With a consolidated balance-sheet total of more than €420bn, Commerzbank is Germany’s third-largest private-sector bank and one of Europe’s leading financial institutions. Its 33,000 employees, 7,400 of whom work outside Germany, look after almost 8 million customers. Apart from the parent bank, Commerzbank AG, the Group consists of numerous subsidiaries in Germany and abroad.
Commerzbank sees itself as an efficient provider of financial services for sophisticated private customers in Germany and also as a creative relationship bank for successful German Mittelstand firms, for major corporates and institutions in Europe, and for multinational companies throughout the world. Commerzbank intends to expand its market shares in these core target groups. Above all, it intends to become the number one address for Germany’s Mittelstand.
In regional terms, Commerzbank concentrates on Germany, where as an integrated provider of financial services it maintains a nationwide branch network for advising customers and distributing products. In corporate business, it also looks upon Western, Central and Eastern Europe as its core markets. In Asia and the USA, the bank is active in the leading commercial centres.

Commerzbank generated a record profit in 2006 and achieved the best results in its history: The consolidated surplus rose substantially by around 35% to EUR 1,597 million, EUR 352 million of which was contributed by the good fourth quarter. 

Return on equity after taxes continued to rise to 14.1% in 2006. After adjustments - taking into account restructuring expenses on the one hand and extraordinary income on the other - after-tax returns reached 11.2%. This figure not only surpassed the comparable figure for 2005 (9.9%), it also clearly exceeded 2006 target returns of at least 10%. The Mittelstand (SME), Corporates & Markets and Commercial Real Estate segments in particular contributed greatly to this excellent overall result. 

As can be expected, Chairman of the Board of Managing Directors Klaus-Peter Müller is satisfied with the (as yet uncertified) annual accounts: "Commerzbank is back: successful, healthy, alert and programmed for growth. What we are hearing again and again is that we - as Germany`s number two bank - are once again a respected and highly regarded place of business." 

Shareholders are expected to participate in the bank`s commercial success with dividends increased from EUR 0.50 to 0.75 per share. The Board of Managing Directors will make a proposal to this effect to the Supervisory Board. 

Solid net commission income and high trading result 

Last year's results were marked by a sharp increase in earnings to a total of EUR 8.7 billion, one quarter higher than the previous year. 

Of this, EUR 3.92 billion emanated from net interest income, which remained steady at its 2005 level (in a pro-forma comparison including Eurohypo) despite the difficult conditions presented by the flat yield curve. Loan-loss provisions came to a total of EUR 878 million, a figure which also includes a special risk provision of EUR 293 million for the harmonization of the risk models used by Commerzbank and Eurohypo. Without this one-time charge, risk provisions would have continued to decline by more than one fifth - a positive consequence not only of the strong economy but also of the cautious value adjustment policies implemented in the past few years. This year, the bank expects current risk provisions at the level of 2006 at the most (i.e. EUR 637 million on a pro-forma basis). 

A very positive development was seen in net commission income, in part due to lively private securities trading. Of all the revenue components, however, the greatest change was seen in the trading result, which shot up by a good 70% to reach a peak value of EUR 1.18 billion. The EUR 770 million in earnings derived from the investments and securities portfolio essentially came from the sale of shares previously held in the Korea Exchange Bank and Ferrari. 

On the other hand, operating expenses (in a pro-forma comparison) only increased slightly by 3%. This shows that, despite higher performance-related bonuses and an increase in the number of employees working in the Group to a total of nearly 36,000, Commerzbank still has its costs under control. 

On the bottom line, this leaves a good operating profit of EUR 2.63 billion for 2006. Correspondingly, the operative return on equity increased to 21.5%, while the unadjusted cost/income ratio improved to under 60%. Five years ago, this ratio would have been some 20 percentage points higher. 

As a first step, the remaining record consolidated surplus following the deduction of restructuring expenses, taxes and profits attributable to minority interests will be applied toward higher dividend payments. This translates into a total dividend payment of EUR 493 million, thus making it Commerzbank's largest distribution to shareholders ever apart from the special situation which arose in 2000. The remaining EUR 1,104 million will go into retained earnings. For 2006, Commerzbank shows earnings per share of EUR 2.43. 

Mittelstand, Corporates & Markets and Commercial Real Estate are the top performers 

Of the individual segments, Mittelstand was the greatest contributor, showing a profit of EUR 817 million, nearly one third of the bank's overall profit. The return on equity for this operating profit grew to an impressive 27%. An even sharper increase was seen in Corporates & Markets, where operating profit rose by nearly two thirds and the return on equity almost doubled to 26%. Another positive result was the performance in Commercial Real Estate, which improved by nearly 40% in a pro-forma comparison. 

In the Private and Business Customers segment, however, high restructuring costs and the special risk provision led to a loss despite the fact that ongoing business has been good. Asset Management was able to boost its results by a good 19% thanks to an increase in assets under management to a current total of EUR 112 billion. 

Facing the future with an offensive growth strategy 

Based on the figures presented and in light of another good start to the year, Commerzbank is confident about the future. Previously set at 11%, this year`s after-tax returns target has now been notched up to more than 12% and by 2010 at the latest, this figure should have reached a steady 15%. To make this happen, the bank intends to maintain a firm grip on its costs and further increase commission income's contribution to overall revenue. The bank also expects a boost from Germany's positive economic performance which, after having undergone drastic therapy, is currently in an upbeat mood both politically and economically. An offensive strategy will be implemented to make the most of these opportunities and the bank has set up special growth and efficiency programmes in all business areas to do just that.