Commerzbank 2Q net loss of $1.07 billion

[August 06, 2009]  FRANKFURT (AP) -- Germany's Commerzbank AG Thursday reported a loss of euro746 million ($1.1 billion) for the second quarter as the effects of the financial crisis continued to weigh on Germany's second largest lender.

The Frankfurt-based bank said it lost euro746 million ($1.1 billion) in the April-June period, compared with a profit of euro817 million in the second quarter 2008.

The bank said the results included effects from weaker business in central and eastern Europe and higher loss provisions at several divisions.

The bank said however, net interest income, a measure of revenue, rose to euro1.8 billion from euro1.2 billion in the second quarter of 2008, an increase of 50 percent.

Despite the second quarter loss, it was an improvement from the first three months of the year when the bank lost euro861 million and net interest income was euro1.7 billion.

"In the second quarter we significantly reduced the operating loss when compared to the previous quarter," Martin Blessing, the company's chief executive said in a note to shareholders.

"The group's second quarter results were nevertheless unsatisfactory," he said.

The bank said it still forecasts it will become profitable by 2012, while the global economic slump should bottom out by the middle of the year and that a recovery should take hold.

Analysts at Calyon Credit Agricole said the euro201 million operating loss beat market expectations. "By business, the bank benefited from better market conditions and reduced writedowns in toxic assets," but Calyon added that "2009 will remain a challenging year for Commerzbank."

The results initially pushed Commerzbank shares to a high of euro6.25 in early Frankfurt trading, up more than 5 percent. The shares settled back to euro5.93 by late morning, up slightly from the day before.

Commerzbank said during the first half of the year, its central and eastern Europe divisions were adversely affected especially by high risk provisions because of the severe recession in the region.

The bank's loss provisions for the region increased to euro375 million from euro43 million in the first six months of 2008 as the bank sought to protect itself against soured loans and mortgages.

The increased risk provisions in the region also meant that the commercial real estate segment suffered an operating loss, Commerzbank said.

Meanwhile, net commission income contracted by 22 percent in the region to euro80 million as securities business continued to decline in the recession.

The company said the result for its corporates and markets division meanwhile improved significantly in the second quarter after having reported massive losses for the first three months of the year. The bank said that was a result of reduced write-downs on structured securities, and on some other improved results from some customer-based business lines.

Still, while the division's net interest income rose to euro510 million during the first half, so did loss provisions.

Corporates and markets loan loss provisions were up to euro478 million from euro385 million in the first half a year ago, a 24 percent increase.

Commerzbank said its business lending to mid-sized businesses made the greatest contribution to the company's results for the first six months.

Net interest income for the division rose to euro1.1 billion from euro599 million in the first half of 2008, helped by a much improved lending margin. Operating profit for the mittelstandsbank improved more than 7 percent to euro481 million. Still, even in this division, the bank had to increase its loss provision to euro309 million, "particularly due to individual exposures to larger mid-sized companies."

Commerzbank said its private customers segment also reported a profit through the integration of more retail business through the Dresdner Bank acquisition.

Commerzbank, which has suffered a string of large losses through the financial crisis, has sought about euro20 billion in aid from the German government, which now owns 25 percent of the bank.

It has also sold off assets and restructured, while earlier this year it bought Dresdner Bank from German insurer Allianz SE.

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On the Net:

http://www.commerzbank.de/

[Associated Press; By GEORGE FREY]

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