Commerzbank s move to the top

Transcription

1 Commerzbank s move to the top Cheuvreux 3rd German Corporate Conference Dr. Eric Strutz CFO Schlosshotel Kronberg January 19, 2004

2 1 From shrink to grow Fresh impetus from new management team Strategic agenda 2002 Strategic agenda 2003 Financial revaluation Strategic agenda 2004 Strategic review of all divisions Cost-cutting initiatives Credit portfolio check Restructuring of all divisions Implementation of more than 200 defined measures Strengthening of Tier 1 ratio Reduction of bulk risk Thorough review of all assets: Loan book Participations Others Write-down of book values and strengthening of the balance sheet Improvement of financial and strategic flexibility Implementation of revenue growth initiative to increase market share and margins Grow to win (Retail) Mittelstand initiative Value offensive large corporates ( Wertoffensive Grosskunden ) Accelerated disposals of non-core assets Phase 1: Stabilization of franchise in difficult market environment Phase 2: Exploration of profitable growth opportunities/ tight financial control

3 Commerzbank back in the black in m 2 Third positive quarter in a row confirms turnaround Profit development Business operating profit +192% 9M2002 4Q2002 1Q2003 2Q2003 3Q2003 9M2003 Business operating profit Consolidated profit before revaluation Q2002 4Q2002 1Q2003 2Q2003 3Q2003 State-of-the-art credit risk management: provisioning on course * ex Rheinhyp -11% 9M2002 4Q2002 1Q2003 2Q2003 3Q2003 9M * In excess: 664m 5, % 6,502 4, Loan-loss coverage ratio In excess: 542m 5,320 5,637 6,846 6, ,683 1, Non-performing loans (excl. Rheinhyp) Collateral Country LLP and general provision 7,388 In excess: 883m 107.9% 112.7% Loan-loss provision 7,822

4 3 After allowance for special effects, net interest income down only slightly Effects Net interest income per 9/2003 only 3.6% down on previous year after adjustment for Rheinhyp Net interest income of core business lines Retail Banking and Corporate Customers and Institutions stable in Q3 as well Net interest income of Group Treasury, Mortgage Banks and Others and Consolidation lower due to non-recurring or seasonal effects Wider credit margins more than offset by reduction of risk-weighted assets and lower deposit margins Negative effect of 30m from currency fluctuations in Q3 Net interest income before provisioning Q02 4Q02 1Q03 2Q03 3Q03 2, % 2,113 9M2002 Adjusted for Rheinhyp -3.6% 2,193 2,113 9M2003 Risk-weighted assets (in bn) and margin (in %) Marked improvement in interest income can be expected in the future, thanks to - further systematic realization of wider margins - greater lending as economy picks up, and - sustained easing of interest burden due to revaluation of portfolio ,2 2,49% 2,45% 2,36% 148,7 2,21% 12/02 03/03 06/03 09/03 2.6% 2.5% 2.4% 2.3% 2.2% 2.1% 2.0% Risk-weighted assets according to BIS (including market-risk positions) Interest margin relative to risk-weighted assets according to BIS

5 4 Cost-cutting initiative successfully implemented target for reducing full-time staff already achieved after Q3 1,623 Operating expenses in m Employees 2,726 1,272 1,197 1,383 1,430 1,479 1,459 1,487 1,398 1,308 1,229 1,220 1,179 1,141 1, ,391 40,067 39,481 39,463 38,565 39,044 38,017 37,176 35,618 36,382 36,566 35,384 35,325 33, bn 5.9bn 5.2bn 33,327 < 5.0bn 891 1,189 2,721 Q I Q II Q III Q IV 2000 Q I Q II Q III Q IV 2001 Q I Q II Q III Q IV 2002 Q I Q II Q III Q IV 2003 Reduction 1Q03 Reduction 2Q03 Reduction 3Q03 Target 2003

6 Systematic reduction of non-strategic participations 5 Reduction of non-strategic bank participations Freeing up of equity/reduction of funding costs Realization of extraordinary profits 5 participations completely or partially disposed of in 2003 Priority Reduction of listed industrial participations Freeing up of equity/reduction of funding costs Realization of extraordinary profits 3 participations completely disposed of in 2003 Step-by-step reduction of secondary-level participations Disposal or liquidation of small participations not essential for Bank s core activities Reduction of portfolio complexity 24 participations disposed of in 2003

7 6 Major disposals of participations in 2003 Deutsche Börse (market placement) Erste Bank (market placement) Unibanco marketability achieved through partial sale (global offering) comdirect free float increased through partial sale (accel. bookbuilding) Quarters 2003 I II III IV Crédit Agricole (accel. bookbuilding) Buderus sold to Bosch KEB partially sold to Lone Star T-Online sold to Telekom

8 7 Valuation adjustments by specific items Participations portfolio: industrial and financial participations Eurohypo + Asset Management units (mainly Jupiter) and other miscellaneous items Total adjustment Company/revaluation measure Amount of valuation adjustment approx. 1.3bn approx. 1.0bn approx. 2.3bn Revaluation reserve now positive again (in m) > 1, , , prerevaluation postrevaluation 03/02 06/02 09/02 12/02 03/03 06/03 09/03 09/03 12/03

9 Capital raising to position Commerzbank for growth and strategic flexibility 8 Successful placing of Commerzbank shares: Placing of 53.3 million new Commerzbank shares More than four times oversubscribed Share price remained quite stable throughout the placement The new shares were allocated at a price of (2.4% below the weighted average price in Xetra) New funds of roughly 760m before expenses Number of issued shares almost 598m after the capital increase Effects Capital raising positions Commerzbank to: Take advantage of selected growth opportunities as the German economy recovers Provide increased financial flexibility Tier 1 ratio at targeted level of above 7.0%, broadly in line with European peers Quality and transparency of capital base greatly improved, stabilizing rating and outlook Higher weighting in DAX

10 9 Commerzbank s 361,000 shareholders Abroad Germany Private investors 3.5% Private investors 31.3% Generali 9.1% SCH 3.4% Mediobanca 1.4% Munich Re 9.5% Intesa Group 1.8% Instituitonal investors 22.0% Institutional investors 18.0% as of

11 10 Equity allocation within Commerzbank Group Strengthening of growth areas, , in bn medium-term target Corporate customers Retail Banking Securities Group Treasury Mortgage banks Others + consolidation Asset Management portfolio shift

12 Corporate banking Improved interest margin not yet reflected in corporate business Corporate Customers and Institutions Operating profit in m 469 Domestic corporate customers margin as % of total lending (incl. commission on credit lines) Q Q Q M M Q01 3Q01 1Q02 3Q02 1Q03 3Q Trading income and net result on investments weakened Q3 result. Q3 net interest income negatively affected by currency changes. Nevertheless, interest income after provisioning higher than in Q2. Credit margin expanded further in Q3 2003

13 Corporate banking Domestic corporate customers: Strategy of a valuedriven portfolio structuring, re-alignment of organization 12 Portfolio Shift Mittelstandsoffensive Wertoffensive RoE Target RoE Value Creation Value Destroyer Mittelstandsoffensive re-deploy capital Wertoffensive Reduce capital tied-up in underperforming relationships Allocated Capital Expand business with existing clients, build up new relationships: additional allowance of 2bn risk-weighted assets) Target: 45% of SMEs with CB account (38% today); 9,000 new clients Extend cross-selling capabilities further Maintain strong focus on credit quality Set-up of five centers for large corporates Review all client relationships on a caseby-case basis Protect existing value creators, develop potential value creators Exit value destroyers Reduce capital employment Reduce bulk risk

14 Corporate banking Crash programme launched for turnaround of low or unprofitable larger corporate relationships larger corporates yielding unsatisfactory profits 18 Loans to SMEs* in bn of which 200 tying up substantial amount of capital Goal per customer: ROE >10% within the next 12 months or drastic reduction of exposure > 20% 10%-20% 0%-10% < 0% ** *) Turnover between 2.5m and 250m **) incl. approx. 2bn provided under our Mittelstand offensive

15 securities Closer cooperation with corporate banking will lead to more stable results 14 Securities Operating profit in m Operating expenses on downtrend % 1Q Q Q M M Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q Cost rationalization completed (19% expense reduction since Q1 02) Diversified product franchise preserved with per head revenue generation above industry average Progressive integration with Corporate Banking to leverage strategic synergies Good trading result in October 2003 makes us confident that the earnings weakness in Q3 was temporary interlude. Trading profit volatile Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03

16 15 Integration of Corporate und Investment Banking Business Committee of Corporate & Investment Bank Inclusion of senior investment bankers in virtual support team for MNCs Inclusion of IB product specialists in virtual support team for large corporates Inclusion of specialists from financial-engineering centres in Mittelstand Resource planning (equity, product specialists) Pricing strategies Setting of targets and activity planning for individual clients Monitoring of agreed measures Senior investment bankers with responsibility for selling investmentbanking products Direct access to clients by investment bank Joint setting of targets and activity planning Monitoring by Business Committee Clearly identified responsibility for selling IB products Joint setting of targets and activity planning Monitoring by Business Committee Joint planning of marketing and activities Functions of FE centres: Support for local corporate relationship managers in structuring specially tailored solutions IB expertise as multiplier Coordinator/interface function between corporate sales and investment-banking product specialists

17 retail banking/ asset management 16 Restructuring efforts bear fruit Retail Banking Operating profit in m Asset Management Operating profit in m Q Q Q M M 2002 Play to win initiative lowered costs by capacity cuts and process streamlining. Costs now back to 1999 levels Grow to win strategy focuses on leveraging strong market position in high-margin client segments Successful restructuring of comdirect With an operating ROE of 13.8% in the first 9 months 2003, we are on the way to becoming Germany s best nationwide bank for retail customers 1Q Q Q M M 2002 Consolidation of domestic franchise within COMINVEST Divestment of non-core activities (in the US and Italy) Result: substantial synergy realization and cost reduction of 52% since Q1 02 In Q3 commission income of 107m, 15% above Q2 level

18 17 Operative turnaround is under way respective business operating profit (ytd) in m Retail Banking Corporate Customers and Institutions Asset Management 9M2002 9M2003 9M2002 9M2003 Securities 9M2002 9M M2002 9M Improved results, but trading income volatile 256 Operative business mainly suffering as a result of high provisioning, but 1. Adopted measures are having an impact Operative turnaround achieved Full turnaround achieved 2. Lower provisioning in the future will bring significant improvement

19 Four levers for moving to the top in Key success factors 1. 1 Growth program in corporate banking 2. 2 Stronger links between investment & corporate banking 3. 3 Expanding retail banking, grow to win Growing in profitable businesses 4. 4 Accelerated disposal of non-strategic participations

20 For more information, please contact: Commerzbank Investor Relations Tel. +49 (69) ir@commerzbank.com