchmarks 40% Mortgage Banking Source: Commerzbank 1H03 segmental reporting of the operating divisions, i.e. excluding Others and Consolidation

11 Major Contributor to AG Performance Equity Tied Up 10% 7% 1% 9% 19% Retail Banking Corporates and Institutions Securities Asset Management Group Treasury Mortgage Banking ZGS is not a capital intensive operation 10 ZGS accounts for 10% of the Bank s capital (gross, 9% net) 54% Operating Profit 18% 16% Retail Banking Corporates and Institutions Securities Reported operating profit of 62m in H12003 represents an Operational Return on Capital of 12% 19% 4% 8% 35% Asset Management Group Treasury Mortgage Banking Based on H segmental reporting of the operating divisions, i.e.excluding Others and Consolidation

12 Major Contributor to AG Performance Direct Costs 19% 11% 32% 1% 1% Retail Banking 36% Corporates and Institutions Securities Asset Management Group Treasury Mortgage Banking 11 ZGS s share of direct costs is proportional with its share of revenue at 19% Allocated Costs 30% 2% 4% 0% 42% Retail Banking Corporates and Institutions Securities However ZGS bears a 30% share of the Group s back office costs Asset Management Group Treasury Mortgage Banking 22% Based on H segmental reporting of the operating divisions, i.e.excluding Others and Consolidation

13 TEUR Performing favourably compared to peers Peer Group Comparison 1,200 1, Lehman Bros Goldman Sachs Bear Stearns ComSec 2003B Peer Revenues per front-office head ComSec 1H03A plus 2H03B RoE 16% 14% 12% 10% 8% 6% 4% 2% 0% 12 These results put Commerzbank Securities on a par with its peer group revenues per head at top of peer group range Yet our RoE lags behind these competitors primarily due to allocated costs using benchmark allocated cost levels produces a post- tax RoE of 23% for 1H03A Sources: Estimates for peer group based on I/B/E/S estimates (adjusted using benchmarked 1.55 : 1 ratio of front office to back office); results for Commerzbank units from 1H03 results and ZGS 2003 budget

14 ZGS peer group reflects segmentation Goldman Sachs Intellectual capital specialists Universal banks Balance sheet specialists 2003E revenues per head ( 000) Bear Lehman HVB ML MS UBS DB BNP Barclays Lloyds TSB BSCH JP Morgan Chase RBS Bank of America HSBC Citibank , , , , ,000 Market cap ( m) Sources: market caps from Bloomberg as of 12 August 2003; 2003E revenues from I/B/E/S as of 13 August 2003; headcount from most recent available numbers (typically December 2002 to Mar 2003)

15 ZGS competes well with the best Goldman Sachs Intellectual capital specialists Universal banks Balance sheet specialists 2003E revenues per head ( 000) ZCB 100 ZGS YTD Lehman ZGS Budget Bear CoBa HVB ML MS UBS DB BNP Barclays Lloyds TSB BSCH JP Morgan Chase RBS Bank of America HSBC Citibank Note: ZCB and ZGS revenues per head based on Booz Allen ratio of 1.55 : 1 for front office staff : back office staff , , , , ,000 Market cap ( m) Sources: market caps from Bloomberg as of 12 August 2003; 2003E revenues from I/B/E/S as of 13 August 2003; headcount from most recent available numbers (typically December 2002 to Mar 2003)

16 Success driven by franchise strengths Revenue Mix by Product %age of revenues 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Projected Brokerage Equity Derivatives FX Capital Markets Fixed Income Local Markets Geographical Revenue Split London 47% Germany 34% New York 8% Other 6% Japan 3% Prague 2% Stable, diversified platform balanced product mix geographically well diversified 15 Fluid organisation responsive to changing market conditions scalable business model Integrated product offering

17 / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / investors / / / / / / / / / / day / / / / september / / / / / / / / / / 10, / / / 2003 / / / / / / / 16 / / / / / / / / Section 3 Review of the Franchise

18 17 EURm Brokerage Net P/L, H vs H Transaction Highlights Top 5 Clients Standard Life Henderson Arcus Generali Thames River H H Revenue Direct Costs Net Placings 2003 Crédit Agricole Deutsche Börse Erste Bank Scalable and industry leading product covering multi-asset classes Highly profitable diversified risk platform utilising our core skills on a multi-asset class basis Development of trading expertise supporting revenues in poor commission markets in H1 2003

19 18 EURm 100 Capital Markets Net P/L, H vs H Source: Euroweek H H Revenue Direct costs* Net Transaction Highlights USD140m Ural Siberian Bank 8.875% due 06 Jul 2006 Joint Bookrunner EUR750m Republic of Turkey 9.50% due 18 Jan 2011 Joint Bookrunner Significant recovery after a difficult 2002 ECM benefited from improved equity issuance advisor to France Telecom on its record E15bn capital increase Strong performance by Capital Structuring Group continuing credit issues are preventing true potential of business from being realised DCM adversely affected by: delays in build up of ABS business difficulty in winning corporate bond mandates in Germany * excludes contribution from derivatives

20 19 EURm Equity Derivatives Net P/L, H vs H H H Business Mix, H Certificates Flow 17% Volatility Flow 24% Revenue Direct costs Net Listed Derivatives 11% Vanilla Risk 14% Exotic Risk 34% Gross revenues of 83 million versus 44 million for 2002 Client-driven revenue stream maintained during difficult times strong recovery led by continued growth of the retail / flow franchise turn around of trading performance following reorganisation of the risk platform AVID-DIVA risk management platform enhanced significantly during H1 allowing the structured product business to be scaled up significant player in options-onfunds exotics business Expected above budget net profitable 2003

21 20 EURm Credit Trading Net P/L, H vs H H H Business Mix, H Convertible Bonds 44% Revenue Direct costs Net Emerging Markets (excl. Prague) 12% High Yield 11% Gross revenues of 93 million versus 52 million for 2002 Results driven by convertible bonds German domestic debt business high yield and structured credit Integrated risk management platform Successful Relative value approach Client facing business running low risk at present Investment Grade Flow 22% Structured Credit 11%

22 21 EURm Securities Finance Net P/L, H vs H H H Revenue Direct costs Net Business Mix, H Repo 33% Equity Finance 67% Securities Finance continues to be net profitable Integrated equity/fixed income platform a distinct competitive advantage Recognised market leader in structured equity finance products Managed reduction in ZGS borrowing requirement to 14bn Should achieve on-budget performance for H2 in absence of any further credit rating changes

23 22 EURm AIS Net P/L, H vs H COMAS performance H H Revenue Direct costs Net J-01 M-01 M-01 J-01 S-01 N-01 J-02 M-02 M-02 J-02 S-02 N-02 J-03 M-03 M-03 J-03 Growth of assets under management COMAS: from $177m on 1 Jan 2003 to $241m YTD CEDAR: from $53 to $83 million Market recognition COMAS Unlimited Certificate No1, the only fund in Germany with a 5 star rating* CEDAR came 5th in the world for 2003 YTD performance of fund of hedge funds** Reflected by improved financial performance in 2003 Comas MSCI World Bond MSCI World Equity HFR Fund of Funds Index Sources: * Zertificate Journal ** Hedgefund.net as of April 2003)

24 23 EURm Interest Rates Net P/L, H vs H H H Business Mix, H TDT 24% Revenue Direct costs Net Govies and Swaps 28% Flow Options 11% Prop 3% Exotic Options 34% Achieved revenues of EUR 139 million - exceeding budget by 37% Strong revenue franchises: 50% customer flow EURO swaps 70% customer flow Corporate Structured Products strong growth of exotic options platform following investment in AVID-DIVA last year Ability to warehouse and risk manage significant market transactions (e.g. 5bn year Euro swaps)

25 24 EURm FX Net P/L, H vs H H H Revenue Direct costs Net Net P/L has increased Electronic trading platform being installed Trading revenues rising with integration of interest rates Synergies of interest rate options and larger dated FX structures Option books have made their full year budget

26 ZGS is critical to Commerzbank s future prospects Commerzbank needs ZGS to strengthen its profitability to maintain its market position 25 ZGS has shown ability to compete successfully with its peers revenues per head are comparable with best in industry

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