eminent commercial Bank in Germany Acquisition of Eurohypo

Transcription

1 Creating the pre-eminent eminent commercial Bank in Germany Acquisition of Eurohypo Frankfurt, November 17, 2005 Klaus-Peter Müller Chairman of the Board of Managing Directors

2 Agenda 1. A powerful combination: transaction highlights and rationale 2. Eurohypo: Europe s leading specialist for real estate and public finance 3. Transaction and financial details 4. Summary 1

3 Transaction Summary Transaction Acquisition of 66.2% in Eurohypo Irrevocable commitments by Allianz and Deutsche Bank First tranche: acquisition of 17.17% from Allianz and Deutsche Bank Second tranche: Remaining stake of 49% Transaction subject to regulatory and merger control approvals Facts Average purchase price per share of in cash or 4.56bn P/BV 2005e: 1.12x P/E 2005 Q3: 15.3x (annualized) Financing Financing package - Capital increase of ~ 1.3bn - Combination of diverse capital measures Satisfactory Tier 1 ratio after capital measures 2

4 Key rationale and transaction highlights Strategic rationale Reinforcement as the leading German commercial bank Revenue enhancement through a broader customer base and improved product range Opening new market opportunities Participate actively in consolidating the fragmented German real estate market Higher leverage to economic turnaround in Germany Financial rationale Significant EPS and RoE accretion starting 2006 Value enhancing with identified synergies More stable and predictable earnings stream Limited integration risk due to complementary businesses Increased leverage through capital management 3

5 Commerzbank s path to stability and growth Progressing: Stability and focused growth Restored: Corporate financial strength ( ) Management changes implemented Costs cut rigidly Liquidity prudently managed Capital base strengthened Regained: Improved core business ( ) Significantly de-risked loan portfolio and VaR Non-core participations sold Restored profitability in Retail Major turnaround in Corporate Bank De-risked Investment Banking, significant turnaround Strong standalone position Active role in the consolidating German banking market Profitability enhancement in all divisions Focusing on regions and products with competitive strengths Focused investments for internal and external growth Increasing capital efficiency Continuing tight cost management Strong basis for a powerful combination with Eurohypo 4

6 Commerzbank and Eurohypo: the pre-eminent commercial bank in Germany No. 1 Commercial real estate bank - market share increase from 17 to 22% No. 1 Public sector financing in combination with Essenhyp No. 2 Residential real estate financing - market share doubled to 6% No. 2 German bank by total assets and profit before taxes (2004) No. 2 Mittelstandsbank Germany No. 3 Retail bank with 5m customers No. 1 CMBS originator International No. 1 Jumbo Pfandbriefe Europe (jointly with Essenhyp 26% market share) Top 5 Real estate banking in USA Leading position in securitization and syndication in Europe No. 10 CEE bank with BRE and strong presence in Moscow, Prague and Budapest 5

7 High RoE and EPS accretion RoE improvement (1) in percentage points up to 2.3 EPS accretion (1) in % up to 26% up to 1.2 up to 17% up to 0.3 up to 6% (3) (2) (3) 2006 (2) RoI in 2007: 12.4% 6 1. vs. IBES estimates for Commerzbank 2. including restructuring charges 3. excluding restructuring charges (assumption 150m)

8 Key financials of Commerzbank and Eurohypo (Jan-Sep 2005) Commerzbank incl % EH Eurohypo 100% Proforma incl. cons. EH Commerzbank/ Eurohypo Customer loans (net) ( bn) % / 48% RWA ( bn) (1) 227 (4) 64% / 36% Total revenues ( m) 5,069 1,117 6,094 (4) 82% / 18% Operating expenses ( m) 3, ,660 90% / 10% Operating Profit ( m) 1, ,703 (4) 70% / 30% Net income ( m) ,077 (4) 71% / 29% Cost/Income Ratio 65% 33% 59% N/A Tier 1 ratio (2) 6.8% 7.5% N/A N/A RoE (2,3) 12.1% 8.8% N/A N/A Employees 33,230 2,375 35,605 93% / 7% 1. Average RWA 2. As reported 3. Post tax 4. Reduced by already existing EH stake (RWA 1.8bn, revenues and income 92m) 7

9 On a joint basis, results will be stronger, more stable and more predictable Net interest income and commission income vs operating expenses in % 145% 132% 111% 113% 112% 110% 114% 118% 125% 92% 98% 98% 100% 98% 101% 98% 99% 99% 90% 83% 85% 84% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Commerzbank/Eurohypo combined Commerzbank 8

10 Agenda 1. A powerful combination: transaction highlights and rationale 2. Eurohypo: Europe s leading specialist for real estate and public finance 3. Transaction and financial details 4. Summary 9

11 Eurohypo: A top 10 player in Germany (Jan Sep 2005) Operating profit in m 5,515 1,703 1,634 1,296 1, (2) Deutsche Bank (1) CB + EH HVB (2) Dresdner Bank Commerzbank (3) DZ Bank Eurohypo Postbank Depfa Hypo Real Estate Without our at-equity consolidated profit of Eurohypo ( 92m) 2. Adjusted for restructuring expenses 3. Jan-Jun 2005

12 Real Estate Banking: Consolidation since 1999 Market in 1999 mortgage loans Market in 2004 mortgage loans Deutsche Hyp Frankfurt Eurohypo DG Hyp Rheinhyp Depfa Berlin Hyp Nürnberger Hyp 11.0 Bayerische Handelsbank 10.8 Münchner Hypo 9.5 Süddt. Bodencreditbank 9.2 AHB 7.5 Württemberger Hypo 7.5 West Hyp 7.2 Rheinboden 6.5 Deutsche Hypo Hannover 5.9 WL-Bank 4.3 BfG Hyp 3.8 Wüstenrot Hypo 2.3 EssenHyp 1.8 Schleswig-Holsteinische L. 1.3 Dexia Hypo 0.4 M.M. Warburg Hypo 0.3 Düsseldorfer Hypo Top 2 Top 8-10 Eurohypo HRE DG Hyp AHBR Aareal Berlin Hyp Münchener Hypo Dt. Hypo Hannover WL-Bank SEB Hyp Wüstenrot Hypo EssenHyp Depfa Düsseldorfer Hypo , Top 2 Top Mortgage loans in bn Top 2 mortgage loans in bn Merger HRE Merger Eurohypo 11

13 The cycle has troughed Rents development p.a. 20% 10% 0% -10% -20% Rental Growth Average (Large Cities, GER) Source: Morgan Stanley Research Office purchases in Germany (000 sqm) Source: Atisreal Düsseldorf Hamburg Berlin München Frankfurt Germany s 10-year real estate cycle (1991) 2001 High vacancy, further fall in rents Decreasing vacancy, increasing rents Supply shortage, rising rents Increasing vacancy, falling rents 2004 (1996) 2005 Source: Degi 12

14 Eurohypo: Stable and profitable business Net interest income in m Risk provisions (1) in m before guarantees (3) 1,151 1,289 1,300 1, Jan-Sep ' Jan-Sep '05 Operating profit pre LLP in m(before guarantees) (3) Return on equity before tax in % (2) Jan-Sep ' Jan-Sep ' HGB, as of 2003 IFRS 2. annualized 3. Before utilization risk umbrella with shareholders (Deutsche Bank, Dresdner Bank, Commerzbank) 13

15 Agenda 1. A powerful combination: transaction highlights and rationale 2. Eurohypo: Europe s leading specialist for real estate and public finance 3. Transaction and financial details 4. Summary 14

16 Leverage of the transaction Retail RE Commercial RE Corporate Center Cost synergies Revenue synergies Retail RE Commercial RE Corporates & Markets / RE IB Hybrid leverage Basel II capital reduction from 2008 Capital effects & Basel II Other synergies Use of tax loss carry-forwards To be detailed in joint teams by April

17 Synergies sum up to 100m - 130m Preliminary evaluation Retail real estate Commercial real estate Others Cost synergies Optimizing credit process Better scale Optimizing credit process Better scale Corporate center (administration and IT functions) 80m- 100m Revenue synergies Increase of agency sales Cross-Selling access to ~ non CB retail customers Enhancing competitiveness Cross Selling to Eurohypo customers and extension of product range for Commerzbank customers Pfandbrief-refunding can be used immediately Synergies in investment banking products (hedges, currencies, etc.) 20m- 30m Σ 100m - 130m in

18 Details of contractual agreement Transaction Details Irrevocable agreement To acquire 66.2% in EH from Deutsche Bank and Allianz by 31/03/06 for on avg per share in cash ( 4.56bn) 1 st Tranche of Eurohypo Increase current CB share in EH to 49% as per 15/12/05 by acquiring 17.17% in total from Allianz and Deutsche Bank 2 nd Tranche of Eurohypo Remaining stake of 49% (1) to be acquired until 31/03/06 Pro-forma holding of 98% Closing Mandatory takeover bid not required according to German takeover code CB may consider acquiring the remaining free float by way of a squeeze-out ( 16 Abs. 4 AktG) Closing of transaction within Q Remaining free float 2 %

19 Comfortable financing capacity 1. Core capital increase Accelerated bookbuild offering Appr. volume up to 1.3bn Hybrid capital Existing Eurohypo volume 900m Estimated additional volume available up to 2.5bn 2. capacity up to 7.4bn 3. Revaluation reserves/ Securitisation Revaluation reserve: up to 1.6bn total ex Intesa Capital management Securitisation > 200m Release of excess capital Volume: up to 900m (Tier 1-ratio reduction from 7.1 to 6.5%) 4. 18

20 Higher profitability leads to Tier 1 build-up Planned evolution of Tier 1 ratio % > 6.5% > 6.3% 31/03/06e 31/12/06e 31/12/07e post closing (1) 1. Including interim profits for Q

21 Agenda 1. A powerful combination: transaction highlights and rationale 2. Eurohypo: Europe s leading specialist for real estate and public finance 3. Transaction and financial details 4. Summary 20

22 Main benefits of Eurohypo transaction Strong business fit Additional Substantial shareholder value value creation Reinforce Commerzbank s position as the leading German commercial bank Broaden exposure in the recovering German real estate market (No. 1, 22% market share) Increasing and more stable earnings Boosting EPS (+26%) and RoE (+2.3ppt) in 2007 (1) Commitment to dividend payment for 2005 and increased dividends in following years Benefit from German recovery story 3. Low integration risk Complementary businesses with stable and predictable earnings stream Eurohypo well known to Commerzbank 4. Synergies Cost synergies of 80m - 100m through process optimizations and back office consolidation Revenue synergies of 20m - 30m vs. IBES estimates

23 Transaction Calendar Preliminary schedule Milestones 17 November 2005 Announcement of transaction Starting on 17 November 2005 Investor Meetings November 2005 Merger Control Notification 15 December 2005 Acquisition of 1 st tranche of Eurohypo Q Acquisition of 2 nd tranche of Eurohypo Q Closing 22

24 Appendix 23

25 Additional Information on Eurohypo The following additional information on Eurohypo is publicly available : Quarterly reports 2005 (IFRS) Annual report 2004 (IFRS) Previous quarterly and annual reports (German GAAP) Several roadshow, investor relations, results & fixed income presentations Merger report and listing prospectus Eurohypo AG Please visit to access this information 24

26 Overview Eurohypo Created in August 2002 as a result of the merger of the mortgage banks Rheinhyp (Commerzbank), Deutsche Hypo (Dresdner Bank) and Eurohypo (Deutsche Bank) TOP 10 German bank No. 7 by revenues No. 6 by operating profit No. 1 German mortgage bank Assets in 2004: market share of 26% New business in 2004: market share of 56% Public sector lending: market share of 24% Leading European franchise No. 1 in European Commercial Mortgage Backed Securities (CMBS) market No. 2 in Euromarket real estate loans No. 1 in Europe (since 2000) in syndication of real estate financing No. 5 real estate banking in USA 25

27 Market leaders continue to gain market share in 2004 in Germany Market shares of German mortgage banks (%) Total Loans New business Loans ( Bn) No. Name Mortagage& Public Sector Mortgages Public Sector Real Estate Public Sector Total Assets ( Bn) Mortgage& Public Sector Mortgages Public Sector 1 Eurohypo 25.0% 25.8% 24.4% 49.2% 9.6% Hypo Real Estate 16.4% 17.5% 15.5% 0.7% 0.3% AHBR 8.5% 6.7% 9.9% 9.6% 9.2% DG HYP 5.7% 6.8% 4.8% 13.9% 12.0% Essen Hyp 5.0% 2.0% 7.4% 8.1% 4.6% Berlin- Hannoversche Hyp 3.5% 4.3% 2.8% 1.9% 1.4% Deutsche Hypo 3.0% 2.4% 3.4% 3.8% 8.2% Münchner Hyp 2.8% 3.1% 2.6% 4.6% 5.9% Total VDH Source: VDH 26

28 Eurohypo: Profitable business in all divisions (Jan-Sep 2005) Corporate Banking Germany Corporate Banking Int l Retail Public Sector Finance Group MM Q Q Q Q Q Q Q Q Q Q Net Interest Income , Loan Loss Provision (130) (172) 1 0 (72) (55) 0 0 (200) (214) Net Interest Income after Loan Loss Provision Net Commission Income (10) (7) (8) Trading Profit (15) (20) (45) 3 (56) Administrative Expenses (99) (105) (111) (90) (85) (99) (44) (35) (368) (354) Other (2) (22) (1) (1) (1) (3) (40) 36 (37) 23 Operating Profit

29 Eurohypo portfolio: Inspite of strong international growth over 70% of portfolio remain still in Germany Existing portfolio (2004) Real estate portfolio by clients (2004) Real Estate Financing 95.6bn 45.4% Public Sector Financing 115bn 54.6% Commercial RE 64.5bn 67.4% Residential RE 31.2bn 32.6% Total = 210.9bn Total = 95.6bn Real estate portfolio by regions (2004) Europe 19.1bn 20.0% Western Germany 49.7bn 52.0% Other 4.7bn 5.0% Total = 95.6n US / Canada 2.8bn 3.0% Eastern Germany 19.1bn 20.0% Real estate: allocation new business (2004) UK 3,1bn 18.0% US 4.1bn 24.0% Total = 17.3bn Germany 4.6bn 27.0% Europe 5.3bn 31.0% 28

30 Eurohypo is the leading player in a consolidated market Market shares commercial real estate 2004 Regional banks 4% Other 1% Landesbanks 14% Eurohypo 37% Large banks 5% Saving banks 21% Cooperative banks 17% Mortgage Banks 38% Other 42% HRE 21% Source: VDP; Deutsche Bundesbank 29

31 Eurohypo Significant distribution power Origination in 2004 German Commercial RE 1. Eurohypo 4.2bn 2. HVB 1.0bn 3. Aareal 1.0bn 4. AHBR 0.8bn 5. DG Hyp 0.8bn International Commercial RE 1. Eurohypo 12.6bn 2. HRE 12.3bn 3. Aareal 4.7bn 4. AHBR 1.7bn Public Finance 1. Depfa 72.0bn 2. Dexia 34.4bn 3. Essenhyp 15.1bn 4. Eurohypo 11.0bn 5. DG Hyp 10.0bn RE Syndication ( denom.) 1. Barclays 5.8bn 2. Eurohypo (2) 5.1bn 3. RBoS 3.9bn 4. Lloyds TSB 3.6bn 5. Citigroup 1.9bn RE Syndication (US) (1) 1. Bank of America Wachovia JPMorgan KeyBanc Eurohypo 10 European CMBS (Conduit) 1. RBoS 1.9bn 2. Morgan Stanley 1.7bn 3. Eurohypo 1.3bn 4. Citigroup 1.1bn 5. Lehman Brothers 1.1bn Number of deals 2. Eurohypo #1 by number of deals

32 For more information, please contact: Commerzbank Investor Relations Jürgen Ackermann Head of Investor Relations P: M: Sandra Büschken P: M: Ute Heiserer-Jäckel P: M: Simone Nuxoll P: M:

33 Disclaimer / investor relations / This presentation has been prepared and issued by Commerzbank AG. This publication is intended for professional and institutional customers. / Any information in this presentation is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Commerzbank Group with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgement at this date and time, and are subject to change without notice. This presentation is for information purposes, it is not intended to be and should not be construed as an offer or solicitation to acquire, or dispose of any of the securities or issues mentioned in this presentation. / Commerzbank AG and/or its subsidiaries and/or affiliates (herein described as Commerzbank Group) may use the information in this presentation prior to its publication to its customers. Commerzbank Group or its employees may also own or build positions or trade in any such securities, issues, and derivatives thereon and may also sell them whenever considered appropriate. Commerzbank Group may also provide banking or other advisory services to interested parties. / Commerzbank Group accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this presentation. / Copies of this document are available upon request or can be downloaded from