INTERIM MANAGEMENT REPORT

Transcription

1 INTERIM MANAGEMENT REPORT Half-year report

2 > Key figures of comdirect group 1st half-year Change in % comdirect group as of Customers number 2,162,819 2,140, Custody accounts number 1,414,035 1,421, Executed orders number 7,167,921 6,839, Total assets under custody in million 37,468 31, of which: portfolio volume in million 27,573 22, of which: deposit volume in million 9,895 9, comdirect business-to-customer (B2C)* business line as of Customers number 1,475,951 1,431, Custody accounts number 727, , Current accounts number 583, , Tagesgeld PLUS ( call money plus ) accounts number 1,030, , Executed orders number 3,941,353 3,601, Average order activity per custody account (annualised) number Order volume per executed order in 5,082 4, Total assets under custody in million 23,786 20, of which: portfolio volume in million 13,940 10, of which: deposit volume in million 9,846 9, Credit volume in million comdirect business-to-business (B2B)* business line as of Customers/Custody accounts number 686, , Executed orders number 3,226,568 3,238, Total assets under custody in million 13,682 11, Earnings ratios Net commission income in thousand 84,084 71, Net interest income before provisions in thousand 46,600 60, Administrative expenses in thousand 99, , Pre-tax profit in thousand 41,708 41, Net profit in thousand 30,809 30, Earnings per share in Balance sheet key figures as of Balance sheet total in million 10,543 10, Equity in million Equity ratio 1) in % Regulatory indicators under Basel II 2) as of Risk weighted assets 3) in million Eligible amount for operational risks in million Core capital in million Own funds for solvency purposes in million Own funds ratio 4) in % Relative ratios Return on equity (annualised) 5) in % Cost/income ratio in % Employees figures as of Employees number 1,133 1, Employees full-time basis number 1, , *) B2C: comdirect bank AG; B2B: ebase GmbH, excluding contributions from branch customers of Commerzbank AG 1) Equity ratio = Equity (excluding revaluation reserve) / balance sheet total 2) These figures are calculated on the basis of internal calculations; publication is voluntary and based on national implementation conversion and the figures are not reported to the Supervisory Authority 3) Risk weighted assets in accordance with Section 10c of the German Banking Act (KWG) (intragroup receivables are zero weighted) 4) Own funds ratio = own funds for solvency purposes / (risk weighted assets x eligible amounts for operational risks) 5) Return on equity = pre-tax profit / average equity (excluding revaluation reserve) in the reporting period

3 FOREWORD 1 > Foreword, There is good news for shareholders of the comdirect group. In an environment of historically low market interest rates, jittery markets and cautious investors, following a solid start to the year we were able to step up the pace of growth in the second quarter, proving our profitability over the long term at the same time. A bank that can do this has to have a particularly attractive and robust business model. Michael Mandel CEO of comdirect bank In direct business with modern investors (B2C), the number of customers has increased by over 25 thousand since the start of the year. At the same time, the number of custody accounts, current accounts and Tagesgeld PLUS ( call money plus ) accounts rose by around 128 thousand in total. With regard to the deposit volume, we confirmed the upward trend and there were also significant liquid fund inflows into custody accounts with lively trading activity overall. In short, by mid-2010, comdirect bank not only has a bigger customer base, but has also vigorously continued its strategy of becoming a main bank for its customers through its complus growth programme. The future is also looking positive for our business with institutional investors (B2B). The extended range of products and services, realigned Sales division and streamlined cost base form the ideal basis for taking a major step towards becoming a B2B direct bank. At 41.7m, pre-tax profit slightly exceeded the comparative figure for This shows that through its broad market positioning in B2C and B2B, in brokerage and banking, the comdirect group has succeeded in offsetting the market-related downturn in earnings in other areas. In the first half of 2010, the decline in net interest income was compensated by strong growth in net commission income. At the same time, our flexible cost management approach contributed to the good pre-tax result. However, flexible does not mean savings at any price, but rather taking the development in earnings into account and controlling administrative expenses on a forward-looking basis while continually exploring and leveraging market opportunities at the same time. After a long phase of conscious restraint in marketing, we now feel the time is right to invest more heavily in growth again.

4 2 The time is right. After conscious restraint in marketing we are now investing more heavily in growth again. In other words: the comdirect group is already setting the sails while the situation in the market is still turbulent. We can see a light on the horizon, as interest rates appear to be bottoming out and the capital markets are welcoming the economic upswing. Just the right time for investors to look more closely again at their personal return on investment targets and their choice of the right banking partner. And exactly the right time for an efficient direct bank to place even greater emphasis on marketing. With its product and services offering in B2B and B2C, the comdirect group is already well-positioned for this next phase. For our B2C customers, we have enhanced our range of products and services in brokerage and banking, which include the relaunch of the Informer section of the website, our successful JubiläumsDepot ( anniversary custody account ) campaign and further improved product and security features for our current account. Additional progress was made on establishing and expanding our Anlageberatung PLUS investment advice and Baufinanzierung PLUS building finance advice services and the withdrawal from offering local advisory services through comdirect private finance, which has meanwhile been merged into comdirect bank, was successfully completed. In the B2B business line, the thoroughly overhauled architecture for custody accounts and other accounts has created a convincing basis for growth in custody account business and B2B-type deposit business. On the earnings side too, we are maintaining our course in turbulent times with our resilient business model. Taking account of our plans for higher investment in growth in the second half of 2010, we aim to achieve pre-tax profit of 80m (previous year: 76m) for the year as a whole. Sincerely yours, Michael Mandel CEO of comdirect bank

5 INTERIM MANAGEMENT REPORT 3 > Interim management report as of 30 June 2010 Value-driven strategy The comdirect group is pursuing a dual brand strategy. The comdirect brand stands for direct business with demanding private investors (B2C business line). ebase is our brand for business with B2B partners financial services providers, asset managers, insurance companies and investment companies and their end customers (B2B business line). Through the collaboration between the two business lines, the comdirect group will strengthen its market leadership in the online securities business and gain market shares in the banking segment. To achieve this, we have to make it even quicker and easier for our customers to access our extended range of products and services; consequently, we are improving the accessibility of our Customer Services and optimising our IT architecture. In addition, over the next few years, we aim to leverage the earnings and cost synergies already identified through cooperation between comdirect and ebase. We intend to increase the number of customers to 3 million and assets under custody to 50bn by Strategy in the B2C business line In the B2C business line, our growth is shaped by the complus programme, which was launched in the previous year. The programme, which runs until the end of 2013, comprises the further development of our well-positioned products and services, direct contact with individual customer groups, optimisation of the IT platform and efficiency improvements in Customer Services, as well as independent and transparent advisory models for investments and building finance advice. Accordingly, we are vigorously continuing the process to become the main bank for our customers. Following the establishment of our direct bank-type advisory models, we withdrew completely from offering local advisory services through the offices of comdirect private finance AG in the first half of The former subsidiary has meanwhile been merged into comdirect bank AG and since then, customers have been serviced directly via comdirect bank. Moreover, comdirect bank continues to offer Baufinanzierung PLUS in four cities. Strategy in the B2B business line Through ebase, we intend to become the leading B2B direct bank throughout Germany. The key elements of the strategy for the B2B business line comprise strengthening the organisation of the Sales division and increasing the number of personnel there, expanding the customer base and enhancing the existing product range that focuses primarily on fund custody account solutions with B2B-type banking products, as well as an extended offering of partner-specific services either through co-branding or white labelling. Measures have also been taken to increase efficiency and cut costs. These include reducing excess capacities in Customer Services. Market environment According to the preliminary data, the global economy continued its recovery in the second quarter. However, the eurozone was unable to follow the growth recorded by the emerging markets and the USA. Economists at Commerzbank expect the national debt crisis in peripheral eurozone countries and the consolidation efforts of the euro countries to curb the pace of growth even more notably in the second half of the year. In the present circumstances, Germany is the primary driver of economic growth in the EU. In the second quarter, order volumes in its heavily export-oriented industry benefited from a weaker euro. There was further easing in the labour market and its development was consequently much more robust than expected at the beginning of the year. As a result of the ongoing economic risks and low inflationary pressure, the European Central Bank maintained its policy of low key lending rates. The three-month EURIBOR stood on average at 0.67% in the first six months of the year and was consequently almost 100 basis points below the comparative figure for 2009 (1.66%). The interest margin achievable in the deposit business was accordingly limited in the period under review. On the investment side, the debt crisis led to renewed spread widening and corresponding price slides for unsecured bank debt securities. In the equity markets, nervousness on the part of investors in light of the debt and euro crisis was reflected in greater price fluctuations. At times, the Deutscher Aktienindex (DAX) was almost 500 points lower than the level at the end of the first quarter, before subsequently recovering once more. By the middle of the year, the index stood at 5,966 points, barely unchanged from the level at the end of The DAX volatility index recorded steep rises in May and June in particular. As prices fluctuated, the number of trades in the German spot market increased. Year-on-year, these were up 14.2% in the first half of 2010 and by as much as 20.0% in the second quarter. As a result of higher average prices, the trading volume attributable to equities rose by 31.0% in the first half of the year and by 41.2% for ETFs. Certificates trading also picked up. In the period January to May, activity in the stock market was up 4.4% on the previous year for investment products and by 11.8% for leveraged products. The retail investment funds included in the statistics from the BVI (Bundesverband Investment und Asset Management) attracted net inflows of 12.9bn (previous year: 3.1bn) in the first five months of the year. Mixed funds were especially popular, but equity and fixed-income funds as well as open-ended property funds also recorded net fund inflows.

6 4 In building finance, sentiment improved substantially in the second quarter. comdirect s Building Finance Sentiment Index, which is calculated bimonthly, climbed 5.9 points in May to reach points, the highest level since the index was launched; in July it dipped only slightly to points. This shows that more than 56% of Germans consider now to be a favourable time to invest in a property acquisition or development. With regard to the regulatory environment, mention should be made of the Act implementing the Consumer Credit Directive which came into force on 11 June The Directive includes rules on credit advertising and requires standardised information on the main components of a loan agreement. The comdirect group implemented the new rules in good time. The general terms and conditions of business now also include terms and conditions for consumer loans and an interest rate adjustment clause. In a persistently difficult environment, net interest income declined, but this was offset by the sharp rise in net commission income resulting from the upturn in securities trading. Overall, at 41.7m, pre-tax profit outperformed the previous year s figure ( 41.5m) by 0.4%. The bank s ongoing cost discipline also contributed to this achievement. The comdirect group will again be relying upon its broad market positioning and flexible cost base in the second half of the year. For 2010 as a whole, we intend to continue to grow, and with intensified marketing once again, aim to achieve pre-tax profit of 80m (previous year: 76m). Number of customers of comdirect group (in thousand) Number of orders on German stock exchanges (in million) Q1 10 Q2 10 H1 09 H1 10 Source: Deutsche Börse AG Other stock exchanges Business performance and earnings situation at the comdirect group Overall assessment of business performance and earnings situation After a slight drop in the number of customers in the first quarter, the comdirect group acquired a larger number of customers again in the second quarter of New customers were convinced by the attractive products in banking as well as the special anniversary terms and conditions in brokerage (see page 7). There was a gratifying increase in the deposit volume, with a rise of 0.79bn since the start of the year, although deposits were used at the same time for securities investments. The 1.11bn increase in the portfolio volume was primarily attributable to net fund inflows in the B2C business line, while price effects had a lesser impact. In the B2B business we succeeded in obtaining important new partner organisations and product providers. FFM XETRA 1,451 1,432 1, Customers B2B Customers B2C Business performance After a slight drop in customer numbers in the first three months of the year, the signs were set for growth again in the second quarter of The total number of customers in the comdirect group increased by 19.8 thousand to 2.16 million, up 12.3 thousand on the figure at the end of 2009 (2.15 million). This growth was attributable in full to the B2C business line, where we have gained more than 25 thousand customers since the start of the year. In the B2B business line, the number of customers stabilised after a decline in the first quarter, due essentially to the normal closure of custody accounts upon maturity of capitalbuilding payments (known as VL contracts) at the beginning of the year. At the same time, customers have been making considerably more active use of comdirect s range of products than in the previous year. In the B2C business line, the share of customers with at least two products advanced from 48% at the end of 2009 to the current level of 51%. The number of custody accounts, current accounts and Tagesgeld PLUS accounts increased by thousand overall.

7 INTERIM MANAGEMENT REPORT 5 Assets under custody in the comdirect group totalled 37.47bn as of 30 June 2010, up 5.3% on year-end 2009 ( 35.57bn). Both business lines recorded growth. Net fund inflows were recorded once more in the second quarter. The portfolio volume dropped by 0.64bn to 27.57bn solely as a result of price effects, but was still up on the level of six months earlier ( 26.46bn). The number of custody accounts remained virtually constant at 1.41 million (end of 2009: 1.42 million). Total assets under custody of comdirect group (in billion) Based on the pre-tax profit and the average equity in the reporting period (excluding revaluation reserve), the annualised return on equity amounts to 17.8% (previous year: 17.6%). After tax, the net profit for the first half of the year stands at 30.8m (previous year: 31.0m). As in the previous year, earnings per share amount to Earnings per share (in Euro) Portfolio volume Deposit volume Q1 10 Q2 10 H1 09 H1 10 Earnings situation At 41.7m, pre-tax profit was slightly up on the previous year s figure ( 41.5m). The structure of earnings has shifted due to the market environment. The significant decline in net interest income has been countered by a notable rise in net commission income stemming primarily from the higher number of trades in the second quarter. In total, earnings amounted to 141.2m (previous year: 143.4m). At 99.2m, administrative expenses were slightly lower than in the previous year ( 101.4m), which produced a moderate improvement in the cost/income ratio from 70.7% to 70.3%. Pre-tax profit of comdirect group (in million) Holistic view of earnings in banking In banking, the comdirect group s business model is based on reinvesting customer deposits in the money and capital markets (see page 11). The Treasury department actively manages the group s investment portfolio. Depending on the situation in the market, there can at times be opposing trends in net interest income, result from financial investments, trading result, and result from hedge accounting, and consequently these are to be viewed as a whole. In the first two quarters of 2010, the persistently low market interest rates curbed the interest margin in deposit business. There was an opposite, but much less pronounced, effect from realising profits on the sale of fixed-income securities. Together, the above earnings components totalled 54.5m (previous year: 64.7m) The revaluation reserve reflects changes in the value of the portfolio resulting from market price fluctuations. This position is reported directly under equity after tax; these changes in value are also a component of the comprehensive income of the comdirect group. After 31.0m in the previous year with a balanced development in the revaluation reserve comprehensive income amounts this time to 21.1m. This includes a decrease in the revaluation reserve of 9.7m for the first six months of the year, which was primarily due to the widening of credit spreads in the second quarter. Q1 10 Q2 10 H1 09 H1 10

8 6 Net interest income At 22.6m in the second quarter of 2010, net interest income before provisions remained 4.9m below the previous year and was also somewhat down on the figure for the first three months of the reporting year. This was due to the increase in the interest paid on the Tagesgeld PLUS account in March 2010 on the one hand, and to the market-related worsening of terms when investing increased customer deposits on the other. Yearon-year, net interest income fell by 22.6% to 46.6m (previous year: 60.2m). After moderate provisions of 0.3m (previous year: 0.5m), net interest income amounted to 46.3m (previous year: 59.8m). Result from financial investments The result from financial investments in the amount of 8.1m (previous year: 5.7m) stems from the realisation of price gains on the sale of selected bonds. Unlike the previous year, valuation adjustments were only required to a very limited extent (see Notes, page 14). Trading result and result from hedge accounting No trading result is reported for the period under review, as no derivative financial instruments were held for trading. The figure for the previous year ( 0.7m) relates to the interest book management of deposit positions using interest rate swaps. In May 2010, we hedged a debt security in the Treasury portfolio against a loss in value using an interest rate swap with a nominal value of 20m. Like the underlying transaction, the swap was measured at fair value through profit or loss. This produced a virtually balanced result from hedge accounting. Net commission income At 84.1m, net commission income was up 18.3% on the previous year ( 71.1m). While in the first quarter this rise was primarily attributable to higher commission on portfolio holdings in the funds business, in the second quarter the increase particularly reflected the higher number of trades in B2C business (see page 8). The front-end loads included in order commission also exceeded the previous year s figure, which was adversely affected by the final withholding tax and the financial market crisis. Net commission income and net interest income before provisions (in million) Q1 10 Q2 10 H1 09 H1 10 Net interest income before provisions Net commission income Other operating result The other operating result amounted to 2.4m and thus did not match the high previous year s figure of 7.2m. This was dominated by extraordinary effects arising from the reversal of provisions and accruals; in addition, special contributions by ebase to the Entschädigungseinrichtung der Wertpapierhandelsunternehmen (EdW German Compensatory Fund of Securities Trading Companies) were refunded in the previous year (see page 11). More over, for the most part, the income generated by passing on costs to the independent advisers of comdirect private finance no longer applied in the current year. Other operating result includes a small contribution ( 0.3m) from the reversal of the restructuring provision recognised for comdirect private finance. This was due to the successful negotiations on re-letting office space (see page 9). Administrative expenses At 99.2m, administrative expenses were down 2.2% on the previous year s figure of 101.4m. The slight rise in the second quarter was due in part to the higher number of trades and associated settlement costs in the securities business as well as increased marketing expenses. In the first six months, other administrative expenses decreased by 6.2% to 61.6m (previous year: 65.6m). The significant reduction in communication and consulting expenses was countered by a moderate rise in marketing expenses. This was due to measures taken to gradually intensify marketing campaigns as of the second half of the year. At 30.7m, personnel expenses were up 4.7% on the previous year s figure ( 29.3m). The rise is due to the establishment of new advisory models as well as the insourcing of IT services.

9 INTERIM MANAGEMENT REPORT 7 Depreciation rose slightly to 6.9m (previous year: 6.5m) and resulted essentially from expansion of the IT infrastructure and the associated increase in internally generated and purchased software. and versicherungsbetriebe magazines in conjunction with the Frankfurt School of Finance & Management. The award recognised especially well-designed and efficient business processes in the financial sector. Administrative expenses (in million) B2C business line Q1 10 Q2 10 H1 09 H Depreciation Other administrative expenses Personnel expenses To understand our customers and their needs even more clearly, we looked again at the longer term trends in customer behaviour in The Customer Motives survey published in mid-june 2010 reveals that despite the fact that they have been seriously affected by the financial market crisis, Germans rarely deal with financial issues and the majority are not interested in investments or old age provisioning. The savings potential offered by financial products frequently remains unused; providing information on the benefits of these products would have a corresponding major impact. Business development in brokerage In brokerage, we benefited from the upswing in stock market trading through our comprehensive range of products and services for equities, funds, ETFs, certificates and warrants. There was a substantial rise in the number of trades. In direct business with modern investors, the pace of growth on the customer and product side increased considerably compared with the first quarter. New business in current accounts and Tagesgeld PLUS accounts was particularly successful. As in the previous year, comdirect bank attained excellent scores in comparison tests and customer surveys. comdirect bank emerged the overall winner in a comparison of the eleven most important direct banks conducted by the Deutsches Institut für Servicequalität (German Institute for Service Quality) in June The comparison looked at terms and conditions, the quality of Customer Services, websites and security standards. In this year s Brokerwahl awards (brokerwahl.de), we successfully defended our Online Broker of the Year title and were honoured as Best Fund Broker for the fifth time in a row. This success was rounded off by a second place ranking for Certificate Broker of the Year and winning second place in the category of ETF Broker of the Year, which was awarded for the first time. In addition, we received an award from Börse Online for the best information offering among all the online brokers; we also scored well for order processing, accessibility, customer focus and product range. There were as well prizes for the bank s advisory offering. We came out on top in a comparison test of direct building finance placed by banks, carried out by German news channel n-tv. Moreover, the Anlageberatung PLUS garnered second place in the Best Pro cess Award presented for the first time by the geldinstitute Developments in brokerage We further expanded the information offering on comdirect s website for traders and securities savers. The fundamentally revised Informer of the website provides even clearer and more comprehensive information on all tradable securities in Germany as well as on currencies and markets. Investors can test investment products and strategies using tools such as the model portfolio and the new funds comparison. With our JubiläumsDepot, we are celebrating already 15 years of success in the online securities business. The account combines the advantages of investor and trader custody accounts. Customers who previously have not held a custody account with com direct, as well as new customers, receive a 50% discount on each order for the first six months and can secure an attractive bonus for fund volumes of over 10 thousand. For top traders executing more than 1,250 trades per half year, comdirect bank is offering an anniversary flat fee of 7.90 per trade. Six no-fee campaigns allowed traders to execute OTC trading (LiveTrading) in various leveraged and investment products without incurring any fees. Furthermore, as early as the first quarter of the year, we acquired another issuer as a new trading partner in LiveTrading. We also ran a free-buy campaign for ETFs from renowned providers and a flat-fee campaign for exchange trading.

10 8 For securities savers and fund investors, we updated our FondsDiamanten fund offering, which comprises 20 selected funds with above-average valuations, using strict selection criteria; the offering now includes an attractive fixed-income fund. The fund selection for the AktivSparpläne savings plans launched a year ago was comprehensively reviewed at the start of May. These enable investors to invest in 20 actively managed asset management and lifecycle funds in different investment classes with individually tailored savings rates without any front-end load, thereby exploiting attractive yield opportunities. Our fund of the month offering comprised two equity funds and one total return fixed-income fund, and demand for these was very pleasing. We doubled the start credit when taking out a securities savings plan in conjunction with a JuniorDepot ( junior custody account ) to 60. Securities trading There was a significant upturn in securities trading compared with the previous year. The comdirect Brokerage Index, which is calculated monthly and was published for the first time in May 2010, shows that with regard to equities in particular, our customers were on the buy-side. Opportunistic investors used the strong price fluctuations in the second quarter to make targeted investments. Overall, comdirect bank executed 3.94 million orders for its customers in the first six months of the year, 9.5% more than in the previous year (3.60 million). As prices were on average higher, there was a disproportionate rise in the securities turnover, which increased by 30.2% to 20.03bn (previous year: 15.38bn). This produces a volume per executed order of 5,082 (previous year: 4,271). Portfolio volume B2C (in billion) % more than at the end of 2009 (719.2 thousand). The positive trend was attributable to the successful anniversary products and services and to cross-selling effects in connection with the current account and Tagesgeld PLUS account. Business development in banking As a result of the ongoing success of the current account and Tagesgeld PLUS account, there was a substantial boost in the deposit volume in the second quarter. We introduced a series of measures to further improve the product and security features. Number of Tagesgeld PLUS accounts and current accounts (in thousand) 1, Executed orders B2C (in million) Tagesgeld PLUS accounts Current accounts Q1 10 Q2 10 H1 09 H1 10 Portfolio volume The portfolio holdings of our B2C customers totalled 13.94bn (end of 2009: 13.16bn). The rise of 5.9% was due both to net investments by our customers and to price effects. By mid-2010, we managed thousand custody accounts for our customers, Developments in banking For our current account customers, we made online payments using the comdirect Visa card even more secure. The Verified by Visa additional authentication procedure has been in place for online purchases since the end of April. After a one-off registration in the customer login section (Persönlicher Bereich) of the bank s website, customers are protected by a password when making online payments at participating retailers. Improvements were also made to the account switching service: customers can now notify payees of their new bank account de-

11 INTERIM MANAGEMENT REPORT 9 tails by personalised letter direct from the website, while being able to access a comprehensive address database at the same time. The advanced credit and debit entry search gives customers a rapid overview of the transactions in their accounts and custody accounts over the past six months and can be used to display specific sums or transactions. In the second quarter, we launched two competitions to boost new customer business. New Tagesgeld PLUS account customers can double their deposit balance or win one of nine ipads, while current account customers with monthly incoming payments totalling more than 1,000 can enter the competition for the Aktion Mensch annual lottery draws. Deposit business The deposit volume in the B2C business line increased by 5.8% in the second quarter, which was considerably more than in the first quarter (2.5%). As of 30 June 2010, the deposit volume amounted to 9.85bn; since the start of the year, the business line has gained 0.76bn. As a result of its attractive interest rate of 2.1% for investments up to 5,000, Tagesgeld PLUS deposits recorded disproportionately growth of 0.71bn (12.7%)in the first six months of the year. The number of Tagesgeld PLUS accounts increased by 7.2% to 1,030.6 thousand, thereby exceeding the one million mark for the first time (end 2009: thousand accounts). The volume of fixed-term deposits declined somewhat in the second quarter as well, while there was a moderate rise in medium to long-term time deposits. Our current account with satisfaction guarantee recorded even stronger growth than the Tagesgeld PLUS account and the number of accounts increased by 9.3% to thousand (end 2009: thousand) in the first half of Deposit volume B2C (in billion) Lending and placement business The volume of loans in the B2C business line rose from 176m (end 2009) to 195m. Traders carried out securities lending to a greater extent in order to profit extensively from volatile price movements. Overdrafts on current accounts also increased slightly. comdirect acts as an intermediary for building finance and consumer loans. Both offerings therefore had no impact on the lending volume. Business development in advice We continued to establish our Anlageberatung PLUS service in the first half of the year and the advice concept continues to be very well received by both customers and the industry. By mid-year, the number of customers had increased to more than 700. With regard to the Baufinanzierung PLUS service, the upturn in market sentiment (see page 4) had a positive impact, as did the expansion of the offering s regional presence with the inclusion of additional financing partners. At 169m the volume of building finance placed in the first six months outstripped the comparative figure for 2009 by around 52%. The number of financing partners has increased by nearly 40 to almost 130 since the start of the year. We continued to maintain a strong media presence through publication of the Building Finance Sentiment Index and building finance tips. We completed the withdrawal from providing local advisory services through the offices of comdirect private finance in the first half of 2010 as planned. comdirect bank is still represented by offices in Berlin, Frankfurt/Main, Hamburg and Munich and offers advisory services in these locations as part of Baufinanzierung PLUS. The customers of comdirect private finance AG, which has meanwhile been merged into comdirect bank AG, were to a large extent also brokerage or banking customers of comdirect bank. Following completion of the withdrawal there was a considerable drop in the net commission income generated by comdirect private finance. Expenses related to the closure of the offices were covered by the restructuring provision ( 4.5m) recognised in the previous year. A small portion ( 0.3m) of the provision was reversed as of 30 June 2010, partly as a result of successful negotiations regarding the re-letting of office space. Earnings situation in the B2C business line At 36.7m, pre-tax profit in the B2C business line was 4.0% below the previous year s figure ( 38.2m). Earnings amounted to 120.2m (previous year: 124.5m), while administrative expenses

12 10 stood at 83.3m (previous year: 85.8m). This yields a cost/ income ratio of 69.2% (previous year: 68.9%). The earnings components relating to the comdirect group s deposit business net interest income, trading result and result from financial investments stem mainly from the B2C business line. For further details, please see the explanation of these items at comdirect group level (see pages 5 to 6). At 63.4m, net commission income exceeded the previous year s figure ( 53.4m) by 18.6%. The increased number of executed orders was the key earnings driver, followed by the rise in sales follow-up commission due to the higher funds volume. A moderate counter trend resulted from the decline in commission income from the advisory business. The reduction in administrative expenses is primarily attributable to declining communication and consulting expenses. Looking at the second quarter alone, there was a slight increase in expenses primarily due to measures to intensify marketing activities as of the second half of the year as well as higher costs for order processing resulting from the increased number of trades. At 2.4m, the other operating result was below the previous year s figure ( 5.9m), which was due in part to the reversal of provisions and accruals. B2B business line Business development in the B2B business line With only minor changes in the number of custody accounts and the portfolio volume, ebase significantly improved net commission income in the second quarter, which was boosted by a nonrecurring effect. The realignment of Marketing and Sales at the start of the financial year has already led to initial successes: in the second quarter, ebase further increased the number of its sales partner organisations and gained a successful investment company as customer. AmpegaGerling investment has been working with ebase for its custody account administration since 21 June and all of its new custody account business is being carried out via ebase. The measures to improve the company s competitive position, which were initiated at the end of 2009, have been rigorously implemented. Developments in the B2B business line ebase expanded its deposit business and is moving consistently towards becoming a B2B direct bank with the new architecture for its custody accounts and other accounts. The central product is the ebase custody account, ebase Depot flex, which was launched in the first quarter and links the established ebase Depot account with a settlement account. This allows fund transactions for the investment custody account to be carried out directly via the settlement account. ebase s call money and fixed-term deposit accounts can now be conveniently and easily used as supplementary products to the investment custody account. Since the second quarter, we have been able to offer this new account products as white label version, and for insurance companies in particular we offer an interim product for the funds received upon maturity of insurance policies in the company s own corporate design. The range of accounts therefore ideally complements the customer advisory services of the B2B partners. With a view to achieving even greater market penetration, at the end of the second quarter ebase launched a new fixed-term deposit account paying interest of 3% p.a. This applies for an investment period of six months and investments up to 5,000. A marketing offensive is being carried out for the deposit account. The custody account solutions were enhanced by features including dynamic Stop Loss and Stop Buy orders for ebase s online portal. Here, ebase was able to utilise the extensive expertise of comdirect bank with regard to trailing stops (automatic adjustment of limits). ebase s portfolio is rounded off by a custody account solution for processing insurance wrapper products. ebase also optimised service fee levying for B2B partners. The aim is to further improve the alignment of fee levying with the partner s business models through greater transparency and prompt automatic charging. Custody accounts and portfolio volume As of 30 June 2010, the number of custody accounts stood at thousand (end 2009: thousand). The moderate drop was attributable in large part to the cancellation of low-margin custody accounts for capital-building payments (known as VL contracts) in the first quarter, while the number of custody accounts largely stabilised in the second quarter. At 13.63bn, the portfolio volume was up 2.5% on the level at the end of 2009 ( 13.31bn).

13 INTERIM MANAGEMENT REPORT 11 Portfolio volume B2B (in billion) The other operating result was balanced. The previous year s figure of 1.3m included a non-recurring effect from the refund of special contributions to the Entschädigungseinrichtung der Wertpapierhandelsunternehmen (EdW Compensatory Fund of Securities Trading Companies) as a result of administrative court decisions. Financial situation and assets of the comdirect group Accounts and deposit volume ebase s extended offering, which now includes deposit products, met once more with pleasing demand among B2B partners in the second quarter. The number of settlement accounts increased by 24.5% compared with the end of March to 23.0 thousand. Additional sales partners created the contractual basis for switching to the new product. ebase continued the growth trend with its other deposit products as well. The number of call money accounts rose to 7.2 thousand (end 2009: 5.9 thousand) and the number of fixed-term deposit accounts has more than doubled in the second quarter. The deposit volume rose by almost 90% in the first half of Earnings situation in the B2B business line The B2B business line increased its pre-tax profit by considerable 50.6% on the first half of 2009 ( 3.3m) to 5.0m. Earnings of 20.9m (previous year: 19.0m) and administrative expenses totalling 16.0m (previous year: 15.6m) yields an improved cost/ income ratio of 76.2% (previous year: 82.5%). At 20.7m, net commission income was up 3.1m on the previous year ( 17.6m). This was due to higher sales follow-up commission resulting from the considerably increased funds volume as compared with the previous year. This was countered by a slight drop in the custody account fees owing to the moderate decline in the number of custody accounts. In addition to the improved quality of the operating margin, the non-recurring effect from the conclusion of negotiations on terms with a partner organisation also had a po sitive impact here. Despite a higher deposit volume, net interest income before provisions fell from 218 thousand to 142 thousand. This was mainly ascribed to declining interest income on securities arising from the changed market environment. We consistently continued our conservative and risk-aware Treasury strategy in the first half of Balance sheet structure of the comdirect group The balance sheet total increased with the deposit volume and as of 30 June 2010 stood at 10.54bn (end 2009: 9.79bn). On the assets side, claims on banks increased in particular. At 5.30bn, they were up 11.3% on the figure at the end of 2009 ( 4.76bn). In contrast, there was only a slight increase in the volume of financial investments from 4.48bn to 4.50bn. The somewhat increased utlisation of loans to purchase securities resulted in a moderate rise in claims on customers to 211.1m (end 2009: 206.2m). The cash reserve amounted to 480.8m (end 2009: 282.8m). The liabilities side is essentially dominated by the deposits of private customers. Liabilities to customers increased by 8.6% to 9.91bn (end 2009: 9.12bn). The decline in provisions from 49.6m to 44.2m is due in part to the utilisation of the restructuring provisions recognised in the previous year. Equity amounted to 496.6m (end 2009: 533.4m). The net profit for the period was countered by the overall negative change in the revaluation reserve and the effect of the dividend payment in the second quarter. Cash flow statement of the comdirect group The cash flow from operating activities of 255.0m (previous year: 8.2m) is essentially influenced by the movement in the deposit volume and the investment of customer deposits via Treasury. Investment activities generated a cash inflow of 0.8m (previous year: outflow of 5.5m). The cash flow from financing activities of 57.9m is attributable completely to the dividend distribution of 0.41 per share. The previous year s figure also included the payment of 24.9m for the acquisition of ebase as well as the profit distribution by ebase to its former parent company Commerz Asset Management Holding.

14 12 The share Data and key figures of the share HY 2010 The price of comdirect shares rose slightly in the second quarter, despite the technical ex-dividend markdown following distribution of the dividend of 0.41 in May. As of 30 June 2010, the share price stood at 7.58, up 14.7% on the end of The shares therefore considerably outperformed the DAX, which remained virtually unchanged (+ 0.1%), as well as the SDAX (+10.0%). The DAXsector Financial Services Performance Index lost 6.1% during the reporting period. Activities in Investor Relations focused on the ordinary annual general meeting, which was held in Hamburg on 7 May 2010 and attended by around 450 shareholders. With 83.97% of the share capital represented, all items on the agenda were adopted with clear majorities of between 99.84% and 99.99%. For the first time, the whole event was broadcast live via comdirect s website. Shareholders could choose to exercise their vote in writing or by proxy voting via the internet. The annual general meeting was followed by a roadshow in Frankfurt/Main. The CEO, CFO and the Investor Relations team also held numerous individual meetings with investors and analysts. Development of comdirect share price to (in ) German securities code no ISIN code DE Stock exchange code COM Reuters: CDBG.DE Bloomberg: COM GR Stock exchange segment SDAX Number of shares issued 141,220,815 no-par-value shares Designated sponsor Commerzbank AG Shareholder structure 80.53% Commerzbank AG 1) 19.47% Free float Key figures HY 2010 Average daily turnover in units XETRA 68,878 Frankfurt 7,928 Other stock exchanges 3,380 80,186 Opening quotation XETRA ( ) 6.61 Highest price XETRA ( ) 2) 8.30 Lowest price XETRA ( ) 2) 6.60 Closing quotation XETRA ( ) 7.58 Market capitalisation ( ) 1,070.5m 7.58 Earnings per share ) Indirectly 2) Daily closing quotation 6.61 Jan Feb March April May June comdirect share SDAX DAXsector Financial Services Performance Index Source: Bloomberg; Indices normalised to the comdirect share price as of year-end 2009 Employees As of 30 June 2010, the comdirect group employed 1,133 staff members, 22 fewer than at the end of On a full-time basis, the number decreased to 1,014.0 (end 2009: 1,029.2) employees. In the B2C business line the number of employees remained virtually stable at 892 (end of 2009: 897). Recruitment focused in particular on the expansion of the Anlageberatung PLUS and Baufinanzierung PLUS services. 241 staff members were employed in the B2B business line at the end of June (end of 2009: 258). All permanent employees of comdirect private finance AG were offered a position with the comdirect bank AG.

15 INTERIM MANAGEMENT REPORT 13 We expanded our competence and talent management activities within the comdirect group in the first half of the year. Building on our proven in-house qualification programme comahead, we will be the first direct bank in Germany to offer Customer Services employees a Chamber of Industry and Commerce (IHK) certification. After several weeks of preparation at the Wirtschaftsakademie Schleswig-Holstein (Schleswig-Holstein Academy of Business and Administration), employees can take the exam for the Customer Services Financial Services (IHK) certificate. The programme has initially been set up for 20 employees and is to be gradually extended to cover all the staff in Customer Services. Number of employees of comdirect group 897 Risk and opportunities report The risk position of the comdirect group is essentially unchanged compared with the presentation in the 2009 annual report. The same applies to the opportunities of the group. Despite a slight rise in credit spread volatilities, the market risks are approximately on a par with the level at the end of Credit default risks were also essentially unchanged compared with the end of the year. The average rating for the trading portfolio remained the same at A2 (Moody s). Even in light of the financial crisis in some peripheral countries in the eurozone, country risks continue to play a minor role. The portfolio is continually monitored. The 2009 risk report can be found on pages 66 to 73 of the annual report and the opportunities report on pages 74 to 75, while Note (61) regarding the risk reporting on financial instruments is on pages 128 to 131. Outlook business line B2C business line B2B The comdirect group s positive development in a difficult interest rate environment with moderately improved trading levels in the first half of 2010 essentially confirms the statements concerning the overall bank strategy and the expected economic framework parameters as well as the expected business situation, earnings, financial situation and assets presented in the outlook section of the 2009 Group management report (pages 76 to 78 of the annual report). Based on the good half-year result, we aim to achieve a pre-tax profit of 80m (previous year: 76m) for 2010 as a whole despite planned additional marketing expenses. We intend to continue our profitable growth course beyond Once complus has been concluded to schedule and the B2B strategy has been implemented, pre-tax profit is set to range from 150m to 170m in On the market side, we are not expecting any significant impetus for the deposit business for the rest of the year. Although the three-month EURIBOR rose slightly in the past few weeks, it is currently unlikely that terms and conditions in the money market will change substantially. Developments in the bond market continue to harbour valuation risks because of potential credit spread widening. The framework conditions for brokerage improved overall in the first half of 2010; however, it is hard to forecast wether this trend will continue in the second half of the year due to the ongoing uncertainty in the market. In the B2C business line, preparations are underway for additional targeted marketing activities. However, these campaigns for the current account and selected products in brokerage and advice will be managed on a flexible basis in line with market developments. In advice, following the withdrawal of comdirect private finance from local advisory services, we are concentrating in full on expanding our Anlageberatung PLUS and Baufinanzierung PLUS services. In the B2B business line the focus is on intensively developing the target market segments and expanding the range of products and services in brokerage and banking. This strongly market-oriented strategy is reflected in comprehensive advice and support for sales partners, coupled with a considerably more active role for ebase as it supports its sales partners in the competition for end customers. The sales campaigns launched in the reporting period should begin to take effect in the second half of the year. At the beginning of the third quarter, ebase acquired two further leading ETF providers, db x-tracker and Lyxor, as product partners and at the same time launched a no-fee ETF campaign to support the marketing activities for the extended offering. Supplementary report No major events or developments of special significance have occurred since the reporting date of 30 June 2010.