Focusing on what really matters Annual Report 2008 About Commerzbank ›› Facts and figures Highlights of Commerzbank Group Income statement 2008 2007 Operating profit (€ m) – 378 2,513 Operating profit per share (€) – 0.56 3.83 Pre-tax profit (€ m) – 403 2,505 Consolidated surplus1 (€ m) 3 1,917 Earnings per share (€) 0.00 2.92 Operating return on equity2 (%) – 2.6 18.7 Cost/income ratio in operating business (%) 77.0 64.2 Return on equity of consolidated surplus1, 2 (%) 0.0 15.4 Balance sheet 31.12.2008 31.12.2007 Balance-sheet total (€ bn) 625.2 616.5 Risk-weighted assets (€ bn) 221.8 237.4 Equity (€ bn) as shown in balance sheet 19.9 16.1 Own funds (€ bn) as shown in balance sheet 34.9 30.6 Capital ratios Core capital ratio (%) 10.1 6.9 Own funds ratio (%) 13.9 10.8 Long / short-term rating Moody’s Investors Service, New York Aa3 / P-1 Aa3 / P-1 Standard & Poor’s, New York A / A-1 A / A-1 Fitch Ratings, London A / F1 A / F1 Operating profit (€ m) Return on equity of consolidated surplus1 (%) – 378 2008 2008 0 2007 2,513 2007 15.4 2006 2,649 2006 14.2 2005 1,757 2005 12.8 2004 1,011 2004 4.0 1 Insofar as attributable to Commerzbank shareholders. 2 Excluding cash flow hedges and minority interests. About Commerzbank As a large, integrated bank, Commerzbank is one of Europe’s leading financial institutions and the second-largest in Germany. Since its acquisition of Dresdner Bank in January 2009, Commerzbank has grown to become Germany’s leading bank for private and corporate customers. Today, the new Commerzbank serves a total of more than 14 million private and corporate customers. Commerzbank is a competent service provider for private and business customers as well as small and mid-sized companies, while also serving numerous large and multinational cor- porate customers. It aims to be the best bank for its key target groups. With some 1,200 branches, the new bank will have the densest branch network of all German banks, and Commerzbank customers will continue to benefit from an increasingly broad and attractive range of products and advisory services. What’s more: Commerzbank’s clear commitment to the German market makes it an even stronger long-term partner that perfectly unites the ex- pertise and know-how of the two institutions. With a strong partner you can achieve anything. This is the idea that underpins everything Commerzbank does. Achieving success through the perfect combination of performance and partnership – that’s what the Commerzbank brand stands for. We aim to achieve success for our customers, and we do that though hard work and dedi- cation, high service quality and a thorough understanding of our customers’ needs. Our reward is the trust that customers place in us again and again. That trust is what makes the equity of the Commerzbank brand – a value we intend to keep building in the years ahead: for our customers in Germany and throughout the world, for our future as a bank and as a company. High performance and a talent for innovation have made Commerzbank a premier name in the German and European markets. Ever since 1870, when Commerzbank was founded in Hamburg, customers have been able to put their trust in us. Commerzbank and its expertise will be there for them in the future too. Structure of Commerzbank Group Board of Managing Directors Segments Central and Commercial Private Customers Mittelstandsbank Corporates & Markets Eastern Europe Real Estate Operating units Private and Corporate Banking Central and Client Relationship CRE Germany Business Customers Eastern Europe Management Small and Medium CRE Abroad Wealth Management Enterprises Germany I Risk Management Corporate Finance Real Estate Small and Medium Central and Direct Banking Equity Markets & Asset Management Enterprises Germany II Eastern Europe Commodities Credit Large corporates Germany Shipping Fixed Income COO Corporates International COO Research Employee Integration Financial Institutions Risk Management Sales Commercial Real Estate Risk Management COO and Shipping Private and Risk Management London Business Customers Mid Caps and America Financial Institutions Public Finance COO Risk Management Corporates & Markets All staff and management functions are bundled into the Group Management division. Information Technology, Transaction Banking and Organization are provided by the Services division. Focusing on our customers P.58 P.68 P.76 P.82 P.88 P.96 P.106 despite the turbulence caused by the financial market crisis Commerzbank laid the foundations for ongoing growth. Acquiring Dresdner Bank and founding the first cus- tomer advisory council at a German bank strengthened our position as a competent partner for private and business customers and for the SME sector in Germany, Eastern Europe and further afield. Commerzbank is on the right track because we are focusing on our principal asset: our customers. Focusing on our strengths is a recipe for success that we, as a company, share with many of our customers. The people mentioned in this report are a good example of this approach. They are remarkably successful because they have concentrated on their strengths. Achieving growth thanks to our clear customer focus In 2008, the financial markets and banking sector faced great challenges world- wide – a situation which will continue in 2009. Despite this difficult environ- ment, we took important steps in the past business year towards establishing Commerzbank as the leading bank in Germany for private customers and SMEs. The takeover of Dresdner Bank was the most significant milestone in this respect. The global banking sector is about to see a reshuffling of the cards, with many institutions undergoing extensive restructuring. By continuing our strategic reorientation in key business areas, 2008 already saw us create the conditions for consolidating and reinforcing our market position. Thanks to our clear customer focus, we are laying the foundations on which to deliver a ”new” Commerzbank built on strength and efficiency. martin blessing Chairman of the Board of Managing Directors +574,000 Our private customer base rose by this amount in 2008; we now have 6.1 million private customers in Germany. +37.4% The extent to which operating profit grew in our Private Customers segment in 2008. +51% The exceptional percentage increase in the number of customers within our Central and Eastern Europe segment in 2008. €46.0bn This is the total volume of loans outstanding to German SMEs as per the fourth quarter of 2008. Our customer-driven business provides security The unusually volatile markets impacted upon almost all banking industry services in 2008. We were able to respond to this challenging environment thanks to solid liquidity management and a healthy funding structure. A substantial increase in customer deposits and a silent participation by the Special Fund for Financial Market Stabilization (SoFFin) also provided a welcome buffer. Our customer-oriented business played a role in keeping our liquidity within a comfortable range over the entire year. In its business policies Commerzbank generally opts for funding with matching maturities. We will continue this approach and further strengthen the liquidity base of the new Commerzbank by consistently focusing on our customers. martin blessing Chairman of the Board of Managing Directors +€20bn During the past year, customer deposits rose by this amount – or 25% – to €101bn. 1.14 Our key liquidity ratio at the end of 2008 – comfortably in excess of the 1.0 target. €19.9bn At 23.4% above the prior-year figure, this was our equity capital at the end of 2008 – which included €8.2bn from the SoFFin silent participation. Survey of the Commerzbank Cover 2 to 8 To our Shareholders Page 06 to 26 Corporate Responsibility Page 28 to 50 Group Management Report Page 52 to 184 Group Financial Statements Page 186 to 292 Further Information Page 294 to 313 Contents Contents C2 – C8 C2 Facts and figures C3 About Commerzbank C4 Structure of the Group C5 Commerzbank worldwide C7 Five-year overview C8 Financial calendar, contact addresses 04 Most important events of 2008 06 – 26 06 Letter from the Chairman of the Board of Managing Directors 12 The Board of Managing Directors 14 Report of the Supervisory Board 20 Supervisory Board and Committees 22 Our share 28 – 50 28 Corporate Governance Report 31 Remuneration Report 43 Corporate Responsibility 52 – 184 52 Business and overall conditions 60 Segment performance 60 Private Customers 70 Mittelstandsbank 81 Central and Eastern Europe 92 Corporates & Markets 101 Commercial Real Estate 108 Earnings performance, assets and financial positions 111 Our staff 116 Report on post-balance sheet and events 117 Outlook and opportunities report 124 Risk Report 186 – 292 189 Group Financial Statements 190 Balance sheet 191 Statement of changes in equity 193 Cash flow statement 195 Notes 292 Auditors’ Report 294 – 313 294 Central Advisory Board 295 Regional Advisory Committees 306 Seats on other boards 310 Glossary Commerzbank Annual Report 2008 Most important events of 2008 Acquisition of Dresdner Bank Commerzbank becomes the leading bank in Germany for private and corporate customers. Q1 / 08 Q2 / 08 Commerzbank brought its public finance business under Following the Annual General Meeting in May, the long- one roof by merging Hypothekenbank in Essen with Euro- standing Chairman of the Board of Managing Directors, hypo at the start of the year. Central and Eastern European Klaus-Peter Müller, abdicated his position to become business was also restructured and consolidated into one Chairman of the Supervisory Board. Martin Blessing segment encompassing all activities in the region. became the new Chairman of the Commerzbank Board of Managing Directors. In February the bank posted a record result for 2007. The consolidated surplus rose by 20% to €1.9bn.