/ ideas ahead / We want to make an authentic and credible impression. Only then will investors commit themselves on a long-term basis.

Transcription

1 / ideas ahead / We want to make an authentic and credible impression. Only then will investors commit themselves on a long-term basis. New communications systems create additional scope. This will give us more time in future for personal discussion. Jürgen Ackermann, Head of Investor Relations, with Simone Nuxoll, Mary Wong-Sommer and Dr. Ingolf Hegner (from left to right)

2 35 our share, strategy and outlook In the past financial year as well, we maintained intensive communication with shareholders and potential investors. By taking part in numerous investor conferences, through meetings with analysts and investors, some of which were readily accessible via internet for those interested, Commerzbank strengthened its contact with professional market participants. At the same time, we increased the number of conference calls and also our one-on-one and group discussions. By adding to the range of information which we provide via internet, we have acknowledged the great interest of private investors, which we also register in the form of enquiries. This medium gives us the opportunity to make information on Commerzbank available to all groups of investors simultaneously. It is our goal to provide all market participants in Germany and elsewhere with a reliable information base for their investment decisions. The fact that we are on the right course here is underlined, among other things, by the business journal Capital s analysis of the information content of the annual reports of all German financial institutions. In this survey, conducted in mid-2001 by a prominent consulting firm, Commerzbank was awarded first place. With the first-time application of IAS 39 in connection with our overall accounting, we have met the demand for even greater transparency. Despite these more intensive communication activities, the Commerzbank share price was unable to shrug off the general weakness of the stock market. In the course of the year, the Commerzbank share forfeited 43% of its value. The final Xetra quotation of the year was Our share managed to recover by only just under 25% from its annual low of , triggered by the tragic events of September 11 in the U.S. In the development during the final quarter of 2001 and the continuing recovery since the start of this year, we see positive signs for a sustained rise in our share price. With our modified strategic positioning, improved operative earnings figures and a communications policy that remains frank and open, we are working to ensure that this trend is maintained. Commerzbank s 361,000 shareholders share of capital held (as of March 2002) Private investors 4% Generali 9.9% SCH 4.9% Mediobanca 1.9% Intesa 0.8% Institutional investors 15.5% 13% Institutional investors 5.6% WCM 10.4% Munich Re 34% Private investors Abroad Germany

3 36 MANAGEMENT REPORT Performance of the Commerzbank share End-of-week figures, January 2001 = *) until March 1, * Commerzbank share CDAX (Banks) DJ Euro Stoxx Banks In a year-on-year comparison, the trading volume of the Commerzbank share also declined in line with its price performance last year. The 504m Commerzbank shares that were traded represented about 1.6% of the overall turnover in the shares of German listed companies. One striking feature is the especially lively trading in Commerzbank shares during the first quarter. We look upon the decline in subsequent quarters as an indication that now more and more investors with a longer-term orientation are holding Commerzbank in their portfolios. Last year, our CB 21 programme to boost earnings did not produce the successes that we had imagined when it was implemented. The reason for this was feeble economic performance which could not have been expected on this scale. All the same, we are convinced that the central points of this programme are valid. That is why we are quite systematically realizing them. In particular, the restructuring of our business activities into two divisions, Retail Banking and Asset Management, on the one hand, and Corporate and Investment Banking, on the other, is proving to be increasingly successful in exploring synergies between business lines. In the future, we will further strengthen our focus on Germany, where we serve our private and business customers on a nationwide basis. In addition, we are quite consciously targeting the European and North American markets in our corporate business. Alongside this concentration on geographical regions and target groups, we will gear our product range more strongly to the needs of our customers. Our data-based marketing platforms, now available to our account managers for both retail and individual customers, are assisting us in this respect. Due to the wealth of information on our customers generated by this system, we are now in a far better position to channel the needs of our clients into selected business activities. Another pillar of our strategic positioning in private-customer business is our cooperation with the German subsidiaries of the Italian Generali insurance group. Here, more quickly than planned, workplaces have been set up at our branches for insurance experts.

4 OUR SHARE, STRATEGY AND OUTLOOK 37 The successful meshing of commercial business and investment banking continues to be of cardinal importance. In the case of our Mittelstand and large corporate clients, this task has been entrusted to the regional board members appointed at the start of this year. The creation of this level of management underlines the Bank s intention to pursue this business model swiftly and successfully. Early experience with our corporate customers has proved to be highly encouraging. Cost-cutting offensive supports turnaround To complement our CB 21 programme for boosting earnings, we launched our cost-cutting offensive in mid In the meantime, this has developed into a five-point programme, also comprising the credit-portfolio check and priceoffensive projects, as well as personnel measures. We are convinced that this overall package will produce the turnaround which Commerzbank needs. Apart from the reduction of the branch network, envisaged by CB 21, from an original 945 at end-2000 to 781 offices, we have resolved to remove another 50 branches. We will implement this measure in the course of In asset management, we are reorganizing the corporate centres and bundling the settlement functions of the individual companies. In investment banking, we are reducing front and back-office IT expenses, streamlining business processes and aiming for further automation in the settlement of securities transactions. At the same time, primarily in transaction banking and information technology, we will quite consciously replace expensive external personnel by our own staff. In these areas, more than 2,000 external personnel were active for the Bank at year-end. Higher creditworthiness thanks to credit-portfolio check Even this year, the third point of our turnaround programme, the credit-portfolio check, should have a positive impact on our risk management. The aim of this measure is to limit provisioning, which last year amounted to roughly 0.4% of total lending. We will examine our credit portfolio exhaustively for special risks, the appropriate collateral and adequate margins. What is new is that the examination is taking place at various hierarchic levels, depending on the size of the Bank s exposure. Parallel to the credit-portfolio check, we are taking a critical look at all our products and services and will make use of possible existing scope if their pricing is unsatisfactory. Personnel measures produce surge in creativity Another point in our programme relates to various personnel measures. The appointment of regional board members has presented our top Mittelstand and major corporate customers as well as our sophisticated private clients with inter- / ideas ahead / Investors want to be well informed at all times. That is why we are reorganizing and further extending the service which we provide above all, via internet. The live internet transmission of events, such as analysts conferences, is already a firmly established part of this service.

5 38 MANAGEMENT REPORT nationally experienced business associates, who can give them support with their strategic decisions. We have also appointed new heads for several departments. We look to them to generate fresh ideas and a great deal of creativity in exploring new and interesting groups of customers. Fresh strategic orientation complements action on earnings and costs Both the cost-cutting offensive and our programme to boost earnings are showing the first effects. However, the entire five-point programme is not enough to take us much closer to our long-term target of 15% for our return on equity. We have therefore resolved further measures, which will be implemented in the course of this year. We refer to these under the collective heading fresh strategic orientation. As a first point, we have decided to sharpen the strategic profile of the Bank as a whole. For one thing, this means that distribution and production will be separated more strictly a concentration on adding value in distribution and, for another, our new external slogan Ideas ahead. This communication campaign underscores our intention to encourage competition in ideas on behalf of our customers and between our employees. Secondly, we are going to reposition asset management strategically. In order to achieve cost synergies, we combined our German units for institutional business, Commerzinvest for German and CICM for international clients, at the end of last year. If necessary, we will have to dispose completely of less profitable units or those which do not fit in with our strategy. In retail banking, our target-group and distribution-channel strategy is to be adapted to changed market conditions and customers needs. This also applies to our direct broker comdirect, which will concentrate in future more strongly on the core region Germany. The exception will be the UK, where comdirect UK plc, on current planning, will reach break-even point next year. In addition, we are also examining various possibilities to cooperate with others in transaction banking. It is probably only in this way that permanently low prices which are consequently in line with the market can be realized for standard services. We have made more efficient steering of the Bank as a whole the third point of the new strategic orientation. Financial controlling will be further expanded; this includes the deployment of reliable instruments for measuring the performance of individual business lines. Commerzbank s strategic thrust In Germany, Commerzbank will continue to strengthen its position as the efficient bank for demanding private customers. For this purpose, we are expanding our individual-customer and private-banking activities. At the same time, we believe it is important to focus asset management on the requirements of distribution and less on production. In corporate business, we will step up the development of investment-banking products for larger SMEs and major corporates. Today, 39% of Mittelstand firms have an account with Commerzbank and we intend to raise this share to become the top German bank for successful SMEs.

6 OUR SHARE, STRATEGY AND OUTLOOK 39 Earnings outlook for 2002 Our earnings performance in the current year will largely depend upon the economic setting and the stock markets. We assume that, thanks to the perceptible interest-rate cuts of the European Central Bank and the marked year-on-year drop in crude oil prices, the mood of German companies and consumers will brighten. The latest economic data from the United States are also positive and show that the recession had bottomed out by end All told, we believe that gross earnings will increase only marginally this year. As we firmly assume that Rheinhyp will be removed from the list of consolidated companies, a slight improvement in net interest income could be considered a successful result. Here the positive impulses should come from a widening of the average interest-rate margin. We do not think that any relief will be forthcoming on the provisioning front, unless our main target group, German Mittelstand companies, rapidly regains momentum. We expect our net commission income to register a double-digit percentage increase on The decisive factor will be how quickly the faith of our customers in the securities markets is restored. However, in our planning, we envisage further positive effects from the CB 21 project and the price offensive. As announced at end-2001, we want to hold our operating expenses at about 75.5bn. We are confident that the systematic implementation of the measures under our cost-cutting offensive will yield this result. We cannot be satisfied with the budgeted pre-tax profit of between 7700m and 7800m. These conservatively calculated figures do not contain any income from possible disposals of investments. In addition, the removal of Rheinhyp from the list of consolidated companies should yield a three-digit million figure in the form of a tax-exempt gain. Earnings performance in 2002 will certainly point in the right direction. However, it will be no more than an interim stage on the way back to the Bank s former earnings strength. Key Commerzbank dates in 2002/2003 May 8, 2002 Interim report as of March 31, 2002 May 31, 2002, a.m. AGM, Jahrhunderthalle Frankfurt am Main-Höchst August 8, 2002 Interim report as of June 30, 2002 November 12, 2002 Interim report as of September 30, 2002 November 13, 2002 DVFA Analysts conference, Frankfurt am Main Early February 2003 Key financial figures for 2002 April 1, 2003 Press conference for 2002 results Early May 2003 Interim report as of March 31, 2003 May 30, 2003 AGM, Jahrhunderthalle Frankfurt am Main-Höchst Early August 2003 Interim report as of June 30, 2003 November 11, 2003 Interim report as of September 30, 2003 All the major Commerzbank news items are also available from Investor Relations on our homepage: