FRANKFURT (dpa-AFX) - Commerzbank AG (CRZBY.PK) on Thursday reported a higher profit for the fourth quarter, helped by cost reductions and lesser provisions for bad loans. This was despite losses on Greek bonds and the unabated euro zone debt crisis.
The German lender also announced plans to further boost its capital structure by exchanging hybrid capital instruments and debt securities for a maximum of 511.34 million of its new shares. Following this, the bank's Core Tier 1 capital would be increased by more than 1 billion euros. Core Tier 1 ratio - a measure of the bank's capital adequacy, was stable at 9.9 percent as of December 2011.
For 2011 as a whole, net income plunged due to losses on Greek investments resulting from the European sovereign debt crisis. Chairman Martin Blessing said, '2011 was characterised for Commerzbank by a successful first six months and difficult market conditions in the second half of the year.'
In the quarter, loan loss provisions dropped to 381 million euros from 595 million euros last year. For the year, such provisions fell more than 40 percent in particular due to a successful restructuring of loans, the company noted.
In the year, the entire sovereign bond exposure in the GIIPS (Greece, Ireland, Italy, Portugal, and Spain) countries was reduced by 4.5 billion euros to 12.3 billion euros.
Looking ahead, the bank projects solid operating profit in its core bank in 2012, even though the uncertainty associated with the European sovereign debt crisis will continue to pose challenges. The company is targeting a further cost reduction to less than 7.6 billion euros in 2012.
In the fourth quarter, consolidated profit attributable to the shareholders grew to 316 million euros from prior year's 257 million euros. This was also an improvement from the third-quarter's net loss of 687 million euros. These results reflect reduced operating expenses.
A 735 million euros positive one-off effect from the repurchase of hybrid equity instruments was offset by a further write-down on Greek sovereign bonds of nearly 700 million euros and a write-down of corresponding interest rate derivatives used for hedging, the company noted.
Quarterly operating profit dipped to 163 million euros from 256 million euros a year ago, as net interest income fell to 1.62 billion euros from 1.68 billion euros a year ago. Net investment income was negative 1.40 billion euros, compared to prior year's positive 191 million euros.
The aggregate principal amount of all capital instruments in the capital boost plan announced today offer invitation amounts to approximately 3.16 billion euros. The exchange offer period starts today and is expected to end on March 2.
This transaction is in addition to the measures announced in January to fulfill the additional capital requirements of the European Banking Authority or EBA. Upon successful execution, the already significantly reduced EBA capital requirements of 1.8 billion euros as of year end 2011 could be further reduced to less than 0.8 billion euros, the company said.
If the transaction is completed to the full extent, the bank would have already reduced the EBA capital requirements, originally 5.3 billion euros, by approximately 85 percent.
On Frankfurt's Xetra, Commerzbank shares are currently trading at 1.99 euros, down 0.08 euros or 3.67 percent.
Copyright RTT News/dpa-AFX