Pro-forma Risk Figures of New Commerzbank
Agenda 1. 2. 3. 4. 5. 6. Risk taking capability Credit Risk Market Risk Operational Risk Portfolios in risk focus Default Portfolio / Charges against earnings 1
Risk taking capability Economic Risk taking capability per Ultimo December 2008 in bn Economic Capital before diversification Economic Capital after diversification Capital available for risk coverage excl. 2 nd SoFFin tranche Capital available for risk coverage incl. 2 nd SoFFin tranche 14.8 5.8 1.8 1.1 2 nd SoFFin tranche 23.5 20.4 24.6 34.6 After booking of first SoFFin tranche, the risk taking capability of New Commerzbank is ensured. The second SoFFin tranche further increases the capital buffer and strengthens the protection against future economic stress scenarios. Economic capital after diversification buffer excl. 2 nd SoFFin tranche: Credit Risk Market Risk Operational Risk Business Risk Capital available for risk coverage 2 nd SoFFin tranche 4% buffer incl. 2 nd SoFFin tranche: 32% The economic and regulatory capital buffer will be closely monitored by comprehensive scenario-based stress testing. During 2009, the economic risk taking capability concept of New Commerzbank will be harmonized with existing regulatory capital adequacy rules leading to a convergence of economic and regulatory capital steering. 2
Agenda 1. 2. 3. 4. 5. 6. Risk taking capability Credit Risk Market Risk Operational Risk Portfolios in risk focus Default Portfolio / Charges against earnings 3
Credit Portfolio Exposure at Default per Ultimo January 2009 in bn Expected Loss / Risk density per Ultimo January 2009 Segment 713bn Private Customers Mittelstandsbank Central and Eastern Europe Corporates & Markets Commercial Real Estate Expected Loss (in mn) 345 412 173 n.a. **) 279 101 Private Customers 111 Mittelstandsbank 26 Central & Eastern Europe 370 Corporates & Markets 87 Commercial Real Estate 19 Others and Consolidation Risk density (in bp) 35 37 67 n.a. **) 32 With the integration of Dresdner Bank in particular the portfolios of Private Customers and Mittelstandsbank will increase. The portfolio of Corporates & Markets will be reduced mainly by reductions in the Public Finance sub-portfolio. Due to the current poor economic environment we expect further ratings migration and therefore an increase in expected loss levels and risk density. This will be partly offset by selective growth in certain markets. The figures shown are still subject to changes during 2009 due to ongoing harmonisation of methods and parameters, as well as ongoing client re-allocations between the segments, in particular with regard to the trading book. **) n.a. due to outstanding harmonisation of methods in the trading book of C&M and therefore for the group 4
Shipping Portfolio Exposure at Default per Ultimo December 2008 in bn Loan-to-Value >100% 3% 25.1bn 7.3 6.3 5.4 1.2 3.5 1.4 Expected Loss / Risk Density per Ultimo December 2008 Expected Risk Loss density ( m) (in bp) Container 15.0 21 Tanker 17.4 28 Bulker 16.3 30 Offshore 4.4 37 Others 18.1 51 Shipyards/Shipping Companies 1.0 17 Group 72.2 29 Container Tanker Bulker Offshore Others shipyards/ shipping comp. 80%-100% 60%-80% 40%-60% 20%-40% <20% Rating distribution 5.0-5.8 4.0-4.8 3.0-3.8 2.0-2.8 1.0-1.8 5% 3% 7% 13% 21% 38% 26% 28% 30% 26% Commerzbank and Dresdner Bank combined hold a share of 80% of Deutsche Schiffsbank. The EAD volume of all three institutes add up to about 25bn. In order to be able to focus on the management of the weaker parts of the portfolio, the risk profile of every single ship financing exposure has been analysed and classified using a traffic lights logic. Since mid 2008, a noticeable decrease of ship values and charter rates especially in bulker and container shipping has been seen. In addition to the general economic environment this was mainly caused by an overcapacity due to higher ship availability. 5
Agenda 1. 2. 3. 4. 5. 6. Risk taking capability Credit Risk Market Risk Operational Risk Portfolios in risk focus Default Portfolio / Charges against earnings 6
Market Risk Value-at-Risk (99 % / 10 days) per Ultimo January 2009 in m 183 68 23 4 375-122 252 Interest rate and credit spread risk continue to be the main drivers of market risk accounting for approximately 3/4 of the overall Value-at-Risk. Main drivers are the trading book of Corporates & Markets and the banking books of Treasury. 96 Via the planned de-risking by the Divisional Restructuring Unit (DRU), in particular in the area of Structured Finance, we expect a significant decrease of credit spread risk during the course of 2009. Interest Rates Credit Spreads* Equity FX Commodity Total before div.** div.** Total after div.** Furthermore, also a step by step de-risking of Dresdner Bank s interest rate derivatives and equity derivatives positions is planned. *: without Credit Spread Risk Public Finance ** div.: diversification 7
Market Risk Credit Spread sensitivities New Commerzbank per Ultimo January 2009 (figures for 12/07-12/08 restated) Basis Point Value (BPV) in m Downshift by 1 bp 112.4 113.2 105.0 105.3 116.6 108.6 The credit spread sensitivities per January 2009 are dominated by Public Finance exposure at Eurohypo and EEPK (incl. the reclassified positions to Loans and Receivables). 12/07 03/08 06/08 09/08 12/08 01/09 Credit Spreads (Eurozone) in basis points (bp) 420 390 360 330 300 270 240 210 180 150 120 90 60 30 0 Bond Spread (Asset Swap Spread BBB) CDS Spread (Itraxx Europe) 12/07 01/08 02/08 03/08 04/08 05/08 06/08 07/08 08/08 09/08 10/08 11/08 12/08 01/09 The increase of sensitivities in Q4/08 were solely caused by market developments (strong interest rate decrease and weaker Euro against US-Dollar) - no position increase. De-risking is planned in Public Finance and DRU. The reduction of the Public Finance portfolio to the target value of 100bn until end of 2010 is on track (as of December 2008: 151bn). However, under current market conditions a fast portfolio reduction is only possible by selling good risks at the expense of the average portfolio quality. 8
Agenda 1. 2. 3. 4. 5. 6. Risk taking capability Credit Risk Market Risk Operational Risk Portfolios in risk focus Default Portfolio / Charges against earnings 9
Operational Risk Regulatory Capital per Ultimo December 2008 in m Commerzbank Dresdner Bank 116 Expected Loss per Ultimo December 2008 in m Commerzbank Dresdner Bank 268 132 94 211 55 19 477 New Commerzbank 1.218 28 11 6 14 3 New Commerzbank 125 48 760 594 62 67 Segments PuG MSB CEE C&M CRE DreBa PCC DreBa DKIB The values per 12/08 of New Commerzbank are based upon first integrated calculations. The assumptions used in this context are still being validated in the course of the integration project. We expect further savings in the capital charge compared to the sum of the capital charges of both institutions. However, we also expect that the operational risk losses (including legal risk) in 2009 will increase. We expect an increasingly difficult environment due to the current financial crisis and the economic downturn. Experiences show that these situations usually are accompanied by increased claims against banks as well as by increased potential for fraudulent activities. Furthermore, the take-over of Dresdner Bank could cause additional events until the full consolidation of business processes and data processing systems has taken place. 10
Agenda 1. 2. 3. 4. 5. 6. Risk taking capability Credit Risk Market Risk Operational Risk Portfolios in risk focus Default Portfolio / Charges against earnings 11
Overview - ABS Portfolio Overview - ABS portfolio per Ultimo December 2008 in bn Nominal values Market values Secondary Market- ABS 23.9 17.3 Conduits 11.1 11.1 ABS-Hedge book 13.7 10.3 SIV K2 * 4.7 4.7 CIRC ** 1.1 1.2 Others 0.2 0.2 New Commerzbank 54.7 44.8 The management of the ABS portfolio, together with the Leveraged Acquisition Finance (LAF) portfolio, poses the greatest challenge in 2009. Details on sub-portfolios are presented on the following pages. * Nominal figures not available, market values are used as a proxy ** Nominal value comprises only second loss piece (nominal value of total portfolio: 1.6bn) 12
Secondary Market ABS Breakdown of products - secondary market ABS per Ultimo December 2008 Market values in bn 5.8 Government guaranteed 2.3 US CDO of ABS 17.3bn Rating distribution - secondary market ABS AAA AA 8% A 9% BBB 3% 0.9 US RMBS 2.6 Non-US RMBS 1.3 CMBS/CRE CDO 1.2 CDO Corporates 1.2 Consumer ABS 0.7 SME CDO 0.8 Term structures 0.5 Others 63% Government Wrapped Asset Backed Securities (government guaranteed) amounting to 5.8bn constitute the biggest sub asset class - whereof US Student Loan ABS of 4.1bn represent the lion s share. From today s point of view negative P&L effects from this sub-segment seem to be unlikely. The economic downturn has an increasing impact on further trigger breaches, delayed payments, declining asset prices and potential refinancing risk (esp. real estate in Spain / UK). Hence, we see further P&L risks with regard to the sub-segments CDO, RMBS and CMBS since the performance of these investments are heavily affected by the factors mentioned above. BB 17% 13
Conduits Breakdown by products per Ultimo December 2008 Market values in bn 11.1bn 23% Corporate Loans 27%Trade Receivables 14%Auto Loans/Leases 9% Film Receivables 6% Equipment Leasing 5% Div. Payment Rights 5% Capital Commitments 5% Rated Securities 2% Consumer Loans 4% Others Silvertower ( 5.9bn) Silvertower is subject to the franchise with regard to the funding of corporate clients of Dresdner Bank. 32% of the conduits are made up of securitisation transactions of own assets of Dresdner Bank, 18% from a leasing transaction based on residual values. Beethoven ( 3.5bn) Assets refer predominantly to trade receivables (25%), film receivables (21%) and capital commitments (17%) (appr. 80% USA and Emerging Markets). Rating distribution Conduits AAA AA A BBB BB 1% 19% 17% 23% 41% Kaiserplatz ( 1.1bn) Only liquidity lines and guarantees, no firstloss or mezzanine positions. The Kaiserplatz-conduit is subject to franchise for the funding of corporate clients with long-standing business connections and sound customer relationship. Participation in conduits of third parties ( 0.6bn) Assets are composed of 31% from European trade receivables and 69% from US-rated securities. 14
ABS Hedge Book Monoline asset classes Non-Monoline asset classes per Ultimo December 2008 per Ultimo December 2008 Market values in bn Market values in bn 9.5bn 5.3 Non-US RMBS 2.6 US ABS CDO 1.0 Corporate CDO 0.3 US RMBS 0.2 Sonstige ABS 0,1 CMBS/CRE CDO 0.8bn 0.1 CMBS/CRE CDO 0.1 US ABS CDO 0.1 Non-US RMBS 0.1 Sonstige ABS 0.4 Corporate CDO ABS positions hedged via Credit Default Swaps (CDS) are bundled in the ABS hedge book. For the major part of the CDS hedges, the counterparties are so-called monolines. Monoline asset ratings AAA AA 1% A 18% 76% Non-Monoline asset ratings AAA AA 1% BBB 13% 43% Since the monolines are severely affected by the financial crisis, the sustainability of the economic value of the respective hedges remains doubtful. The current replacement value of the relevant CDS hedges amounts to 2.6bn. BBB 1% BB 7% BB 1% B 32% B 3% CCC 4% 15
Structured Investment Vehicle (SIV) K2 Portfolio details per Ultimo December 2008 Market values in bn 4.7bn Ratings of ABS structures AAA 97% 2.9 ABS 1.8 Non-ABS Since March 2008 K2 consolidated. has been fully Dresdner Bank provides the following facilities: Buy/sell facility: $5bn (current usage: $3.1bn) Mezzanine facility $1.5bn (current usage: $1.0bn) Backstop bid facility (no usage at present) BBB 3% Ratings of other products AAA 11% AA 44% P&L-hit in 2008: $947m (= 681m) due to deterioration of market values. In case of a market recovery, we see potential for write-up, given the good ABS portfolio quality. A 39% BBB 6% 16
Leveraged Acquisition Finance (LAF) Overall portfolio with focus on Underwriting / Final Hold Portfolio per Ultimo December 2008 Exposure at Default in bn 10.6 1.6 2.8 2.3 3.9 LAF portfolio financing Leveraged- Loan-CIRCs Underwriting Final Hold Regions 51% 9% 4% Germany USA Italy 6.2bn 3% 6% France 15% UK 2% Spain 10% The Netherlands Rest of Europe In 2008 the well-structured Commerzbank portfolio (average exposure size of about 30m) only reported a loan loss provision of appr. 11m. In Dresdner Bank the credit quality of individual transactions deteriorated during the second half of 2008 in the course of the worsening economic environment. In the Final Hold portfolio, a loan loss provision of 10m was made for a single exposure. For the Underwriting portfolio, loan loss provisions of 662m were made. We expect the macroeconomic environment during 2009 to remain weak. Therefore, and in view of the higher leverage ratios in the LAF portfolio, negative rating migrations and further defaults in the Final Hold and Underwriting portfolio cannot be ruled out. 17
Agenda 1. 2. 3. 4. 5. 6. Risk taking capability Credit Risk Market Risk Operational Risk Portfolios in risk focus Default Portfolio / Charges against earnings 18
Default Portfolio Performance of default portfolio per ultimo December 2008 in m excl. / incl. GLLP (in %) Group 80% / 89% 6,749 6,128 1,461 16,119 14,337 Defaults in 2008 were dominated by bulk risks. However, there was a general increase of new cases, including migrations from the homogeneous portfolio. PBC 82% / 93% MSB 70% / 79% CEE 63% / 83% C&M 85% / 98% CRE 84% / 88% 1,067 Default volume 1,882 1,458 836 2,164 1,788 290 272 177 145 346 406 2,886 407 211 Total loan loss provisions Collateral Total GLLP 3,617 3,356 3,282 2,584 716 595 2,965 2,917 5,534 1,788 In addition to an increased inflow to the default portfolio, successful and efficient processing proved to be increasingly difficult in light of the negative trends on the commercial real estate market. Future development of default volume is strongly dependent upon restructuring and processing progress of individual bulk risks. The figures shown are still subject to changes during 2009 due to continuous harmonisation of methods and parameters as well as ongoing client re-allocations between the segments. 19
Loan Loss Provisions (Loans and Receivables) Loan loss provisions per ultimo December 2008 in m Run Rate IC result Change in GLLP Net-LLP Private customers 335-87 -43 205 Mittelstandsbank 575-251 -63 262 Central and Eastern Europe 145-35 80 190 Corporates & Markets 2,083 4 147 2,234 Commercial Real Estate 663-48 3 618 Others & consolidation 31-14 0 17 Group 3,832-431 124 3,526 Group: significant portfolio shifts in addition to a moderate decline. Private customers: increase largely due to adjustments in methodology and a significant decline in amounts received on claims written off. Mittelstandsbank: Significant rise of insolvencies and restructurings in 2009, and therefore also in net loan loss provisions. Central and Eastern Europe: significant year-on-year rise in net loan loss provisions, with Russia, Ukraine and Poland being affected in equal measure. Corporates & Markets: after the exceptionally high charges in 2008, we expect a decline of risk provisions by more than 50% although they will still be high in the LAF portfolio. CRE & Shipping: we expect more defaults and bulk risks; additionally, the negative effect on earnings from ship financing (incl. Schiffsbank) needs to be taken into account. 20
Overview Effects on Earnings Effects on earnings 2008 compared to 2007 in bn Provisions for LaR Loans Effects on earnings from defaults AfS/ trading book Sum of effects on earnings 2007 Total 0.5-0.1 0.4 0.7 1.3 2.0 2008 Total Gesamt 1.9 1.4 1.7 3.3 3.6 1.3 4.1 4.5 5.4 5.8 1.2 1.2 2.4 3.1 3.2 5.5 6.2 8.7 9.4 We expect risk provisions to be slightly below 2008 levels, despite large structural shifts at the New Commerzbank in 2009. In addition, the probability of bulk and event risks has increased in the current unstable and extremely volatile environment. In terms of impairment charges arising from available-for-sale holdings and defaults in the trading book, we currently assume that we reached the peak for the New Commerzbank in 2008. We are expecting a large reduction for this area in 2009 under our realistic-case scenario. Effects on revaluation reserve 0.8 0.4 1.2 3.1 5.5 1.5 8.7 4.6 In the revaluation reserve, charges against the New Commerzbank s capital base should be well below the 4.6bn total for 2008. 21
For more information, please contact Commerzbank s IR team: Jürgen Ackermann (Head of IR) P: +49 69 136 22338 M: juergen.ackermann@commerzbank.com Wennemar von Bodelschwingh P: +49 69 136 43611 M: wennemar.vonbodelschwingh@commerzbank.com Stefan Philippi P: +49 69 136 45231 M: stefan.philippi@commerzbank.com Sandra Büschken (Deputy Head of IR) P: +49 69 136 23617 M: sandra.bueschken@commerzbank.com Michael Klein P: +49 69 136 24522 M: michael.klein@commerzbank.com Ute Heiserer-Jäckel P: +49 69 136 41874 M: ute.heiserer-jaeckel@commerzbank.com Simone Nuxoll P: +49 69 136 45660 M: simone.nuxoll@commerzbank.com Karsten Swoboda P: +49 69 136 22339 M: karsten.swoboda@commerzbank.com www.ir.commerzbank.com
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 www.commerzbank.com/aktionaere/index.htm