New Deutsche Bank Investor Cerberus Doubles Down on German Lenders (11/15/17)

By Jenny Strasburg

U.S. private-equity firm Cerberus Capital Management LP on Wednesday disclosed a 3% stake in Deutsche Bank AG, deepening its bets on European banks and the German economy.

The investment, worth roughly EUR978 million ($1.2 billion) at Wednesday's closing share price, made Cerberus the bank's No. 4 shareholder. The roster is led by a Chinese conglomerate, members of the Qatari royal family and U.S. asset manager BlackRock Inc.

This summer, Cerberus disclosed a roughly 5% stake in Germany's No. 2 lender, Commerzbank AG. Cerberus manages more than $30 billion in assets.

The firm said Wednesday in a statement that Germany is a "highly attractive place to invest." It cited "attractive long-term opportunities in retail and corporate banking due to Germany's robust economy, high savings rate, and a number of other factors."

"We welcome every investor who believes in the value potential of the Deutsche Bank share," Deutsche Bank said in a statement.

Deutsche Bank shares rose on the news, climbing 1.9% for the day, to EUR15.76. The shares are up 2.4% this year, after a brutal 2016 hampered by questions about strategy, unsettled legal battles and the bank's capital position.

Earlier this year Deutsche Bank raised $8.5 billion in a share sale and refreshed its strategy, which now includes a multiyear process of combining its big German retail-banking operations.

There was no indication Wednesday that Cerberus has communicated with Deutsche Bank beyond formally notifying the bank of its share position, a person briefed on the communications said.

Still, Cerberus's recent arrival to Germany to amass a roughly $2 billion combined stake in its two biggest lenders will fuel speculation that the banks could talk about a potential merger -- if not now, then down the road -- analysts and investors said. Some said Cerberus can be patient, citing its 2006 purchase of Austrian retail bank Bawag PSK for about EUR3.2 billion.

Bawag raised EUR1.9 billion last month in Austria's biggest-ever initial public offering, which valued the company at EUR4.7 billion. Cerberus retains a significant stake.

Commerzbank, with advisers, has been evaluating its strategic options, people close to the bank say. After a 2008 bailout, Commerzbank remains around 15% government owned, and has long been the subject of merger speculation. Its executives have declined to comment on the speculation or on discussions with shareholders. A spokeswoman declined to comment Wednesday. The bank's shares rose 1.8% Wednesday, to EUR11.87.

Bankers say financial executives in general have warmed to the idea of potential big European bank mergers, both domestic and cross-border. Some bankers and finance executives say combining all or big portions of Deutsche Bank and Commerzbank would be too messy, unwieldy or politically unacceptable, though others say such a move can't be ruled out. Speculation about cross-border mergers, with German banks or otherwise, also has focused on French and Italian banks.

Executives of Commerzbank and Deutsche Bank held preliminary talks in August 2016 about a potential tie-up, but concluded it wasn't viable, The Wall Street Journal and others reported at the time, citing people familiar with the matter. Since then Deutsche Bank said it would integrate its big Postbank retail-banking business in Germany, after earlier planning to shed it.

News: comdirect sees itself on course in difficult waters

02.11.2017

The online bank comdirect has mastered a quarter characterized by low interest rates and quiet financial markets.

Earnings before taxes increased in the third quarter compared to the same period last year by 13 percent to 21.5 million euros, as the Commerzbank subsidiary announced on Thursday in Quickborn near Hamburg. The bottom line was 15.5 million euros left. On the trading platform Tradegate, the price was slightly higher than the previous day's Xetra close.

"In view of the difficult market environment, we have achieved a very decent result," said CEO Arno Walter. "We have a firm eye on the earnings target for 2017 of 85 million euros before taxes for the first half of the year". However, that is less than the bank had earned in the previous two years.

The entire industry is currently bogged down by low interest rates and quiet financial markets - when investors take less action, they lose money. Compared to comdirect bank, the costs have been increased. The management justified the increase in the first nine months with expenses for the integration of the acquired financial portal and online broker Onvista, a sales campaign and expenses for the tightened regulation.
comdirect is listed on the stock exchange and belongs to 82 per cent of Commerzbank, which presents its business figures this Thursday (9 November). By late summer, the investment company Petrus Advisers had joined the online bank and caused a stir. In an open letter to Commerzbank CEO Martin Zielke, Peter spoke of cost problems, a lack of growth strategy and questionable management compensation at comdirect. The Commerzbank had rejected the allegations. / Das / she / oca

http://www.finanzen.net/nachricht/aktien/commerzbank-tochter-comdirect-sieht-sich-in-schwierigem-fahrwasser-auf-kurs-5789263

CRZBY hits new 52-week high (10/25/17)

COMMERZBANK AG (CRZBY)
Last Trade [tick] 14.3500 [-]
Volume 65,837
Net Change 0.1100
Net Change % 0.77%
52 Week High 14.4000 on 10/25/2017
52 Week Low 6.5300 on 11/02/2016
Day High 14.4000
Day Low 14.2500

CRZBY hits new 52-week high (10/24/17)

COMMERZBANK AG (CRZBY)
Last Trade [tick] 14.2400 [-]
Volume 50,377
Net Change 0.8300
Net Change % 6.19%
52 Week High 14.3000 on 10/24/2017
52 Week Low 6.5300 on 11/02/2016
Day High 14.3000
Day Low 14.0400

Commerzbank hires advisers amid interest of European peers: sources (10/24/17)

MUNICH/FRANKFURT (Reuters) - Commerzbank is working with two investment banks to prepare itself for the event of a takeover bid from a European rival, several people close to the matter said.

Germany’s second-largest lender has hired Goldman Sachs and Rothschild to evaluate its options, including a possible defense scenario, they said. Commerzbank, Goldman Sachs and Rothschild all declined to comment.

Commerzbank has been restructuring ever since an ill-timed acquisition of Dresdner Bank for 9.8 billion euros ($11.53 billion) in 2008. The move forced Commerzbank to take a government bailout, slash jobs, close hundreds of retail branches and rein in its investment banking.

But its strong corporate lending business - Commerzbank specializes in financing Germany’s prized Mittelstand of medium-sized companies - makes it an attractive target for European peers eyeing a stronger footprint in Europe’s largest economy.

Italy’s UniCredit recently told Berlin it is interested in eventually merging with Commerzbank, people familiar with the matter told Reuters last month.

The bank has also caught the eye of other European peers. But the German government, which still holds a 15.6 percent stake, last month denied a report that it favored a merger of Commerzbank with France’s BNP Paribas.

Berlin has said it would be willing to eventually sell the stake but it needs to get at least 18 euros per share in any sale to avoid a loss on its investment.

Shares in Commerzbank, which has a market capitalization of 14.4 billion euros ($16.93 billion), were up 2.5 percent at 11.71 euros by 0800 GMT.

While a foreign peer may eventually succeed in buying the lender, a consolidation within Germany is also on the cards.

Top executives at Commerzbank and bellwether Deutsche Bank held unsuccessful talks on a combination last year, a person with knowledge of the matter said at the time.

Regardless of the outcome, private equity firm Cerberus stands to gain from any deal after recently becoming Commerzbank’s second-largest investor with a 5 percent stake.

Goldman Sachs had been in contact with Commerzbank for months, but the mandate was formalized after Cerberus’ investment in the summer, a person close to the matter said.

The bank mandates were earlier reported by the Financial Times.

https://www.reuters.com/article/us-commerzbank-m-a/commerzbank-hires-advisers-amid-interest-of-european-peers-sources-idUSKBN1CT0MG

CRZBY hits new 52-week high (10/18/17)

COMMERZBANK AG (CRZBY)
Last Trade [tick] 13.9600[+]
Net Change 0.1900
Net Change % 1.38%
52 Week High 13.9600 on 10/18/2017
52 Week Low 6.5000 on 10/19/2016
Day High 13.9600
Day Low 13.8360

CRZBY hits new 52-week high (5/04/17)

COMMERZBANK AG (CRZBY)
Last Trade [tick] 10.3300[+]
Volume 11,603
Net Change 0.3200
Net Change % 3.2%
52 Week High 10.3500 on 05/04/2017
52 Week Low 5.8300 on 08/03/2016
Day High 10.3500
Day Low 10.2000

CRZBY hits new 52-week high (4/25/17)

COMMERZBANK AG (CRZBY)
Last Trade [tick] 9.8700[+]
Volume 21,743
Net Change 0.0400
Net Change % 0.41%
52 Week High 9.9150 on 04/25/2017
52 Week Low 5.8300 on 08/03/2016
Day High 9.9150
Day Low 9.8300

CRZBY hits new 52-week high (4/24/17)

COMMERZBANK AG (CRZBY)
Last Trade [tick]
Volume 41,805
Net Change 0.9420
Net Change %10.6%
52 Week High 9.8500 on 04/24/2017
52 Week Low 5.8300 on 08/03/2016
Day High 9.8500
Day Low 9.7400

Forget about weak European bank earnings — Citi says it’s time to dive in (4/29/16)

By Sara Sjolin

A dramatic slump in first-quarter profits. A sharp underperformance in the stock markets. And an indisputable difficult business environment.

No, 2016 hasn’t been great for the European banking sector, but it’s time to perk up on the unloved industry and load up on shares while they are still a bargain, analysts at Citigroup say.

In a note dated Thursday, the analysts argued that the losses over the recent year — the Stoxx Europe 600 banks index is down 29% over the past 12 months — make it a solid entry point into the sector.

“The recent derating provides a good cushion for disappointment at a time when various macro drivers should provide a more positive support for the sector, i.e., rising oil prices/CPI, narrowing credit spreads, stabilizing GDP,” the analysts wrote in the note.

“We see the case for moving more positive on European banks and move to overweight in our European sector strategy,” they added.

Of course, there have been many false dawns for the banks over the past few years. In 2009 and 2012-2013, sharp relief rallies occurred after periods of serious concerns about the global economy and the future of the eurozone. But those rebounds “appear insignificant” when you look at the consistent underperformance over the last decade, Citi said.

Since 2003, the segment has been the worst performing sector in Europe, with half of all the region’s banks underperforming the market by at least 50%. This has been because of a flagging European and global economy, building of capital buffers, deleveraging and dealing with a raft of new regulations postcrisis.

Then came the brave new world of negative interest rates, which has been criticized for squeezing net interest margins and eroding bank profits. The first-quarter earnings season is partly a testament to that, with major banks reporting significant declines in profit. At Deutsche Bank AG for example, net income sank 58% in the first three months of the year, while earnings at Spanish lender BBVA tumbled 54%.

“The recent underperformance of European Banks has been sharp. The sector’s derating has been aggressive. The sector is back toward its post-1980 lows on price/book,” Citi explained.

But the U.S. bank is more optimistic on the future for its European peers when looking into the rest of 2016 and to 2017 and 2018. Rising oil prices and receding fears of a global recession play a major part in this, and so do signs of rising core inflation in the U.S. and the U.K.

Additionally, they are more upbeat on the earnings outlook and see an almost 10% annual growth rate in profits for 2017-2018. Among banks that are set to bring about the biggest upside, but with the greatest protection against risks, Citi pointed to Lloyds Banking Group PLC, BNP Paribas SA, Danske Bank AS, KBC Group NV, Banco de Sabadell and Commerzbank AG.

There is a major caveat to Citi’s positive outlook on Europe’s banking sector, though: The June 23 Brexit referendum in the U.K. on whether the country should leave the EU.

“In the near-term a vote for the U.K. to leave the EU in late June would likely be disruptive for banks across the region and especially in the U.K., although Citi’s base case remains for no Brexit,” the analysts said.

http://www.marketwatch.com/story/forget-about-weak-european-bank-earnings----citi-says-its-time-to-dive-in-2016-04-29

Commerzbank Sues Banks in U.S. Over Mortgage-Backed Securities Losses (12/28/15)

Claims banks failed to properly monitor losses on securities for which they acted as trustees

By Madeleine Nissen and Ulrike Dauer

German lender Commerzbank AG is suing four banks in the U.S. in an attempt to hold the banks accountable for almost $2 billion in losses related to mortgage-backed securities.

According to court documents viewed by The Wall Street Journal, the German bank claims that the four banks— Deutsche Bank AG ’s U.S. unit Deutsche Bank National Trust Co., Bank of New York Mellon Corp. Wells Fargo N.A. and HSBC Bank USA N.A.—failed to properly monitor losses on residential mortgage-backed securities for which they acted as trustees on behalf of Commerzbank.

In each of the four lawsuits, Commerzbank accuses the bank in question of breaching “contractual and fiduciary duties.”

Commerzbank bought these securities between 2005 and 2007; in the subsequent mortgage debt crisis, the investments lost virtually their entire value. Commerzbank is making a last attempt to secure the funds or some of the funds before the claims lapse.

The overall amount Commerzbank is trying to recoup from the four banks is almost $1.9 billion. Of this, Commerzbank claims it lost some $640 million when using Deutsche Bank National Trust as trustee for some of the securities. It pegs an even higher loss of $750 million incurred for securities entrusted to BNY Mellon. Commerzbank also claims $290 million from Wells Fargo and $204 million from HSBC Bank USA.

The four lawsuits were filed on Dec. 23 and Dec 24 in the U.S. District Court for the Southern District of New York.

A spokesman for Deutsche Bank declined to comment on the matter. Spokespeople for BNY Mellon, Wells Fargo and HSBC weren’t immediately available to comment.

For Deutsche Bank, Commerzbank’s crosstown neighbor in Frankfurt, Germany, the lawsuit comes at a bad time, as it tries to reduce number of legal disputes it is currently involved in—currently around 7,000.

The cases filed in the U.S. District Court, Southern District of New York, are Commerzbank AG v. The Bank of New York Mellon, No. 15-10029; Commerzbank AG v. Deutsche Bank National Trust Company, No. 15-10031; Commerzbank AG v. Wells Fargo Bank N.A., No. 15-10033; and Commerzbank AG v. HSBC Bank USA, National Association, No. 15-10032.

http://www.wsj.com/articles/commerzbank-sues-banks-in-u-s-over-mortgage-backed-securities-losses-1451314571

European Retail and Real Estate Stocks Headed Higher (9/05/15)

Europe must still cope with China and deflation. But certain sectors still look like opportunities.

By Digby Larner

European investors received a much-needed shot in the arm last week when the European Central Bank hinted it could expand its quantitative-easing program to help combat pressure on inflation from weak commodities prices and China’s economic woes.

The Stoxx Europe 600 index closed more than 2.3% higher on Thursday after ECB President Mario Draghi stressed the central bank’s “willingness and ability to act if warranted.”

Stocks around the world have taken a battering lately, as oil prices resumed their downward path, and China, a key export market for the euro zone, continued to push out disappointing economic data. Following Thursday’s gains, the Stoxx index had still tumbled by almost 12% from the previous month.

The problems afflicting markets have upset the ECB’s efforts to lift inflation, dampening the positive impact of its 60 billion euros ($67.44 billion) a month bond-buying program launched earlier this year. As a result, its initial signs of success turned out to be short-lived.

The euro dropped to about $1.05 when QE was launched in March, but more recently crept back to around $1.12 ahead of last week’s ECB announcement.

At Thursday’s meeting, the ECB reduced its inflation forecast for this year to 0.1% from its previous figure of 0.3%, which itself was modest relative to its medium-term target of just under 2%. In August, euro-zone inflation was only 0.2% on the year. The ECB also lowered its expectations for next year to 1.1% from 1.5%, and for 2017, to 1.7% from 1.8%.

Some adjustment had been widely expected following comments from the central bank’s Chief Economist Peter Praet a week earlier, who warned the risk of Europe suffering weak inflation in the longer term had increased.

Bank of America Merrill Lynch’s Europe economist Gilles Moec had expected minor tweaking to the ECB’s monetary policy, with the possibility of a more substantial move further out. “In the medium run, we believe the negative risk to consumer prices from the China-related turmoil matters more than the adverse shock on growth,” he says.

Hopes that China’s problems weren’t as deep-rooted as some feared were shaken on Tuesday when the country published weaker-than-expected manufacturing data.

Apart from the likely positive impact on European stocks from more extensive monetary intervention, investors are buoyed by the prospect that ongoing economic weakness will continue to keep a lid on interest rates. Janus Capital reckons China’s woes and low rates will be especially helpful for Europe’s retailers and property businesses. “China’s weakness to some extent is a boon to consumers, with lower oil and gasoline prices, lower prices on imported goods such as apparel, and lower raw-material prices overall. Retailers can do well if positioned to take advantage of healthier and savvier consumers,” says Janus European Equity Strategy fund portfolio manager Wahid Chammas.

LOW INTEREST RATES, in particular, should be good for European real estate businesses, he says. “The property market is firming throughout Europe and looks especially attractive in Germany,” he says, as lower rates keep prices high and provide cheap financing for acquisitions.

He says Germany has one of the fastest growth rates in household formation, as people continue migrating from the countryside to cities and as the number of working immigrants increases. “The German housing market is one of the lowest priced when considering their [gross domestic product] per capita, their average wage rate versus house prices, and their low interest rates,” he says.

Vonovia (ticker: VNA.Germany), formerly Deutsche Annington Immobilien, Germany’s largest residential real estate player, last month reported that its funds from operations more than doubled in the first half of the year to €264.3 million from €130.3 million a year earlier. JPMorgan Cazenove’s European property analyst, Tim Leckie, described the figures as “positive” and in line with the bank’s upbeat view of the company.

He has the stock at Overweight with a €32.50 price target. It closed on Friday at €29.57.

Among retailers, says Chammas, many apparel and food “discounters” in the United Kingdom have generated strong growth that should go further. “Online retailers continue to see positive momentum, and it is another area that we expect positive growth from,” he says.

RBC Capital Markets analyst Richard Chamberlain says a challenging summer for European apparel retailers is likely to give way to a stronger fall and winter period. Among others, he favors undervalued British stocks, such as Debenhams (DEB.UK). Last week, he upgraded the company to Outperform with a 100-pence ($1.53) price target. He expects Debenhams to post its first full-year pretax profit in four years in October, something he says isn’t currently factored into the share price. The stock closed Friday at 74 pence.

http://www.barrons.com/articles/european-retail-and-real-estate-stocks-headed-higher-1441434108

Commerzbank to Start Operations in Brazil (9/01/16)

German bank to launch its Brazilian unit in the first quarter of 2016

SÃO PAULO—Germany’s Commerzbank AG received authorization from the Brazil’s central bank to operate in Latin America’s largest nation, where it will focus in financial services for small and medium-size German and European companies, the bank said in a statement.

Commerzbank said it expects to launch its operations in the first quarter of 2016, and its unit in Brazil will be headed by Harald Lipkau, who worked for Commerzbank in Asia. The bank’s unit will be based in São Paulo and it will have a total of 50 employees.

“Even though the growth momentum in Brazil has slowed recently, the country still remains the seventh-largest economy in the world and is by far the most important economy in Latin America and thus a major economic partner for Germany and Europe,” said Bernd Laber, Divisional Board Member International of the Corporate Banking segment known as Mittelstandsbank.

Brazil’s gross domestic product contracted 1.9% in the second quarter from the previous three months in seasonally adjusted terms, the Brazilian Institute of Geography and Statistics, or IBGE, said last week. In a major revision, the IBGE downgraded its GDP figure for the first quarter, saying output shrank 0.7% instead of the preliminary estimate of a 0.2% contraction.

”Even in times of volatile markets, it is important for our Mittelstandsbank, the market leader in Germany for SMEs, to have a local presence to support our customers outside Germany,” added Mr. Laber.

http://www.wsj.com/articles/commerzbank-to-start-operations-in-brazil-1441104613

Commerzbank profit rise helps it on road to financial redemption (8/03/15)

http://www.ft.com/intl/cms/s/0/04cf298a-39a3-11e5-bbd1-b37bc06f590c.html#axzz3hkpUIYT0

Commerzbank Profit Up on Revenue, Taxes (8/03/15)

German bank’s performance owed largely to midsize corporates and retail customers

By Eyk Henning

FRANKFURT— Commerzbank AG said Monday that second-quarter net profit more than doubled as the German bank increased revenue and paid less tax.

Net profit for the period was €280 million ($307.23 million) compared with €100 million a year earlier and against analysts’ forecasts of €245 million.

The upbeat performance was owed largely to the strength of its business with midsize corporates and retail customers. Germany’s second-largest bank by market value said that helped boost revenue by more than 9% to €2.42 billion compared with €2.24 billion a year earlier and against €2.4 billion expected by analysts.

“The substantially improved operating profit in the first six month of the year is clear testimony to the successful turnaround achieved by Commerzbank,” Mr. Blessing said. He reiterated that the bank aims to pay a dividend for 2015 next year, the first since 2008. It aims to pay out 40% of its net profits in dividends to shareholders, finance chief Stephan Engels said. The news helped lift Commerzbank by around 2%.

The earnings gains were made despite a roughly €100 million hit taken by the bank on the sale of unwanted commercial real estate and shipping portfolios worth more than €3 billion.

But, as with its larger domestic rival, Deutsche Bank AG , Commerzbank’s net profit was also propelled by a dwindling tax ratio, which fell to 22% from around 50% a year earlier. “The tax rate should float around 25% for the full year,” Mr. Engels said.

The partially state-owned lender is trying to boost growth after repaying most of the €16 billion in state aid it received at the height of the financial crisis in 2008. Chief executive Martin Blessing, one of the few European bank CEOs to have remained in place since the crisis, is refocusing the lender as an adviser to midsize companies and as a retail bank, alongside a lean investment bank and its Polish unit, mBank. Operating profit in these units rose to €641 million from €442 million.

While the bank has made progress in adapting to tougher capital rules, it still needs to work on its profitability, said Equinet analyst Philipp Hassler. Commerzbank’s overall net return on equity stood at around 4% in the second quarter, its equity capital ratio, a measure how well it can absorb losses, rose to 10.5%.

Mr. Engels said the bank is continuously working on profitability by cutting costs, but said it didn’t plan a broader cost-cutting program. In contrast to Commerzbank, domestic rivals including Deutsche Bank AG and Italian bank UniCredit SpA’s German unit HVB, have cost-cutting programs in place and have or are working on shedding retail branches.

http://www.wsj.com/articles/commerzbank-profit-up-on-revenue-taxes-1438580348

Oaktree, JPMorgan Buy $3.2 Billion of Loans From Commerzbank (7/01/15)

Commerzbank AG sold 2.9 billion euros ($3.2 billion) of commercial real estate loans to Oaktree Capital Group LLC and JPMorgan Chase & Co., making headway with its plan to reduce riskier assets.

Germany’s second-biggest bank ceded 700 million euros of distressed German debt to Oaktree, a U.S.-based alternative investment firm, the Frankfurt-based lender said in a statement Wednesday. It also sold 2.2 billion euros of mixed non-performing and performing loans backed by European assets to a group controlled by JPMorgan and Lone Star Funds. It sold the assets at a 3 percent discount, it said.

While the bank expects the sale to reduce earnings by 65 million euros in the second quarter and 20 million euros in the third quarter, respectively, it will release 105 million euros of capital, bolstering the bank’s core capital. German lenders are cutting exposure to riskier assets as they shore up their balance sheets before global rules designed to prevent a rerun of the 2008 financial crisis, known as Basel III, take full effect.

“We are significantly reducing both risk and complexity,” said Sascha Klaus, divisional board member for non-core commercial real estate assets. “In this respect we are taking advantage of market opportunities, in order to achieve best possible results through competitive bidding procedures.”

Commerzbank’s exposure at default in shipping and commercial real estate stood at 30 billion euros as of March 31, it said in the statement. The sale reduces the volume of non-performing commercial real estate loans by 1.3 billion euros, down from 3 billion euros at the end of March, it said.

http://www.bloomberg.com/news/articles/2015-07-01/oaktree-jpmorgan-buy-3-2-billion-of-loans-from-commerzbank

Commerzbank may resume dividend for 2015 (4/30/15)

FRANKFURT--Germany's partially state-owned lender Commerzbank AG (CBK.XE) Thursday said it is likely to resume dividend payments for 2015, eight years after its last payout, but warned that financial targets have become even more ambitious.

"We plan to pay a dividend for 2015" [next year], said Chief Executive Martin Blessing, cautioning that it remained to be seen whether the bank's profits will suffice.

Mr. Blessing is under pressure from shareholders to return a profit to them after the country's second-largest lender launched 10 capital increases since the outbreak of the financial crisis in 2008. In 2012, it indicated it might do so, but eventually refrained.

Commerzbank is to seek shareholders approval Thursday to pay bonuses for executives and some managers that exceed base salaries, so delivering on financial targets is key. To avoid excessive bonus payments and better-link compensation to long-term performance, investors need to approve them the payouts.

Mr. Blessing on Thursday reiterated that the bank will find it harder to reach its financial targets for 2016, saying conditions are harsher now than two years ago.

"We will have to undertake even greater endeavors to attain our targets for 2016," Mr. Blessing said, adding the lender is aiming for greater efficiency.

The bank's 2016 targets are more ambitious than initially expected because of new regulatory costs and a tough economic environment. "We have to fight harder now...but we are sticking to our targets," he said.

Write to Isabel Gomez and Eyk Henning at Isabel.Gomez@wsj.com and Eyk.Henning@wsj.com

http://www.marketwatch.com/story/commerzbank-may-resume-dividend-for-2015-2015-04-30

Commerzbank profit nearly doubles; to issue new shares (4/28/15)

FRANKFURT — Commerzbank AG will issue new shares worth around 1.4 billion euros to strengthen its capital base after improved first-quarter results boosted by higher revenues.

In an unexpected release on Monday after markets closed, the country’s second-largest lender said it will sell as many as 113.85 million new shares to institutional investors to improve its capital adequacy. The bank is partially owned by the German government.

The measure is set to increase Commerzbank’s leverage ratio, which compares loss-absorbing capital to total assets, to 3.9% from 3.4% and its equity capital ratio to above 10% from 9.5%. Investors reacted coolly, with Commerzbank shares falling 3.6% in the after-market trading session.

Commerzbank’s larger domestic rival, Deutsche Bank, in a separate statement on Monday revealed that it plans to increase its leverage ratio to more than 5% in the expectation of tighter banking rules.

The Commerzbank move was a bit of a surprise. Deutsche Bank analysts had said in a recent research note that they didn’t expect Commerzbank to carry out a capital increase, which they considered to be a downside risk for the bank’s shares.

Commerzbank boosted its net profit to €366 million in the first quarter, up from €200 million the same quarter a year earlier and above a €227 million consensus of analysts polled by Commerzbank.

At the same time, the lender boosted revenues by €522 million to €2.8 billion, propelled by an uptick in capital market transactions, positive valuation effects and unspecified one-time gains. The results were also helped by lower loan loss provisions, which fell by one-third to €158 million.

http://www.marketwatch.com/story/commerzbank-profit-nearly-doubles-to-issue-new-shares-2015-04-28

Commerzbank Said Poised for U.S. Settlement to End Probes (3/09/15)

By Keri Geiger and Greg Farrell

(Bloomberg) -- Commerzbank AG is poised to put a half-decade of legal woes behind it as it prepares to settle parallel U.S. investigations into sanctions violations and allegations about the bank’s role in one of Japan’s biggest accounting scandals, according to two people familiar with the matter.

The bank is prepared to enter this week into an agreement with the Justice Department to avoid at least three criminal prosecutions, one of the people said. It will pay as much as $1.45 billion in settlements with nearly a half-dozen government agencies, which also include the Manhattan District Attorney, the Federal Reserve and the U.S. Treasury Department.

New York’s Department of Financial Services will require the bank, Germany’s second-largest lender, to install a monitor and will seek senior executives’ resignations, said the two people familiar with the investigation, who asked not to be named because the discussions aren’t public.

Duncan King, a company spokesman, and spokesmen for the government agencies, all declined to comment.

The settlement is notable for combining investigations of two distinct areas into one deferred-prosecution agreement, a deal that puts pressure on the bank to overhaul its compliance and regulatory functions.

Blacklisted Countries

In one of the probes, officials have investigated whether the bank violated U.S. sanctions laws by doing business with countries blacklisted by the Treasury Department, including Iran. Commerzbank is among more than a dozen banks that have been under scrutiny for sanctions violations over the past decade.

In the second case, it had been scrutinized for failing to report suspicious activities at Olympus Corp., whose $1.7 billion accounting scandal shook Japan in 2011.

Commerzbank last year bolstered the money it reserves for legal issues. Record low interest rates and faltering economic growth in Europe have made it harder for the company to hit its targets, Chief Executive Officer Martin Blessing has said.

Germany’s federal government still has a 17 percent stake in the bank after bailing it out in 2009 in the wake of the financial crisis.

The U.S. Attorney for the District of Columbia is expected to file Commerzbank’s deferred-prosecution agreement as early as Tuesday, according to the people. The firm will pay at least a combined $1.45 billion to the Justice Department, the Federal Reserve, the Manhattan District Attorney’s office and New York’s DFS.

Accounting Fraud

The firm had been under investigation by the Manhattan District Attorney for years over potential sanctions violations when federal prosecutors in Manhattan opened a separate probe over violations related to the $1.7 billion accounting fraud at the Japanese maker of cameras and endoscopes.

In 2012 three former Olympus executives including ex-Chairman Tsuyoshi Kikukawa pleaded guilty for covering up losses for 13 years starting in the 1990s. A former Commerzbank banker admitted in court in 2013 to aiding the conspiracy. He has cooperated with the government’s probe in hopes of leniency.

Of the total settlement, $610 million will go to New York’s DFS, of which $300 million for money-laundering violations and $310 million for sanctions breaches, one of the people said. An additional $300 million will go to the U.S. Attorney for the Southern District of New York for money laundering violations, $170 million to the Justice Department for sanctions violations and $170 million to the District Attorney of New York, also for sanctions violations, the person said.

Finally, $200 million will go to the Federal Reserve and the penalty due the Office of Foreign Assets Control, which is part of the Treasury Department, will be satisfied by the bank’s payment to the Justice Department, the person said.

Big European financial firms including HSBC Holdings Plc, Deutsche Bank AG and Barclays Plc have consented to monitors in accords with U.S. authorities in recent years. In December, U.S. prosecutors said Standard Chartered Bank Plc’s oversight from a 2012 settlement would be extended for three years and include an independent monitor for its sanctions-compliance program after investigators got new information on how the firm handled certain international transactions.

http://www.bloomberg.com/news/articles/2015-03-09/commerzbank-said-poised-for-u-s-settlement-to-end-probes

Commerzbank tells investors to brace for more legal charges (2/12/15)

By Thomas Atkins and Arno Schuetze

(Reuters) - Commerzbank AG (CBKG.DE) has told investors to brace for higher legal charges after adding close to half a billion euros to its legal reserves in 2014, as negotiations with U.S. authorities over alleged rules breaches near completion.

Commerzbank said on Thursday it had put aside 1.4 billion euros ($1.6 billion) in total for potential costs, related in part to negotiations with U.S. authorities over alleged sanctions violations stemming from transactions with Iran, and accounting fraud at Japan's Olympus Corp (7733.T).

The lender had been primed to settle with U.S. regulators and prosecutors by late 2014 and rising legal costs threaten to stall its recovery plan.

The bank performed well on an operating level, said Helmut Hipper, senior portfolio manager at Union Investment. "But costs for legal issues are going to remain burdensome for a while," he added.

"We should see a settlement sooner rather than later," Chief Financial Officer Stephan Engels said after the bank posted a higher-than-expected fourth-quarter net profit of 77 million euros ($87 million), due in part to smaller loan-loss provisions.

Engels said some legal charges could still be booked in the 2014 accounts on top of the 484 million euros already added to legal reserves for the year.

Chief Executive Martin Blessing predicted a difficult year ahead due to low interest rates and slow growth in some key businesses, but he promised a more aggressive approach to increase profit in 2015.

Commerzbank, a household name which finances more than a third of Germany's exports, is more than half way through a four-year recovery plan. Blessing has cut costs, shrunk the bank's balance sheet and plans to reduce headcount by around 5,200.

In 2014, the bank's return on equity rose to 7.3 percent in its core bank excluding a portfolio of unwanted investments being wound down, still short of its goal of 10 percent ROE by 2016.

But in a sign the revamp remains on track, the bank's troubled asset portfolio or internal "bad bank" shrank to 84 billion euros from 88 billion at end September.

The unit contains investments stemming from an expansion drive that backfired, requiring the German government to spend around 18 billion euros on a bailout in the financial crisis.

Analysts polled by Reuters had on average expected a quarterly net profit of 58.5 million euros.

Shares hovered near unchanged in midday trading.

The bank's capital ratio calculated in the most stringent form of new bank rules weakened slightly to 9.5 percent at end December compared with 9.6 percent three months before.

http://www.reuters.com/article/2015/02/12/us-commerzbank-results-idUSKBN0LG0DT20150212

Commerzbank says prepared for Grexit but has little exposure (2/12/15)

Feb 12 (Reuters) - Commerzbank has contingency plans in place should Greece leave the euro currency zone but the bank has very little exposure of any kind to Greece, the bank's chief executive Martin Blessing said on Thursday.

"I'm not so worried about this issue," he said at a media briefing where the bank unveiled its 2014 results.

Separately, Blessing said Commerzbank hoped to achieve a dividend payout ratio of 40 percent eventually and that the bank would arrive at that ratio step by step. Commerzbank will not pay a dividend for 2014, he said.

http://www.reuters.com/article/2015/02/12/commerzbank-results-greece-idUSL5N0VM3A220150212

Commerzbank recovery takes hold (2/12/15)

Germany's second largest lender has surprised analysts by logging a higher-than-expected profit in 2014. Commerzbank is half-way through a post-crisis recovery plan, but still struggling amid challenging conditions.

In 2014, Commerzbank earned seven times more than in the previous year, with income boosted by lower restructuring costs and a better operating performance.

Germany's second largest lender published its full-year report on Thursday showing bottom-line net profit rising to 602 million euros ($682 million) from a meager 81 million euros a year earlier.

In the fourth quarter alone, net profit jumped by 20 percent to 77 million euros, according to the bank. Underlying or operating profit increased by 40 percent to 1.022 billion euros in the whole of 2014, while full-year revenues slipped by 2.0 percent to 9.092 billion euros.

"We have increased operating profit ... and significantly improved our capital base through our own efforts," said Chief Executive Martin Blessing. "In a challenging environment we have posted further growth, have made more loans and increased market share," he added

Better prospects, but no dividend

Commerzbank, which received an 18 billion euro ($23 billion) government bailout in 2009, has sold underperforming assets and slashed its balance sheet. Its retail banking business won over 532,000 new clients last year under efforts to increase the segment's operating profit to 500 million euros by the end of 2016.

Moreover, Commerzbank was able to reduce its bad-bank liabilities by 32 billion euros, down 28 percent, as it was able to sell underperforming mortgages and real estate loans to the tune of 20 billion euros.

But the lender's target of reaching a 10 percent return on equity (ROE) - a key measure of a bank's profitability - by 2016, still appears out of reach. In 2014, ROE was 7.3 percent.

Looking ahead, CEO Blessing said the market environment was "likely to remain challenging in 2015." Nevertheless, Commerzbank intended to bring about a further increase in business volume and in revenues from its core banking activities. Operating expenses were set to remain stable at approximately 7.0 billion euros.

Blessing also announced that Commerzbank would not pay a dividend for 2014, making 2007 the last year in which the bank shared profits with investors.

http://www.dw.de/commerzbank-recovery-takes-hold/a-18250951

Commerzbank climbs on ECB stress test pass (10/27/14)

Commerzbank shares have climbed as much as 9.5 per cent in initial trading after passing the European Central Bank's stress tests.

The results of the ECB's far-ranging probe into the health of eurozone banks were publicised over the weekend.

While 25 smaller banks failed the stress test, Commerzbank - one of Germany's biggest banks - passed comfortably, with a core capital ratio of 8 per cent even in the adverse scenario, compared to the 5.5 per cent hurdle.

The test only ran to the end of last year, and in a statement Commerzbank said it had further improved its capital ratio since then.

Martin Blessing, the German lender's chief executive, said:

The good result of the comprehensive assessment by the ECB is testimony to the successful reorganisation of Commerzbank in the past years and to the strength of our client-centric business model. In this respect the stress test has clearly confirmed the stability and stress resilience of the bank. The strategic orientation is correct; the implementation of the measures from our agenda through to 2016 is proceeding successfully and to schedule.

http://www.ft.com/intl/fastft/226502/commerzbank-climbs-on-ecb-stress-test-pass

Commerzbank Jumps After Passing ECB’s Asset Review, Stress Tests (10/27/14)

By Shane Strowmatt

Shares in Commerzbank AG (CBK), Germany’s second-largest lender, gained the most in nearly a year in initial trading after passing the European Central Bank’s stress test and asset quality review.

Commerzbank rose as much as 9.5 percent, the biggest intraday increase since Nov. 7, 2013, and traded up 4.8 percent at 12.34 euros at 9:21 a.m. in Frankfurt. The benchmark Bloomberg Europe Banks and Financial Services Index was 0.4 percent higher. Commerzbank shares have more than doubled from a record low of 5.56 euros during the second half of 2013.

Commerzbank shares are among the European banks that “should react most positively as the level of valuation largely reflected risk of failure,” analysts at Exane BNP Paribas, including Jag Yogarajah, said in a note yesterday.

The lender passed the ECB’s asset review with a Tier 1 capital ratio of 10.84 percent and emerged from the most onerous stress test with 7.96 percent. A minimum CET1 of 8 percent and 5.5 percent was needed respectively.

http://www.bloomberg.com/news/2014-10-27/commerzbank-jumps-after-passing-ecb-s-asset-review-stress-tests.html

Commerzbank Second-Quarter Profit Rises as Bad Assets Cut (8/07/14)

By Shane Strowmatt

Commerzbank AG (CBK), Germany’s second-biggest bank, said second-quarter profit more than doubled as the bank shed unwanted assets.

Net income rose to 100 million euros ($134 million) from 40 million euros a year earlier, the Frankfurt-based company said in a statement today. The average of 12 analyst estimates compiled by Bloomberg was for a 127 million-euro profit.

Commerzbank is expanding lending to German consumers and companies while winding down soured shipping and real estate assets as part of an 18.2 billion-euro bailout. Commerzbank’s finances are under scrutiny by the European Central Bank which is reviewing balance sheets of the region’s biggest banks and conducting stress tests before taking over as their supervisor in November.

“They’ve made progress on the cost side, but it’s still a difficult environment on the income side,” Christian Hamann, an analyst at Hamburger Sparkasse, said by telephone yesterday. “The low interest rates are leading investors to buy riskier portfolios, which pushes along the sale of noncore assets, even if it’s bad for the income side.”

Operating profit was 257 million euros, up from 74 million euros in the second quarter of last year. The average estimate of 11 analysts was for 221 million euros. Provisions for risky loans decreased to 257 million euros from 537 million euros a year earlier.

Commerzbank shares dropped 0.7 percent to 10.41 euros in Frankfurt trading yesterday, valuing the company at 11.8 billion euros. The shares are down 11 percent this year, while the benchmark Bloomberg Europe Banks and Financial Services Index fell 3.5 percent in the same period.

Commerzbank said it will cut assets at its noncore unit, where it bundles public and commercial real estate, ship financing and public debt set to be sold, faster than previously expected. Commerzbank previously expected to reduce noncore assets to 75 billion euros by the end of 2016.

Asset Disposals
In June, Commerzbank agreed to sell 5.1 billion euros of commercial real-estate loans in Spain and Japan and non-performing loans in Portugal, including 1.4 billion euros of loans that the bank classified as non-performing. The sale will drop risk-weighted assets by 3.2 billion euros, Commerzbank said at the time.

“A lot of the assets they’ve sold were in the higher-risk block of commercial real estate, so that’s quite encouraging,” Karl Morris, an analyst with Keefe, Bruyette & Woods, said by telephone Aug. 5. Morris has an underperform rating on the stock with a target price of 11.30 euros.

The common equity Tier 1 ratio was 9.4 percent, up from 9 percent at the end of the first quarter.

http://www.bloomberg.com/news/2014-08-07/commerzbank-second-quarter-profit-rises-as-bad-assets-cut.html

German Unemployment Drops for First Time in Three Months (7/31/14)

By Stefan Riecher

German unemployment fell for the first time in three months in a sign that Europe’s largest economy is gathering pace after a second-quarter slowdown.

The number of people out of work dropped a seasonally adjusted 12,000 to 2.9 million in July, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 5,000, according to the median of 31 estimates in a Bloomberg News survey. The adjusted jobless rate was unchanged at 6.7 percent, the lowest level in more than two decades.

Germany has led the euro area’s recovery and a survey by GfK SE shows that consumer confidence in August will be the strongest since 2006. The Bundesbank predicts that while the nation’s economic growth may have stagnated in the three months through June, it will pick up again this quarter.

“There’s no need to be concerned about the German economy or its labor market,” said Andreas Moeller, an economist at WGZ Bank in Dusseldorf. “Germany is still outperforming most of Europe and it’s competitive even if wages were to increase a bit.”

Bundesbank President Jens Weidmann said this week that signs of labor shortages are increasing and that there’s “practically full employment” in a range of industries. Wages nationally could rise by around 3 percent, he told Frankfurter Allgemeine Zeitung.

Porsche, Osram

The tight labor market may limit the scope for employment gains. Osram AG (OSR), the world’s second-biggest lighting company, said this week it will cut an additional 1,700 jobs in Germany and 6,100 elsewhere to safeguard earnings. Porsche AG, the sports-car maker which is part of Volkswagen AG (VOW), says its hiring of about 1,000 employees annually over the next five years will be mostly outside its home country.

The number of people out of work fell by 5,000 in western Germany and 7,000 in the east, today’s report showed.

The German economy expanded 0.8 percent in the first three months of 2014. That’s twice as fast as the previous quarter and four times as fast as the euro area as a whole.

The jobless rate in the 18-nation currency bloc probably held at 11.6 percent in June and inflation remained at 0.5 percent in July, according to separate Bloomberg surveys before figures from the European Union’s statistics office today. The reports are scheduled to be published at 11 a.m. in Luxembourg.

European Central Bank President Mario Draghi last month unveiled a range of measures including targeted long-term loans for banks and a negative deposit rate to fight low inflation and boost growth in the region. He said in April that his “biggest fear” is a stagnation that leads to high unemployment becoming structural.

http://www.bloomberg.com/news/2014-07-31/german-unemployment-drops-for-first-time-in-three-months.html

SocGen, Santander each mull tie-up with Germany's Commerzbank - report (6/05/14)

FRANKFURT (Reuters) - France's Societe Generale (SOGN.PA) and Spain's Santander (SAN.MC) are each mulling a tie-up with Germany's second-largest lender Commerzbank (CBKG.DE), German magazine Bilanz reported on Thursday.

A delegation from Societe Generale recently met with representatives from the German government to talk about Berlin's 17 percent stake in Commerzbank, the report said, without specifying its sources.

Commerzbank, which was bailed out by the government in the financial crisis and has seen its share price plunge more than 90 percent since 2007, has repeatedly been mentioned in the media as a potential takeover target.

The German government currently has no plans to sell its stake, a finance ministry spokeswoman said.

Commerzbank, Societe Generale and Santander declined to comment.

German magazine Der Spiegel reported last month that the government wants to stay invested in Commerzbank until at least 2016 and that finance minister Wolfgang Schaeuble had already rebuffed several potential suitors.

Other banks mentioned as potential Commerzbank stake buyers - including UniCredit (CRDI.MI), UBS (UBSN.VX) and BNP Paribas (BNPP.PA) - have said publicly that they were not interested.

The German government has indicated repeatedly that it wants to wait for the Commerzbank share price to recover before it sells its stake.

Chief Executive Martin Blessing said this year that according to some calculations the government could sell its Commerzbank investment without booking a loss if gets a price of 18-19 euros a share.

The shares were up 2.7 percent at 11.72 euros on Thursday at 1:18 pm British Time (1218 GMT), outperforming a sector index (.SX7P) up 1 percent.

Berlin acquired the Commerzbank stake, which it holds through bank bailout fund Soffin, as part of an 18-billion-euro (14.6 billion pounds) government bailout in the financial crisis.

Commerzbank Revival Falters as Targets Seen Eluding CEO (6/01/14)

Martin Blessing is one of the most resilient bank chiefs in Europe. He has remained at the top of Germany’s Commerzbank AG (CBK) since 2008 even after an ill-fated takeover, a record loss and a writedown on Greek debt.

Now, after he revamped the bank by selling assets and cutting costs, shareholders are questioning whether the chief executive officer can generate profits that meet expectations in the face of a sluggish economy, tough capital requirements and a European Central Bank review of asset quality.

“Commerzbank has pushed along a turnaround as far as it could itself,” said Michael Seufert, an analyst at Norddeutsche Landesbank Girozentrale in Hanover, Germany. Now “profitability depends on customers losing their euro-crisis fears and interest rates picking up.”

Shares in the Frankfurt-based company, which more than doubled during the second half of last year, have fallen 19 percent since April 4. The bank’s 0.51 price-to-book ratio, a measure investors use to gauge a firm’s value, is lower than that of any of the 42 other members of the Bloomberg Europe Banks & Financial Services Index.

Germany’s second-largest bank handed over a 25 percent stake to the government in 2009 in return for an 18.2 billion-euro ($24.8 billion) bailout. In an effort to turn around the firm, Blessing, 50, added about 245,000 new consumer-banking customers last year and cut so-called noncore assets by 36 percent in the 18 months through the first quarter. While the former McKinsey & Co. partner has shrunk those unwanted soured shipping and commercial real estate loans as well as government debt, it has become more difficult to generate profit with the remaining parts of the bank.

Missing Estimates

Commerzbank last month reported first-quarter profit of 200 million euros, less than the 227.1 million-euro average estimate of eight analysts surveyed by Bloomberg. While profit compared with a loss of 98 million euros a year earlier, it was about half of the average 397 million euros reported in the four quarters before Blessing became CEO in May 2008. Net interest income, the difference between the interest the bank earns and pays, fell 17 percent.

“They’re not making money, and that won’t change anytime soon, even without noncore assets,” Dirk Becker, an analyst with Kepler Cheuvreux, said by telephone from Frankfurt.

Banker Family

Blessing, who earned a master’s degree in business administration from the University of Chicago in 1988, comes from a family of bankers. His father, Werner Blessing, was on the management board of Deutsche Bank AG (DBK); grandfather Karl was a former president of the Bundesbank; and wife Dorothee was co-head of investment banking for Germany and Austria at Goldman Sachs Group Inc. until last year.

After seven years at McKinsey, Blessing joined Commerzbank in 2001 and became CEO in May 2008. He hung onto his post after leading a costly takeover of Dresdner Bank in August 2008 and surviving a record loss of 4.54 billion euros in 2009 and a 2.23 billion-euro writedown on Greek debt in 2011. More than 25 of his counterparts in Europe lost their jobs during and after the financial crisis.

While investors have shifted their sights to weak earnings, Blessing remains optimistic about the bank’s turnaround.

“At the moment, the glass is a little bit more than half full,” Blessing said at the bank’s Frankfurt headquarters, a 259-meter (850-foot) skyscraper that’s the city’s tallest. “Cost management isn’t done. It’s an ongoing process, and it probably won’t go away for the next 10 or 15 years. Two percent to 3 percent efficiency gains are needed on an annual basis.”

‘Boat Afloat’

The turning point, Blessing said, came last summer as he used funds from a 2.5-billion-euro capital increase to repay financial aid and sold the bank’s U.K. real estate unit, which had 5 billion euros of loans, to Wells Fargo & Co. (WFC) and Lone Star Funds to comply with conditions of the bailout.

Commerzbank has received offers in excess of 3 billion euros for Spanish real estate loans with a face value of more than 4 billion euros, Bloomberg News reported in March. Blackstone Group LP (BX) and Lone Star are among the bidders, two people with knowledge of the matter said.

The remaining unwanted assets comprise almost one-fifth of the bank’s 574 billion-euros total.

“Blessing has kept the boat afloat, even though it’s still moving very slowly,” Klaus Nieding, vice president of DSW, a proxy-voting group for small investors with almost 500 million euros invested in German firms, said in a telephone interview. “He’s making progress.”

Nieding’s words contrast with comments a year ago that “management is not at all credible” after “an orgy of capital increases.”

Revised Goals

Blessing set more ambitious goals for strengthening capital and reducing unwanted assets in February. The bank will shrink those assets to 75 billion euros by the end of 2016 rather than to a previous target of less than 90 billion euros, he said.

The revisions came after the euro-area economy exited its second recession in five years in the fourth quarter, expanding 0.5 percent, and the ECB’s main refinancing rate dropped to a record low of 0.25 percent.

“The search for yield is driving investors toward riskier investments, which has pushed along the reduction of noncore assets faster than you would have expected a year ago,” said Philipp Haessler, an analyst at Equinet Bank AG in Frankfurt, who recommends investors hold Commerzbank stock.

Commerzbank’s capital-adequacy ratio under Basel III rules, a measure of financial strength, will exceed 10 percent by 2016, beating a previous target of 9 percent, Blessing said. The ratio was 9 percent on March 31, unchanged from the end of December.

Past Failures

Some analysts and investors don’t believe he will deliver on his targets, pointing to past failures. They also question a plan to invest 1 billion euros in the consumer bank because margins of 5.7 percent at the end of last year were less than one-third those at Mittelstandsbank, the most profitable unit, which serves small and medium-size companies. Blessing is spending the money on online banking and revamping branches.

Blessing failed to meet profit goals he set in May 2009. At the time, he forecast 2012 operating profit of 4 billion euros and an after-tax return on equity of 12 percent. Operating profit ended up at 1.2 billion euros and return on equity was zero. In November 2011, he said the plan was no longer achievable, citing volatile global markets.

Government Support

Blessing joined Commerzbank as the management board member responsible for consumer banking. He was known for his drive and down-to-earth communication style during his tenure at McKinsey, which included working with German banks looking to modernize during the 1990s, said Frank Mattern, a managing partner at the firm who worked with Blessing.

“Martin was not only great at conceptual, strategic work, but also at motivating and energizing,” Mattern said in a phone interview. “He could implement change -- do it himself.”

Blessing steered the bank clear of the scandals involving manipulation of benchmark interest rates and currencies that led to the departures of CEOs including Robert Diamond of Barclays Plc and Rabobank Groep’s Piet Moerland. He also kept the support of the government as some investors sought a change in management last year, a German government official who asked not to be identified said at the time.

Commerzbank was founded in Hamburg in 1870, the same year Deutsche Bank, Germany’s biggest bank, was formed. It was privatized during the financial crisis of the 1930s, and at the end of 2013 had about 1,200 consumer-banking branches with more than 11 million customers.

Luring Depositors

The bank is paying cash to new deposit holders. It set a target in November 2012 of adding 1 million consumer-banking clients by the end of 2016. In April, Commerzbank began offering 100 euros to open a deposit account, raising the payment from 50 euros. Deutsche Bank, Commerzbank’s main competitor for deposits, charges account-holders a monthly fee of five euros, according to its website.

While analysts including Becker of Kepler Chevreux criticized the strategy on cost grounds, Dennis Bartel, a spokesman for the company, said upfront expenses are lower than for traditional advertising. New client business becomes profitable in the second year on average, he said.

Investors also are eyeing any moves by the government to sell all or part of its remaining 17 percent stake in the bank. In August, Finance Minister Wolfgang Schaeuble said no immediate sale is planned and the ministry is accounting for the price at which it bought the shares when deciding when to sell.

To break even on its investment, the government would need to find buyers for its remaining 193.5 million shares at about 25.90 euros each, more than twice the current stock price, data compiled by Bloomberg show.

Legacy Assets

In the meantime, Commerzbank remains weighed down by its legacy assets, which generated an operating loss of 1.1 billion euros last year, offsetting the 1.1 billion euros of operating profit at its Mittelstandsbank.

In a few years, those assets will no longer be a major burden on earnings and the bank “will clearly be profitable,” Haessler of Equinet said.

“They’re on the right path with the reduction of noncore assets but still need to work on profitability at the core bank and particularly retail banking,” he said. “It’s not time for a pat on the back yet, but the bank’s definitely stronger now than this time last year.”

To contact the reporter on this story: Shane Strowmatt in Frankfurt at sstrowmatt@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Mark Bentley, Robert Friedman

What Investors Need to Know About Commerzbank AG (ADR) (5/27/14)

In the U.S. market, most investors looking for German banks tend to focus on Deutsche Bank (NYSE: DB ) . While Deutsche Bank certainly does deserve attention considering it's Germany's largest bank, that nation's second largest bank is often overlooked.

Having taken quite a beating during the financial crisis, Commerzbank (NASDAQOTH: CRZBY ) is on the rebound as profits return and non-core assets are disposed of. Wise investors should take notice.

Share dilution

Government assistance for banks was hardly unique during the most recent downturn, and Commerzbank was no exception. Commerzbank accepted a 18 billion euro bailout while rival Deutsche Bank escaped without one (although some former employees alleged Deutsche Bank hid $12 billion of losses to avoid a bailout). But bailouts aren't free to shareholders, and these investors paid the price through a massive wave of share dilution.

The government stake in Commerzbank fell below 20% in 2013 from 25% previously. However, this was largely due to the bank's 2.5 billion euro capital raise further diluting shareholders. As a bank struggling to raise capital, share dilution was unavoidable during the crisis, but investors in Commerzbank should not expect to see the pre-crisis highs again for a long time, if ever, because of the magnitude of the dilution.

Dividends?

With European stress tests coming up, Europe's banks are shedding non-core assets and looking to raise and preserve capital on favorable terms. Not too surprisingly, Commerzbank is not paying a dividend leading up to the stress test results.

Commerzbank CEO Martin Blessing wants to get the results from the ECB stress tests before any dividend action is taken. Considering the potential share dilution from finding a capital deficiency and having to issue new shares, holding off on a dividend for the time being is probably a smart move.

So Commerzbank shareholders should not expect big dividends anytime soon. Even after the results are released, the bank will probably start out small and build a meaningful dividend over time. For now, Commerzbank is not a stock for income investors, but if the turnaround continues, it may one day deserve another look.

Government stake

Currently holding a 17% stake in Commerzbank, the German government does not appear to be in any hurry to divest itself of the bank. Instead, a report in Spiegel says the government is holding out for a higher price until 2016. Reuters notes the government did not comment on much, but a finance ministry spokesperson said, "The German government has no plans to sell its stake."

With this government strategy, Commerzbank will have to wait longer to shake off the image of government ownership. However, the government stake should not be a major operational issue since the 17% stake is small enough that Commerzbank can make its own decisions.

Valuation

Commerzbank trades about where one would expect a zero-dividend paying partially government-owned bank to trade. At about half of book value, the bank trades at a sharp discount to its more stable rivals. Trading around 18 times forward earnings, Commerzbank shares look overvalued, however, earnings are expected to rise sharply in the following years as the economy recovers and more non-core assets are disposed of. Of course, forward earnings estimates can be off, so investors should still run their own numbers.

At this point, Commerzbank carries a lower valuation than many other major banks, but it does so because of increased risk, partial government ownership, and the lack of a dividend. With this in mind, Commerzbank sets itself up best as a recovery play. If the bank can continue to dispose of non-core assets, as it's been doing while turning earnings performance around, there is upside to be had as the bank moves closer to peer valuation. At the same time, the bank continues to face stress test and economic risks, making this far from a blue-chip bank stock.

Recovery bank

Commerzbank ran into billions of euros worth of trouble during the financial crisis as it had a major role in shipping and real estate loans, two of the areas hit hardest by the financial crisis. After taking a government bailout and having enough share dilution to push the bank to run a 1 for 10 reverse stock split, Commerzbank is profitable again and continues to weed out non-core assets.

Primarily because of its low price to book value, Commerzbank looks to be a recovery/value play for risk-tolerant investors with a long-term outlook. For investors looking to diversify their European bank holdings or find European recovery plays, Commerzbank is worth a further look.
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Alexander MacLennan owns shares of Commerzbank. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

http://www.fool.com/investing/general/2014/05/27/what-investors-need-to-know-about-commerzbank.aspx

Lone Star, J.P. Morgan Near Purchase of Spanish Loans (5/21/14)

MADRID— Commerzbank AG is in final-stage talks to sell a multibillion-euro portfolio of Spanish real-estate loans and assets to Lone Star Funds and J.P. Morgan Chase, the latest showing of renewed interest in one of the most-battered property markets in Europe.

According to people familiar with the talks, the two U.S. investors will pay between €3.7 billion and €3.9 billion (between $5 billion and $5.3 billion) for the portfolio, which includes loans with a face value of about €4.5 billion that are backed by shopping centers, hotels and offices.

The deal, which one of the people said may close within a month, would be the largest property transaction in Spain since the country's real-estate bubble burst six years ago and illustrates foreign investors' renewed appetite for assets in the financially stressed euro-zone countries of Europe.

Under the terms of the proposed deal, known by the code name Project Octopus, Lone Star would acquire the majority of the loans in the portfolio, while J.P. Morgan will acquire a minority and provide the financing for the deal, one person said.

Demand for Spanish real-estate loans and assets has recovered dramatically over the past year, as investors grow more confident that the worst of the financial crisis has passed. There were $1.5 billion worth of commercial real-estate transactions in Spain in the first quarter of 2014, up from $410.9 million during the same period last year, according to data from Real Capital Analytics.

The sheer size of Project Octopus could help transaction volumes keep rising, as Lone Star sells and restructures parts of the loan book, said Federico Montero, a partner in corporate finance at real-estate broker Cushman & Wakefield. "The good news is that you have a private equity investor with these loans now," he said. "Things will move faster than they were with a German bank."

The auction, run by investment bank Lazard Ltd., initially attracted more than a dozen large international investors, many of which had teamed up with financial institutions to bid.

Blackstone Group LP, Cerberus Capital Management and Apollo Global Management were leading three of the four consortia in the final stages of the Project Octopus bidding. U.S. private-equity funds have helped drive the activity in Spain, as well as in Ireland and Italy, as they search for distressed real-estate assets.

The loans were originally extended by Eurohypo AG, a unit of Commerzbank that is being wound down after suffering large losses in recent years.

The proposed deal would be structured in a similar way to the sale of Commerzbank's £4 billion ($6.73 billion) U.K. real estate portfolio last year, people familiar with the talks said. Loan Star bought the U.K. portfolio together with Wells Fargo & Co.

The next closely watched portfolio sale in Spain is Project Hercules, a €6.95 billion portfolio of mostly residential mortgages. The loans are held by Catalunya Banc SA, a once-prominent regional lender that was nationalized in 2011.

Investors are also circling Realia SA, a troubled builder that is cleaning up its balance sheet and looking for funds willing to inject money into the company. In a deal announced Tuesday, Realia said it had agreed to sell a majority stake in SIIC de Paris to France's Eurosic SA for €558.9 million. Realia's two largest shareholders, and Fomento de Construcciones y Contratas SA, are working with Goldman Sachs to find a buyer for their stakes in the company.

http://online.wsj.com/news/articles/SB10001424052702304198504579573401186089522?mod=WSJ_qtoverview_wsjlatest&mg=reno64-wsj

Commerzbank Swings to Profit (5/07/14)

Absence of Restructuring Costs Boosts German Bank's First-Quarter Results

Commerzbank AG swung to a first-quarter net profit of €200 million ($278 million) after recording a loss in the same period a year ago, helped by the absence of hefty restructuring costs which hurt its first-quarter results last year.

Shares of Germany's second-largest lender were down 3.75% in midday trading, making it the biggest decliner among European banking stocks after net profit missed analysts' estimates of €227 million and the bank failed to boost its capital buffers in the quarter.

Commerzbank's capital ratio, a key measure of its ability to weather a crisis, remained flat at 9%.

"The flat…ratio was disappointing and begs the question why the bank didn't make more progress," analyst Neil Smith from Bankhaus Lampe said.

Chief Financial Officer Stephan Engels moved to reassure investors in a conference call Wednesday, saying the bank is strongly capitalized and feels well prepared for the this year's stress test of Europe's largest banks.

Commerzbank posted a €94 million net loss in the first quarter of 2013, which included €500 million in expenses for sweeping job cuts.

Operating profit, a better yardstick for the bank's performance, fell 30% to €324 million from €464 million a year earlier as sluggish client activity weighed on investment banking operations. The unit's revenues from fixed income and currency sales and trading fell by almost a third to €135 million.

Commerzbank's rivals have also posted fixed-income trading declines with Deutsche Bank AG's fixed-income sales and trading business falling 10% and Barclays PLC's by 41%. The investment banking unit's overall profit fell to €215 million, down from €272 million.

In Commerzbank's case, the faster run down of its internal bad bank which contains its nonperforming loans also dented overall profit. The operation that houses shipping and commercial real-estate loans as well as sovereign bonds doubled its loss to €172 million in the first quarter.

The bank reduced unwanted assets to €102 billion, down 12% from the end of last year and down 29% from the end of March 2013. A large part of the reduction was achieved by transferring some securities and bonds that help improve liquidity back into the core bank. "This might change the valuation of the core bank at some point," Mr. Smith said.

On the flip side, Commerzbank activities with midsize business clients as well as its operations in Central and Eastern European and the private customers segment posted higher profits on the back of lower loan loss provisions or higher revenues.

Commerzbank repeated its outlook for the full year, saying pretax and net profit would be "considerably higher in 2014." In 2013, the bank recorded net profit of €78 million.

Write to Eyk Henning at eyk.henning@wsj.com

http://online.wsj.com/news/articles/SB10001424052702304431104579546990686279908

Commerzbank Rises to 2-Year High as ECB Test Seen Passed (4/02/14)

Commerzbank AG (CBK), Germany’s second-largest bank, advanced to a two-year high as some investors speculated that Chief Executive Officer Martin Blessing may have taken sufficient steps to pass a Europe-wide stress test.

Commerzbank climbed as much as 2.5 percent in Frankfurt trading and increased 1.5 percent to 14.03 euros at 1:40 p.m. The benchmark Bloomberg Europe Banks and Financial Services Index was little changed. Commerzbank’s shares have more than doubled in value from a record low of 5.56 euros in July.

“Fears that the stress test could reveal holes or cause problems for the bank appear to be declining,” said Michael Seufert, a bank analyst at Nord/LB in Hannover. “Some investors see a turnaround story.” He recommends investors hold the stock and has a 12-month price estimate of 13 euros.

The European Central Bank is conducting a comprehensive assessment of the euro area’s 128 most significant banks before becoming the currency bloc’s single supervisor in November. The assessment includes a probe into whether banks have adequate capital for selected loan portfolios. Commerzbank’s non-core assets, which include shipping and commercial real estate loans and municipal and government debt, have been a concern for investors.

In February, Commerzbank said that it expected to reduce its non-core assets faster than estimated, to about 75 billion euros by the end of 2016 from a previous goal of less than 90 billion euros. In its annual report published about two weeks ago, Commerzbank said it expected a smaller loss from its non-core asset business in 2014 than the 1.07 billion euros it posted last year, which reduced total profit for the company.

To contact the reporter on this story: Shane Strowmatt in Frankfurt at sstrowmatt@bloomberg.net

http://www.bloomberg.com/news/2014-04-02/commerzbank-rises-to-2-year-high-as-ecb-test-seen-passed.html

Commerzbank Climbs as Morgan Stanley Raises to Overweight (3/21/14)

Commerzbank AG (CBK), Germany’s second-largest bank, advanced after Morgan Stanley (MS) raised the company to overweight from equal weight saying it was making faster progress with offloading non-core assets.

Commerzbank climbed as much as 4 percent in Frankfurt trading, reaching the highest level in a month, and increased 2.2 percent to 13.29 euros at 2:16 p.m. The benchmark Bloomberg Europe Banks and Financial Services Index fell 0.2 percent.

“We expect accelerated disposals to continue with net positive capital release, as well as greater capital recovery and clarity,” Morgan Stanley analysts including Hubert Lam and Francesca Tondi said in an e-mailed report today.

Morgan Stanley said it increased its price estimate for the shares to 16.00 euros from 11.80 euros.

Commerzbank, which received an 18.2 billion-euro government bailout in 2009, is offloading assets including shipping and real estate loans to boost profitability. Chief Executive Officer Martin Blessing’s salary remained at 1.31 million euros last year and he hasn’t received a bonus since 2007 as he works to clean up the bank’s balance sheet.

The value of Commerzbank’s non-core assets, which the bank is trying to wind down, rose to about 2.6 billion euros, based on the price of such sales in the past, Morgan Stanley said.

Commerzbank said last month that it expected to reduce its non-core assets faster than estimated, to about 75 billion euros by the end of 2016 from a previous goal of less than 90 billion. In its annual report published today, Commerzbank said it expects a smaller loss from the non-core asset business in 2014 than the 1.07 billion euros it posted last year, which reduced total profit for the company.

Commerzbank also said today that it expects operating profit to increase this year.

To contact the reporter on this story: Shane Strowmatt in Frankfurt at sstrowmatt@bloomberg.net

http://www.bloomberg.com/news/2014-03-21/commerzbank-climbs-as-morgan-stanley-raises-to-overweight.html

German finance ministry 'expects ECB rates to rise'

Berlin (AFP) - Experts at the German finance ministry expect the European Central Bank to raise key interest rates soon due to the economy picking up, a German news weekly said on Sunday, citing an internal document.

With the eurozone debt crisis increasingly fading and an improving economy, "an active contribution to the overcoming of the low interest policy is to be expected" from the ECB, Spiegel quoted the ministry document as saying.

That will lead to Germany having to pay more for its loans in a year's time than it currently does, according to the experts at Finance Minister Wolfgang Schaeuble's ministry.

The ECB has held its key interest rates at an all-time low of 0.25 percent since November and analysts do not expect a cut by the Frankfurt-based bank at its meeting this week.

http://news.yahoo.com/german-finance-ministry-expects-ecb-rates-rise-153722404.html

Marker:
Commerzbank (PC) (CRZBY)
$18.02 up 0.21 (1.18%)
Volume: 10,857

I'm estimating that CRZBY was approx. $7.50 when you posted this Pagz.

Commerzbank lifts targets as turnaround gains pace (2/13/14)

* Shares jump to 22 month high in early trading

* Increases 2016 target for capital to 10 pct

* To reduce NCA portfolio to 75 bln euros by 2016

* CEO waives bonus as says results not yet good enough

* Q4 pretax profit at 89 mln euros vs 225 mln loss year ago (Adds CEO waives bonus, quotes, updates shares)

By Arno Schuetze and Thomas Atkins

FRANKFURT, Feb 13 (Reuters) - Commerzbank said its turnaround plan was running ahead of schedule, allowing it set more ambitious targets for improving its capital position and shedding weaker assets, and easing investor fears it might need to raise more cash.

Shares in Germany's second-biggest lender, which also posted a small profit for the fourth quarter of 2013, rose more than 3 percent to a 22-month high on Thursday.

Nonetheless, Chief Executive Martin Blessing still waived his bonus, saying 2013 earnings were not convincing enough.

Commerzbank was one of the highest-profile casualties of the global financial crisis after an expansion drive backfired, with the German government spending around 18 billion euros ($24.5 billion) on a bailout of the bank.

It has since been cutting costs and selling assets in a bid to return to health and Blessing said that restructuring was gaining traction, with the bank turning a corner in 2013.

"2014 is year one - after the year of transition," he said.

The bank said its core tier 1 capital ratio - a key measure of financial strength used by regulators - improved to 9.0 percent at the end of 2013 and it set new a target to reach more than 10 percent by 2016.

While less than the 10.3 percent of rivals BNP Paribas and Lloyds at the end of 2013, it is well above the 7.6 percent that Commerzbank posted in 2012.

The German bank also said efforts to wind down its non-core asset (NCA) portfolio, a "bad bank" split off as part of its restructuring, were proceeding more quickly than expected.

It now aims to reduce the unit to 75 billion euros by 2016 from an earlier target of 90 billion, benefiting from a recovery in asset prices.

"My concern was that there could be another cap hike. This concern was wiped away with the numbers on the non-core asset reduction," said Christian Hamann, analyst at Haspa.

At 1130 GMT, Commerzbank shares were up 2.8 percent at 13.76 euros, making them the top gainers among European rivals and bringing to almost 70 percent the amount Commerzbank stock has risen in the past six months.


BAD TO GOOD

Since mid-2013, Commerzbank has struck several deals to reduce its exposure to assets such as commercial real estate and shipping.

"The wind-down unit slowly is getting into a dimension where it is not as frightening anymore as two years ago," Metzler analyst Guido Hoymann said.

Commerzbank's non-core assets stood at 116 billion euros at the end of 2013, comparing with 289 billion in 2008.

Last week it announced the sale of $1 billion in bad Spanish property loans in a bid to clean up its balance sheet and free up capital ahead of European banking health checks.

Profit improved at the bank, mainly due to higher investment banking and retail income as well as lower loan-loss provisions in its non-core asset portfolio.

Blessing said that although Commerzbank swung to a modest 78 million euro net profit for 2013 after a 47 million euro loss last year, he felt he was not entitled to a bonus.

"If there is no profit then I don't think it's right, independent of whether the goals were reached, for the CEO to receive variable compensation," said Blessing, who last received a bonus for 2007.

He added he would have considered accepting the payment if group net profit had been over 100 million euros for the year.

Commerzbank's 64 million euros net profit in the fourth quarter beat analysts' average forecast for 25 million euros. The lender lost 726 million in the year earlier period.

However, operating profit in its cash-cow business - the Mittelstandsbank which caters to Germany's raft of medium-sized companies - fell as the bank needed to set aside more cash to cover potential bad loans.

Levels of provisions overall are normalising after the Germany's economic success in 2012 allowed the bank to reclaim bad-loan reserves it had set aside during the financial crisis.

($1 = 0.7359 euros) (additional reporting by Jonathan Gould and Andreas Doernfelder; Editing by Mark Potter)

http://www.reuters.com/article/2014/02/13/commerzbank-results-idUSL5N0LI0GX20140213

Commerzbank CEO voluntarily waives his 2013 bonus (2/13/14)

Feb 13 (Reuters) - Commerzbank Chief Executive Martin Blessing will voluntarily waive his 2013 bonus payment because the bank, despite swinging to a profit from a loss, didn't earn enough to justify it, Blessing said on Thursday.

"If there is no profit then I don't think it's right, independent of whether the goals were reached, for the CEO to receive a variable component," Blessing told journalists.

Although the bank earned a small profit in 2013, it wasn't enough for him to justify receiving a bonus, he said. Blessing last received a bonus in 2007.

Blessing said he would have considered accepting a bonus if the net result of the group were over 100 million euros ($135.88 million)for the year.

Commerzbank posted a 78 million euro net profit for 2013 after a 47 million euro loss last year. ($1 = 0.7359 euros) (Reporting by Thomas Atkins)

http://www.reuters.com/article/2014/02/13/commerzbank-ceo-idUSWEB00IES20140213

Commerzbank: Need "comfortable" capital before paying dividend (2/13/14)

Feb 13 (Reuters) - Commerzbank wants to ensure its capital position is solid before paying out any net profit to shareholders as a dividend, its chief executive said on Thursday.

"We first want to have the capital situation at the bank as comfortable as possible before we pay out a dividend," Martin Blessing told a news conference on the lender's 2013 results.

Earlier on Thursday, Germany's second biggest bank dampened any hope it might pay a dividend for its 2014 financial year, though few analysts had expected one anyway.

Blessing also told the news conference that variable compensation paid to staff for 2013 would be slightly higher than in 2012. (Reporting by Thomas Atkins and Arno Schuetze; Writing by Jonathan Gould; Editing by Victoria Bryan)

http://www.reuters.com/article/2014/02/13/commerzbank-results-captial-idUSL5N0LI27720140213

EUROPE MARKETS: Banks, Data Drive European Stocks Higher

By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) -- European stocks rose on Tuesday, with banks driving the gains after German jobless figures came in better than expected and Ireland marked a successful return to the international bond market. Broker moves across the board left BASF SE higher and Swedish Match AB lower.

The Stoxx Europe 600 index rose 0.7% to 329.32, with the oil sector helping pad out those gains. The index eased 0.2% on Monday.

Vestas Wind Systems AS was among the biggest movers on the Stoxx 600, up more than 6%. The wind-turbine maker upgraded its free cashflow expectations for 2013 to around 1 billion euros ($1.36 billion).

On the downside, shares of Swedish Match AB were a top decliner, off 5.4% after Citi cut it to sell from neutral, saying competition pressures in Sweden were likely to continue in 2014. It cited specific worries about the cigar sector.

Broker moves triggered action for several companies. Shares of BASF SE added nearly 3% after UBS lifted shares to buy from neutral, saying the company should resume a re-rating trend relative to other big-cap-chemical household names. UBS also cut Air Liquide SA to sell from neutral, triggering a drop of 1.4%, saying shares in the industrial-gas producer should resume underperformance versus BASF.

The German DAX 30 index rose 0.7% to 9,497.03 after data showed seasonally adjusted jobless claims in the country falling 15,000 to 2.97 million in December, which was better than expected. German retail sales data also came in better than expected, with a November preliminary rise of 1.5%.

"If Germany can show an improving labor market, it gives hope to the region overall, although all bar Germany have substantial reform to undertake if they are to match German efficiency," said Stephen Pope, managing partner at Spotlight Ideas, in emailed comments.

European stocks also rose after data showed euro-zone inflation falling back in December, further below the European Central Bank's target.

Tom Rogers, senior economic advisor to the EY Eurozone Forecast, said the central bank will "need to remain alert to the risk of deflation, and following Thursday's Governing Council meeting, be prepared to respond to increased speculation over which policy tools it might use to try and address falling prices."

Banking stocks were the day's best performers, and investors also got encouraged as Ireland successfully sold 3.75 billion euros' ($5.1 billion) worth of 10-year bonds on Tuesday to strong demand, according to news reports. The return to the bond market follows the country's exit from its international bailout program.

The French CAC 40 index rose 0.7% to 4,258.29, with banks such as Credit Agricole SA soaring 7%, BNP Paribas SA up 3% and Societe Generale SA gaining over 4%. Shares of Total SA (TOT) rose 0.8% as the oil sector gained amid strong energy prices.

In Frankfurt, shares of Commerzbank AG jumped 6%, while in London, HSBC Holdings PLC (HSBC) rose 3.4%. BP PLC (BP) gained close to 1%, helping drive the FTSE 100 index up 0.5% to 6,763.16.

Also in London, shares of Severn Trent PLC fell 2% after J.P. Morgan Cazenove cut shares in the water company to underweight from neutral. It cited concerns about rising regulatory risks, and a decreasing likelihood of mergers and acquisitions activity.

A number of technology companies were affected by a note from Barclays analysts on the sector. They said they see a gradual improvement for the European tech sector, but shares of ST Microelectronics NV slid 2% after a cut to underweight from equalweight.

The best performer for Tuesday so far was the Spanish IBEX 35 index , rallying 2.8% to 10,176.40, with Banco Santander SA (SAN) up nearly 4% and BBVA SA (BBVA) up more than 5%%.

Data released Monday from Markit indicated strengthening in Spain helped raise a gauge of the euro zone's services sector and the broader private sector in December.

Commerzbank Sells 14 Tankers to Oaktree Fund to Reduce Bad Loans (12/16/13)

Commerzbank AG (CBK), Germany’s second biggest bank, sold 14 chemical tankers to a fund managed by Oaktree Capital Management LP, eliminating 280 million euros ($385 million) in bad shipping loans from its books.

The asset sale reduces the volume of non-performing loans at Commerzbank’s Deutsche Schiffsbank ship-finance unit by 6 percent compared with the end of September, the Frankfurt-based lender said in an e-mailed statement today. The “net capital relief effect” of 8 million euros means the sale “doesn’t significantly impact” fourth-quarter earnings, it said.

Commerzbank, which announced its exit from ship financing in 2012, reduced its loan portfolio to the crisis-ridden industry this year by 3 billion euros to 15.7 billion euros as of Sept. 30, Otto said in an interview last month. The German lender is taking over ownership and operation of some ships from clients unable to repay their loans in a bid to salvage some of the debt.

“We will continue with our consistent strategy of value-preserving reduction,” Stefan Otto, head of the Hamburg-based Deutsche Schiffsbank unit that is part of Commerzbank’s non-core assets, said in the statement.

Germany’s top shipping lenders, including Commerzbank and HSH Nordbank AG, face rising credit default risks next year as bad debt from clients struggling to emerge from the industry crisis mounts, Moody’s Investors Service said in a report last week.

Private Investors

Oaktree, Blackstone Group LP (BX), JPMorgan Chase & Co. (JPM) and Tennenbaum Capital Partners LLC are among firms buying new and used German vessels and taking stakes in German shipping companies that need financial backing. They are replacing mostly private investors who for decades participated as limited partners in German ships.

Howard Marks, the chairman and co-founder of Oaktree Capital Group, indicated on Dec. 10 that shipping is one area his company is exploring for further takeovers, at a conference hosted by Goldman Sachs Group Inc. in New York.

“There absolutely is a paucity of bargain-priced distressed opportunities,” he said, according to a transcript of his comments. “Most of the distressed which is out there is in just a few pockets, shipping, power, non-prime real estate and Europe. And there we find opportunities to put money to work.”

To contact the reporter on this story: Nicholas Brautlecht in Hamburg at nbrautlecht@bloomberg.net

http://www.bloomberg.com/news/2013-12-16/commerzbank-sells-14-tankers-to-oaktree-fund-to-reduce-bad-loans.html

Banking Turnaround Foreseen in Europe, Citigroup, MS Say (12/05/13)

Europe’s banks may be on the point of a turnaround as economic growth returns to the continent and the European Central Bank prepares to review the industry’s assets, Citigroup Inc. (C) and Morgan Stanley said.

Banks in Europe are at an “inflection point” and “ripe” for increased return on capital, Citigroup said in an e-mailed report today, saying it was maintaining an overweight recommendation. Next year will be “pivotal” and banking shares may rally a median 14 percent versus 10 percent for the equity market as a whole, Morgan Stanley said in a report.

An ECB review of the balance sheets of about 130 banks, which began last month, “should serve to reduce the sector risk premium,” Citigroup analysts including Kinner Lakhani and Ronit Ghose said. The review “will probably prove more cathartic than the market fears” as banks front-load charges this quarter and at the start of 2014, said Morgan Stanley (MS) analysts led by Huw Van Steenis.

Europe’s banks have been forced to forsake dividends, boost capital and sell businesses as the continent’s sovereign-debt crisis ripped through balance sheets. A cleanup of assets continues at many firms as the ECB prepares to take over regulation of the industry.

BNP Paribas SA (BNP), France’s biggest bank, ING Groep NV (INGA) of the Netherlands, Swiss bank UBS AG (UBSN) and UniCredit SpA (UCG) of Italy were among firms Morgan Stanley most preferred. It raised Sweden’s Swedbank AB (SWEDA) to overweight from equal-weight and Mediobanca SpA (MB) of Italy to equal-weight from underweight.

Italian Banks

French, Nordic and Swiss banks including BNP and Danske Bank A/S (DANSKE) of Denmark are among the best placed, Citigroup said. ING is also favored, it said.

The Bloomberg Europe Banks & Financial Services Index climbed 15 percent this year, compared with a gain of 13 percent for the Stoxx Europe 600 Index.

Both Citigroup and Morgan Stanley said Italian banks were among those that may need to rebuild capital. Commercial real estate in the Netherlands will be a focus, while few surprises are expected in Spain, Morgan Stanley said.

Citigroup said it is concerned about capital risks and asset quality at Bank of Ireland and long-term profitability at Royal Bank of Scotland Group Plc.

To contact the reporter on this story: Mark Bentley in Frankfurt at mbentley3@bloomberg.net

http://www.bloomberg.com/news/2013-12-05/banking-turnaround-foreseen-in-europe-citigroup-ms-say.html

earnings

http://www.benzinga.com/news/earnings/13/11/4059584/commerzbank-posts-upbeat-q3-profit?utm_campaign=partner_feed&utm_source=money.cnn.com&utm_medium=web_click&utm_content=ticker_page

Commerzbank post higher profit than No. 1 bank rival Deutsche Bank this quarter :)

good article

http://seekingalpha.com/article/1797102-commerzbank-substantial-value-in-germanys-2nd-bank

Exane target of EUR11.7 equals $16.09 (EUR=$1.37)

Commerzbank ‘Cheap’ as Bank May Pass ECB Test, Exane Says (10/18/13)

By Nicholas Comfort - Oct 18, 2013 5:47 AM CT

Investors should own Commerzbank AG (CBK) as Germany’s second-biggest lender may pass a test of its financial health by the European Central Bank, according to Exane BNP Paribas.

Commerzbank, which has gained more than 50 percent since the end of July, still commands a “sufficiently compelling” valuation, Guillaume Tiberghien, a London-based Exane analyst, wrote in a note to clients today. “Improving odds of passing the test should allow the re-rating to continue.”

The ECB is assuming oversight of Europe’s biggest banks from national regulators to ease the debt crisis by helping to break the link between states and their lenders. Frankfurt-based Commerzbank is among lenders with unprofitable loans that are waiting to see how tough the central bank will be when determining if banks need additional capital to withstand more stressed scenarios.

Commerzbank rose as much as 1.5 percent to 9.877 euros in Frankfurt trading today, the highest intraday level since March, and was 1 percent higher as of 12:40 p.m. local time.

Exane, which has an outperform recommendation on the stock, raised its price target 26 percent to 11.7 euros.

Commerzbank would pass the ECB’s test if non-performing loans at its unprofitable unit for winding down assets were to almost double, the analyst wrote. That calculation also assumed a 6 percent capital requirement, according to the note.

The bank is “well positioned” for the ECB’s review after similar audits of its assets, Stephan Engels, Commerzbank’s chief financial officer, told analysts on a conference call in August. “I do not see any specific risk there.”

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

http://www.bloomberg.com/news/2013-10-18/commerzbank-cheap-as-bank-may-pass-ecb-test-exane-says.html

Constancio Says European Banks Undervalued, FT Reports (10/02/13)

European Central Bank Vice President Vitor Constancio said investors have yet to price in that European banks are as strong as U.S. lenders in terms of their capital levels, the Financial Times reported.

“The situation of the European banks is better than market perceptions,” Constancio said in an interview, according to the FT. “If you take the largest European and American banks, you find that the median common equity Tier 1 capital of European banks is slightly above the median of U.S. banks.”

The ECB will start supervising European lenders next year in a step toward a banking union that is designed to sever the link between banks and sovereigns. It is due to conduct a risk review before analyzing banks’ balance sheets and conducting stress tests in collaboration with the London-based European Banking Authority.

Constancio said the scope of the asset review would be tailored to individual banks’ risk profiles, business models and home countries, and will harmonize diverging definitions of non-performing loans, according to the FT. ECB Executive Board member Yves Mersch said in August that the risk assessment will form the basis for picking the assets that will be scrutinized for each bank.

“Of course we will define priorities according to the known situations in each country,” Constancio told the FT. “In some places, real estate poses potentially more problems than other asset classes. In other countries it’s shipping loans and we will take that into consideration in the size and depth of the sampling in our exercise.”

The ECB will publish banks’ capital positions, including possible shortfalls, after the asset review and the stress test and before it formally starts supervision, Constancio said. By that time, the European Stability Mechanism may become a backstop vehicle for re-capitalizing banks that can’t tap the market for funds, he said, according to the FT.

The exercise will result in a “scoring” system for banks’ financial health modeled on a similar U.S. formula, Constancio said.

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

http://www.bloomberg.com/news/2013-10-02/constancio-says-european-banks-undervalued-ft-reports.html

Schaeuble In No Rush to Sell Commerzbank Stake as Shares Wilt (8/28/13)

By Rainer Buergin & Birgit Jennen

German Finance Minister Wolfgang Schaeuble said he has no plans to sell the government’s stake in Commerzbank AG (CBK) any time soon because the share price is too low to justify a divestment.

“It’s not the federal government’s wish to be an entrepreneur, but I happen to know at what price we took on the stake and where the price is now,” Schaeuble said in an Aug. 27 interview. “I’m not in sales negotiations with anyone.”

Germany, through the government’s Soffin bank rescue fund, became the Frankfurt-based lender’s biggest shareholder after an 18.2 billion-euro ($24 billion) bailout in 2009 in the aftermath of Lehman Brothers Holdings Inc.’s collapse. The stock has declined more than any other DAX Index member since the first part of the rescue was unveiled on Nov. 3, 2008. In that time, it has lost 83 percent of its value, compared with a 64 percent gain in the benchmark.

The shares have climbed more than 50 percent from an intraday low on July 4 amid speculation an international competitor may purchase the government’s 17 percent stake to gain access to clients including the small and medium-sized companies that make up Germany’s Mittelstand, the backbone of the country’s economy.

Commerzbank shares have also benefited after the company reported second-quarter profit that fell less than analysts had estimated and said it’s making headway in raising capital levels.

Chief Executive Officer Martin Blessing, who has increased capital five times in the past four years in a bid to repay the government and bolster the bank’s financial strength, is firing staff as the bank wrestles with souring shipping and commercial real estate loans.

Takeover Speculation

Standard & Poor’s lowered the company’s debt rating to A-, four levels above junk, two months ago, saying poor economic conditions mean it will struggle to boost earnings sustainably.

A full or partial takeover by an international bank is “conceivable,” Florian Rentsch, the economy minister for the state of Hesse, said in an interview with Handelsblatt today, adding that he would welcome Commerzbank making its way independently.

Soffin wants to sell the stake over the next six months and foreign banks including BNP Paribas SA (BNP), Banco Santander SA (SAN) and UBS AG (UBSN) are interested, WirtschaftsWoche magazine reported on July 20, citing people close to the rescue fund it didn’t name.

To contact the reporters on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net; Birgit Jennen in Berlin at bjennen1@bloomberg.net

http://www.bloomberg.com/news/2013-08-28/schaeuble-in-no-rush-to-sell-commerzbank-stake-as-shares-wilt.html

Stock Investors Embark on a European Tour (8/23/13)

Experts Say There Are Stock Bargains to Be Found as EU Economies Rebound

By LIAM PLEVEN and SARAH KROUSE

Things are starting to come together for the continent that almost fell apart.

The economy in the 17-member euro zone is growing again—slowly—after contracting for more than a year. Signs of revival are showing up in data on business activity and consumer confidence. As in the U.S., central bankers' extraordinary commitment to injecting cheap money into their economies has so far helped avert disaster. The euro zone hasn't splintered, as some feared, and no country has dropped the common currency.

As worries ease, markets are up from Ireland to Italy. Benchmark national indexes in the U.K., France and Germany have climbed at least 10% this year. The pan-European Stoxx Europe 600—akin to the S&P 500 in the U.S.—is up 19% in the 13 months since Mario Draghi said the European Central Bank, which he heads, was "willing to do whatever it takes to preserve the euro."

Investors planning their own grand investing tour of Europe's stocks should know there still are discounts available. But as many a shopper in the markets of London, Paris or Rome will agree, it can pay to be choosy. For instance, many fund managers see more near-term upside in consumer goods and banks than in European utilities or energy firms.

There are several options for investors. Low-cost index funds, such as the Vanguard FTSE Europe exchange-traded fund—which charges 0.12% in fees, or $12 for every $10,000 invested—offer broad exposure that includes many of the region's global heavyweights. There also are actively managed, Europe-focused funds run by stock pickers who try to beat benchmark indexes, and global funds that feature a hefty dose of European exposure.

In addition, many European companies issue American depositary receipts that trade like shares on U.S. exchanges. Some firms only trade on home-country exchanges, which U.S. investors can access through brokers or international accounts, though this typically involves taking on currency risk and navigating complicated tax rules.

Global fund managers now have more of their portfolios in euro-zone equities than at any point since January 2008, according to a monthly survey Bank of America Merrill Lynch conducted in early August. U.S. investors had poured $3.7 billion into Europe-focused equity funds this month through Wednesday, according to data-provider EPFR Global—more than in any full month this year.

Nevertheless, European stocks have generally lagged behind their U.S. counterparts this year. Some investors think Europe's shares could climb higher.

"Europe is in a recovery cycle. It's in a bull-market cycle. And it's earlier in the cycle than the U.S. is," says Michael Shaoul, chairman of Marketfield Asset Management, in New York. He says the firm, which manages $13 billion, has more funds allocated to Europe than any other region outside the U.S.

Companies that focus on domestic European markets may also be in a better position to benefit from any uptick in demand from long-suffering consumers.

"There are much more opportunities in a Spanish media stock, or Europe-focused banks that will benefit from a European recovery, than a global company that has done well through the crisis and has been supported by emerging-market sales," says Dean Tenerelli, a London-based European equity manager at T. Rowe Price Group who manages €1.2 billion ($1.6 billion) in assets.

But the recent rebound also highlights two major risks.

First, many individual stocks have already risen sharply, particularly Europe-based multinationals that get much of their revenue abroad. German insurer Allianz is up 30% over the past year, as is Dutch electronics giant Koninklijke Philips Electronics.

"The easy money has been made," says Philippe Brugère-Trélat, portfolio manager of the Mutual European Fund at Franklin Templeton Investments. The fund has about $2 billion in assets and charges 1.43%. It has gained 23% over the past year through Thursday, according to Morningstar.

The second risk is that Europe's deep problems haven't been solved.

Persistent unemployment, particularly among the young, hampers the outlook for consumer spending and growth. Coming elections in Germany and elsewhere are reminders of the potential for upheaval, and weakness in Europe's export markets could also hit Europe-based stocks.

"There are still plenty of pitfalls," says Tim Stevenson, a manager of the €2.2 billion Henderson Horizon Pan European Equity Fund at Henderson Global Investors in London. The fund isn't open to investors in the U.S.

Stock buyers also need to be alert to how central-bank actions could affect currency movements—and returns. If the U.S. Federal Reserve tightens monetary policy sooner than the European Central Bank, the dollar could strengthen against the euro, reducing returns for U.S. investors—though the shift could also boost the prospects of European companies, particularly exporters.

Despite the caveats, further signs that the old world's economy has new life, such as a rise in corporate earnings, could send European stocks higher, fund managers say.

Here is what investors need to know about industries that could benefit, and the developments that could propel stocks in those areas higher:

Catering to consumers. Any investor betting on a European revival should understand how bad things seem to the average consumer there. Here is a simple way to look at it: 55% of respondents in the biannual Eurobarometer survey released last month believe "the worst is still to come" for the job market.

That counted as good news. In the fall of 2012, 62% of respondents felt that way.

Ordinary Europeans have been so battered during years of crisis that the threshold for improvement is low. That means companies catering to those beleaguered consumers could be among the first to feel the impact if the fledgling economic recovery takes hold.

Among the candidates are firms such as consumer-goods giant Unilever and cosmetics firm L'Oréal, fund managers say. Both are sprawling multinationals, but they also rely on Europe for a significant portion of their sales.

Companies that sell products to relatively well-heeled consumers also could profit from an improving economy, if their customers feel freer to spend. Risteard Hogan, who manages the Fidelity Europe Fund, likes Christian Dior, whose shares are trading at a lower multiple of earnings over the past 12 months than the Stoxx Europe 600, based on FactSet data. Dior's shares are up 17% over the past year.

Mr. Hogan also likes Marr, an Italian food distributor, which he says is "benefiting from consolidation in the domestic market." Marr's shares are up 25% over the past year. The Fidelity mutual fund has $756 million in assets and charges 0.80% in fees, according to Morningstar.

Firms such as Spain's Industria de Diseño Textil, or Inditex, which owns fashion stores such as Zara and Massimo Dutti, illustrate the opportunity and the risk for investors considering buying shares now. The company's shares are up 19% over the past year, in Spanish trading, and are trading at a higher multiple of earnings than the Europe index, according to FactSet.

"Inditex has impressively been able to retain sales growth despite being a Spanish company," says Franz Weis, a fund manager for the €1.2 billion Comgest Growth Europe fund, which isn't distributed in the U.S. He says the company has been able to do this by opening stores in new markets internationally.

Yet Mr. Weis says he reduced his stake in recent months because the stock had become more expensive.

"Sales have been strong, but if there was a recovery, there would be further growth," he says.

Socking money away. The global financial crisis pounded European banks in 2008. They got pummeled again when debt woes seemed poised to torpedo the euro more recently.

That helps explain why some investors think there is still opportunity for European bank stocks to climb higher, even though the Stoxx Europe 600 Banks, an index that tracks the performance of 47 large banks, has already risen 29% over the past year.

But given the persistent and often unpredictable risks banks face—and the fact not all of them maximized the opportunity to boost their capital in recent years—this is one sector where it is particularly important to be picky. Regulatory pressure to shore up balance sheets and sell assets also poses challenges for the region's banks.

Mr. Tenerelli of T. Rowe Price highlighted Société Générale as one strong bank stock. The French bank said earlier this month that second-quarter net profit more than doubled from a year prior. "I think financials are still a great opportunity, and I think they are going to be multiyear recovery stocks," he says.

The bank's shares have risen 68% in the past year but are trading at a lower multiple of earnings than the Stoxx Europe 600, according to FactSet.

Ann Steele, a London-based fund manager at Threadneedle Investments, a unit of Ameriprise Financial, says she has increased holdings of Swiss bank UBS over the past year, and it now represents 3% of the portfolio in the Threadneedle Pan European Fund she manages. The fund isn't available to U.S. investors.

UBS restructured its investment bank last year and is increasingly focused on wealth and asset management, which she thinks improves the bank's outlook. Shares in UBS are up 74% over the past year.

"I think there's much more room" for the stock to rise, she says. Ms. Steele says that, even though UBS trades "like an expensive bank" today, she thinks its focus on wealth management gives it further potential for gains.

Nicholette MacDonald-Brown, a London-based fund manager who runs the Schroder ISF European Total Return fund, favors DNB, a Norwegian financial-services group. Shares are up 46% in the past year in Oslo trading. By some measures, shares are trading at a lower valuation than the Europe index.

For investors seeking broad exposure, the iShares MSCI Europe Financials ETF holds shares of many of the region's largest financial firms, including banks and insurers. The fund has $183 million in assets and charges 0.48% in fees. Shares are up 39% over the past year.

Hitting the road. High unemployment, austerity measures and recession also have kept many Europeans closer to home.

Fund managers who are bullish on the sector are betting livelier consumers may get out and about more often, generating business for airlines, toll-road operators and the like.

Toll-road operators in Spain, Italy and Portugal all reported drops in traffic volumes in the first half of the year, a trend highlighted in a recent note from Moody's Investors Service. The ratings firm highlighted first-half traffic figures from Atlantia ATL.MI 0.00%in Italy, Brisa Concessão Rodoviária in Portugal and Società Iniziative Autostradali e Servizi as challenges for the firms.

Some fund managers say this presents a buying opportunity for those companies, because traffic is down disproportionately to declines in gross-domestic-product growth in those markets.

Atlantia is one of the biggest holdings in the Europe fund that Ms. MacDonald-Brown runs. Its shares are up 25% over the past year. The firm is "very exposed to any form of recovery," she says.

Discount airlines such as Ryanair Holdings and easyJet remain popular choices in the airline sector. Ms. Steele of Threadneedle says International Consolidated Airlines Group has upside following the restructuring of Iberia, one of its airline brands, and signs of a mild recovery in Spain.

"Iberia has the potential to contribute more than it has to date," she says. Shares have more than doubled over the past year, in London trading.

Mr. Brugère-Trélat's Franklin fund has French hotel firm Accor as one of its top holdings. As the company increasingly licenses its hotel brands, such as Sofitel and Ibis, and lowers the proportion of properties it runs, it will see a "significant increase in the return on capital employed," he says.

Keeping aging Europeans healthy. While many fund managers focus on which sectors will benefit if the economy keeps improving, others are finding opportunities in the continent's aging population and its rising health-care needs.

Simon Edelsten, fund manager of the £36 million ($56 million) Artemis Global Select Fund, said European health-care stocks look like a better value than other sectors there. The fund invests globally, but about 20% of its assets are invested in European stocks. The fund isn't distributed to U.S. investors.

"It's the more cyclical areas that we've been cautious about," Mr. Edelsten said.

Thorsten Winkelmann, manager of the €4.4 billion Allianz Europe Equity Growth fund at Allianz Global Investors, favors Novo Nordisk . The Nordic pharmaceuticals company recently raised its earnings estimates and said it is expecting sales growth of 11% to 13% for the year. One of its strengths is in products for people with diabetes.

Novo Nordisk's shares have risen 4% over the past year, in Danish trading. The Allianz fund isn't available to U.S. investors.

U.K. health-care company GlaxoSmithKline, Germany's Bayer, French drug company Sanofi and Swiss pharmaceutical company Novartis were other top picks for European equity-fund managers.

The stocks are often among the top holdings of ETFs offering sector-specific exposure globally. For example, BlackRock's iShares and State Street Global Advisors' SPDR ETF unit both offer funds for U.S. investors that give investors exposure to the health-care sector world-wide.

Write to Liam Pleven at liam.pleven@wsj.com

A version of this article appeared August 24, 2013, on page B7 in the U.S. edition of The Wall Street Journal, with the headline: Stock Investors Embark on a European Tour.

http://online.wsj.com/article/SB10001424127887323980604579028843275327248.html?KEYWORDS=investors+embark

Commerzbank (PC) (CRZBY)
10.325 up 1.425 (16.01%)
Volume: 32,891 @ 4:00:00 PM ET

In a word - Wow!

Commerzbank Posts Small Profit In 2Q (8/08/13)

FRANKFURT--Commerzbank AG (CBK.XE) Thursday posted a small net profit for the second quarter, as high provisions for potential losses on loans, writedowns on assets and pressured revenues overshadowed some improvements in restructuring Germany's second largest lender.

Net profit fell 84% to EUR43 million ($57 million) from EUR270 million, better than forecast, as provisions--such as for some commercial real estate and public finance assets--rose 34% to EUR537 million from EUR404 million, but were below the forecast EUR551 million. Net interest income, the main revenue driver, fell 8.7% to EUR1.63 billion from EUR1.78 billion, above the forecast EUR1.38 billion.

Commerzbank has said that 2013 will be a year of transition in its four-year restructuring plan to strengthen its four main business units by 2016, while shedding other assets that were transferred to an internal "bad bank" a year ago. In 2013, the bank expects loan loss provisions to remain above 2012 levels as it gradually reduces the bad bank's assets, which include public finance, commercial real estate finance and ship finance portfolios.

Costs will be capped at EUR7 billion, and revenues in the retail bank and in the business with German medium-sized banks will steady, the bank said. The assets in the bad bank will drop well below EUR90 billion by the end of the year, helped by the sale of a portfolio of U.K. commercial real estate loans worth around EUR5 billion in the second quarter.

Under the plan announced in November, Commerzbank plans to cut 5,200 jobs, reduce the group's costs compared with revenues and invest in retail operations to grow its customer base and revenues. Together, the retail bank, the business with German medium-sized companies, the small investment bank and the Central and Eastern European business are targeting an after-tax return on equity of above 10%, a cost-income ratio of around 60%, and a 9% key capital ratio under future regulations for European banks by 2016. The bank hopes to achieve the 9% capital ratio by the end of 2014.

In the second quarter, Commerzbank raised EUR2.5 billion in capital to wean itself off the German government aid that was needed in early 2009, by repaying the final part of non-voting shares the government held. The government now only holds a 17% equity stake in the bank.

Due to the U.K. portfolio sale, risk-weighted assets were reduced by EUR1.5 billion, but there will be charges of EUR179 million in 2013, the bank has said. Of this, around EUR134 million would be booked in the second quarter, Commerzbank said.

It also reduced the assets in the bad bank further in the three months to June, by EUR7 billion to EUR136 billion. With the U.K. portfolio sale, that number will drop to EUR131 billion.

Write to Ulrike Dauer at ulrike.dauer@dowjones.com

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