Commerzbank Group Annual report 1999 Annual report 1999 Commerzbank Commerzbank Commerzbank Highlights of Commerzbank Group 1999 1998 1997 Basic earnings per share (h) 1.83 1.91 1.51 Pre-tax earnings per share (h) 2.75 2.65 2.70 After-tax return on equity (%) 9.3 10.4 8.9 Cost/income ratio (%) 68.5 63.0 60.3 Share price (h) High 36.70 38.86 38.50 Low 24.04 20.68 19.20 Number of shares outstanding (million units) 513.6 496.1 464.0 Market capitalization (h bn) 18.72 13.57 16.06 Long-term rating Moody´s Investors Service, New York AA3 AA3 AA2 Standard & Poor´s, New York AA- AA- AA- Fitch IBCA, London AA- AA- AA- Staff 34,870 32 593 30,446 Germany 30,557 28,642 27,782 Abroad 4,313 3,951 2,664 Balance-sheet total (h m) 372,040 326,211 274,431 Risk-weighted assets according to BIS (h m) 187,709 172,117 140,472* Equity (h m) 11,141 10,060 8,765 Subscribed capital (h m) 1,335 1,267 1,185 Core capital ratio according to BIS (%) 6.3 6.3 5.9 Overall capital ratio according to BIS (%) 9.7 8.7 9.5 Income statement (h m) Net interest income 3,207 3,104 3,349 Provision for possible loan losses -689 -881 -953 Net interest income after provisioning 2,518 2,223 2,396 Net commission income 2,193 1,671 1,457 Trading profit 592 413 288 Result on financial investments 595 553 248 Operating expenses 4,476 3,612 3,172 Other operating result -51 -8 -78 Pre-tax profit 1,371 1,240 1,139 Taxes 396 298 489 After-tax profit 975 942 650 Minority interests -64 -50 -10 Net profit 911 892 640 * excl. market-price risks To our shareholders 2 Annual Report 1999 Commerzbank Group management report 6 Survey 6 Group management and services, incl. risk report 12 Retail banking and real estate 30 Corporate banking and institutions 36 Investment banking 44 Staff and welfare report 50 Our share, strategy and outlook 54 Consolidated financial statements 1999 59 Headquarters Commerzbank AG Income statement 60 Kaiserplatz Balance sheet 61 Frankfurt am Main Postal address: Statement of changes in equity 62 60261 Frankfurt am Main Cash flow statement 63 Telephone (069) 136-20 Telefax (069) 285389 Notes 64 Internet: Report of the Supervisory Board 117 http://www.commerzbank.com e-mail: [email protected] Boards, membership of other boards, heads of departments, branches and Group companies Supervisory Board 120 Central Advisory Board 121 Board of Managing Directors 122 Heads of central departments 124 Managers of domestic main branches 125 Managers of foreign branches 126 Managers of domestic subsidiaries 127 Managers of foreign subsidiaries 128 Regional Advisory Committees 129 Membership of other boards 139 Appendices The Commerzbank Group’s basic principles 4 Structure of the Commerzbank Group 29 Commerzbank worldwide 42 Our full Annual Report and also an abridged version is available in Business progress 1968/1999 143 German and English. Financial holdings of Commerzbank AG 144 ISSN 0414-0443 VKI02041 1 Keeping Commerzbank on course We are guided by the following max- remains our objective, and this we did ims, as successful banking means for successfully in 1999 as well. However, us today: in times when the economy is undergo- ing dramatic upheavals, navigation is G efficient information management not easy, as fixed points become ever given the enormous flood of data, more difficult to find. G constantly updated risk control, Dr. h.c. Martin Kohlhaussen G a competitive cost structure Chairman of the Board Globalization and the internet revolution and of Managing Directors are the most important developments G stronger selling potential for bank- on the threshold of the twenty-first ing products whose brand identity century. For us in the financial domain, provides customers with a convinc- they pose a double challenge. On the ing idea of product quality and their one hand, such secular changes require sound price/performance ratio. us to be especially careful as regards risk management; structural change in Success does not depend, therefore, the economy also entails considerable on the decision to be a universal bank and often existential threats to our or a specialist institution, and volume is customers. On the other hand, excep- only significant where economies of tionally good opportunities arise, as scale are still possible in terms of costs flexibility and the concentration of or earnings. We have concentrated our energies on selected strategic goals efforts and our investments on areas increasingly replace size and tradition which improve our base with a view to as the crucial factors behind success in the future. After the special projects of banking. the past few years, e.g. the introduc- tion of the euro and the Year 2000 A detailed risk report (see p. 15ff.) issue, which caused high non-recurring shows you how we quantify, limit and costs, our non-personnel operating systematically manage risks. The need expenses could be expected to decline. to form lower value adjustments in But in view of the great challenges, we 1999 confirms that we are obviously on still need sizeable investment in tech- the right path here. Our lighter risk nology and talent. However, we will burden and the marked improvements make very sure that our costs are held in commissions and proprietary trading within reasonable limits. enabled us to approve additional invest- ment programmes in the course of the We have not let ourselves become year, some of which have already been infected by the merger mania gripping realized. Europe's financial markets. We are continuing along our path to becoming 2 To our shareholders a profitable, focused and integrated the flexible use made of all strategic universal bank. In the future as well, options in exploring markets in Central we will maintain our own branch net- and Eastern Europe. We can now use work with its established brand name in the edge in expertise with regard to Germany; we do not intend to give up expansion into neighbouring markets in our nationwide presence, and certainly direct banking and e-commerce as well. not our business with small to medium- sized firms. We continue to see our Commerzbank does not only react to branch network as an important asset. the structural change in Europe's bank- ing markets; it also plays a role in bring- We intend to use all the important ing it about. And by actively supporting distribution channels in the future as new ideas and initiatives, we discover well. In comdirect bank, we have very promising business and strategic Europe's largest direct broker. The perspectives. formation of Commerz NetBusiness AG has also taken us a major step forward At our Annual General Meeting on May in e-commerce. 26, 2000, for which we invite you once again to Frankfurt, we will be available In our Allfinanz business – for insurance to provide further explanations and to and home loan savings products – we answer your questions. Should you be prefer to work with partners that sell unable to attend, we urge you to have our products. At the same time, we are your shares represented by proxy. You keen to have Commerzbank products, will find more details on individual including ADIG funds, sold to a greater points of the agenda, such as the extent by third parties. This approach election of new members to the Super- extends far beyond the national bor- visory Board, in the invitation to the ders. Abroad in particular, and above all AGM enclosed in this Annual Report. in Western Europe, we give coopera- tion priority over concentration. Here In the coming years, our AGM will take we seek exclusive agreements with place on May 25, 2001 and May 31, selected providers of financial services. 2002 – both to be held in Frankfurt am Such agreements are not based on Main. loose declarations of intent, but rather on concrete business plans. This distin- End-March 2000 guishes our present strategic approach from the idea behind the “banking clubs” of the seventies, but also from the current strategies of some of our competitors. In addition to cooperation agreements, Commerzbank's European strategy has other special features. These include 3 The Commerzbank Group's basic principles Strategic and organizational adjustment commitment and a friendly approach to is not enough in order to cope suc- customers. We are convinced that by cessfully with the present times of improving internal cooperation we can far-reaching change in banking. Stock- become even more successful. taking and reorientation in terms of management and cooperation are For this reason, we have launched an needed as well. The questions which internal dialogue and an exchange of have to be answered are: views on this topic throughout the Bank under the motto “Shaping the G How do we treat one another? future”. In this connection, our basic G Do we inside the Bank, among our- principles of the Commerzbank Group selves, also feel that we are were revised and updated by a team of providers of services? young executives. The stone motif which appears on the cover G Are the efforts of each one of us of our Annual Report represents the core applied at the point where they will They describe the Bank's corporate idea of our “Shaping the future initiative. have the optimal effect in terms of culture, which has developed over 130 It shows a broken circle of eleven stones; a twelfth lies ready to make the circle com- the Bank's overall performance? years of history and tradition.