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
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
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 19.60 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
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
Commerzbank s path to stability and growth Progressing: Stability and focused growth Restored: Corporate financial strength (2000-2004) Management changes implemented Costs cut rigidly Liquidity prudently managed Capital base strengthened Regained: Improved core business (2003-2005) 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
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
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) 2006 2007 2006 2006 2007 RoI in 2007: 12.4% 6 1. vs. IBES estimates for Commerzbank 2. including restructuring charges 3. excluding restructuring charges (assumption 150m)
Key financials of Commerzbank and Eurohypo (Jan-Sep 2005) Commerzbank incl. 31.84% EH Eurohypo 100% Proforma incl. cons. EH Commerzbank/ Eurohypo Customer loans (net) ( bn) 159 148 308 52% / 48% RWA ( bn) 146 83 (1) 227 (4) 64% / 36% Total revenues ( m) 5,069 1,117 6,094 (4) 82% / 18% Operating expenses ( m) 3,292 368 3,660 90% / 10% Operating Profit ( m) 1,251 544 1,703 (4) 70% / 30% Net income ( m) 832 337 1,077 (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
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 Q3 2003 2004 2005 Commerzbank/Eurohypo combined Commerzbank 8
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
Eurohypo: A top 10 player in Germany (Jan Sep 2005) Operating profit in m 5,515 1,703 1,634 1,296 1,251 643 544 517 477 328 (2) Deutsche Bank (1) CB + EH HVB (2) Dresdner Bank Commerzbank (3) DZ Bank Eurohypo Postbank Depfa Hypo Real Estate 10 1. Without our at-equity consolidated profit of Eurohypo ( 92m) 2. Adjusted for restructuring expenses 3. Jan-Jun 2005
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 0.1 31.7 28.0 23.5 23.4 21.9 18.9 60 127 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 24.8 24.3 23.2 15.5 12.6 8.5 7.4 6.7 6.3 3.7 3 1,3 53.0 148 60 80 100 123 95.6 Top 2 Top 8-10 1999 2004 Mortgage loans in bn Top 2 mortgage loans in bn Merger HRE Merger Eurohypo 11
The cycle has troughed Rents development p.a. 20% 10% 0% -10% -20% 99 00 01 02 03 04 05 06 07 08 09 Rental Growth Average (Large Cities, GER) Source: Morgan Stanley Research Office purchases in Germany (000 sqm) 225 248 Source: Atisreal 438 381 292 312 586 460 482 490 Düsseldorf Hamburg Berlin München Frankfurt 2003 2004 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
Eurohypo: Stable and profitable business Net interest income in m Risk provisions (1) in m before guarantees (3) 1,151 1,289 1,300 1,035 418 392 325 226 2002 2003 2004 Jan-Sep '05 2002 2003 2004 Jan-Sep '05 Operating profit pre LLP in m(before guarantees) (3) Return on equity before tax in % 980 832 956 770 7.6 6.5 11.4 13.0 (2) 2002 2003 2004 Jan-Sep '05 2002 2003 2004 Jan-Sep '05 1. 2002 HGB, as of 2003 IFRS 2. annualized 3. Before utilization risk umbrella with shareholders (Deutsche Bank, Dresdner Bank, Commerzbank) 13
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
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 2006 15
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 ~190.000 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 2008 16
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. 19.60 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 Q1 2006 17 1. Remaining free float 2 %
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
Higher profitability leads to Tier 1 build-up Planned evolution of Tier 1 ratio 6.5 7.0% > 6.5% > 6.3% 31/03/06e 31/12/06e 31/12/07e post closing (1) 1. Including interim profits for Q1 2006 19
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
Main benefits of Eurohypo transaction 1. 2. 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 21 1. vs. IBES estimates
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 Q1 2006 Acquisition of 2 nd tranche of Eurohypo Q1 2006 Closing 22
Appendix 23
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 www.eurohypo.com to access this information 24
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
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% 220.9 202.8 93.8 108.9 2 Hypo Real Estate 16.4% 17.5% 15.5% 0.7% 0.3% 151.4 133.1 63.8 69.3 3 AHBR 8.5% 6.7% 9.9% 9.6% 9.2% 79.2 68.6 24.5 44.1 4 DG HYP 5.7% 6.8% 4.8% 13.9% 12.0% 71.9 46.0 24.6 21.4 5 Essen Hyp 5.0% 2.0% 7.4% 8.1% 4.6% 78.4 40.3 7.2 33.1 6 Berlin- Hannoversche Hyp 3.5% 4.3% 2.8% 1.9% 1.4% 36.9 28.1 15.7 12.4 7 Deutsche Hypo 3.0% 2.4% 3.4% 3.8% 8.2% 35.9 24.0 8.8 15.2 8 Münchner Hyp 2.8% 3.1% 2.6% 4.6% 5.9% 32.9 23.0 11.4 11.6 Total VDH 811.6 364.3 447.3 Source: VDH 26
Eurohypo: Profitable business in all divisions (Jan-Sep 2005) Corporate Banking Germany Corporate Banking Int l Retail Public Sector Finance Group MM Q3 2005 Q3 2004 Q3 2005 Q3 2004 Q3 2005 Q3 2004 Q3 2005 Q3 2004 Q3 2005 Q3 2004 Net Interest Income 349 361 249 222 207 231 230 174 1,035 988 Loan Loss Provision (130) (172) 1 0 (72) (55) 0 0 (200) (214) Net Interest Income after Loan Loss Provision 219 189 250 222 135 176 230 174 835 774 Net Commission Income 50 21 100 57 (10) (7) (8) 0 111 45 Trading Profit 0 0 23 4 0 (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 168 83 261 192 39 52 118 130 544 432 27
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
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
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 144 2. Wachovia 58 3. JPMorgan 53 4. KeyBanc 13 5. 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 30 1. Number of deals 2. Eurohypo #1 by number of deals
For more information, please contact: Commerzbank Investor Relations Jürgen Ackermann Head of Investor Relations P: +49 69 136 22338 M: juergen.ackermann@commerzbank.com www.commerzbank.com/ir Sandra Büschken P: +49 69 136 23617 M: sandra.bueschken@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
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