Commerzbank Aktiengesellschaft - CMVM
Commerzbank Aktiengesellschaft - CMVM
Commerzbank Aktiengesellschaft - CMVM
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<strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong><br />
Head-office: Kaiserplatz, 60261 Frankfurt am Main, Federal Republic of Germany<br />
A corporation according to the German Stock Corporation Act<br />
Registered Share Capital: EUR 1,554,430,813.00<br />
Commercial register number: HRB 32 000<br />
ANNUAL REPORT 2003
AVISO<br />
A Comissão do Mercado de Valores Mobiliários, ao abrigo do disposto no n.º 3 do artigo<br />
250º do Código dos Valores Mobiliários, dispensou a publicação das contas individuais.<br />
Os documentos de prestação de contas alvo desta dispensa encontram-se disponíveis<br />
para consulta, juntamente com os restantes, na sede do <strong>Commerzbank</strong>.
SECTION 1<br />
INDEX<br />
ANNUAL REPORT............................................................................................................................................1<br />
BALANCE SHEET .........................................................................................................................................85<br />
STATEMENT CHANGES IN EQUITY ...................................................................................................................86<br />
CHANGES IN MINORITY INTERESTS .................................................................................................................87<br />
CASH FLOW STATEMENT..............................................................................................................................88<br />
NOTES........................................................................................................................................................90<br />
AUDITOR’S REPORT ...................................................................................................................................172<br />
SUPERVISORY BOARD REPORT ...................................................................................................................173<br />
SECTION 2<br />
INDIVIDUAL ACCOUNTS OF COMMERZBANK AG ............................................................................................216<br />
SECTION 3<br />
EXTRACT FROM THE MINUTES OF COMMERZBANK GENERAL MEETING OF MARCH 31..........................................216<br />
SECTION 4<br />
INFORMATION ON COMPANIES WITH SHAREHOLDING INTERESTS ON THE ISSUER................................................217
annual report 2003
highlights of <strong>Commerzbank</strong> group<br />
Income statement<br />
2003 2002<br />
Operating profit (7 m) 559 192<br />
Operating profit per share (7) 1.03 0.36<br />
Pre-tax profit (7 m) –1,980 –372<br />
Net loss (7 m) –2,320 –298<br />
Net loss per share (7) –4.26 –0.56<br />
Operative return on equity (%) 4.9 1.6<br />
Cost/income ratio in operative business (%) 73.3 77.3<br />
Pre-tax return on equity (%) –17.4 –3.1<br />
Balance sheet<br />
31.12.2003 31.12.2002<br />
Balance-sheet total (7 bn) 381.6 422.1<br />
Risk-weighted assets according to BIS (7 bn) 140.8 160.2<br />
Equity as shown in balance sheet (7 bn) 9.1 8.8<br />
Own funds as shown in balance sheet (7 bn) 18.7 19.3<br />
BIS capital ratios<br />
Core capital ratio, excluding market-risk position (%) 7.6 7.5<br />
Core capital ratio, including market-risk position (%) 7.3 7.3<br />
Own funds ratio (%) 13.0 12.3<br />
<strong>Commerzbank</strong> share<br />
Number of shares issued (million units) 597.9 542.2<br />
Share price (7, 1.1.–31.12.) high 17.58 21.29<br />
low 5.33 5.04<br />
Book value per share *) (7) 17.37 18.98<br />
Market capitalization (7 bn) 9.3 4.0<br />
Customers 6,840,000 6,039,000<br />
Staff<br />
Germany 25,426 28,603<br />
Abroad 6,951 7,963<br />
Total 32,377 36,566<br />
Short/long-term rating<br />
Moody’s Investors Service, New York P-1/A2 P-1/A2<br />
Standard & Poor’s, New York A-2/A- A-2/A-<br />
Fitch Ratings, London F2/A- F2/A-<br />
* ) excluding cash flow hedges
structure of commerzbank group<br />
Group<br />
Management<br />
Staff<br />
departments<br />
● Accounting and Taxes<br />
● Compliance and<br />
Security<br />
● Corporate<br />
Communications and<br />
Economic Research<br />
● Financial Controlling<br />
● Group Treasury<br />
● Human Resources<br />
● Internal Auditing<br />
● Legal Services<br />
● Risk Control<br />
● Strategy and Controlling<br />
Retail Banking and<br />
Asset Management<br />
● Asset Management<br />
● Credit Operations<br />
Private Customers<br />
● Private Banking<br />
● Retail Banking<br />
Board of Managing Directors<br />
Corporate Divisions<br />
Banking<br />
departments<br />
Corporate and<br />
Investment Banking<br />
● Corporate Banking<br />
● Financial Institutions<br />
● Global Credit Operations<br />
● Multinational Corporates<br />
● Real Estate<br />
● Securities<br />
Domestic and foreign branch network<br />
Cooperation in bancassurance area<br />
Services<br />
Service<br />
departments<br />
● Global Operations<br />
Investment Banking<br />
● IT Development<br />
● IT Investment Banking<br />
● IT Production<br />
● IT Support<br />
● Organization<br />
● Transaction Banking<br />
● Hypothekenbank in<br />
Essen AG<br />
● Erste Europäische<br />
Pfandbrief- und<br />
Kommunalkreditbank AG<br />
● EUROHYPO AG<br />
● Korea Exchange Bank<br />
Group companies and major holdings<br />
● COMINVEST Asset<br />
Management GmbH<br />
● ADIG-Investment<br />
Luxemburg S.A.<br />
● AFINA Bufete de Socios<br />
Financieros, S.A.<br />
● Caisse Centrale<br />
de Réescompte, S.A.<br />
● CICM Fund Management<br />
Limited<br />
● Commerz International<br />
Capital Management<br />
(Japan) Ltd.<br />
● Jupiter International<br />
Group plc<br />
● <strong>Commerzbank</strong> Europe<br />
(Ireland)<br />
● <strong>Commerzbank</strong><br />
International S.A.<br />
● <strong>Commerzbank</strong><br />
(South East Asia) Ltd.<br />
● <strong>Commerzbank</strong><br />
(Switzerland) Ltd<br />
● comdirect bank AG<br />
● COMMERZ PARTNER<br />
Beratungsgesellschaft für<br />
Vorsorge- und Finanzprodukte<br />
mbH<br />
● Commerz Service GmbH<br />
● BRE Bank SA<br />
● <strong>Commerzbank</strong><br />
(Budapest) Rt.<br />
● <strong>Commerzbank</strong><br />
(Eurasija) SAO<br />
● <strong>Commerzbank</strong><br />
(Nederland) N.V.<br />
● Commerz (East Asia) Ltd.<br />
● P.T. Bank Finconesia<br />
● Commerz Grundbesitzgesellschaft<br />
mbH<br />
● CommerzLeasing und<br />
Immobilien AG<br />
● CBG Commerz<br />
Beteiligungsgesellschaft<br />
Holding mbH<br />
● <strong>Commerzbank</strong> Capital<br />
Markets Corp.<br />
● Commerz Futures, LLC<br />
● Commerz Securities<br />
(Japan) Co. Ltd.<br />
● Commerz Business<br />
Consulting AG<br />
● pdv.com<br />
Beratungs-GmbH<br />
● SOLTRX Solutions for<br />
financial business GmbH<br />
● TC TrustCenter AG
‡ What happens if somewhere in the world a<br />
new trend appears? ‡ your phone rings ‡ you<br />
shouldn’t chase after opportunities, but rather meet them head-on.<br />
But who lets you know where things are happening and what’s<br />
promising? We do, for example. When we find something suitable,<br />
we tell you immediately.<br />
‡ ideas ahead ‡<br />
////// www.commerzbank.com / ////////////////////////////////////////////////////////////<br />
‡ what do we do with funds that are better<br />
than our own? ‡ we get them into the team ‡<br />
how does a successful team come about? You look for the best. And<br />
that’s precisely how we select our funds for you. For this purpose, we<br />
perform a completely neutral analysis of thousands of offers. And if<br />
the funds of other companies are interesting, we recommend them.<br />
‡ ideas ahead ‡<br />
‡ What should an optimal propertyfinancing<br />
deal look like? ‡ how you<br />
want it to ‡ Our mixture for an individual financing<br />
plan: a calculation of your financial possibilities, planning<br />
involving state promotion funds and attractive<br />
interest-rate conditions, and finally A thorough technical<br />
check of the object of your choice. This all adds up to a<br />
package ideally suited to your needs.<br />
‡ ideas ahead ‡<br />
////// www.commerzbank.com / ////////////////////////////////////////////////////////////<br />
‡ What if you have more important things to<br />
do than to go to your bank? ‡ then we simply<br />
come to you ‡ you can settle a lot of things by phone or<br />
online, but not everything. We prefer to discuss with you personally<br />
what is crucial for you. anywhere you wish.<br />
‡ ideas ahead ‡<br />
‡ With whom do german companies do the<br />
best deals abroad? ‡ with commerzbank ‡<br />
SEDUS stoll ag, one of germany’s largest producers of office furniture,<br />
draws upon our experience. Just as other companies have<br />
for decades. That’s why we’re involved in 16% of germany’s overall<br />
external trade today. When are you coming to us?<br />
‡ ideas ahead ‡<br />
////// www.commerzbank.com / ////////////////////////////////////////////////////////////<br />
‡ it’s quite normal to be available for customers<br />
at all hours ‡ we think so, at any<br />
rate ‡ you can always reach us. By using our self-service zones<br />
and our extensive online services, Giving retail and corporate<br />
customers all they need in the way of banking.<br />
‡ ideas ahead ‡<br />
////// www.commerzbank.com / //////////////////////////////////////////////////////////// ////// www.commerzbank.com / //////////////////////////////////////////////////////////// ////// www.commerzbank.com / ////////////////////////////////////////////////////////////
‡ ideas ahead ‡<br />
or: how do we get our message across?<br />
In banking, the advertising “battle” for cus- The translation of the slogan<br />
tomers primarily takes place at the emotional into advertising takes account<br />
level: how can we position our Bank such that of the various target groups,<br />
our customers both have more trust in us and but addresses them in the<br />
think we are capable of more than our rivals? same tonality: for Commerz-<br />
/<br />
bank, much is matter-of-course<br />
/<br />
which for others is quite the<br />
Based on a broad survey of various target exception. <strong>Commerzbank</strong> has<br />
groups in Germany, France and Italy, we surprisingly straightforward<br />
have identified two key points distinguishing solutions for apparently complex<br />
us from our competitors: our customers are problems. Our advertising identi-<br />
relatively well satisfied with <strong>Commerzbank</strong>. fies the problem and presents a<br />
Non-customers imagine that, as a “small” convincing, target-group-oriented<br />
major bank, we are more flexible, creative solution.<br />
and act more quickly than our competi- /<br />
tors.<br />
/<br />
/<br />
The motifs used as images in our<br />
/<br />
advertising – and which appear as<br />
The right positioning for <strong>Commerzbank</strong> illustrative material throughout this<br />
is, therefore: “<strong>Commerzbank</strong> is a cre- report – repeatedly show people in<br />
ative major bank. In an interactive situations that tell entire stories in<br />
relationship with customers and its combination with the headline. Ex-<br />
business associates, it offers the best citing, unusual, surprising and striking,<br />
financial services.” That is the starting but always in close touch with the<br />
point for all our advertising messages topic. We are the flexible bank which is<br />
and presentations. The core concept full of ideas in responding to customers’<br />
“creativity” distinguishes us, for one wishes. The deliberate use of colour,<br />
thing, from our competitors and, for contrast and sharpness depicts reality<br />
another, it entails a promise.<br />
as more attractive and impressive than<br />
/<br />
it actually is. Small is made larger and the<br />
/<br />
normal more unusual. The campaign is<br />
Our slogan “ideas ahead” sums intended to make an impression; it should<br />
this up. It serves as a “heightened also polarize and arouse curiosity about<br />
translation” of the expectations <strong>Commerzbank</strong>. For we have ideas, and they<br />
placed in us and at the same<br />
time embodies what we offer<br />
customers by way of creative<br />
cooperation. It enhances the<br />
Bank’s attractiveness, makes it<br />
more sympathetic and arouses<br />
curiosity for its services. It has<br />
a motivating impact on staff,<br />
but also calls upon them to<br />
generate new ideas.<br />
get our customers ahead.
contents<br />
Management report<br />
Survey of the <strong>Commerzbank</strong> Group 6<br />
Corporate governance at <strong>Commerzbank</strong> 14<br />
Retail banking and asset management 20<br />
Corporate and investment banking 30<br />
Staff and welfare report 40<br />
Our share, strategy and outlook 46<br />
Risk report 52<br />
Financial statements of the <strong>Commerzbank</strong> Group 2003<br />
Overview 80<br />
Income statement 83<br />
Balance sheet 85<br />
Statement of changes in equity 86<br />
Cash flow statement 88<br />
Notes 90<br />
Group auditors’ report 172<br />
Report of the Supervisory Board 173<br />
Boards, seats on other boards,<br />
Group managers, managers of branches and Group companies<br />
Supervisory Board 177<br />
Central Advisory Board 179<br />
Board of Managing Directors 180<br />
Regional Board Members and CIO 182<br />
Group managers 183<br />
Managers of domestic main branches 184<br />
Managers of larger corporates centres 184<br />
Managers of foreign branches 185<br />
Board of Trustees of <strong>Commerzbank</strong> Foundation 185<br />
Managers of domestic Group companies 186<br />
Managers of foreign Group companies 187<br />
Regional Advisory Committees 188<br />
Seats on other boards 201<br />
Tables and charts<br />
Glossary 206<br />
Index 211<br />
Business progress 1968-2003 212<br />
Front inside cover: Structure of the <strong>Commerzbank</strong> Group<br />
Back inside cover : <strong>Commerzbank</strong> worldwide
Klaus-Peter Müller March 2004<br />
Chairman of the Board<br />
of Managing Directors<br />
<strong>Commerzbank</strong> is now a better bank. Step by step, we have made progress<br />
towards restoring a satisfactory level of profitability. Naturally, our customer<br />
and our employee orientation have not been overlooked in the<br />
process. Quite the contrary – these are essential if we want to be successful<br />
in the long term. We want to be a highly efficient, credible and<br />
trustworthy partner in financial matters for everyone, for the entire public<br />
at large.<br />
While the disappointment on the part of the employees affected is understandable,<br />
the cancellation as of December 31, 2004, of the Bank’s internal<br />
agreements on the company pension scheme based on the last net<br />
salary drew some very polemical, and for the most part poorly informed,<br />
commentaries in the public sphere. We were unable to communicate in<br />
an appropriate form and adequately the crucial point – namely, that our<br />
company pensions as well should be made calculable and should be<br />
maintained for future generations.<br />
In the meantime, we have held sober and constructive negotiations at our<br />
Bank. We are grateful to the staff council and the senior staff representatives<br />
for helping us to search for an adequate solution. Together with the<br />
central staff council, we had established the framework for a new definedcontribution<br />
company pension by mid-February. The details are to be<br />
agreed upon by mid-year.
We expressly support the institution of the company pension scheme as<br />
an ever more important pillar in Germany’s system of old-age provision.<br />
However, it is essential for companies that their future expenses – as part<br />
of their wage-related costs – can be calculated clearly and remain within<br />
a tolerable framework.<br />
We were quicker and better at convincing people as regards the outcome<br />
of our painful restructuring phase, which began in mid-2001. Now that<br />
existing capacities have been adjusted to the weaker demand for banking<br />
services, there is fresh scope for expansion which we are going to use in<br />
a selective manner. One example here is the recently agreed takeover of<br />
SchmidtBank. As a result, we have not only increased our customer base<br />
by about ten per cent, but have also strengthened our presence in an area<br />
where <strong>Commerzbank</strong> was previously hardly represented at all.<br />
Our capital base is strong enough to support further acquisitions or<br />
organic growth. Any restrictions in this respect tend to be imposed by the<br />
rigid “three-pillar structure” of the German banking market. It is still not<br />
possible to say whether and at what point politicians will be in a position<br />
to reform this – in our view – outdated model, which is unique among industrial<br />
nations. However, the international criticism on the part of the<br />
EU Commission in Brussels and the IMF in Washington has apparently<br />
triggered a process of rethinking, as has the attempt by the city parliament<br />
in Stralsund to sell the local savings bank.<br />
<strong>Commerzbank</strong> at any rate has completed its fitness cure and is now on the<br />
way to becoming the “first choice” for retail customers in Germany. We<br />
are focusing intensively on Mittelstand firms, as here, too, we intend to<br />
become the “number one” nationwide in this segment. At the same time,<br />
we want to be an interesting relationship partner for European larger<br />
corporates and multinationals. Admittedly, these are ambitious goals that<br />
can only be attained through the best service, excellent products and<br />
dedicated personnel. Nonetheless, these are also goals which we consider<br />
realistic.
Our shareholders will be able to measure the successes which we achieve<br />
step by step in the form of rising share prices and of dividend payments<br />
reflecting the Bank’s ever stronger earnings performance.<br />
Over the past few years, we have concentrated our international network<br />
of outlets and reshaped it with a view to the structures needed over the<br />
long term. In the United States in particular, we have been really successful<br />
and profitable for decades. In Central and Eastern Europe, we similarly<br />
have a network of branches and subsidiaries which are established<br />
in the market, giving us an outstanding starting position for the eastern<br />
enlargement of the European Union. We believe that the enlargement of<br />
the Union this May will give rise to further strong expansion in our business<br />
in this region.<br />
For years, it has been speculated in a broadly-based public debate that<br />
<strong>Commerzbank</strong> is too small to exist all by itself. But size is relative, and<br />
who knows what is the optimal size for a bank?<br />
At Group level, we serve just over 6.8 million customers. Too small? Our<br />
business volume stands at about 7380bn. Too little? Germany’s exports<br />
and imports added up to almost 71,200bn in 2003; roughly 16% of this<br />
total passed through the books of <strong>Commerzbank</strong>. Too small? Of course,<br />
such figures are no answer to the question. Rather, the right thing is to<br />
ask whether we will be in a position in the long run to achieve a reasonable<br />
return, in line with market rates, on the equity which <strong>Commerzbank</strong><br />
employs. We have set ourselves the target of demonstrating this by 2005.<br />
The groundwork has been laid; that is why we look with confidence and<br />
assurance to an independent future for <strong>Commerzbank</strong>. We also owe this<br />
to our customers, to our employees and to our shareholders.
All the same, the management is also obliged to examine alternatives in<br />
the consolidation process that is taking place in the German and<br />
European financial market. Theoretically, very many possibilities exist;<br />
yet there are far fewer practical solutions. In the future as well, we will<br />
study all the realistic options. However, no one will remove from us<br />
the responsibility for embarking on the right course. In the final analysis,<br />
it is up to you, our shareholders, to decide to what extent – and indeed<br />
whether – you are satisfied with your investment in <strong>Commerzbank</strong> shares.<br />
We do not know what opportunities the future holds in store for us. But<br />
we are self-assured and strong enough to play an active role in the<br />
European banking market.<br />
I hope to be able to welcome you in large numbers to our Annual General<br />
Meeting in the Jahrhunderthalle Frankfurt on May 12. I will then present<br />
to you the interim report for the first quarter of 2004.
6 MANAGEMENT REPORT<br />
Germany:<br />
rebound in investment<br />
survey of the commerzbank group<br />
Mounting confidence in the world economy<br />
Expansionary monetary policy in the industrial nations and the related<br />
extremely low interest rates had their impact in 2003. Worldwide, the prospects<br />
for growth improved. Once again, the United States led the way, as monetary<br />
stimuli were reinforced there by massive tax cuts and public spending programmes.<br />
But there are signs that Asia, too, is regaining its former dynamic<br />
momentum, with China assuming a special significance as the region’s engine<br />
of growth. The foundations have been laid, therefore, for the world economy to<br />
expand rapidly in the current year. We expect real growth of 4.6%; world trade<br />
should expand even far more strongly.<br />
By comparison, Western Europe’s economic progress is modest. But here<br />
as well, economic activity emerged from its stagnation at mid-year or so. The<br />
development in Germany was crucial in this respect, where after declining in<br />
the first half of the year, GDP registered subdued growth from last summer<br />
onwards. Initially fuelled by brisk demand for exports, business investment also<br />
rose at long last in the final quarter after a lengthy interruption. We expect this<br />
rebound to continue throughout the current year, with the first positive effects<br />
of the economic upturn on the labour market probably being felt roughly as from<br />
the summer.<br />
For the financial markets, historically low interest rates combined with the<br />
expectation of an upswing were the forces which revived the stock market in<br />
particular. Worldwide, stock indices improved considerably; climbing by 37%,<br />
the DAX index was even one of the top performers. If the hopes of an upswing<br />
are fulfilled in Germany and the government does not slacken in its reform<br />
efforts, conditions for the financial markets, and consequently for banks as well,<br />
will continue to develop positively.<br />
Revaluation measures shape 2003 results<br />
Last autumn, we decided to free the <strong>Commerzbank</strong> Group from its unrealized<br />
losses. On the one hand, this helped set the stage for a sustained increase in our<br />
profitability. On the other, we have improved our position, enabling us to play an<br />
active, structuring role in possible changes in the banking landscape.<br />
4<br />
3<br />
2<br />
1<br />
0<br />
-1<br />
-2<br />
-3<br />
-4<br />
Real investment in machinery and equipment Ifo business climate<br />
(forecast as from 1 st quarter 2004) (trade and industry in western Germany)<br />
percentage change on year index 2000=100<br />
2001 2002 2003 2004<br />
100<br />
95<br />
90<br />
85
In our revaluation initiative, the unrealized losses identified in our securities<br />
and investments portfolio per September 30 were written down. This entailed<br />
reducing the book values of listed investments, which despite the recovery of<br />
prices since mid-2003 were still higher than their market values, to a value<br />
that can be realized in the market. Industrial participations were affected here<br />
as well as holdings in financial institutions, such as Mediobanca, Generali and<br />
Santander Central Hispano.<br />
We wrote other participations down to their fair value. These were primarily<br />
Eurohypo AG and our London asset-management subsidiary, Jupiter. In the case<br />
of Eurohypo, market conditions and business plans had changed so much since<br />
2002 that we deemed it necessary to adjust its valuation. This measure will<br />
directly affect our income statement in future. Our interest expenses will be substantially<br />
reduced, as this company is consolidated on an at-equity basis and the<br />
now lower write-downs on those components relevant for an IAS valuation are<br />
also deducted from our interest position. The reduction in goodwill at Jupiter<br />
will greatly help our Asset Management to return to profitability.<br />
The revaluation measures, for which we needed to use 72.3bn, gave rise to<br />
a large net loss for the year in our financial statements for 2003, which will be<br />
balanced by a withdrawal from the capital reserve. In order to compensate for<br />
the decline in our regulatory equity, we placed a capital increase without subscription<br />
rights in November, which raised a net amount of 7742m for us.<br />
All told, by revaluing our securities and investments portfolio we have<br />
removed sizeable burdens for the current year, thanks to lower amortization of<br />
goodwill and lower funding costs for our investments.<br />
Consolidated balance-sheet total at 7382bn<br />
In the course of 2003, the <strong>Commerzbank</strong> Group’s balance-sheet total shrank<br />
by 9.6% to 7381.6bn. The weak dollar accounted for 712bn of this decline. In<br />
addition, we systematically maintained our strategy of selectively reducing riskweighted<br />
assets. These were down by 12.1% to 7140.8bn.<br />
We trimmed interbank lending by 72.7bn to 751.7bn; claims on customers<br />
contracted by 710.1bn to 7138.4bn.<br />
In our investments and securities portfolio, which expanded by 3.9% to<br />
787.8bn overall, we mainly added to bonds, notes and other fixed-income securities.<br />
By contrast, the item Investments in associated companies was 35.8%<br />
lower. This was due, for one thing, to the amortization of goodwill at Eurohypo<br />
and, for another, to the transfer of our holding in Korea Exchange Bank to<br />
Investments. In the final quarter of last year, we sold part of our interest in KEB.<br />
At the same time, KEB effected a capital increase, to which we did not subscribe.<br />
This reduced our interest from 32.6% to 14.8%. Since this transaction, therefore,<br />
we have no longer included KEB on an at-equity basis.<br />
On the liabilities side, interbank borrowing fell by 719.7bn to 795.2bn and<br />
securitized liabilities by 78.7bn to 784.0bn. By contrast, we achieved a 74.3bn<br />
increase in customer deposits to 7100.0bn. Savings deposits advanced slightly<br />
by 7200m, but time deposits registered the strongest growth at 72.9bn. Attractive<br />
interest rates played a role here, which both the Parent Bank, <strong>Commerzbank</strong><br />
AG, and comdirect used to gain new customers.<br />
SURVEY OF THE COMMERZBANK GROUP 7
8 MANAGEMENT REPORT<br />
Structure of provision for possible loan losses<br />
Equity slightly higher<br />
Per end-2003, we had equity as shown in the balance-sheet of 79.1bn, compared<br />
with 78.8bn a year earlier. The Bank’s capital ratios continue to exceed our target<br />
levels: at 7.3%, the core capital ratio remained at its year-earlier level; the own<br />
funds ratio rose to 13.0%. As a result of our clean-up, the revaluation reserve<br />
moved from –7769m at end-2002 to a current 71,240m.<br />
Marked improvement in operating results<br />
Our efforts – above all on the cost side – bore fruit last year. As against 7192m<br />
in the previous year, we achieved an operating profit of 7559m in 2003.<br />
However, net interest income made no contribution towards improved<br />
results, falling by 11.4% to 72.8bn. In addition to the weak dollar and the<br />
absence of interest income from Rheinhyp (roughly 7220m), the further reduction<br />
of risk-weighted assets made itself felt. While we managed to widen our<br />
average interest margin at the Parent Bank, this was not enough to compensate<br />
for the decline in volume.<br />
Provision for possible loan losses was down by almost 7240m from its level<br />
of 71.3bn in 2002. At the start of the year, we had assumed an amount of 71.2bn.<br />
Ultimately, we used 71,084m for provisioning purposes, even though the economic<br />
situation remained tight in 2003 and the number of insolvencies was even<br />
higher. We attribute the need for less provisioning to our further improved risk<br />
management and in particular to the reduction of bulk risks. We have also systematically<br />
scaled back latently endangered credits. In this way, we have not<br />
been involved in several of the major cases of insolvency that have occurred in<br />
recent years.<br />
We also managed a turnaround in our net commission income, which<br />
showed a small increase to 72.14bn after two years of decline. Above all, as<br />
from mid-year we benefited from a recovery in securities markets and also<br />
achieved growth in both foreign commercial business and payment transactions.<br />
We were also more successful with our trading profit than we had been a<br />
year previously; it was 35.5% higher at 7737m. We were able to draw upon our<br />
strength in equities business, which was also lifted by the emerging recovery of<br />
the markets.<br />
<strong>Commerzbank</strong> Group, in 7 m 2003 2002 2001 2000 1999<br />
Germany 813 946 555 529 522<br />
Abroad 260 365 325 148 89<br />
Global provision 11 10 47 8 78<br />
Total net provisioning 1,084 1,321 927 685 689
The Net result on the investments and securities portfolio reached 7291m,<br />
compared with a minus of 711m a year earlier. Among other things, we disposed<br />
of our interests in Buderus and T-Online. Write-downs were needed on<br />
only a limited scale following our clean-up last autumn.<br />
The Other operating result, which mainly comprises allocations to and reversals<br />
of provisions, as well as expenses and income from building and architects’<br />
services, reached 7174m. In 2002, we achieved a much higher surplus on<br />
this item through the proceeds from the deconsolidation of Rheinhyp.<br />
Operating expenses practically 7650m lower<br />
The success of our two cost-cutting offensives is clearly underlined by the<br />
expense items in our income statement. Operating expenses fell by 12.5% to<br />
74.5bn. With this outcome, we realized our target for 2004 a year earlier than<br />
planned.<br />
At end-2003, we had a Group workforce of altogether 32,377, practically 4,200<br />
fewer than a year previously. Due above all to this development, personnel expenses<br />
were down by 8.8% to 72.4bn.<br />
We cut other operating expenses by 16.5% to 71.6bn and the depreciation of<br />
office furniture and equipment by 16.2% to 7475m.<br />
We will not relax our efforts to keep costs within very narrow limits. Precisely<br />
at times when we are focusing on earnings growth, we have to continue to<br />
watch costs closely. Only in this way will we achieve sustained success and permanently<br />
raise our profitability.<br />
The above-mentioned income and expenses yield an operating profit of<br />
7559m. From this, for one thing, goodwill amortization of 7110m has to be<br />
deducted. For another, we already recognized in the first quarter of 2003 restructuring<br />
expenses of 7104m for measures under our second cost-cutting offensive.<br />
Last but not least, the loss of 72.3bn resulting from our clean-up is included<br />
in the item Expenses arising from special factors. Once these items have been<br />
deducted, a pre-tax loss of –71,980m remains, as against –7372m in the previous<br />
year.<br />
In view of the sizeable loss, the 2003 tax position of 7249m seems too large<br />
at first sight – especially compared with a year earlier, when we showed tax<br />
income of 7103m. However, it should be noted here that some of our subsidiaries<br />
in Germany and abroad generated profits and paid tax on them. In addition,<br />
the large loss as a result of revaluation is not relevant for tax purposes.<br />
After tax expenses and minority interests of 791m have been deducted, the<br />
<strong>Commerzbank</strong> Group has a net loss for the year of 72.32bn, which will be balanced<br />
by a withdrawal from the capital reserve. As we are also posting a “zero”<br />
result at the Parent Bank, we are unable to pay a dividend for the 2003 business<br />
year. Holders of our profit-sharing certificates will receive a full payment. This<br />
expense is covered in our 2003 interest position.<br />
SURVEY OF THE COMMERZBANK GROUP 9
10 MANAGEMENT REPORT<br />
Operating profit,<br />
by segment<br />
in 7 m<br />
Uneven development of segments<br />
In Retail Banking, the upswing that had begun in 2002 gathered momentum.<br />
However, revenues are developing very unevenly. Net interest income was lower<br />
than a year earlier, in line with the general trend. This means that the wider<br />
average margin achieved on the credit side was not enough to offset the reduction<br />
in volume, and the margin we realized on borrowed funds sank, due to the<br />
low level of interest rates. On the other hand, net commission income rose by<br />
12.6%. Here, our attractive range of real-estate funds, certificates and reverse<br />
convertibles compensated for the weaker demand for equities in the first half of<br />
the year.<br />
Especially noteworthy is the 11.0% fall in operating expenses. The operating<br />
profit rose from 753m in 2002 to a sizeable 7258m. The operative return on<br />
equity increased from 3.2% to 14.3% and the cost/income ratio receded from<br />
almost 90% to 79.2%.<br />
We believe that Asset Management is also developing really well, even<br />
though its net commission income was down by 14.2%. Here, the revenues from<br />
Montgomery Asset Management and <strong>Commerzbank</strong> Asset Management Italia<br />
were missing in 2003. We have sold both companies. Our consolidation measures<br />
showed a positive impact on the cost side: operating expenses fell by no<br />
less than 28.3% to 7345m.<br />
Consequently, the operating result rose substantially, from 713m to 790m.<br />
The return on equity improved from 1.6% to 14.1% and the cost/income ratio<br />
from 97.4% to 79.3%.<br />
In the Corporate Customers and Institutions segment, the heavy dependence<br />
on economic performance and interest rates was felt. Net interest income<br />
declined by 20.6%. The volume of lending contracted; to some extent, this was<br />
quite deliberate due to our active clean-up of the loan portfolio; at the same<br />
time, though, it was also involuntary because of the low dollar and companies’<br />
weak investment activity.<br />
Despite flat economic activity, our early-warning systems made it possible<br />
to reduce provisioning considerably. Net commission income was also encouraging,<br />
rising 19.8% to 7726m, thanks to intensive and creative sales efforts.<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
-100<br />
-200<br />
-300<br />
2002<br />
2003<br />
Retail<br />
Banking<br />
Asset<br />
Management<br />
Corporate<br />
Customers and<br />
Institutions<br />
Securities Group<br />
Treasury<br />
Mortgage<br />
banks
The decline in operating expenses, at –4.6%, was not as strong as in the other<br />
segments. For this reason, lower earnings could not be compensated for, which<br />
meant that the operating profit was down 21.6% in a year-on-year comparison.<br />
At 75.2bn, by far the greatest part of our equity is tied up in this segment. The<br />
return on equity sank from 8.5% to 6.9%, while the cost/income ratio rose from<br />
45.9% to a still very good 49.8%.<br />
The largest swing in operating profits was registered by Securities. Both net<br />
interest and net commission income were lower, but the trading profit was<br />
raised by 56.6% to 7783m.<br />
As operating expenses were brought down substantially – principally<br />
through staff reductions – the operating profit achieved a plus of 73m, after a<br />
minus of 7296m a year previously. This meant a return on equity of 0.3%, as<br />
against –22.7%, and a cost/income ratio of 99.7%, as against 136.1%.<br />
At Group Treasury, revenues were 15.5% higher than a year earlier, while<br />
operating expenses receded by 20.0%. The operating profit rose sharply, therefore,<br />
to 7220m. With only a small amount of equity tied up, a return of 203.7%<br />
was registered, as against 100.6%, and another very low cost/income ratio of<br />
20.3%, as against 29.3%.<br />
Comparison with the previous year is difficult in the case of the mortgage<br />
banks. In the first seven months of 2002, namely, Rheinhyp was included with<br />
its consolidated figures. Since August 2002, this segment has comprised<br />
Hypothekenbank in Essen, Erste Europäische Pfandbrief- und Kommunalkreditbank<br />
in Luxemburg and Eurohypo, which is consolidated at equity. These institutions<br />
achieved quite a good operating profit of 7242m overall. This gave rise<br />
to a return on equity of 27.3%, compared with 14.6% a year earlier. The cost/<br />
income ratio is traditionally low in this segment, reaching an extreme low of<br />
10.2% (as against 22.4%) in 2003.<br />
Within the Group as a whole, the operating profit of 7559m led to an operative<br />
return on equity of 4.9%. A year earlier, it had been 1.6%. The cost/income<br />
ratio improved from 77.3% to 73.3%.<br />
SURVEY OF THE COMMERZBANK GROUP 11<br />
Mortgage banks<br />
2003<br />
Equity tied-up (7 m) 888<br />
Operative return<br />
on equity 27.3%<br />
Cost/income ratio in<br />
operating business 10.2%
12 MANAGEMENT REPORT<br />
Development in individual quarters<br />
2003 financial year<br />
7 m Total 4 th quarter 3 rd quarter 2 nd quarter 1 st quarter<br />
Net interest income 2,776 663 662 746 705<br />
Provision for possible loan losses –1,084 –256 –273 –303 –252<br />
Net interest income after provisioning 1,692 407 389 443 453<br />
Net commission income 2,136 591 509 516 520<br />
Net result on hedge accounting 40 3 12 15 10<br />
Trading profit<br />
Net result on investments<br />
737 121 107 278 231<br />
and securities portfolio 291 68 64 54 105<br />
Operating expenses 4,511 1,113 1,078 1,141 1,179<br />
Other operating result 174 15 98 29 32<br />
Operating profit 559 92 101 194 172<br />
Regular amortization of goodwill<br />
Profit from ordinary activities before<br />
expenses arising from special factors<br />
110 21 29 30 30<br />
and restructuring expenses 449 71 72 164 142<br />
Expenses arising from special factors 2,325 – 2,325 – –<br />
Restructuring expenses<br />
Profit from ordinary activities after<br />
expenses arising from special factors<br />
104 – – – 104<br />
and restructuring expenses –1,980 71 –2,253 164 38<br />
Extraordinary profit – – – – –<br />
Pre-tax profit –1,980 71 –2,253 164 38<br />
Taxes on income 249 139 30 78 2<br />
After-tax profit –2,229 –68 –2,283 86 36<br />
Profit/loss attributable to minority interests –91 –20 –22 –16 –33<br />
Net loss/profit for the year –2,320 –88 –2,305 70 3
2002 financial year<br />
SURVEY OF THE COMMERZBANK GROUP 13<br />
7 m Total 4 th quarter 3 rd quarter 2 nd quarter 1 st quarter<br />
Net interest income 3,133 678 721 861 873<br />
Provision for possible loan losses –1,321 –323 –436 –308 –254<br />
Net interest income after provisioning 1,812 355 285 553 619<br />
Net commission income 2,120 490 501 554 575<br />
Net result on hedge accounting –56 –54 –21 51 –32<br />
Trading profit<br />
Net result on investments<br />
544 91 36 104 313<br />
and securities portfolio –11 368 –531 60 92<br />
Operating expenses 5,155 1,220 1,229 1,308 1,398<br />
Other operating result 938 2 884 40 12<br />
Operating profit 192 32 –75 54 181<br />
Regular amortization of goodwill<br />
Profit from ordinary activities before<br />
expenses arising from special factors<br />
108 25 26 29 28<br />
and restructuring expenses 84 7 –101 25 153<br />
Expenses arising from special factors 247 247 – – –<br />
Restructuring expenses<br />
Profit from ordinary activities after<br />
expenses arising from special factors<br />
209 177 32 – –<br />
and restructuring expenses –372 –417 –133 25 153<br />
Extraordinary profit – – – – –<br />
Pre-tax profit –372 –417 –133 25 153<br />
Taxes on income –103 –141 –20 6 52<br />
After-tax profit –269 –276 –113 19 101<br />
Profit/loss attributable to minority interests –29 33 –16 –17 –29<br />
Net loss/profit for the year –298 –243 –129 2 72
14 MANAGEMENT REPORT<br />
Corporate governance<br />
at commerzbank<br />
On February 25, 2002, an independent commission set up by the German government<br />
presented the German Corporate Governance Code for the first time.<br />
It describes key statutory provisions for the management and supervision of<br />
German listed companies and embodies internationally and nationally recognized<br />
standards for good and responsible governance. The Code makes the German<br />
system of corporate governance transparent and understandable. At the<br />
same time, it is designed to promote the trust of international and national<br />
investors, customers, employees and the general public in the management and<br />
supervision of German listed companies.<br />
Responsible corporate governance has always been a high priority at<br />
<strong>Commerzbank</strong>. That is why we – the Supervisory Board and Board of Managing<br />
Directors – expressly welcome and support the Code as well as the goals and<br />
objectives which it pursues. On February 4, 2003, we issued our annual declaration<br />
of compliance pursuant to Art. 161, German Stock Corporation (Aktiengesetz)<br />
and published it on the internet. In it, we stated that, with one exception,<br />
we have complied with all the recommendations of the Code. The single exception<br />
relates to section 5.3.2., according to which the Audit Committee of the<br />
Supervisory Board should also deal with risk-management issues. We have<br />
entrusted these functions to the Risk Committee, which for years has dealt with<br />
the Bank’s credit and market risks.<br />
Even at the time of publication of the German Corporate Governance Code,<br />
the articles of association of <strong>Commerzbank</strong> AG as well as the procedural rules<br />
of the Board of Managing Directors and Supervisory Board complied with its<br />
requirements for the most part. To the extent necessary, we have adapted the<br />
articles of association of <strong>Commerzbank</strong> AG and also the procedural rules for the<br />
Board of Managing Directors and the Supervisory Board to the regulations of the<br />
Corporate Governance Code. The changes in the articles of association were<br />
resolved by the AGM on May 30, 2003.<br />
German Corporate Governance Code as amended in July 2003<br />
In July 2003, a partly revised version of the German Corporate Governance Code<br />
was published in the Federal Gazette (Bundesanzeiger). We subsequently examined<br />
our own code and updated our declaration of compliance on November 11,<br />
2003. Overall, we deviate from three of the Code’s recommendations. In addition<br />
to the already existing deviation from section 5.3.2, two new ones have arisen<br />
through the amendments to the German Corporate Governance Code:
Pursuant to section 4.2.2, the full Supervisory Board should discuss and regularly<br />
examine the structure of the system of compensation for the Board of<br />
Managing Directors. The Supervisory Board has entrusted matters related to<br />
compensation to the Presiding Committee, which independently resolves upon<br />
and deals with them. This procedure has proved successful. The Presiding Committee<br />
discusses the structure of the system of compensation, regularly examines<br />
it and determines the amount of compensation for members of the Board<br />
of Managing Directors. It regularly reports to the full Supervisory Board on its<br />
deliberations and decisions in this connection.<br />
Section 4.2.4 recommends that the compensation of the members of the<br />
Board of Managing Directors should be reported in the Notes to the consolidated<br />
financial statements, subdivided according to the various components and presented<br />
in individualized form. In the Notes on page 161f., we present their compensation<br />
subdivided according to fixed amount, variable performance-related<br />
components and long-term incentive components, but not in individualized<br />
form. The total compensation of the Chairman of the Board of Managing Directors<br />
alone is shown separately. This enables shareholders to infer the compensation<br />
received by the other members of the Board of Managing Directors, thus<br />
representing in our opinion a good compromise between shareholders’ desire<br />
for information and the protection of the personal rights of board members.<br />
Principles of the system of compensation<br />
The compensation of the members of the Board of Managing Directors is made<br />
up of a fixed remuneration and a variable bonus, based on the Group’s business<br />
success and the attainment of individual targets. In addition, there is remuneration<br />
in kind on the usual scale and possibly remuneration for board functions at<br />
subsidiaries. Details can be found in this annual report on page 161f. In addition,<br />
like other executives and selected staff of the Group, the members of the Board<br />
of Managing Directors are able to acquire “virtual” stock options which run for<br />
three to five years under so-called long-term performance plans (LTPs). The<br />
exact structure of these LTPs is explained on page 102f. of this annual report.<br />
Details of the current value of these options may be found on page 162. The<br />
structure of compensation was not altered in the past year.<br />
Suggestions of the German Corporate Governance Code<br />
We comply with virtually all the suggestions of the German Corporate Governance<br />
Code, deviating from them in only five points:<br />
In section 2.3.4, it is suggested that the Annual General Meeting be broadcast<br />
in its entirety via internet. We make it possible to follow the speeches of the<br />
Chairman of the Supervisory Board and the Chairman of the Board of Managing<br />
Directors. The general debate is not broadcast. For one thing, this seems inappropriate<br />
given the length of our Annual General Meetings; for another, we do<br />
not want to infringe upon the personal rights of the individual speaker.<br />
CORPORATE GOVERNANCE AT COMMERZBANK 15
16 MANAGEMENT REPORT<br />
Section 3.6 of the German Corporate Governance Code suggests that separate<br />
meetings to prepare Supervisory Board meetings should be held regularly<br />
for the representatives of the shareholders and the employees. We arrange such<br />
preparatory meetings only if the need arises.<br />
Section 5.3.2 suggests that the chairman of the Audit Committee should not<br />
be a former member of the Board of Managing Directors. We have not adopted<br />
this suggestion as we are interested especially here in the expertise of the person<br />
in question.<br />
The suggestion contained in section 5.4.4 that the members of the Supervisory<br />
Board should be elected at different dates and for different periods of<br />
office is not compatible with the German system of co-determination. Employee<br />
representatives, namely, have to be elected at the same time for five years. The<br />
suggestion could only be applied, therefore, in the case of shareholder representatives<br />
and would lead to unequal treatment.<br />
Last but not least, the German Corporate Governance Code suggests that<br />
the variable compensation of Supervisory Board members should be linked<br />
to the long-term performance of an enterprise. At <strong>Commerzbank</strong>, variable compensation<br />
is bound up with the dividend payment. We consider this to be a<br />
transparent and readily understandable system.<br />
Board of Managing Directors<br />
The Board of Managing Directors is responsible for the independent management<br />
of the Company. In this function, it has to act in the Company’s best interests<br />
and is committed to increasing the sustainable value of the Company.<br />
It develops the Company’s strategy, coordinates it with the Supervisory Board<br />
and ensures its implementation. The Board of Managing Directors conducts<br />
<strong>Commerzbank</strong>’s business activities in accordance with the law, the articles of<br />
association, its procedural rules and the relevant employment contracts. It<br />
cooperates on a basis of trust with the other bodies of <strong>Commerzbank</strong> and with<br />
the employee representatives.<br />
The composition of the Board of Managing Directors and the responsibilities<br />
of its individual members are presented on pages 180-181 of this annual report.<br />
Supervisory Board<br />
The Supervisory Board advises and supervises the Board of Managing Directors<br />
in its management of the Company. It conducts its business activities in accordance<br />
with the legal provisions, <strong>Commerzbank</strong>’s articles of association and its<br />
procedural rules; it cooperates closely and on a basis of trust with the Board of<br />
Managing Directors. The Supervisory Board regularly examines the efficiency of<br />
its activities, at least every two years.<br />
The composition of the Supervisory Board and its committees is presented<br />
on page 177f. The report of the Supervisory Board on pages 173-176 provides<br />
information on the work of this body, its structure and its control function.
Accounting<br />
For accounting purposes, the <strong>Commerzbank</strong> Group uses the International<br />
Accounting Standards (IAS), whereas HGB rules are still applied in the case of<br />
the individual financial statements of <strong>Commerzbank</strong> AG. The consolidated and<br />
Parent Bank financial statements are prepared by the Board of Managing Directors<br />
and approved by the Supervisory Board. The audit is performed by the auditors<br />
appointed by the Annual General Meeting. The annual financial statements<br />
also include a detailed risk report, providing information on the Company’s<br />
responsible handling of the various types of risk. It appears on pages 52-79.<br />
Shareholder relations and communication<br />
Once a year, the Annual General Meeting of shareholders takes place. Above all,<br />
it resolves upon the appropriation of the distributable profit, approves the<br />
actions of the Board of Managing Directors and Supervisory Board and authorizes<br />
the Board of Managing Directors to undertake capital-raising measures.<br />
Each share entitles the holder to one vote.<br />
Our shareholders are regularly – four times a year – informed about the<br />
Bank’s financial position and earnings performance; further corporate news<br />
items that are relevant for the share price are published in the form of a so-called<br />
ad hoc release. By means of press conferences and analysts’ meetings, the<br />
Board of Managing Directors reports on the annual financial statements or the<br />
quarterly results. For reporting purposes, we increasingly use the possibilities<br />
offered by the internet; at www.commerzbank.com, those interested can find a<br />
wealth of information on the <strong>Commerzbank</strong> Group. We feel committed to communicating<br />
in an open and transparent manner with our stakeholders. We intend<br />
to realize this claim in the future as well.<br />
Frankfurt, March 23, 2004<br />
<strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong><br />
The Board of Managing Directors The Supervisory Board<br />
CORPORATE GOVERNANCE AT COMMERZBANK 17
‡ what do we do with funds that are better<br />
than our own? ‡ we get them into the team ‡<br />
how does a successful team come about? You look for the best. And<br />
that’s precisely how we select our funds for you. For this purpose, we<br />
perform a completely neutral analysis of thousands of offers. And if<br />
the funds of other companies are interesting, we recommend them.<br />
‡ ideas ahead ‡
20 MANAGEMENT REPORT<br />
Retail Banking<br />
department<br />
2003<br />
Equity tied-up (7 m) 1,804<br />
Operative return<br />
on equity 14.3%<br />
Cost/income ratio in<br />
operating business 79.2%<br />
Retail banking and<br />
asset management<br />
The business lines which form Retail Banking and Asset Management continued<br />
their restructuring and consolidation efforts in 2003, for the most part completing<br />
them successfully. The segment reporting figures provide impressive evidence<br />
that we embarked on the right course with these measures.<br />
Retail Banking department<br />
Thanks to excellent sales performance and the “play to win” restructuring programme<br />
introduced in 2002, break-even point was reached in 2003. At 7258m,<br />
the operating profit was well ahead of our medium-term planning. Despite the<br />
persistently difficult market environment and the reduced sales force, revenues<br />
were held at their year-earlier level. This translates into a productivity increase<br />
of over 20%.<br />
The pilot phase of the bank agency, the advisory branch model with automatic<br />
cash-desk functions available on a 24-hour basis, was launched last year.<br />
After the test phase has been successfully completed, the bank agency will<br />
enable us to extend our geographical presence in selected locations efficiently<br />
and in a cost-conscious manner.<br />
Successful against market trend<br />
While the number of bank accounts in Germany has been reduced by 9.4 million<br />
over the past twelve years, <strong>Commerzbank</strong> has managed to hold its market share<br />
steady against this trend over the past ten years. In securities and lending business<br />
in particular, <strong>Commerzbank</strong> has expanded thanks to the individualized and<br />
professional advice it offers.<br />
<strong>Commerzbank</strong> an ideas laboratory<br />
Talks with customers and market research have prompted us to examine the<br />
subject of general financial knowledge. For despite a high degree of competence,<br />
many customers seem to have a deep-rooted uncertainty with regard to<br />
financial topics. In <strong>Commerzbank</strong>'s “ideas laboratory”, therefore, independent<br />
experts are exploring topics related to personal finances. The experts formulated<br />
the demand for a canon of general financial knowledge. This triggered a debate<br />
in society which attracted great attention in both the media and the political<br />
sphere. In restructuring its advisory processes, the Bank has already anticipated<br />
the outcome and is, for example, systematically focusing on a comprehensive<br />
structured survey of demand. The ideas laboratory will continue to pursue the<br />
topic of general financial knowledge inside and outside the Bank.<br />
We are translating the “ideas ahead” claim into innovations in the areas of<br />
advice and products. Our goal here remains to offer customers all financial services<br />
under a single roof – regardless of whether these are our own products or<br />
products provided by others.
Pioneer in selling third-party funds<br />
In order to increase the quality of advice and customer satisfaction, we have<br />
added the investment funds of other institutions to our range. In May 2001, we<br />
recommended the first non-Group fund, the Fidelity European Growth Fund. In<br />
the meantime, half of our recommended investment funds are not produced by<br />
ourselves.<br />
By deciding in favour of open architecture, <strong>Commerzbank</strong> has assumed a<br />
pioneering role among Germany’s major banks. Last year, third-party investment<br />
funds already accounted for 37% of the overall net inflow. When selecting its<br />
own or third-party products, <strong>Commerzbank</strong> also takes into consideration the<br />
assessments of external rating agencies. This procedure leads to a high-quality<br />
range of funds on offer and makes objective, customer-oriented advice possible.<br />
Attractive products for retail investors<br />
Close contact with our customers is an important element in creating attractive,<br />
innovative products. In 2003, we were especially successful with our portfolio<br />
insurance funds. Our Best End Certificate, for example, enables customers to<br />
dispose of investments before they reach maturity at the highest possible price<br />
– a frequently expressed wish of investors in times of volatile markets.<br />
The ADIG Total Return Product is also a response to the uncertain situation<br />
in securities markets. By means of flexible investment in equities and bonds, the<br />
investor can benefit from interest-rate changes or rising share prices according<br />
to market phase. What is more, the fixed-income element serves to secure the<br />
investment and the achieved gains.<br />
The Comas Unlimited Certificate offers even more protection against market<br />
movements; it systematically decouples itself from the short-lived performance<br />
of the equity, bond and foreign-exchange markets. For this purpose, the certificate<br />
is based on an index characterized by a broad diversification in professionally<br />
managed hedge funds. The investment goal is simple: a steady return of<br />
roughly 10% p.a. with a narrow fluctuation band of 3-6%. With these product<br />
innovations, <strong>Commerzbank</strong> is making available to retail investors a major bank’s<br />
extensive knowledge of capital-market instruments.<br />
In 2003, <strong>Commerzbank</strong> also became the first bank to bring to the market a<br />
special interest-rate product of KfW for retail customers. This represented an<br />
innovative approach in property financing to making state promotion available<br />
to retail customers, providing home buyers with very reasonable market conditions.<br />
Strong growth surge for bancassurance<br />
We built further upon our successful cooperation with our strategic partner, the<br />
AMB Generali group. This was above all thanks to the activities of our mobile<br />
advisers for old-age provision and building finance under the roof of our joint<br />
subsidiary CommerzPartner. In connection with a sales offensive in the<br />
branches, we managed to boost the volume of life insurances sold by 50% to<br />
7760m last year. The rise in home-loan savings by 70% to 7660m was even more<br />
marked. We believe that we are well equipped for the future as well, therefore,<br />
to participate successfully in the growing market for old-age provision.<br />
RETAIL BANKING AND ASSET MANAGEMENT 21
22 MANAGEMENT REPORT<br />
Fresh expansion of customer base in branch business<br />
In 2003, too, we stepped up our activities to gain new customers. A series of<br />
innovative sales measures produced over 100,000 extra customers for the Bank.<br />
New customers were offered an attractive deposit interest rate. This was the first<br />
time that the Bank had used an incentive to make the changeover and test phase<br />
easier for new customers.<br />
The strategic cooperation with TUI has been extended until 2012. About<br />
450,000 TUI card-holders use <strong>Commerzbank</strong> credit cards. A systematic programme<br />
for contacting customers and offering products is designed to bind this<br />
group even more closely to <strong>Commerzbank</strong>. Thanks to its many years of good<br />
experience with TUI, <strong>Commerzbank</strong> is now a professional partner for further<br />
cooperation agreements of this kind.<br />
Steady expansion in online banking<br />
Since its launch in 1997, commerzbanking.de, the virtual branch for retail customers,<br />
has met with ever greater interest. In mid-2003, commerzbanking.de<br />
was geared more strongly to sales and acquiring new customers; since then, it<br />
has offered not only a broad range of information but also non-customers the<br />
opportunity to conclude their banking transactions online. By end-2003, more<br />
than 500,000 customers were taking advantage of the possibility to effect banking<br />
transactions in this form. With comdirect bank included, we are one of the<br />
leading providers in the German market, with roughly 1.2 million online-banking<br />
customers.<br />
Growth initiative “grow to win”<br />
The encouraging result of Retail Banking in 2003 shows that the turnaround has<br />
been achieved through a sustained reduction of costs and an increase in productivity.<br />
On the way to becoming the best bank nationwide for retail and business<br />
customers, we now need a sustained growth strategy. That is why we have<br />
followed “play to win” in quick succession with a programme that, for one thing,<br />
significantly optimizes the business model (excellence) and also generates<br />
sustained growth. Through the “grow to win” programme, we intend to achieve<br />
and hold a result that, independently of market performance, is on a par with our<br />
target return.<br />
International benchmarks in retail banking show that operative excellence is<br />
the decisive success factor in retail business and the necessary condition for<br />
profitable and sustained growth.<br />
Naturally, we are constantly examining whether we can expand through<br />
selective acquisitions. We took our first step in this direction by purchasing the<br />
branch operations of SchmidtBank with its roughly 360,000 retail customers.<br />
We are sure that we can lay the foundations for profitable expansion in retail<br />
business with this programme.
comdirect achieves best result since it was formed<br />
In the 2003 business year, comdirect bank achieved a pre-tax consolidated profit<br />
of 739.1m – easily the best since the bank was formed in 1994. In a year-on-year<br />
comparison, this meant an improvement of 757.7m. The result enables<br />
comdirect to make its first dividend payment. The management board will propose<br />
to the annual general meeting on April 28, 2004, that a dividend of 70.16<br />
per share be paid.<br />
The increase in results can mainly be traced to two effects: for one thing,<br />
operating expenses were significantly reduced again, by almost 19% to<br />
7112.5m; for another, comdirect generated higher commission income. This is<br />
above all due to the “com one programme for the future”, introduced in 2002,<br />
with which comdirect has stabilized its revenues, lowered costs and streamlined<br />
structures.<br />
Compared with the previous year, its customer base expanded by almost<br />
18,000 to reach 640,220 at group level. As a result, comdirect continues to be<br />
Germany’s market leader in online investment. Its UK subsidiary, comdirect ltd.,<br />
increased its number of customers to 49,700.<br />
Securities markets have steadily recovered from their low levels. With a yearon-year<br />
rise of 11.8% in securities orders, comdirect benefited to an aboveaverage<br />
extent from this development. Its net commission income reached<br />
783.1m, representing a 7.7% increase on the previous year. However, net interest<br />
income before provisioning declined by 10.5% to 757.2m. Apart from the<br />
lower level of interest rates, the rise in interest paid was instrumental in this<br />
respect, fuelled by special campaigns to acquire new customers. This was<br />
prompted by the conviction that investing in attractive interest-bearing products<br />
is an efficient way to gain new customers. While interest expenses rose, the<br />
bank took in 7800m in funds and acquired roughly 25,700 new customers. The<br />
total assets under custody expanded altogether by 73.4bn to 710.4bn, thus<br />
reaching their highest level in three years.<br />
In response to the needs of its customers, comdirect bank established and<br />
built up two further strategic pillars in the 2003 business year – parallel to the<br />
ongoing extension of its Online Investment services. In its Direct Banking field of<br />
competence, it bundles the products for short-term financial investments and<br />
modern payments. In its Financial Advisory field of competence, comdirect looks<br />
after its customers’ needs in the area of old-age provision and asset accumulation.<br />
For this purpose, its comdirect private finance AG subsidiary was formed<br />
in 2003. It opened its first office in Munich on October 1, 2003. Hamburg and<br />
Düsseldorf followed in the same year, Frankfurt in January 2004. By implementing<br />
this three-pillar strategy, comdirect is realizing its objective of being the bank<br />
for the modern investor. It combines the efficiency of the online-based business<br />
model with an individual, personal and all-inclusive service for the customer.<br />
The share price of comdirect rose by 182% in the 2003 financial year. The<br />
share thus registered the strongest performance in the MDAX index, in which<br />
comdirect was included in September as the only bank with an online-based<br />
business model.<br />
RETAIL BANKING AND ASSET MANAGEMENT 23
24 MANAGEMENT REPORT<br />
Asset Management<br />
department<br />
2003<br />
Equity tied-up (7 m) 639<br />
Operative return<br />
on equity 14.1%<br />
Cost/income ratio in<br />
operating business 79.3%<br />
Private Banking department<br />
In 2003, the Private Banking department was able to build upon its position as<br />
one of the three leading institutions in German private banking. The basis for<br />
this success is the all-inclusive service which excellently qualified private-banking<br />
advisers provide for our wealthy clients. Drawing upon the support of systematic<br />
analytical instruments, they develop specific solutions for each individual<br />
customer. Further factors in our success last year were the good performance<br />
of our portfolio management and the innovative additions to our range of<br />
products. The private-banking units in Switzerland, Luxembourg and Singapore<br />
are also able to look back upon a successful year. In 2004 as well, Private Banking<br />
will continue to pursue a growth course thanks to selective investment in<br />
closer contact with clients, product innovations and advisory services. We are<br />
confident that these measures will enable us to acquire further new customers.<br />
Asset Management department<br />
At end-2003, Asset Management had altogether 783.3bn of assets under custody.<br />
By far the greater part of this amount is concentrated at our European production<br />
units in Frankfurt, London and Paris. The Frankfurt-based COMINVEST,<br />
formed in 2002, managed considerably more than half of the total assets under<br />
management for its private and institutional customers.<br />
In the past financial year, we altered our previous approach in Italy and sold<br />
our <strong>Commerzbank</strong> Asset Management Italia unit. As part of our European focus,<br />
we also disposed of our American subsidiary Montgomery Asset Management,<br />
thus withdrawing entirely from the United States in this segment. The two disposals<br />
removed a sizeable burden from the cost side in Asset Management.<br />
COMINVEST achieves positive result<br />
Even after all the costs and amortization had been deducted, we achieved a distinctly<br />
positive result with COMINVEST in the first year of its existence, thanks<br />
to optimized procedures and effective cost management. With the administration<br />
and service units in Luxembourg, Dublin and Munich included, which<br />
belong to the COMINVEST group, an amount of 728m emerges. In addition, we<br />
launched numerous initiatives to extend our market- and customer-based activities<br />
and to improve our market position.<br />
Retail funds back in favour<br />
Despite a persistently difficult market situation and investors’ continuing uncertainty,<br />
the retail funds arm of the COMINVEST group with its ADIG brand managed<br />
to generate a positive net inflow of 7493m in its high-earning securities<br />
funds in 2003. Customers and distribution partners were especially attracted to<br />
our successful portfolio insurance funds such as the ADIG Europa Invest family<br />
with its inflows of 7346m, our established bond-based funds and also the newly<br />
issued ADIG Total Return Protect, with an inflow of 7340m. The funds under<br />
management expanded from 723.8bn to 724.4bn last year. This was partly due<br />
to the revitalization of the ADIG brand through sponsorship of the long-established<br />
soccer club Hamburger Sportverein.
The performance of our funds also proved highly encouraging. Practically<br />
70% of all funds beat their underlying benchmark; in some cases, the increases<br />
easily exceeded the latter.<br />
The refocusing of the product range, greater efficiency in terms of both<br />
administration and settlement as well as tight cost management all led to a<br />
marked rise in profitability.<br />
Innovative products for institutional clients<br />
At end-2003, the institutional segment of COMINVEST was managing an overall<br />
volume of 725.2bn in 336 Spezialfonds (non-publicly-offered funds), 25 portfolios<br />
under free portfolio management and 15 retail funds not offered for public<br />
sale. In addition, 72.2bn was invested in 33 advisory mandates.<br />
Last June, COMINVEST Institutional launched the first German mutual fund<br />
for institutional investors which invests almost exclusively in securitized issues<br />
(asset-backed securities). This innovative product generated inflows of an overall<br />
781.6m.<br />
Custody service and custody outsourcing<br />
The European Bank for Fund Services (ebase), a wholly-owned subsidiary of<br />
CAM Holding GmbH, is a full-service platform for custody services and custody<br />
outsourcing. In its second year of existence, it passed further important milestones<br />
in its business development. In the field of capital investment company<br />
outsourcing, it concluded a cooperation agreement with Siemens KAG and<br />
Credit Suisse Asset Management GmbH. The custody accounts of these companies<br />
were combined with those of ebase and successfully integrated into the<br />
ebase IT system. With its IT expertise and professional project management,<br />
ebase has staked out a claim for itself in the fiercely contested market for service<br />
platforms. In the second product segment, multi-fund custody accounts, it has<br />
reached agreement with its cooperation partners to make a range of 3,500 funds<br />
available. At end-2003, ebase was managing altogether 910,047 accounts with<br />
76.2bn of assets under control.<br />
Subsidiaries in Europe<br />
Our subsidiary in the United Kingdom, Jupiter International Group plc, benefited<br />
from the positive trend for the UK stock market. Assets under management grew<br />
by 22%. Hedge-fund management was especially successful with its flagship<br />
Jupiter Hyde Park. The funds under management expanded from US$190m at<br />
the start of 2003 to US$614m. At year-end, Jupiter was managing roughly<br />
715bn. This year as well, Jupiter is pursuing a profitable growth strategy so that<br />
its funds can outperform comparable funds over the long term. Activities in the<br />
current year are focused on improving the market position of its retail funds in<br />
the United Kingdom. In addition, hedge-fund business is to be expanded and<br />
growth potential tapped in Continental Europe by making use of synergies with<br />
COMINVEST.<br />
Our French subsidiary, Caisse Centrale de Réescompte (CCR), registered an<br />
encouraging rise in its 2003 results of 22% to 723.3m. At end-2003, CCR was<br />
managing assets of 712.8bn, an increase of 3.3% on the previous year. The management<br />
of equities based on the “value” approach, introduced by CCR in the<br />
French market in 1998, displayed an impressive and extraordinary development,<br />
RETAIL BANKING AND ASSET MANAGEMENT 25
26 MANAGEMENT REPORT<br />
generating a plus of 122%. Thanks to this success, our subsidiary is benefiting<br />
from a further diversification of its asset-management activities. At the same<br />
time, it is maintaining its traditionally strong position as a leading provider of<br />
money-market products.<br />
ADIG-Investment Luxemburg S.A. (ALSA) was administering funds of<br />
711.8bn in its core business – fund services for Group and non-Group associates<br />
– at end-2003. In the shareholder services area, it was looking after 24,978<br />
investment accounts with an overall volume of 71.0bn at year-end, 7419.8m of<br />
which was attributable to institutional investors. This represents a year-on-year<br />
increase of 80%. In the current financial year, it is planned to focus on implementing<br />
the interest-taxation guidelines and to concentrate further on core competencies.<br />
The Irish subsidiary, CICM Fund Management in Dublin, managed 73.2bn in<br />
its core business of fund administration. In 2003, six new funds were launched<br />
for <strong>Commerzbank</strong> and relations with other business lines, such as Private Banking,<br />
were further strengthened. Thanks to the stepped-up expansion of information<br />
technology, CICM established a straight-through processing (STP) link with<br />
all the custodian banks last June. Up to now, this has been realized by only a<br />
handful of institutions.<br />
The Spanish AFINA company maintained its growth strategy in 2003, raising<br />
its assets under management by 50%. In order to increase market coverage and<br />
to tap the attractive Catalonian market, an offshoot was established in<br />
Barcelona.<br />
Successful in Asia<br />
As Asian markets rebounded strongly and sales activities became more intensive,<br />
our asset-management companies in Asia were able to expand their customer<br />
base and their assets under management substantially. To an increasing<br />
extent, regional products were developed in order to serve the growing intraregional<br />
investment flows. Profitability was boosted sharply again in 2003.
Group companies and equity participations<br />
in the Retail Banking and Asset Management division<br />
Retail Banking department<br />
comdirect bank AG<br />
Quickborn 58.7% 2)<br />
Private Banking department<br />
<strong>Commerzbank</strong> Europe<br />
(Ireland)<br />
Dublin 44.0% 1)<br />
<strong>Commerzbank</strong><br />
(Switzerland) Ltd<br />
Zurich 100.0% 2)<br />
Asset Management department<br />
COMINVEST<br />
Asset Management GmbH<br />
Frankfurt am Main 100.0% 2)<br />
Caisse Centrale de<br />
Réescompte, S.A.<br />
Paris 99.6%<br />
<strong>Commerzbank</strong> Asset<br />
Management Asia Ltd.<br />
Singapore 100.0% 2)<br />
Commerz Service Gesellschaft<br />
für Kundenbetreuung mbH<br />
Quickborn 100.0%<br />
<strong>Commerzbank</strong><br />
International S.A.<br />
Luxembourg 100.0% 2)<br />
European Bank for Fund<br />
Services GmbH (ebase)<br />
Haar near Munich 100.0% 2)<br />
Capital Investment Trust<br />
Corporation<br />
Taipei 24.3% 1)<br />
Commerz International Capital<br />
Management (Japan) Ltd.<br />
Tokyo 100.0% 2)<br />
1) The Parent Bank holds some of the interest indirectly.<br />
2) The Parent Bank holds the interest indirectly.<br />
RETAIL BANKING AND ASSET MANAGEMENT 27<br />
COMMERZ PARTNER Beratungsgesellschaft<br />
für Vorsorge- und<br />
Finanzprodukte mbH<br />
Frankfurt am Main 50.0%<br />
<strong>Commerzbank</strong> International<br />
Trust (Singapore) Ltd.<br />
Singapore 100.0% 1)<br />
ADIG-Investment<br />
Luxemburg S.A.<br />
Luxembourg 100.0% 2)<br />
CICM Fund Management Ltd.<br />
Dublin 100.0% 2)<br />
Jupiter International<br />
Group plc<br />
London 100.0% 2)<br />
<strong>Commerzbank</strong><br />
(South East Asia) Ltd.<br />
Singapore 100.0%<br />
AFINA Bufete de Socios<br />
Financieros, S.A.<br />
Madrid 48.7%<br />
Commerz Advisory<br />
Management Co. Ltd.<br />
Taipei 100.0% 2)<br />
KEB Commerz Investment<br />
Trust Management Co. Ltd.<br />
Seoul 45.0%
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30 MANAGEMENT REPORT<br />
Corporate Banking<br />
department<br />
2003<br />
Equity tied-up (7 m) 5,154<br />
Operative return<br />
on equity 6.9%<br />
Cost/income ratio in<br />
operating business 49.8%<br />
corporate and investment banking<br />
The Corporate and Investment Banking division is responsible for business relationships<br />
with companies and institutions as well as the product and trading<br />
areas geared to these groups of customers.<br />
Strategically, the systematic development of business with the successful<br />
German Mittelstand continues to be of outstanding significance for us. We<br />
intend to become Germany’s best nationwide bank for Mittelstand companies.<br />
At the same time, we want to be the partner of choice for our larger corporates<br />
and multinationals, able to provide them with the right solutions.<br />
Corporate Banking department<br />
In view of the flat economic performance in Germany for the third year in succession<br />
and a further rise in company insolvencies, the overall conditions for<br />
corporate business remained difficult in 2003. They were felt above all in persistently<br />
weak demand for financing, primarily reflected at the Bank in a decline<br />
in our lending to larger corporates and multinationals. While provisioning for<br />
problem credits is still at a high level, we were able to reduce the valuation<br />
allowances in our lending by altogether more than a fifth, not least thanks to<br />
the acknowledged efficiency and state-of-the-art character of our systems for<br />
managing risk.<br />
We attach great priority to reflecting risk in our pricing, which in any case will<br />
become obligatory at the latest with the introduction of Basel II. Margins in corporate<br />
business remain narrow and do not adequately reflect the risk. Alongside<br />
these efforts, we have stepped up our cross-selling in order to sell more of our<br />
other banking products and services and we are intensifying the dialogue with<br />
our customers.<br />
Lending offensive for Mittelstand<br />
In order to underscore our Mittelstand orientation and to counter the frequently<br />
and indiscriminately raised accusation that the private-sector banks are no<br />
longer lending to Mittelstand firms, we launched a lending offensive last spring<br />
especially designed for this group of customers. In a first step, we made available<br />
an extra one billion euros in funds. Shortly afterwards, we were able to<br />
arrange a global loan of 7500m with Kreditanstalt für Wiederaufbau for financing<br />
the investments of smaller businesses. In addition, we made available – for<br />
the first time at individual state level – a global loan of 7250m with L-Bank<br />
Baden-Württemberg especially for companies in this state. A third general loan<br />
facility of 7100m for firms in Bavaria was arranged with LFA Förderbank Bayern.<br />
We pass on the funding advantage realized through these general loan facilities<br />
to our Mittelstand borrowers. All told, we provided almost 72bn from these programmes<br />
alone for the new business of smaller firms, thereby holding our lending<br />
to Mittelstand companies steady against the general trend – in marked contrast<br />
to popular talk of a credit squeeze.
In order to improve the financial standing of smaller businesses and to create<br />
greater transparency, we have strengthened our rating-based advisory service.<br />
There has been remarkably strong demand for our “rating:coach” product.<br />
In the meantime, we have found over 200 customers for this very individual<br />
advisory service.<br />
Dynamic expansion of “public sector”<br />
In addition to traditional corporate customers, we are increasingly serving institutions<br />
of the public sector as an independent target group of Corporate Banking.<br />
Above all, these are the federal, state and local authorities, and especially<br />
“Konzern Kommune” with its often numerous municipal companies and financial<br />
peculiarities.<br />
As a rule, the main emphasis is on communal loan business, which registered<br />
an encouraging development. In 2003, for instance, <strong>Commerzbank</strong> was<br />
once again the European market leader in selling credits under the EIB global<br />
loans programme. But we were also successful in finding financing solutions<br />
for social-insurance institutions, local utilities and waste-disposal companies as<br />
well as for healthcare institutions. There was also lively demand for derivative<br />
instruments for use in interest-rate management. Institutions availed themselves<br />
to a very great extent of the persistently low level of interest rates both to<br />
finance investments and to reduce their interest burdens.<br />
Advising municipal enterprises, such as public utilities, continues to be particularly<br />
important. On account of the trend towards more competition and<br />
greater deregulation, organization and rating are the main topics here. In the<br />
area of municipal investment, we have created a special mixed fund consisting<br />
of equities and bonds, “KommunalCorent”, as a portfolio insurance instrument<br />
and have been quite successful with it.<br />
Improved functions for corporate-customer portals<br />
We added several functions to our two <strong>Commerzbank</strong> corporate-customer<br />
portals last year, thereby making electronic access to the Bank even easier. The<br />
Mittelstand portal, for example, now has a forward money-market function. In<br />
the meantime, this “companydirect” portal is regularly selected and used by<br />
more than 22,000 of our corporate clients. This represents virtually half of the<br />
relevant target group.<br />
Additional modules and functions have also been integrated into “companyworld”,<br />
the internet portal for larger Mittelstand firms. These make documentary<br />
foreign commercial business and also bulk payments via internet simpler and<br />
international payments easier. Our goal continues to be to introduce new applications,<br />
creating greater financial scope for corporate customers through these<br />
portals and providing them with a better overview of their day-to-day transactions.<br />
New fund products for financial investments<br />
In order to tap new attractive financial investment opportunities for Mittelstand<br />
customers and smaller institutional investors, <strong>Commerzbank</strong> has reached an<br />
agreement for close cooperation with the American SEI Investments Company.<br />
First and foremost, our customers, who are able to choose between two investment<br />
funds applying the manager-of-managers approach, will benefit from the<br />
CORPORATE AND INVESTMENT BANKING 31
32 MANAGEMENT REPORT<br />
independent selection and control of SEI, one of the world’s leading companies<br />
in the area of investment consultants. This will give them access to the best<br />
managers in all the relevant markets and investment styles. Through the cooperation<br />
with SEI Investments, our investors will achieve far better performance for<br />
their company funds, especially over the medium to long term.<br />
<strong>Commerzbank</strong> is the first bank in Germany to conclude such an exclusive<br />
cooperation agreement with a broadly-based manager-of-managers platform.<br />
Mezzanine to overcome weak capital base<br />
With our new product initiative “Mezzanine for the Mittelstand”, we are seeking<br />
to tackle a core problem of Germany’s smaller businesses: their overly high<br />
debt/equity ratios. By offering mezzanine financing, we are expressing our confidence<br />
in their future. They can then receive the liable funds to enable them to<br />
realize their investment plans without having to restrict their decision-making<br />
scope. The mezzanine funds are made available by our subsidiary Commerz<br />
Beteiligungsgesellschaft and have an average lifetime of five to seven years.<br />
Our goal: more Mittelstand customers<br />
In the current business year as well, Corporate Banking is set to steer an expansion<br />
course. In the Mittelstand segment in particular, we want to gain new customers<br />
and raise the proportion of such companies which have a <strong>Commerzbank</strong><br />
account from its present level of 39%. An important role in this connection is<br />
played by our four financial engineering centres set up in 2002, providing onthe-spot<br />
support for our corporate relationship managers in the form of quality<br />
structured and corporate-finance products. We will do all that is in our power to<br />
complement our attractive product range in the areas of interest-rate, currency<br />
and liquidity-risk management, transaction and cash management, as well as<br />
international trade and export financing by adding innovative solutions<br />
designed for Mittelstand firms. At the same time, our Mittelstand offensive is<br />
intended to help make our corporate business as a whole more profitable.<br />
“Move to the top”<br />
At the start of 2004, our Bank’s entire Corporate Banking repositioned itself. We<br />
gave this important corporate project the name “Move to the top”. The main<br />
emphasis in this repositioning is to make a clear distinction in the support which<br />
we provide for our key target groups – on the one hand, for smaller businesses<br />
at our 20 main branches with more than 150 sales locations; on the other, for the<br />
larger corporates centres, specialized in dealing with our larger corporate customers<br />
in the major business locations of Hamburg, Düsseldorf, Frankfurt,<br />
Stuttgart and Munich. Retaining our successful existing practice, we will continue<br />
to look after roughly 100 selected multinationals from our head office, applying<br />
a global relationship management approach. With this systematic target-group<br />
orientation, we will further strengthen our excellent competitive position.<br />
Experts at finding solutions for such management problems as interest and<br />
currency risk or complex solutions in the area of cash and transaction management<br />
are available to support these customer segments. They are assigned to<br />
the newly formed product areas Interest, Currency & Liquidity Management<br />
(ICLM) and Trade Finance & Transaction Services (TFTS), which have a single<br />
management. Maintaining the previous successful arrangement, a qualified
elationship manager will coordinate the overall business relationship with the<br />
client. We believe that this new orientation will above all generate sustained<br />
growth in the Mittelstand segment and more intensive commitments in the<br />
larger corporates area.<br />
Financial Institutions department<br />
On behalf of the Group, the Financial Institutions department looks after relations<br />
with German and foreign banks and financial services providers as well as<br />
central banks and countries. Applying a global approach, it also complements<br />
our network of operative outlets. In the 2003 financial year as well, it made a<br />
stable contribution to results.<br />
Our strength abroad is based on a closely-knit network of 26 representative<br />
offices as well as delegates of the Bank in all the leading economic regions. In<br />
addition, the relationship managers at head office possess detailed knowledge<br />
of the cultural, legal and economic conditions in the regions for which they are<br />
responsible.<br />
In foreign commercial business, contacts with over 6,000 banks document<br />
<strong>Commerzbank</strong>’s position as a leading external-trade bank. We handle the financial<br />
side for 16% of Germany’s external trade – a large market share which has<br />
been growing for years and which we easily maintained in 2003; for exports<br />
alone, the share is even as much as 17%. We are especially well-positioned<br />
in the emerging markets, for which this department serves as a centre of competence.<br />
Comprehensive range of services<br />
We provide businesses active in external trade with a comprehensive and highquality<br />
service. Here, Financial Institutions forms the bridge between German<br />
corporate customers and foreign banks. Our main products and services are:<br />
Advice on delivery transactions and planned investments<br />
Handling payments via direct accounts in more than 70 currencies<br />
Provision of foreign guarantees, taking into consideration local regulations<br />
Cover against claims arising from letters of credit or guarantees<br />
Forward exchange cover even for exotic currencies<br />
External-trade financing, from forfaiting to complex structured products, as<br />
well as<br />
Direct on-the-spot support.<br />
In 2003, we were able to confirm our important position as a European transaction<br />
bank and participant in the euro-clearing system.<br />
Good opportunities in Central and Eastern Europe<br />
Despite geographical concentration on our European home market, <strong>Commerzbank</strong><br />
still has a direct presence in 43 countries.<br />
In Central and Eastern Europe, we have even increased our presence in some<br />
places. At the end of the year, for example, our new branch in Bratislava began<br />
operations, which had developed from the Bank’s former representative office<br />
CORPORATE AND INVESTMENT BANKING 33
34 MANAGEMENT REPORT<br />
Securities department<br />
2003<br />
Equity tied-up (7 m) 995<br />
Operative return<br />
on equity 0.3%<br />
Cost/income ratio in<br />
operating business 99.7%<br />
in Slovakia. In the current year, a further representative office will follow in the<br />
Serbian capital, Belgrade. Our network in the Central and Eastern European<br />
region, where we are one of the largest foreign banks, is complemented by<br />
minority stakes in several procredit banks, the former microfinance banks.<br />
By far our most important involvement in the region is our interest in BRE<br />
Bank in Poland, which having achieved a turnaround last year is now back on an<br />
expansion course. With its market share of a good 6.5%, it is one of the country’s<br />
leading banks. After receiving the approval of the authorities to raise our existing<br />
50% interest in BRE Bank to a maximum of 75%, we acquired further shares<br />
through two public tender bids. In the meantime, our stake amounts to more<br />
than 72%. This puts us in a position to play a major role in a consolidation of the<br />
Polish banking market.<br />
US branches successful<br />
Last year, the <strong>Commerzbank</strong> branches and subsidiaries operating in Western<br />
Europe had to contend with a persistently unfavourable market environment. We<br />
mainly concentrated on improving the networking of our units and on strengthening<br />
our sales teams through specialists for complex financing solutions.<br />
Larger corporates and multinationals in particular benefited as a result.<br />
In North America, we maintain four branches; last year, they remained on a<br />
successful course, once again turning in exceptionally good results. Their pretax<br />
return on equity reached 24%. Above all, asset/liability management and secondary-market<br />
activities registered above-average performance again. The cost<br />
base was further reduced, by a tenth. Due to the strong economic upswing, we<br />
see good opportunities for our Northern American outlets this year as well.<br />
Securities department<br />
The strongest improvement in the results of our operative business lines last<br />
year was registered by the Securities department, which has included foreignexchange<br />
business since mid-2002. Thanks to substantial reductions in costs,<br />
accompanied by a recovery in trading revenues, and with a gradually more positive<br />
outlook in the markets, Securities returned to profitability.<br />
Central to business strategy in 2003 was an expansion in services for corporate<br />
clients in Germany, but also throughout Europe as a whole and the United<br />
States. For the first time, the range extended from capital raising and products<br />
for hedging and asset enhancement to advising companies facing the need to<br />
reorganize their balance sheets.<br />
Synergies from integration of bond and FX businesses<br />
The fixed-income area benefited last year not only from the persistent buoyancy<br />
of new issues and trading activity in many markets, but also from the integration<br />
of foreign-exchange and interest-rate business. Both of these will now be provided<br />
from a single platform and can draw upon the synergies to their mutual<br />
benefit, given the ever greater influence that exchange rates have on interest<br />
rates.
In options business as well, the advantages of this integration are becoming<br />
evident, with a positive trend in both client business and proprietary trading. The<br />
launch of long-dated/exotic FX options will add further to revenues this year.<br />
A new electronic trading platform, developed last year, will give our private and<br />
corporate clients direct access to the global FX market.<br />
In the run-up to EU enlargement, we have integrated trading in Central and<br />
Eastern European bonds into our major European centres in London and Frankfurt,<br />
enabling us to provide the complete service of an international investment<br />
bank for all customers in the accession countries as well.<br />
Turnaround in equity capital markets<br />
Thanks to the strong recovery in equity markets and increased fund-raising<br />
activity on the part of many companies, we considerably expanded our equity<br />
capital markets business. Among other things, <strong>Commerzbank</strong> acted as adviser to<br />
France Télécom in their 715bn capital increase, the largest-ever rights issue. The<br />
deal was named Equity Issue of the Year by International Financing Review. The<br />
improved performance of ECM was achieved despite a disappointing IPO market<br />
in Germany.<br />
The development of a European-based M&A business remains a key part<br />
of the strategy to provide our clientele with a complete range of investmentbanking<br />
products and services. In a subdued market environment for M&A, we<br />
advised clients in ten completed deals last year.<br />
Combining the syndicated loan and debt capital markets groups also had a<br />
positive impact on our business opportunities. We served as joint lead arranger<br />
for a two-year credit of 713bn for DaimlerChrysler. In addition, we were the lead<br />
manager of syndicated loan deals for such prominent companies as Volkswagen,<br />
Degussa and Linde.<br />
In the bond market, we played a major role in a floating-rate issue, once<br />
again for DaimlerChrysler. Other important issues in which we were involved<br />
were launched by the Republic of Turkey and the European aerospace company,<br />
EADS.<br />
In asset-backed securities, we built further upon our strong market position<br />
and franchise. Among other things, we were the sole bookrunner for both of<br />
the two largest European securitization deals, for Aareal Bank and Eurohypo.<br />
We believe that the true sale initiative, which <strong>Commerzbank</strong> has worked to<br />
establish, will generate sustained growth for the securitization market over the<br />
next few years.<br />
Success with hedge fund certificates<br />
Our derivatives group benefited from both the recovery in equity markets and<br />
our efficient distribution channels for institutional and private investors in Germany.<br />
The star product proved to be our hedge fund of fund index-linked certificates,<br />
offered under the name of Comas. The new Comas unlimited certificate<br />
in particular achieved excellent performance combined with low volatility.<br />
<strong>Commerzbank</strong> is now regarded as a major player in the fund-linked derivatives<br />
markets.<br />
CORPORATE AND INVESTMENT BANKING 35
36 MANAGEMENT REPORT<br />
Independent <strong>Commerzbank</strong> research<br />
Research activities are increasingly focused on a core German expertise across<br />
all asset classes, geared to the needs of both institutional and corporate customers.<br />
In different independent surveys, we performed exceptionally well,<br />
underlining our approach of offering absolutely independent research that<br />
meets high quality standards.<br />
Real Estate department<br />
Our Real Estate department has remained unchanged, comprising Commerz<br />
Leasing und Immobilien AG (CLI), Düsseldorf, and Commerz Grundbesitz Gesellschaft<br />
GmbH (CGG), Wiesbaden. Once again, it achieved an encouraging profit<br />
contribution of about 7100m.<br />
CLI – a leading German leasing company<br />
Despite a difficult overall economic and tax framework, our subsidiary CLI was<br />
able to strengthen its position as one of the leading and most profitable German<br />
leasing companies. The group consists of CommerzLeasing und Immobilien AG<br />
together with 13 subsidiaries and four equity participations, covering the entire<br />
spectrum of leasing and real-estate business. Last year, it generated its largest<br />
volume of new business to date, at 72.5bn, with expansion fuelled by activities<br />
in Germany. The leasing of moveable goods grew by a particularly dynamic 22%.<br />
All in all, the CLI group asserted its market position in the real-estate area,<br />
which includes – apart from the leasing of property and large moveable goods –<br />
structural financings and funds, and further expanded it in the leasing of moveable<br />
goods. At end-2003, the overall portfolio of contracts amounted to 723bn.<br />
The year’s most important transactions were:<br />
In real-estate/structured investments, a leasing contract for a fund-based<br />
plan of over 7400m for the new head office of a major company, a major<br />
municipal investment with a volume of more than 7300m and a 7100m supplier<br />
financing for investment in machinery and equipment by an automobile<br />
components supplier.<br />
In the fund area, the inclusion of five ships of identical construction in a shipping<br />
fleet fund with a volume of US$167m and a stadium fund of 7163m. In<br />
addition, a project development plan was implemented in Düsseldorf with<br />
roughly 22,000 square metres of office space and included in a closed-end<br />
property fund. As a result, the overall volume of investors’ capital held in<br />
funds rose to 73.4bn, representing 82,000 individual investments.<br />
In the leasing of moveable goods, the acquisition of Hansa Automobil<br />
Leasing GmbH and also the integration of ComSystems GmbH, a company<br />
for the leasing of hardware and software, sold by DaimlerChrysler in 2002.
CGI/HAUS-INVEST remains on successful course<br />
Once again, the Commerz Grundbesitz group achieved above-average success<br />
with its sales. Under the roof of Commerz Grundbesitz Gesellschaft, it consists<br />
of Commerz Grundbesitz-Investmentgesellschaft mbH (CGI), which manages the<br />
open-ended property fund HAUS-INVEST europa, and Commerz Grundbesitz-<br />
Spezialfonds-Gesellschaft mbH (CGS) for business related to non-publiclyoffered<br />
property funds.<br />
Last year, a net 71.75bn flowed into HAUS-INVEST europa – roughly 13% of<br />
the net inflows for all of Germany’s open-ended property funds. The fund’s<br />
assets rose to 711.9bn. As a result, it remains the market leader, at 14%, and also<br />
the largest German investment fund.<br />
The large net inflows were immediately invested in attractive real estate.<br />
At year-end, the overall portfolio comprised 152 properties in 10 countries and<br />
60 cities. The non-German share of the assets amounted to more than 75%.<br />
Commerz Grundbesitz-Spezialfonds-Gesellschaft can also look back on a successful<br />
year. It has now launched four property funds for institutional investors<br />
and acquired altogether 28 properties in nine European countries, for which it<br />
invested an amount of roughly 7600m.<br />
Group companies and equity participations<br />
in the Corporate and Investment Banking division<br />
Corporate Banking department<br />
BRE Bank SA<br />
Warsaw 72.2%<br />
Commerz (East Asia) Ltd.<br />
Hong Kong 100.0%<br />
Securities department<br />
CBG Commerz Beteiligungsgesellschaft<br />
Holding mbH<br />
Bad Homburg v.d.H. 100.0%<br />
Real Estate department<br />
Commerz Grundbesitzgesellschaft<br />
mbH<br />
Wiesbaden 100.0%<br />
<strong>Commerzbank</strong> (Budapest) Rt.<br />
Budapest 100.0%<br />
P.T. Bank Finconesia<br />
Jakarta 51.0%<br />
<strong>Commerzbank</strong> Capital Markets<br />
Corporation<br />
New York 100.0%<br />
CommerzLeasing und<br />
Immobilien AG<br />
Düsseldorf 100.0%<br />
1) The Parent Bank holds some of the interest indirectly.<br />
2) The Parent Bank holds the interest indirectly.<br />
CORPORATE AND INVESTMENT BANKING 37<br />
<strong>Commerzbank</strong> (Eurasija) SAO<br />
Moscow 100.0%<br />
Commerz Futures, LLC<br />
Chicago 100.0% 1)<br />
<strong>Commerzbank</strong> (Nederland) N.V.<br />
Amsterdam 100.0% 2)<br />
Commerz Securities<br />
(Japan) Company Ltd.<br />
Hong Kong/Tokyo 100.0%
‡ What if you have more important things to<br />
do than to go to your bank? ‡ then we simply<br />
come to you ‡ you can settle a lot of things by phone or<br />
online, but not everything. We prefer to discuss with you personally<br />
what is crucial for you. anywhere you wish.<br />
‡ ideas ahead ‡
40 MANAGEMENT REPORT<br />
Staff and welfare report<br />
In view of the persistently unfavourable economic situation, we launched a<br />
further cost-cutting offensive with the aim of reducing operating expenses by<br />
almost 7700m to altogether 74.5bn by end-2004. Apart from numerous savings<br />
in non-personnel costs as well as various painful cuts in pay and extra benefits,<br />
this also called for additional staff reductions of 3,100 full-time personnel – this<br />
time mainly at head office and in our foreign outlets.<br />
In 2003, we realized all our targets. The <strong>Commerzbank</strong> Group’s regular workforce<br />
shrank from 34,336 in June 2001 to 27,630 full-time staff at end-2003. This<br />
means that over 6,700 jobs were shed, which we have achieved up to now without<br />
dismissals. In 2004, just under 700 jobs have to go, which, as things stand<br />
today, we will be able to realize according to plan.<br />
Company pension<br />
A further measure adopted by the Board of Managing Directors to reduce personnel<br />
costs was the cancellation of the company old-age provision schemes<br />
–the so-called bank pension – as of December 31, 2004. The cancellation, which<br />
was a hard decision for the management to take, had become very necessary for<br />
economic reasons. It related exclusively to the Bank’s own pension scheme.<br />
Employees’ benefits stemming from Bankenversicherungsverein (BVV), the<br />
banking industry scheme representing the second and much larger pillar of<br />
<strong>Commerzbank</strong>’s old-age provision, was not affected.<br />
Moreover, by the end of January 2004, in response to calls by the central staff<br />
council, the Bank declared its readiness to negotiate on a possible new system<br />
for company pensions, on condition that a new system of benefits would eliminate<br />
the risks attached to previous arrangements.<br />
The former systems, which were based on the final salary, entailed substantial<br />
and also incalculable risks that would have become economically intolerable<br />
and unjustifiable for the Bank. Above all, changing external factors, such as<br />
lower state pension payments and tax changes, are leading to ever greater<br />
financial commitments on the part of the Bank. Given the difficult economic setting<br />
in which <strong>Commerzbank</strong> is operating and in view of the medium to long-term<br />
perspectives, the Bank has to be able to calculate the cost of the company pension<br />
scheme better. This was not the case under the existing arrangements.<br />
In mid-February, the Board of Managing Directors and the central staff council<br />
reached agreement on the framework for a new system of company provision<br />
for old age. The three existing internal agreements on the bank pension are to<br />
be replaced by a uniform defined-contribution internal agreement. Negotiation<br />
of the details was to begin at end-February and is to be concluded by end-June<br />
2004.
Data on <strong>Commerzbank</strong>’s personnel* )<br />
Looking ahead<br />
In order to streamline our administration even further, we have subjected work<br />
procedures in personnel support to critical examination. The aim of the project<br />
was to maintain the quality of personnel work or even improve it in times of<br />
cost-cutting. The core features of the restructuring which has been initiated are:<br />
less administration through more efficient structures and procedures, a higher<br />
degree of automation through the use of modern technology and more intensive<br />
advisory functions.<br />
The new electronic portal “Personal Online” gives employees, managers and<br />
human resources staff direct access to all the necessary personnel information,<br />
services and applications. Many activities – such as entering periods of leave,<br />
making an adjustment to flexitime or notifying a change of address – can now<br />
be handled swiftly and smoothly online.<br />
In a new information centre, members of staff and managers receive extensive<br />
and professional advice on all personnel-related topics which are not covered<br />
by “Personal Online”.<br />
In addition, specialists at ten regional service units advise managers of our<br />
Bank in particular on complex issues arising in various ways from the responsibility<br />
borne for managing personnel.<br />
STAFF AND WELFARE REPORT 41<br />
2003 2002 Change in %<br />
Total staff Group 1) 32,377 36,566 –11.5<br />
Permanent staff Group 2) 29,580 33,224 –11.0<br />
Total staff Parent Bank 1) 25,260 28,343 –10.9<br />
including: based abroad 2,303 2,604 –11.6<br />
including: trainees 1,331 1,568 –15.1<br />
Permanent staff Parent Bank 22,966 25,303 –9.2<br />
Years of service<br />
more than 10 56.2% 53.2%<br />
more than 20 22.3% 21.0%<br />
Total pensioners and surviving dependents 11,587 11,267 2.8<br />
including: those retiring during the year 475 446 6.5<br />
those entering early retirement 140 291 –51.9<br />
Older staff on part-time scheme 338 316 7.0<br />
*) Actual number employed; 1) including local staff in representative offices and cleaning and kitchen personnel, excluding staff on maternity<br />
leave and long-term sick; 2) employees, excluding trainees, junior executive staff, temporary staff, volunteers, cleaning and kitchen<br />
personnel, staff on maternity leave and long-term sick.
42 MANAGEMENT REPORT<br />
Internal suggestions scheme<br />
Our internal suggestions scheme, COMIDEE, which was radically overhauled<br />
five years ago, continues to meet with very high acceptance. In the years ahead<br />
as well, we will ensure that it remains a dynamic process. There is hardly<br />
another forum which employees can use to express their ideas and criticism so<br />
directly by having an impact on the company with their own ideas and receiving<br />
an attractive award in return.<br />
Skill management – coming to grips with personal development<br />
Employees frequently express the wish to form a clear picture of the opportunities<br />
for their personal development and deployment within the Bank. By introducing<br />
our skill-management system, we are able to fulfil this wish. Staff can<br />
now make their personal qualifications, experience, abilities and interests within<br />
the company transparent electronically and thus actively shape their professional<br />
development. At the same time, skill management provides managers<br />
and human resources personnel with transparency as regards the potential of<br />
the staff in the areas for which they are responsible. With the aid of the system,<br />
managers can analyse the need for staff in their department to gain further<br />
qualifications, seek suitable candidates to fill vacancies in their department and<br />
optimally support their staff in achieving their development goals. Participation<br />
in skill management is voluntary and is dependent on the active involvement of<br />
employees and managers. Following the successful pilot phase in our management<br />
circle B and on the retail side of our Mannheim main branch, skill management<br />
will be successively introduced nationwide starting this year.<br />
Developing managerial potential – more important than ever<br />
Especially in economically difficult times, developing managerial potential is of<br />
key importance. The main emphasis is on the management circles which we<br />
have established to develop management personnel for the most part from<br />
within the Bank and to prepare them for their next post. All of <strong>Commerzbank</strong>’s<br />
management circles begin with a selection procedure, followed by various qualification<br />
modules.<br />
Which management circle for which function?<br />
In management circle C, 188 staff are currently gaining the qualifications for<br />
their future functions as either group leaders or branch managers. At present,<br />
management circle B has 123 future sectional heads or regional branch managers.<br />
The 26 members of management circle A are preparing themselves to<br />
manage a main branch or head-office department. The management circles<br />
enable us to secure a constantly high level of managerial skills at <strong>Commerzbank</strong>.
Training younger staff<br />
In the difficult economic environment of the past few years, we have maintained<br />
our training of younger personnel at a level well in excess of our own needs. In<br />
addition to commercial training, we offer training as bank information scientists,<br />
courses at vocational academies, qualification for younger staff through<br />
<strong>Commerzbank</strong> study circles, tertiary-level studies in banking and further training<br />
via our own internal junior executive programmes and courses of study at<br />
Bankakademie.<br />
Altogether 419 young people started their training at <strong>Commerzbank</strong> in 2003.<br />
Most of them – 313 participants – are future qualified bank employees (Bankkaufleute),<br />
while 72 are students at the vocational academy.<br />
A major feature last year was the systematic implementation of our new<br />
approach to the training of qualified bank employees. The main goal of the new<br />
approach is to encourage people to act with a sales orientation and to learn of<br />
their own accord. We want to put our trainees in a position to seize the initiative,<br />
to actively approach customers, systematically analyse what is needed, develop<br />
satisfactory solutions, present them convincingly, thereby achieving customer<br />
satisfaction. With the aid of detailed correspondence lessons and new media, it<br />
is possible to acquire the necessary theoretical foundations and then train the<br />
application of the knowledge acquired in practical workshops. The stronger link<br />
between learning at college, on the one hand, and on-the-job learning at the<br />
Bank, on the other, enables our future bank employees to work even more successfully<br />
for the benefit of our customers and the Bank.<br />
We thank our staff<br />
Successful personnel work can only be realized in constructive cooperation with<br />
the management and the employee representatives. That is why we want to take<br />
this opportunity to thank the staff councils, the spokesmen of the Bank’s senior<br />
staff, and the representatives of both the physically disabled and the younger<br />
staff for the responsible nature of their cooperation.<br />
Naturally, our special thanks go to all those staff who, despite the difficult<br />
overall conditions, have put in intensive efforts to help us achieve a return to<br />
profitability in our operating business.<br />
STAFF AND WELFARE REPORT 43
‡ What happens if somewhere in the world a<br />
new trend appears? ‡ your phone rings ‡ you<br />
shouldn’t chase after opportunities, but rather meet them head-on.<br />
But who lets you know where things are happening and what’s<br />
promising? We do, for example. When we find something suitable,<br />
we tell you immediately.<br />
‡ ideas ahead ‡
46 MANAGEMENT REPORT<br />
Data and facts on the<br />
<strong>Commerzbank</strong> share<br />
Bearer shares 803 200<br />
Reuters CBKG.DE<br />
Bloomberg CBK GR<br />
ISIN DE0008032004<br />
Performance of the<br />
<strong>Commerzbank</strong> share 2003<br />
Daily figures,<br />
30.12.2002=100<br />
Our share, strategy and outlook<br />
After the year’s crises, the fear of terrorism, but above all the war in Iraq and the<br />
long period of sluggish economic activity, the quick recovery in the equity markets<br />
and the return to normal undoubtedly came as a surprise. German financials<br />
in particular registered marked price gains in 2003, advancing at double- or<br />
three-digit rates.<br />
With a plus of 108.7%, the <strong>Commerzbank</strong> share even claimed first place in the<br />
DAX index. The performance not only of its national competitors but also of<br />
European financials improved to a far lesser extent. Over the twelve-month<br />
period, the DowJones EuroStoxx Banks index climbed by roughly 35%. In a yearon-year<br />
comparison, <strong>Commerzbank</strong>’s market value surged from 74.0bn to<br />
79.3bn due to its price performance and the increase of about 10% in the number<br />
of shares.<br />
240<br />
220<br />
200<br />
180<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
<strong>Commerzbank</strong> share DJ Euro Stoxx Banks CDAX (Banks)<br />
Group restructuring makes progress – capital increase without rights issue<br />
The extensive revaluation of our entire securities and investments portfolio<br />
came as a positive surprise for the market. We see the following advantages:<br />
Permanent reduction of goodwill amortization;<br />
Disposals from investments portfolio have been made easier;<br />
Lower funding costs;<br />
Sustained profitability and ability to pay dividend have been achieved, which<br />
will also benefit shareholders in the form of a higher share price and dividend<br />
payments;<br />
Strengthening of position vis-à-vis competitors and in current consolidation<br />
process.<br />
This revaluation measure, whose rigour and scale were unique up to now in<br />
the European banking sector, went hand in hand with the issue of new shares.<br />
The capital increase without subscription rights for shareholders was resolved in<br />
order to dampen the effects of the measure on the Bank’s regulatory capital.<br />
Interest in subscribing to the roughly 53.3 million new shares was so great that<br />
the transaction was concluded within only a few hours. The book had been oversubscribed<br />
more than four times. The new shares were allocated at a price of<br />
714.25. This transaction lifted the number of issued shares to almost 598 million.
Change in shareholder structure<br />
Through the capital increase, several changes have occurred in our shareholder<br />
structure. The interest of Munich Re, for instance, was reduced from 10.4% to<br />
9.5%, while that of WCM initially fell from 5.5% to 4.9%; the company has since<br />
disposed of at least a further 4% of our shares.<br />
As only an interest in a company that exceeds 5% is deemed a permanent<br />
investment, the free float in <strong>Commerzbank</strong> shares rose to 81.7%. The free float<br />
is crucial for a company’s weighting in various indices. For this reason, the<br />
<strong>Commerzbank</strong> share now accounts for 1.792% of the DAX index.<br />
In January 2004, we commissioned a fresh survey of our shareholder structure.<br />
The findings are now available and present an interesting picture, not least<br />
by comparison with the last detailed surveys in 1994 and 1999.<br />
The most obvious shift is that over the past ten years the percentage of<br />
<strong>Commerzbank</strong>’s shares held by institutional investors has steadily increased,<br />
from 49% to 60%, and now to as much as 76%. This confirms that the disposals<br />
of blocks of shares and the November 2003 capital increase have landed for the<br />
most part in the custody accounts of institutional investors.<br />
Private investors hold over 24% of <strong>Commerzbank</strong> AG in 347,600 accounts,<br />
with 23% held in Germany. 29% is in the hands of German companies and institutional<br />
investors. At the start of 2004, therefore, 52% of <strong>Commerzbank</strong> shares<br />
were held by German investors, the largest domestic investor being Munich Re.<br />
Non-German banks and institutional investors account for 48% of <strong>Commerzbank</strong>’s<br />
shares. 32% is held in member states of the European Union, with Italy<br />
especially prominent at 12%. Above all, Assicurazioni Generali (9.1%),<br />
Mediobanca (1.4%) and Banca Intesa (1.9%) should be mentioned in this connection.<br />
Since the last survey five years ago, the position of non-German<br />
investors has increased by ten percentage points. At 8%, the United Kingdom<br />
occupies the next place, followed by Spain with 4%; here, Bank Santander<br />
Central Hispano has a 3.4% stake in <strong>Commerzbank</strong>. Swiss investors hold 6% of<br />
<strong>Commerzbank</strong>’s shares and US investors 4%.<br />
When share prices boomed in the second half of the nineties, the number of<br />
<strong>Commerzbank</strong> shareholders surged from 190,000 to 410,000. The more sober<br />
mood of the past few years has reduced the number of direct investors some-<br />
Abroad Germany<br />
1.0 Private investors<br />
9.1 Generali<br />
3.4 SCH<br />
1.4 Mediobanca<br />
1.9 Banca Intesa<br />
31.2 Institutional investors<br />
OUR SHARE, STRATEGY AND OUTLOOK 47<br />
23.3 Private investors<br />
9.5 Munich Re<br />
19.2 Institutional<br />
investors<br />
<strong>Commerzbank</strong>’s<br />
360,000 shareholders<br />
in per cent<br />
share of capital held<br />
(as of start of March 2004)
48 MANAGEMENT REPORT<br />
Turnover in<br />
<strong>Commerzbank</strong> shares<br />
2003<br />
in 7 bn, quarterly figures<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
Daily turnover<br />
High 35.32m units<br />
Low 0.81m units<br />
Average 3.70m units<br />
what. However, with 360,000 investors <strong>Commerzbank</strong> remains one of Germany’s<br />
major public companies. Its employees and pensioners represent a significant<br />
group, to which the Bank has regularly issued special employee shares for practically<br />
three decades. In the meantime, they own just over 3% of the Bank.<br />
Stock-exchange listings of the <strong>Commerzbank</strong> share<br />
Germany Berlin, Bremen, Düsseldorf, Frankfurt,<br />
Hamburg, Hanover, Munich, Stuttgart, Xetra<br />
Europe London<br />
Switzerland<br />
Asia Tokyo<br />
North America Sponsored ADR<br />
(CRZBY) CUSIP: 202597308<br />
The year’s IR highlight: Investors’ Day 2003<br />
In 2003 as well, <strong>Commerzbank</strong>’s Investors’ Day was a convincing event: more<br />
than 90 analysts and fund managers took up the invitation to come to Collegium<br />
Glashütten in order to hear about the latest developments at the Bank and the<br />
progress made by the individual business lines. More people participated than<br />
in the previous year, reflecting the growing interest of the financial community<br />
in <strong>Commerzbank</strong>.<br />
Capital-market communication<br />
Apart from Investors’ Day, which has established itself as a fixed element of IR<br />
activity, we also – as in previous years – held a number of analysts’ meetings,<br />
conference calls and roadshows as well as group and individual discussions. In<br />
order to improve our service for analysts and investors, we further improved<br />
<strong>Commerzbank</strong>’s IR internet portal.<br />
Recently, mounting interest has been registered on the part of fixed-income<br />
analysts in Germany and elsewhere in information about <strong>Commerzbank</strong>. So far,<br />
the enquiries have primarily related to the equity capital side; in future, the<br />
Investor Relations team will include this group to a greater extent in its communication<br />
activities.<br />
Our outlook<br />
More positive overall economic conditions and stable or improving markets<br />
make us confident as regards the development of our net interest and commission<br />
income. We expect provisioning at Group level to recede further to below<br />
one billion euros. We had already achieved the cost targets we had set ourselves<br />
for 2004 by end-2003. As things stand today, we will be able to hold our workforce<br />
at its current level. In 2004, we intend to come close to our target of 8% for<br />
the after-tax return on equity, even though in our planning we do not exceed this<br />
level until 2005. For 2006, we plan a return on equity that is higher than the<br />
medium-term cost of capital of 10%. At the same time, we want to get our<br />
cost/income ratio down to 65% by then.
<strong>Commerzbank</strong>’s major shareholdings in the financial sector<br />
Assicurazioni Generali<br />
Trieste 1.1%<br />
Mediobanca<br />
Milan 1.7%<br />
1) held indirectly<br />
In February 2004, we agreed with SchmidtBank to take over its branch business.<br />
In concrete terms, we are acquiring 70 branches and 29 self-service centres<br />
in Bavaria, Thuringia and Saxony. Thanks to this transaction, our retail customer<br />
base will expand by 10% or so. In addition, there are roughly 4,000 corporate<br />
customers. We expect the newly acquired business activities to be profitable by<br />
2005.<br />
Our strategic goals are:<br />
Banca Intesa S.p.A.<br />
Milan 3.8%<br />
Santander Central Hispano<br />
Madrid 1.9%<br />
to be the efficient provider of financial services for demanding private customers<br />
in Germany;<br />
to become the number one bank for Germany’s successful Mittelstand and<br />
the creative relationship bank for larger corporates and institutions in Europe<br />
as well as for multinationals from all over the world;<br />
to achieve a close integration of corporate business and investment banking;<br />
to allocate equity to reflect business lines’ growth potential;<br />
and to reduce strategically unnecessary shareholdings.<br />
<strong>Commerzbank</strong>’s 2004/2005 financial calendar<br />
Korea Exchange Bank<br />
Seoul 14.8%<br />
Unibanco – União de<br />
Bancos Brasileiros S.A.<br />
São Paulo 5.1% 1)<br />
OUR SHARE, STRATEGY AND OUTLOOK 49<br />
May 12, 2004 Interim report as of March 31, 2004<br />
May 12, 2004 AGM, Jahrhunderthalle Frankfurt<br />
August 4, 2004 Interim report as of June 30, 2004<br />
September 22, 2004 <strong>Commerzbank</strong> Investors’ Day<br />
November 10, 2004 Interim report as of September 30, 2004<br />
February 2005 Annual results press conference 2005<br />
Early May 2005 Interim report as of March 31, 2005<br />
May 20, 2005 AGM, Jahrhunderthalle Frankfurt<br />
Early August 2005 Interim report as of June 30, 2005<br />
Early November 2005 Interim report as of September 30, 2005<br />
All the major <strong>Commerzbank</strong> corporate news items are also available from “Investor Relations” on our homepage: www.commerzbank.com.
‡ it’s quite normal to be available for cus-<br />
tomers at all hours ‡ we think so, at any<br />
rate ‡ you can always reach us. By using our self-service zones<br />
and our extensive online services, Giving retail and corporate<br />
customers all they need in the way of banking.<br />
‡ ideas ahead ‡
52 MANAGEMENT REPORT<br />
Risk report<br />
Contents<br />
I. Risk-oriented overall management of <strong>Commerzbank</strong> 53<br />
1) Risk-policy principles 53<br />
2) Risk categories 53<br />
3) Integration of risk and capital management<br />
into the Bank’s overall management 54<br />
II. Risk-management/risk-control organization 56<br />
1) Risk control 57<br />
2) Risk management: the operative credit function (back office) 58<br />
3) Risk management: operative risk-steering<br />
of market units (front office) 59<br />
4) Internal risk reporting 59<br />
5) Internal auditing 59<br />
6) Implementation of developments in supervision: Basel II and MaK 60<br />
III. Risk-control/risk-management process 61<br />
1) Monitoring and controlling credit risk 61<br />
Internal rating system 61<br />
Quantification of credit-portfolio risk 63<br />
Credit-approval powers 65<br />
Monitoring of credit risk for trading activities 65<br />
Development of risk and risk provisioning 66<br />
Country risk 67<br />
Sectoral and bulk risks 68<br />
Use of credit derivatives 68<br />
Securitization transactions 69<br />
Reporting for credit risk 69<br />
2) Monitoring and controlling market risk 71<br />
Value-at-risk approach 71<br />
Back-testing 72<br />
Stress testing and sensitivity analysis 73<br />
Interest-rate risk 73<br />
Procedure for setting and monitoring limits 74<br />
Reporting for market risk 74<br />
3) Monitoring and controlling equity holding risk 74<br />
4) Monitoring and controlling liquidity risk 75<br />
Liquidity risk 75<br />
Liquidity-risk measurement 76<br />
Market-liquidity risk 76<br />
5) Monitoring and controlling operational risk 76<br />
Operational risk management framework 76<br />
Operational risk methods 77<br />
Business contingency and continuity planning 77<br />
6) Monitoring and controlling business risk 78<br />
7) Monitoring and controlling legal risk 78<br />
8) Monitoring and controlling strategic risk 78<br />
9) Monitoring and controlling reputational risk 78<br />
IV. Summary and outlook 79
I. Risk-oriented overall management of <strong>Commerzbank</strong><br />
1) Risk-policy principles<br />
<strong>Commerzbank</strong> regards the professional treatment of risks as an important core<br />
competency and an integral part of a value-oriented overall Bank management.<br />
Apart from the risk strategy formulated by the Bank’s Board of Managing<br />
Directors, the basis for monitoring and steering risk throughout the entire<br />
<strong>Commerzbank</strong> Group is a comprehensive risk manual, presenting the organizational<br />
guidelines, responsibilities and procedures of the Bank’s overall riskmanagement<br />
system. Both frameworks are regularly examined and adjusted to<br />
accommodate internal and external developments. This creates the basis for a<br />
uniform Group-wide standard in dealing with all the major types of risk. Responsibility<br />
for implementing the risk strategy is borne by the Chief Risk Officer<br />
(CRO), who is a member of the Board of Managing Directors.<br />
<strong>Commerzbank</strong>’s system for the early recognition and monitoring of risk is<br />
geared to identifying risks in good time and to taking measures to counteract<br />
such risks in the sense of a proactive management and control of risk. The methods<br />
applied to measure, steer and aggregate all types of risk are continually<br />
being refined and regularly adapted to <strong>Commerzbank</strong>-specific requirements and<br />
current market conditions. Comprehensive, objective reporting enables the<br />
Board of Managing Directors as well as shareholders and market participants<br />
regularly to assess the Bank’s risk situation.<br />
As an elementary feature of the steering of risk and earnings, the systematic<br />
portrayal of risk provides the basis for business activities at the <strong>Commerzbank</strong><br />
Group to be appropriately backed with capital and through its integration into<br />
the management of economic capital, it helps bring about an optimal allocation<br />
of capital and a sustained increase in the Bank’s market value.<br />
2) Risk categories<br />
For the purpose of risk management, the following types of risk are distinguished<br />
at <strong>Commerzbank</strong>:<br />
Credit risk is the risk of losses or lost profits due to unexpected defaults or<br />
unexpected deterioration in the creditworthiness of counterparties. In addition<br />
to this, credit risk covers above all issuer risk, counterparty risk and country risk.<br />
The general market risk represents the potential loss of a portfolio due to<br />
changes in share prices, exchange rates, precious-metal/commodity prices or<br />
interest rates in the market as a whole and their volatilities. The specific market<br />
risk (spread risk) covers the risk of loss due to changes in price of individual<br />
interest-rate and equity-based financial instruments relative to changes in the<br />
relevant market indices – which are reflected by the general market risk.<br />
For risk-management purposes, the risks arising from equity holdings of<br />
<strong>Commerzbank</strong> are also subsumed under market risk. They result from changes<br />
in the valuation of listed and non-listed equity holdings, which may be due to<br />
issuer-specific factors or also to general market movements.<br />
RISK REPORT 53
54 MANAGEMENT REPORT<br />
Liquidity risk, also understood in the narrower sense as the solvency or refinancing<br />
risk, is the risk of the Bank not being able to meet its current and future<br />
payment commitments. The market-liquidity risk describes the risk of the Bank<br />
being unable to settle or hedge its trading positions on time to the desired extent<br />
due to the market situation.<br />
Operational risk is the risk of loss resulting from inadequate or defective<br />
internal processes and systems, human and technical failures, or from external<br />
events. The adopted definition is geared to the current supervisory discussion<br />
and consequently also includes legal risks arising from inadequate contractual<br />
agreements or from the overall legal framework as part of operational risk.<br />
Business risk is understood by <strong>Commerzbank</strong> as the risk of unexpected negative<br />
developments in results, which may be due to unforeseeable changes in<br />
business volume or the margin situation on account of changed overall conditions<br />
such as the market environment, customers’ behaviour or technological<br />
developments.<br />
Strategic risk is the risk of unexpected negative developments in results<br />
stemming from previous or future fundamental business-policy decisions. These<br />
may take the form of decisions with regard to business lines or business associates<br />
or the choice of a local strategic approach.<br />
Reputational risk is the danger of losses or lower earnings on account of<br />
publicized business occurrences which erode the confidence of the public or<br />
business associates in the Bank. Reputational risk may result from other types of<br />
risk or may arise alongside these.<br />
3) Integration of risk and capital management into the Bank’s<br />
overall management<br />
A close meshing of risk and earnings components is especially important for<br />
value-based overall Bank management. Apart from guaranteeing that the entire<br />
Bank has a capital base that is adequate for its risk profile, the objective of overall<br />
management of the Bank is to allocate the resource equity as optimally as<br />
possible – in other words, to use it in business lines which yield a strong return,<br />
even with risk taken into consideration.<br />
All the Group’s risks – insofar as they are quantifiable – are aggregated in a<br />
risk-taking capability calculation and the overall risk figure worked out for the<br />
Group is set off against its risk capital. The purpose of this comparison is to<br />
ascertain whether the Bank is in a position to anticipate potential unexpected<br />
losses without serious negative effects on its business opportunities and to<br />
cushion their impact. In order to distinguish it from other definitions of capital<br />
used in accounting and for regulatory purposes, the calculated risk is also<br />
referred to as economic capital, as it is economically necessary for cushioning<br />
unexpected fluctuations in results.<br />
<strong>Commerzbank</strong> calculates economic capital by taking market risk, credit risk,<br />
operational risk and – in the year under review for the first time – also business<br />
risk into consideration. In the case of market risk, a further distinction is made<br />
between market risk in the trading book and in the banking book as well as that<br />
arising from equity holdings. As, in addition to the regulatory core capital that is<br />
tied up (KWG Principle I), the individual need of the various business lines for<br />
economic capital is identified, it is generally possible to work out risk-adjusted<br />
performance.
The chart below shows the percentage share of the various types of risk in<br />
the Bank’s overall economic capital.<br />
8% Market risk (trading book)<br />
7% Market risk (banking book)<br />
29% Market risk<br />
(equity holdings)<br />
42% Credit risk<br />
9% Operational risk<br />
5% Business risk<br />
In order to achieve a more sophisticated risk/return-based overall Bank management,<br />
<strong>Commerzbank</strong>’s Board of Managing Directors resolved in the year<br />
under review that the economic capital concept should be integrated into the<br />
management of business lines. In this connection, a project for steering via economic<br />
capital was implemented at <strong>Commerzbank</strong>, drawing upon external verification<br />
and validation of the economic-capital approach which was applied. This<br />
confirmed that the models used met the market standard. In addition last year,<br />
key parameters for quantifying and aggregating economic capital were adjusted<br />
to a more conservative view of risk.<br />
To ensure compatibility between the various risk categories, all types of risk<br />
are scaled consistently over a twelve-month period. Last year, the confidence<br />
level of 99.95% used here was far more conservative (previous year: 99.80%).<br />
With the diversification effects taken into consideration, the economic risk of the<br />
<strong>Commerzbank</strong> Group stood at 77.9bn as of December 31, 2003, which cannot be<br />
directly compared with the year-earlier figure as different assumptions were<br />
used for the parameters.<br />
Economic capital in 7 bn 31.12.2003<br />
Market risk (trading book) 0.8<br />
Market risk (banking book) 0.7<br />
Market risk (equity holdings) 2.9<br />
Credit risk 4.3<br />
Operational risk 0.9<br />
Business risk 0.5<br />
Total 10.1<br />
Total (after diversification effects) 7.9<br />
The Bank is convinced that over the medium term the integration of economic<br />
capital into the management of business lines, using a RAPM (riskadjusted<br />
performance measurement) approach, will make a notable contribution<br />
towards raising the Bank’s earnings/profitability. In addition, higher transparency<br />
will be achieved with regard to the comparability and profit contribution<br />
of the various business lines under risk and return aspects, and shareholder<br />
value will be created, as the scarce resource capital will be allocated even more<br />
efficiently as part of a risk-based overall Bank management.<br />
Economic capital,<br />
by type of risk,<br />
as of 31.12.2003<br />
RISK REPORT 55
56 MANAGEMENT REPORT<br />
II. Risk-management/risk-control organization<br />
The organizational structure of risk management and risk control within the<br />
<strong>Commerzbank</strong> Group provides the basis for an effective risk- and return-based<br />
steering of the overall Bank. Risk management implies all the measures appropriate<br />
for increasing the Bank’s market value on the basis of an active and conscious<br />
management of all risks by the risk-management units. Risk control, however,<br />
comprises the identification, quantification, limitation and monitoring, as<br />
well as the reporting, of risks. On the basis of the quantitative and qualitative<br />
assessments, risk control also provides recommendations and impulses for the<br />
operative steering of the front-office units.<br />
Responsibility for the implementation throughout the Group of the riskpolicy<br />
guidelines laid down by the Board of Managing Directors lies with the<br />
Chief Risk Officer (CRO), who in this function regularly informs the Board of<br />
Managing Directors and the Risk Committee of the Supervisory Board about the<br />
Group’s overall risk situation. In addition to assuming responsibility for Risk<br />
Control (ZRC), the CRO is also in charge of Global Credit Operations (ZCO) and<br />
Credit Operations Private Customers (ZCP).<br />
For the operative implementation of risk management, the Board of Managing<br />
Directors have delegated functions to specific committees, which support<br />
them in making decisions on all risk-relevant issues:<br />
Risk-management/risk-control organization<br />
Risk<br />
identification<br />
Risk Committee of the Supervisory Board<br />
Board of Managing Directors<br />
Risk strategy<br />
Risk control Risk management<br />
Risk<br />
quantification<br />
ZRC<br />
Risk<br />
transparency<br />
Risk<br />
mitigation<br />
Risk<br />
Committee<br />
CRO<br />
Credit<br />
Committee<br />
Independent control: Internal Auditing (ZRev)<br />
Back office<br />
(operative<br />
credit function)<br />
ZCO*<br />
ZCP*<br />
ZKE<br />
ZRA<br />
Front office<br />
ZAM<br />
ZCB<br />
ZFI<br />
ZGS<br />
ZGT<br />
ZIM<br />
ZMC<br />
ZPK<br />
* including regional back-office units<br />
Types of risk<br />
Credit risk, market risk,<br />
liquidity risk, operational risk (incl. legal risk),<br />
business risk, strategic risk<br />
ALCO
The Credit Committee – chaired by the CRO, and made up of equal numbers<br />
of front- and back-office personnel – is responsible for the entire credit risk at<br />
the individual and portfolio level. Within the overall hierarchy of loan<br />
approval powers, it decides all of <strong>Commerzbank</strong>’s lending commitments of<br />
up to 2% of its liable equity and also issues a recommendation on all the<br />
lending decisions to be taken by the Board of Managing Directors. In addition<br />
to the Credit Committee, further head-office and regional sub-credit committees<br />
exist which, depending on the size of the commitment, can take lending<br />
decisions independently.<br />
The Risk Committee, chaired by the CRO, is responsible for issues related to<br />
the monitoring of all the major types of risk, as well as their aggregation as<br />
part of the economic-capital approach and for the overall risk situation; it also<br />
helps the Board of Managing Directors in formulating the risk strategy.<br />
As a sub-committee of the Risk Committee, the New Product Committee is<br />
made up of representatives of various trading units and service departments<br />
and is chaired by the head of ZRC. It is responsible for approving the introduction<br />
of new products and markets.<br />
The Operational Risk Committee (OpRiskCo), chaired by ZRC, performs its<br />
function as a sub-committee of the Risk Committee in dealing with all the<br />
broader issues relating to operational risk.<br />
The Asset Liability Committee (ALCO), chaired by the Board member responsible<br />
for treasury, determines the Bank’s asset/liability and liquidity strategy<br />
and policy.<br />
1) Risk control<br />
Overall responsibility for Group-wide risk control for all types of risk lies with<br />
Risk Control (ZRC), which reports directly to the CRO.<br />
The core functions of ZRC within the risk-control process include the ongoing<br />
identification, evaluation and monitoring of market, credit, business and operational<br />
risks in particular and also their proactive control. To ensure uniform risk<br />
standards throughout the Group, ZRC works out internal guidelines for dealing<br />
with all the major types of risk, also establishing and refining adequate methods<br />
for quantifying risk. In addition, ZRC is responsible for internal and external risk<br />
reporting and performs within the Bank an advisory function on all risk-relevant<br />
issues and with regard to the conception of the risk strategy.<br />
Apart from implementing risk-related supervisory requirements, ZRC concentrates<br />
on preparing information for the Board of Managing Directors and<br />
producing quantitative risk analyses and key ratios for steering trading portfolios.<br />
A central role here is played by the Group-wide aggregation of all types<br />
of risk to form an overall risk position and the development of an ever more<br />
sophisticated risk- and return-oriented overall Bank management as part of the<br />
economic-capital approach.<br />
RISK REPORT 57
58 MANAGEMENT REPORT<br />
2) Risk management: the operative credit function (back office)<br />
<strong>Commerzbank</strong> sees itself as a pioneer in implementing throughout the Group<br />
the organizational pattern and structuring of operations called for by the “Minimum<br />
requirements for the lending business of credit institutions” (MaK). Last<br />
year, the restructuring of credit risk management along MaK lines, begun in<br />
2002, was completely concluded worldwide. As required by MaK, the independence<br />
of lending decisions from the front office has been ensured by the systematic<br />
separation of sales and risk assessment/risk decision-making in every<br />
phase of the credit process and up to management board level.<br />
For corporate customers, financial institutions and banks worldwide, as well<br />
as for private customers abroad, the operative credit function (back office) has<br />
been concentrated on the Global Credit Operations (ZCO) banking department.<br />
For retail customer business in Germany, the back-office function is performed<br />
by the Credit Operations Private Customers (ZCP) department. Both departments<br />
are organized along decentralized lines and monitor risk closely; they report<br />
directly to the CRO.<br />
In both corporate and retail business, credit-approval powers are clearly<br />
structured according to the principle of committee decision-making. All committees,<br />
in which the two sides are equally represented, are chaired by credit-analysis<br />
and approval specialists. Below management board level, a credit may not be<br />
granted if the representative of the back-office side votes against it. At each level<br />
of approval, the front-office side has the possibility of declaring its disagreement.<br />
The decision is then taken at the next highest level.<br />
Thanks to the existence of a distinct interface for the intensive treatment of<br />
commitments which are latently endangered to a great extent and also to the<br />
firm responsibility of the credit side for intensive treatment commitments, problem<br />
credits can be treated intensively at an early stage. For this purpose, units<br />
have been installed both at head office and at the regional level specializing in<br />
the handling of such commitments. The prime goal of this intensive treatment is<br />
to improve the Bank’s risk position and, wherever possible, to return the intensive-treatment<br />
loans to the better credit brackets. In cases in which it is thought<br />
possible to improve the Bank’s risk position considerably through operative<br />
action, the Bank seeks a lead-manager role, drawing upon its entire expertise.<br />
Above all in cases where the Bank can exert little influence, alternative exit possibilities<br />
are increasingly sought. In particular, this includes the identification of<br />
credits in poor risk categories which can be reduced through secondary-market<br />
activities and the introduction of the respective measures. Secondary-market<br />
activities help to mitigate risk, taking into account the cost/benefit ratio, and also<br />
to release tied-up capital.<br />
In addition to their traditional credit function, ZCP and ZCO maintain their<br />
own head-office risk-management departments for operative credit portfolio<br />
management. Their core functions are to analyse the development of relevant<br />
parts of portfolios and sectors (volume, risk concentration, risk/return ratio, provisioning)<br />
and also the development of solutions for making portfolios more<br />
dynamic and improving them. Transactions are closely coordinated between<br />
front- and back-office teams.
3) Risk management: operative risk-steering of market units (front office)<br />
Within the scope of their business activities, the individual divisions and subsidiaries<br />
of the Bank bear immediate responsibility for risk and earnings.<br />
Risk management in the narrower sense – i.e. the operative steering of risk – is<br />
handled for the various types of risk – with the exception of credit risk – on a<br />
local basis by the relevant market units. These local risk units are also responsible<br />
within their division for implementing and observing the Group’s risk standards.<br />
Responsibility for steering operational risk – insofar as systems, processes<br />
and technology are affected – is borne by the head-office service departments.<br />
The steering of legal risk is entrusted to the Legal Services staff department<br />
(ZRA), while responsibility for strategic risk lies with the Strategy and Controlling<br />
staff department (ZKE).<br />
4) Internal risk reporting<br />
Prompt, objective reporting is of special significance in managing risk. The central<br />
information medium and steering instrument for internal purposes is the<br />
monthly risk report produced by the Risk Control department, which is presented<br />
by the CRO to the Risk Committee, the Board of Managing Directors and<br />
the Risk Committee of the Supervisory Board.<br />
The monthly risk report contains detailed evaluations and presentations of<br />
all the major types of risk within the <strong>Commerzbank</strong> Group, aggregating them<br />
–insofar as they are quantifiable – into an overall risk position. As part of the calculation<br />
of risk-taking capability, the identified risks are set off against the regulatory<br />
and economic capital for risk coverage. If necessary, the report is adjusted<br />
to accommodate current developments and presents the latest status of major<br />
projects relevant for risk (e.g. Basel II, MaK). At the same time, it forms the basis<br />
for presenting risk data to supervisory bodies and rating agencies.<br />
5) Internal auditing<br />
The functioning and adequacy of all risk-control and risk-management activities<br />
are examined by the Internal Auditing staff department (ZRev) in accordance<br />
with the Minimum requirements for the organization of the internal auditing<br />
function (MaIR). Internal Auditing forms an integral part of the Group-wide riskcontrol<br />
and risk-management system and works, free from directives and external<br />
influence, as a unit independent of business processes with the goal of<br />
identifying risk at an early stage and monitoring it. In the course of its auditing<br />
activities, it monitors compliance with both internal and supervisory standards<br />
such as the Minimum requirements for the trading activities of credit institutions<br />
(MaH).<br />
The main emphasis in internal auditing is on testing and assessing the effectiveness<br />
of both security measures built into the work process and existing internal<br />
checks, as well as on reporting on the structure, functioning and adequacy of<br />
risk monitoring to the Bank’s management and the Group units affected. Riskoriented<br />
auditing includes the recognition, analysis, limitation, limit monitoring<br />
and reporting of credit and market risk, as well as the establishment and limitation<br />
of operational risk.<br />
RISK REPORT 59
60 MANAGEMENT REPORT<br />
6) Implementation of developments in supervision: Basel II and MaK<br />
For <strong>Commerzbank</strong>’s risk strategy, the changes in the overall framework of<br />
banking supervision are also of crucial importance. Currently, the main factors<br />
here are the introduction of the Minimum requirements for the lending business<br />
of credit institutions (MaK) and the implementation of the New Basel Capital<br />
Accord (Basel II).<br />
A principal goal of the New Capital Accord of the Basel Committee on<br />
Banking Supervision (Basel II) is to promote the security and stability of the<br />
banking and financial system. In addition to the risks involved having to be<br />
reflected in the capital backing provided for credits, the other central elements<br />
of Basel II requirements are the elaboration of banks’ internal systems of control,<br />
their monitoring by the supervisory authorities and market discipline. According<br />
to current plans, banks are supposed to implement the new capital accord by<br />
end-2006.<br />
The introduction of the new capital requirements will lead to a convergence<br />
of the regulatory and the economic views of risk; it makes possible an analysis<br />
of risk at the portfolio level and thus also lays the basis for a risk-adjusted steering<br />
of the overall Bank. For implementing the Basel II requirements, a project<br />
team was set up in the Risk Control department in 2001. Working together with<br />
the banking departments, the staff departments and subsidiaries, it coordinates<br />
the implementation of the Basel II requirements throughout the Group.<br />
In addition to the technical and substantive implementation of Basel II, the<br />
project is already looking into the time “afterwards”, i.e. the impact of the<br />
new capital adequacy rules after Basel II, and is instigating the relevant<br />
activities. Through its participation in international and national bodies such<br />
as the Institute of International Finance (IIF) and the risk-policy committee of<br />
the Bundesverband deutscher Banken (Association of German Banks),<br />
<strong>Commerzbank</strong> is also involved in the substantive discussion for developing the<br />
rules further.<br />
The Minimum requirements for the lending business of credit institutions<br />
(MaK), published by the German Financial Supervisory Authority in 2002, define<br />
qualitative standards for the organization of credit business to be met by German<br />
banks by June 30, 2004. Should adjustments be necessary in the IT area,<br />
the deadline for implementation can be extended until end-2005.<br />
The requirements mainly focus on ensuring an adequate risk environment,<br />
within which credit business may be conducted. Banks are obliged, therefore, to<br />
create and internally implement the overall conditions for establishing the<br />
appropriate organization and procedures for credit business and also for the<br />
development of methods for identifying, steering and monitoring credit risk.<br />
Prominent among the overall conditions is the formulation of a credit-risk<br />
strategy, in which credit activities are defined for an appropriate planning<br />
period. Here, the existing credit-risk strategy has been refined in accordance<br />
with regulatory requirements with the cooperation of the market and credit<br />
units. This also took into account the Bank’s risk-taking capability as well as an<br />
analysis of the given business situation and the related risks.
The core requirement of MaK as regards organization is the separation of<br />
front- and back-office functions. The credit-risk control function consists of an<br />
independent monitoring of risk at the portfolio level and independent reporting.<br />
Here, <strong>Commerzbank</strong> has already met the standards for loan-approval procedures<br />
and the organizational separation of front- and back-office functions. More farreaching<br />
requirements, such as the implementation of risk-classification methods<br />
have similarly already been met, but they are being made more sophisticated<br />
in order to achieve a constant improvement in the methods applied.<br />
For the purpose of realizing further MaK requirements, a detailed target/<br />
performance comparison and analysis of the fields of activity were drawn up<br />
for <strong>Commerzbank</strong>’s entire lending business pursuant to Art. 19, (1), German<br />
Banking Act – KWG. Drawing upon these findings, the Bank has begun to build<br />
up a comprehensive data warehouse to store the combined MaK and Basel II<br />
data for the implementation of the necessary adjustments in the IT area.<br />
The MaK project, launched at end-2002, was meshed even more closely with<br />
the existing Basel II project in the year under review in order to guarantee a consistent<br />
database for implementation throughout the Group.<br />
III. Risk-control/risk-management process<br />
1) Monitoring and controlling credit risk<br />
The credit-risk strategy elaborated with a view to the Minimum requirements for<br />
the lending business of credit institutions (MaK) describes the planned lending<br />
activities, thus creating important strategic impulses. With the Bank’s general<br />
risk appetite taken into consideration, the starting point in this respect is a critical<br />
analysis of the strengths and weaknesses of the current credit portfolio. Complemented<br />
by a forward-looking evaluation of the opportunities and risks in the<br />
target markets, this provides the framework for the definition of a risk/returnoriented<br />
target portfolio together with the related planning of measures.<br />
In the realization of the targeted risk/reward profile, this “benchmark portfolio”<br />
forms the basis for Group-wide portfolio-management activities. Apart<br />
from the acquisition of new customers from specific target groups, these also<br />
include the conscious use of asset trading, credit derivatives and asset-backed<br />
securities (ABS), thereby covering the entire spectrum of the initiatives of business<br />
lines. In order to ensure that actions conform to the credit-risk strategy and<br />
to restrict concentrations of risk, Risk Control establishes risk ceilings for sections<br />
of portfolios and concentration risks (business lines, sectors, products and<br />
regions). As part of a comprehensive controlling process, utilization of these<br />
caps is subjected to constant independent monitoring and reporting.<br />
Internal rating system<br />
For many years, <strong>Commerzbank</strong> has drawn upon detailed rating and scoring procedures<br />
for checking creditworthiness and standardizing credit decisions. These<br />
are binding for our branches and subsidiaries in Germany and elsewhere. Borrowers<br />
are assigned to ten different rating levels, ranging from 1.0 (exceptionally<br />
good creditworthiness) to 5.5 (very weak creditworthiness) as well as<br />
two rating levels for problem loans (6.0 for pre-work-out commitments and 6.5<br />
for work-out commitments).<br />
RISK REPORT 61
62 MANAGEMENT REPORT<br />
The internal rating procedures are continually being further developed and<br />
undergo a regular validation procedure, in which adequate methods are used to<br />
check the ability of every rating system to classify risks properly. In order to<br />
ensure that all of the Bank’s lending commitments are covered by ratings and<br />
that the rating procedures are applied uniformly throughout the Group with the<br />
various accounting standards taken into consideration, permanent professional<br />
checks and documentation assume a key role.<br />
<strong>Commerzbank</strong> has accepted the structural change in the German credit market<br />
and the statutory requirements expected on account of the Basel capital<br />
adequacy rules as an opportunity and is currently subjecting its existing rating<br />
systems to efficient professional and technical checks and also revision. The aim<br />
is to secure and build upon our strategic competitive edge by consistently realizing<br />
risk-adjusted pricing on the basis of best-practice rating tools. To achieve<br />
these ambitious goals, the Bank is taking extensive measures in the credit-risk<br />
area in order to recognize the Basel II Internal Ratings-Based (IRB) Advanced<br />
Approach.<br />
Assessing creditworthiness in corporate business<br />
The rating for Mittelstand clients based in Germany is calculated with the help<br />
of an expert system Codex, which analyses the key figures of the financial statements,<br />
but also takes qualitative company data into account.<br />
<strong>Commerzbank</strong> regards its rating system for corporate business as a distinct<br />
competitive advantage and decided last year to pursue a stronger mathematicalstatistical<br />
approach, in addition to the assessment of experts, in the methods it<br />
applies in rating corporate customers. In 2004, these models will be refined and<br />
combined with the existing methods. It is <strong>Commerzbank</strong>’s aim to achieve better<br />
portfolio diversification and thereby reduce its cost of capital and average margins.<br />
Assessing creditworthiness in retail business<br />
In its retail lending, <strong>Commerzbank</strong> has successfully used application scoring<br />
procedures and rating methods for assessing the creditworthiness of both<br />
dependently employed borrowers and business customers for several years<br />
now. All of these methods are computer-based and draw upon acknowledged<br />
and highly reliable, predominantly mathematical-statistical methods for the<br />
early recognition of risk. In addition, <strong>Commerzbank</strong> has introduced a behavioural-scoring<br />
procedure on a nationwide basis, which – monitoring in-payments<br />
and the customer’s payment record – makes a permanent and fully automatic<br />
monitoring and adjustment of limits possible for over one million customers<br />
maintaining accounts for payment transactions. It is to be extended to business<br />
customers who do not have to prepare a balance sheet.<br />
The procedures that are relevant for ratings, whose employment depends,<br />
for example, on the customer group in question or the use to which the credit is<br />
to be put, have been added to step by step. The behavioural scoring developed<br />
by <strong>Commerzbank</strong> has been steadily refined in order to make possible a constant<br />
computer-based evaluation of the creditworthiness of dependently employed
orrowers. Even today, therefore, a regulatory requirement has been met<br />
which will become effective in 2007 when the new Basel Accord is implemented.<br />
As a rule, it is not necessary for borrowers to become actively involved in this<br />
process (e.g. by making available income statements, etc.) insofar as this does<br />
not violate statutory requirements.<br />
Quantification of credit-portfolio risk<br />
<strong>Commerzbank</strong>’s internal credit-risk model is of key importance for risk monitoring,<br />
portfolio management and steering sales efforts. It provides important data<br />
for quantifying credit risk in moving towards an overall Bank management<br />
based on economic capital. The portfolio model’s range of application stretches<br />
from the global, Group-wide monitoring of portfolios to measuring the risk<br />
contributions for individual transactions. As a result, the results produced by<br />
the model are reflected in risk measurement and sales management in a variety<br />
of ways.<br />
The main result produced by the portfolio model is the so-called loss distribution,<br />
permitting probability statements on possible losses in credit business.<br />
From this, both the expected loss (EL) and the credit value-at-risk (credit VaR) as<br />
the measure of unexpected loss (UL) are derived. For a given confidence level,<br />
the credit VaR represents an upper estimate of the extent to which the potential<br />
loss of a credit portfolio may exceed the expected loss. At the same time, the<br />
credit VaR for the Group portfolio represents the credit-risk portion of the Bank’s<br />
economic capital. In a revision of the parameters designed to produce a more<br />
conservative approach to risk, the confidence level used has been raised from<br />
99.80% to 99.95%.<br />
Quantification of the credit value-at-risk within the <strong>Commerzbank</strong> Group is<br />
based on the CreditRisk+ model, which is widely used in banking; however,<br />
it has been substantially refined and adapted to the specific requirements of<br />
<strong>Commerzbank</strong>. The model makes possible, for instance, a risk-adjusted redistribution<br />
of the portfolio and diversification effects right down to individual customer<br />
level on the basis of conditional expectations. In this way, the relative<br />
share of the overall credit risk borne by the individual units can be determined<br />
at various levels of aggregation.<br />
A variety of risk factors and parameters are included in the model. Apart from<br />
estimates of the exposure to be expected in the case of default and the conservative<br />
recognition of collateral, guarantees and netting agreements, these also<br />
incorporate such statistical quantities as default rates, recovery rates und sectoral<br />
correlations. As part of the ongoing modification of the model, the input<br />
parameters for calculating risk were altered in 2003. In particular, further results<br />
of the statistical methods of estimation implemented as part of the Basel II<br />
project were integrated into the model. Together with the raising of the confidence<br />
level, this led to a marked increase in the credit VaR as well as a slight<br />
rise in the expected loss.<br />
All told, the Group’s credit VaR per December 2003 was 74.3bn and its<br />
expected loss 71.25bn. The median for the loss distribution, serving as a yardstick<br />
for the potential loss which with 50% probability will not be reached, is<br />
RISK REPORT 63
64 MANAGEMENT REPORT<br />
Expected loss and<br />
credit value-at-risk<br />
as of 31.12.2003<br />
Breakdown by business line,<br />
in 7 m<br />
somewhat below 71.1bn. If the model with its new parameters is retroactively<br />
applied to December 2002, it becomes evident that the 2003 financial year was<br />
characterized by a lowering of credit risk (reduction of expected loss and credit<br />
VaR by 7.5% and 13.8%, respectively).<br />
Corporate Banking, Germany<br />
Corporate Banking, abroad<br />
Retail Banking<br />
Subsidiaries<br />
Multinational Corporates<br />
Securities<br />
Financial Institutions<br />
Asset Management<br />
Treasury<br />
EL<br />
Credit VaR<br />
0 500 1000 1500 2000<br />
The above chart shows the contributions of the various business lines to the<br />
Group’s expected loss and credit VaR. In the traditional Mittelstand segment<br />
(Corporate Banking), where the Bank’s main credit risk develops, the ratio of<br />
unexpected to expected risk is roughly 3:1. Given a high level of diversification,<br />
this relationship is more favourable in retail business, where expected loss is<br />
more important as a result. In business involving multinational corporates and<br />
in investment-banking areas, however, the risk is significantly determined by<br />
unexpected loss, as the structure of creditworthiness is generally very good here<br />
and bulk risks alone with their volatility represent a potential loss.<br />
For portfolio-management purposes, the expect loss and credit VaR shares of<br />
individual sectors are additionally worked out and a loss-at-default value is<br />
assigned to each sector. The risk volume (loss-at-default [LaD]) of an individual<br />
transaction is defined as the forecast loss in the case of a customer’s default<br />
– with collateral and recovery factors taken into consideration. It may therefore<br />
be interpreted as a risk-adjusted credit volume.<br />
The risk data discussed up to now make it possible to assess credit risk for a<br />
one-year time frame (risk measurement). These variables provide key information<br />
for portfolio management, the calculation of risk-taking capability and the<br />
implementation of the credit-risk strategy between the two poles of risk and<br />
return.<br />
For longer time frames, the portfolio model is used to work out standard risk<br />
costs and economic capital costs as well, which provide sales personnel with<br />
customer-specific signals. The standard risk costs are used in calculating the<br />
return-on-equity (RoE) at the level of the individual transaction. As part of the<br />
transition, begun in 2003, to the economic value added as the control variable,<br />
the economic capital costs are successively being integrated into the steering of<br />
business relationships with individual customers. To an increasing extent, they
are being used in the Bank’s risk-adjusted pricing and define a system of incentives<br />
in the acquisition of new and follow-up business. In this way, it is ensured<br />
that the portfolio targets established by the Bank under its credit-risk strategy<br />
are already observed at the loan origination level.<br />
Credit-approval powers<br />
The basis for managing credit risk throughout the Group is a structure of ratingrelated<br />
credit approval powers, which also extends to the subsidiaries<br />
Hypothekenbank in Essen and Erste Europäische Pfandbrief- und Kommunalkreditbank<br />
(EEPK).<br />
Credit decisions for individual borrowers or groups of borrowers are made<br />
on the basis of either the aggregated exposure pursuant to Art. 19, (2), German<br />
Banking Act – KWG (borrower unit), or a larger economic risk entity. The Board<br />
of Managing Directors has delegated credit decisions up to a maximum amount<br />
of 2% of the liable equity to the central credit committee chaired by the CRO.<br />
Sub-credit committees at head office (up to 1% of liable equity) for banks, corporate<br />
and retail customers and regional sub-credit committees on the corporate<br />
and retail side in Germany and abroad complete the picture of credit-approval<br />
powers. The credit committees are made up of representatives of the front and<br />
back office in equal numbers.<br />
By way of preparation for the MaK, the credit-approval powers delegated<br />
ad personam were scaled back, according to the degree of creditworthiness, to<br />
a low euro figure in the double-digit millions and the lending powers of the committee<br />
were strengthened. The result in terms of risk underlines the success of<br />
this structure of credit-approval powers.<br />
Monitoring of credit risk for trading activities<br />
In <strong>Commerzbank</strong>’s management of the Group’s credit risks arising from trading<br />
activities, special attention is paid to counterparty and issuer risk. A system of<br />
limits is used to monitor whether daily utilization remains within the set framework.<br />
The system of limits directly intervenes in trading systems and ensures<br />
that credit exposure arising from trading activities is monitored globally, in real<br />
time, and right around the clock.<br />
The size of the credit risk for trading activities is worked out using simulation<br />
methods, which project credit risks on to the future. Here, the risk-mitigating<br />
effects of netting agreements are taken into consideration, as is the effect of<br />
collateral agreements. In addition to such information, trading units are<br />
provided with data on whether the relevant limits are available. Only if the socalled<br />
pre-deal limit check has confirmed that free trading lines are available<br />
may deals be concluded. Limit breaches are reported daily to the management.<br />
By means of a graduated procedure, such overruns are brought back within the<br />
set limits.<br />
RISK REPORT 65
66 MANAGEMENT REPORT<br />
The 20 largest<br />
sub-standard loans<br />
(ratings 4.5-5.5)<br />
in 7 m<br />
7,000<br />
6,000<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
0<br />
12/02 12/03<br />
The 20 largest<br />
problem loans<br />
(ratings 6.0-6.5)<br />
in 7 m<br />
2,000<br />
1,750<br />
1,500<br />
1,250<br />
1,000<br />
750<br />
500<br />
250<br />
0<br />
12/02 12/03<br />
performing<br />
non-performing<br />
High coverage ratio for<br />
non-performing loans<br />
in 7 m<br />
Development of risk and risk provisioning<br />
Doubtful credit exposures are classified by rating and kept in a special IT system,<br />
which makes it possible to process individual transactions effectively and to<br />
monitor risks. Discernible credit risks are taken account of by forming the appropriate<br />
provisions. For latent risks general provisions are formed. For concrete<br />
creditworthiness risks – which are indicated by the rating – provision is made,<br />
applying Group-wide standards, by means of specific valuation allowances on<br />
the scale of the potential loss. The amount of provisioning required for problem<br />
loans (rating of 6.0 to 6.5) is gauged by the unsecured part of the exposure. An<br />
individual assessment of the borrower in terms of future payments is also incorporated<br />
into the calculation of the need for provisioning.<br />
In international credit business, the economic and political situation of the<br />
country is also reflected in the overall assessment of a borrower. For loans to<br />
borrowers with an enhanced country risk (transfer or event risk), provisions are<br />
formed, if necessary, on the unsecured exposure, reflecting the relevant internal<br />
country rating, in the form of provision for country or individual risks, with<br />
priority always given to the latter type.<br />
The adequacy of the Bank’s risk provisioning is regularly monitored at the<br />
portfolio level. In addition, the expected need for provisions throughout the<br />
entire financial year is worked out each spring and autumn on the basis of careful<br />
bottom-up estimates. These are complemented in the course of the year by<br />
further regular top-down estimates. As a rule, after the conclusion of insolvency<br />
proceedings, after disposal or after an accord has been reached, or debt forgiveness<br />
at the expense of existing provisions, the claims are removed from the<br />
books and residual amounts are written off or reversed.<br />
Despite last year’s persistently high level of insolvencies, it proved possible<br />
to lower the Group’s net loan loss provision ratio by 11 basis points to 0.66%<br />
compared with 2002, putting <strong>Commerzbank</strong> in a good position relative to its<br />
competitors. The conservative approach to working out provisioning needs was<br />
retained; the actual amount required fell considerably short of the budgeted<br />
figure. The write-off ratio in 2003 also reflects direct write-offs through the<br />
proactive sale of critically assessed performing loans. As a result, the Bank has<br />
limited its unexpected loss in the years ahead. Despite additional burdens<br />
imposed by the last few weeks of the year, the Bank achieved its target for provisioning<br />
of just under 71.1bn. In addition, thanks to active risk management,<br />
the problem of major increasingly latent risks could be reduced.<br />
8,000<br />
7,000<br />
6,000<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
0<br />
Excess cover<br />
7542m<br />
6,846<br />
7,388<br />
5,320<br />
385<br />
1,683<br />
Excess cover<br />
7634m<br />
7,077<br />
7,711<br />
5,506<br />
348<br />
1,857<br />
31.12.2002 31.12.2003<br />
Non-performing loans<br />
Collateral<br />
Country valuation allowances and<br />
global valuation allowances<br />
Loan loss provisions
1.40<br />
1.20<br />
1.00<br />
0.80<br />
0.60<br />
0.40<br />
0.20<br />
0<br />
0.70<br />
1.30<br />
0.70<br />
0.50<br />
0.12 0.11 0.15 0.17<br />
0.60<br />
0.29<br />
0.50 0.50<br />
0.46 0.21<br />
Country risk<br />
In view of the international character of <strong>Commerzbank</strong>’s business activities, the<br />
monitoring and management of country risk is especially important. The essential<br />
core of country-risk monitoring is formed by a well-established so-called<br />
traffic-lights system which points the direction for future business activities and<br />
lending.<br />
Country ratings are worked out and constantly updated by the Corporate<br />
Communications and Economic Research staff department, which is independent<br />
of the market side. Under the traffic-lights system, groups of countries with<br />
a rating of 3.0 and lower and a certain minimum exposure are covered.<br />
The system distinguishes between commercial banking, investment banking<br />
and equity holdings, on the one hand, and short and medium/long-term exposures,<br />
on the other. For risk optimization purposes, the Bank has extended its<br />
controlling for a number of countries to so-called total exposure. This takes<br />
account not only of the net country exposure but also of the claims in a non-risk<br />
country on the foreign outlets and subsidiaries of a parent company based in a<br />
risk country.<br />
The monitoring of country risk/exposure occurs at monthly intervals. A<br />
reporting system is used for possible discrepancies between the projected<br />
trends and the actual development of the Bank’s exposure, enabling countermeasures<br />
to be taken promptly. Country-risk reports appear at periodic intervals,<br />
describing the development of individual countries and regions and establishing<br />
guidelines for future lending. In this way, we achieve risk-oriented control and<br />
geographical diversification in our exposure abroad.<br />
0.30<br />
0.15<br />
0.29<br />
0.39<br />
0.35 0.28<br />
Allocation ratio 1)<br />
Write-off ratio 2)<br />
0.77<br />
0.66<br />
0.48 0.50<br />
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003<br />
1) Net provision for risks as a ratio of average commercial loan portfolio, with valuation allowances<br />
deducted;<br />
2) Write-offs as a percentage of average commercial loan portfolio<br />
74% CR 1<br />
11% CR 2<br />
7% CR 3<br />
6% CR 4<br />
1% CR 5<br />
1% CR 6<br />
CR = country rating<br />
RISK REPORT 67<br />
Provisioning of<br />
<strong>Commerzbank</strong> Group<br />
Valuation allowances and<br />
loan losses (excl. country<br />
risks), 1992-2003<br />
Country risk,<br />
by rating group<br />
as of 31.12.2003
68 MANAGEMENT REPORT<br />
Credit derivatives<br />
(trading book)<br />
as of 31.12.2003<br />
Reference assets,<br />
by rating class, in 7 m<br />
Sectoral and bulk risks<br />
Sectors are similarly managed by means of a limits/traffic-lights system. The<br />
internal assessment (scoring system) and the degree to which a sectoral limit<br />
has been exhausted determine the colour of the traffic lights, which steers sales<br />
efforts, using resources economically, and indicates where the Bank seeks new<br />
business and where its commitment is deemed to be large enough. In the case<br />
of bulk risks, the traffic lights are determined by the use of economic capital,<br />
with use of more than 720m representing a critical ceiling for borrower groups.<br />
In addition to steering new business activities, Global Credit Operations performs<br />
active portfolio management (exits, disposal, and above all risk coverage)<br />
in close coordination with the front office and trading units. Apart from the steering<br />
of new business by means of selective instructions with regard to lending,<br />
therefore, the creation of a more dynamic portfolio is a major feature of the management<br />
of sectoral risk.<br />
Use of credit derivatives<br />
<strong>Commerzbank</strong> looks upon products which transfer credit risk as an important<br />
instrument for managing such risk, taking portfolio-management aspects into<br />
consideration. The Bank’s credit-trading activities are primarily in proprietary<br />
trading as a market maker, above all for credit default swaps (CDS). At the same<br />
time, <strong>Commerzbank</strong> offers its customers structured, derivative credit products.<br />
5.0<br />
4.5<br />
4.0<br />
3.5<br />
3.0<br />
2.5<br />
2.0<br />
1.5<br />
1.0<br />
Protection sold Protection bought<br />
-30,000 -20,000 -10,000 0 10,000 20,000 30,000<br />
In addition to trading activities, <strong>Commerzbank</strong> employs credit derivatives in<br />
its banking book, with the focus on both limiting risk and selectively taking on<br />
credit risk. For this purpose, a team has been set up in credit derivative trading<br />
specially to hedge major credit exposures in the banking book. This team uses<br />
the centralized risk-management platform of the trading section and – observing<br />
the internal credit guidelines – also invests in credit derivative products in order<br />
to diversify the portfolio and make use of open credit lines. Through deliberate<br />
investment in these products, extra earnings potential is tapped and new asset<br />
classes explored.
Securitization transactions<br />
<strong>Commerzbank</strong> AG is one of the leading issuers of ABS/MBS transactions in<br />
Europe. Its issuing activity is mainly concentrated on the structuring of synthetic<br />
securitizations. In these, the credit risks of the securitization pool are hedged by<br />
credit default swaps against third parties and transferred to investors by placing<br />
credit-linked notes. In addition to synthetic structures, balance-sheet claims are<br />
also securitized to a lesser extent in the form of a true sale securitization. Here,<br />
the claims – arising from trade bills – are legally assigned to a special-purpose<br />
entity, which then, for its part, issues securities. Up to now, mainly private and<br />
commercial mortgage loans and corporate credits have found their way into the<br />
securitization pool.<br />
<strong>Commerzbank</strong> uses securitizations as defined by the new Basel capital<br />
accord (Basel II) as an originator for the significant transfer of credit risk, taking<br />
into consideration portfolio-management effects and in order to achieve a better<br />
diversification of risk. In addition, the Bank is active to a reasonable extent as an<br />
investor (in accordance with the Basel II definition) in ABS instruments.<br />
The following table presents an overview of <strong>Commerzbank</strong>’s securitized<br />
assets (nominal volume of in-house securitization programmes as of December<br />
31, 2003):<br />
Nominal amount in 7 m<br />
Collateralized loan obligations (CLO)* 6,305<br />
Residential mortgage-backed securities (RMBS) 6,983<br />
Trade bills* 193<br />
Total 13,481<br />
* As CLO and trade-bill securitizations also represent revolving pools, the actual securitized volume in<br />
2003 was 728,722m and 71,248m, respectively.<br />
Reporting for credit risk<br />
For credit risk, <strong>Commerzbank</strong> uses an intranet-based management information<br />
system, CoMKIS. As an integral part of Group-wide credit-risk control, CoMKIS<br />
makes it possible to present the main steering parameters and important risk<br />
data; it can also be used to perform individual evaluations, such as rating- or<br />
sector-based portfolio analyses. In this way, analyses of weak points may be<br />
made on the basis of various search criteria and early-recognition indicators can<br />
be defined and evaluated. In addition, new indicators are provided for measuring<br />
portfolio quality. These are, for instance, rating-migration analyses, including<br />
the related upgrade/downgrade ratios.<br />
RISK REPORT 69
70 MANAGEMENT REPORT<br />
Borrowing,<br />
by rating structure<br />
Commercial banking<br />
(gross, before collateral<br />
and provisioning)<br />
as of 31.12.2003<br />
in per cent<br />
Borrowing,<br />
by rating structure<br />
Investment Banking<br />
as of 31.12.2003<br />
in per cent<br />
Regions of<br />
foreign exposure<br />
as of 31.12.2003<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
12.4<br />
3.7<br />
23.1 22.9<br />
26.6<br />
31.9<br />
21.9 24.2<br />
7.6 7.5<br />
2.0 1.7<br />
December 2002<br />
December 2003<br />
n.r. R1 R2 R3 R4 R5 R6<br />
0.1 0.0<br />
65.3 61.3<br />
27.2 28.5<br />
5.7 8.7<br />
6.4 8.0<br />
December 2002<br />
December 2003<br />
1.2 1.1 0.3 0.2 0.1 0.2<br />
n.r. R1 R2 R3 R4 R5 R6<br />
The CoMKIS information, covering both German and foreign credit business,<br />
is incorporated into the credit section of the monthly risk report. The risk-management<br />
departments of the Group units in Germany and elsewhere have direct<br />
intranet access to CoMKIS. The control information available through CoMKIS<br />
permits a detailed analysis of portfolio developments over time and serve as a<br />
basis for launching risk-limiting measures.<br />
Credit risk arising from trading transactions is reported on the basis of the<br />
Minimum requirements for the trading activities of credit institutions (MaH).<br />
Limit breaches are reported daily to the management. In addition, the management<br />
is informed every month about the largest drawings in off-balance<br />
business. Furthermore, limits and exposures are reported by type of business,<br />
maturity of transaction, country, risk classification and counterparty category.<br />
Portfolio reports are also prepared on a regular basis for certain groups of counterparties.<br />
1.1% Africa (excl. North Africa)<br />
0.6% Central/South America<br />
1.6% Internat. Caribbean<br />
financial centres<br />
0.6% Internat. organizations<br />
72.0% Europe and Turkey<br />
15.2% North America<br />
7.5% Asia/Pacific<br />
1.4% Middle East and<br />
North Africa
2) Monitoring and controlling market risk<br />
At <strong>Commerzbank</strong>, a model for the internal management of specific interest-rate<br />
risks has been used since 2001. In 2002, it became one of the first banks to<br />
receive approval from the German Financial Supervisory Authority to work out<br />
the capital backing required for specific interest-rate risks on the basis of this<br />
internal model. This permits the Bank to save a significant amount of capital as<br />
far as this type of risk is concerned. In order to measure the capital required to<br />
cover general and specific market risk, <strong>Commerzbank</strong> applies an internal model,<br />
that is also used at the Parent Bank and its foreign branches. It covers the equity<br />
(including residual risk), interest-rate and foreign-exchange risk categories.<br />
Value-at-risk approach<br />
The value-at-risk (VaR) method is the procedure currently used by the majority<br />
of all internationally active banks for measuring market risk. The value-at-risk<br />
indicates the maximum loss in value of a portfolio with a given degree of probability<br />
(confidence level). It is assumed that the composition of the portfolio<br />
remains unchanged during the holding period. A value-at-risk of 71m at a 99%<br />
confidence level and a one-day holding period means that a loss of more than<br />
71m within one day will only occur with a probability of no more than 1%.<br />
Historical simulation for general market risk<br />
In order to calculate the value-at-risk of trading portfolios, the historical simulation<br />
method is employed at <strong>Commerzbank</strong> for the general market risk. Changes<br />
in interest rates, currencies, equity prices and volatility are incorporated directly<br />
into the historical simulation. A special advantage of this method is that it is<br />
fairly easy to calculate the overall risk on the basis of the individual results for<br />
lower portfolio levels.<br />
Variance-covariance approach for specific risk<br />
Credit trading has become increasingly important in recent years. Here the variance-covariance<br />
method is practical, since it always employs simple approximations<br />
for the risk factors themselves and, unlike historical simulation, is<br />
robust as regards the historical market data.<br />
Aggregated value-at-risk<br />
The Group-wide internal calculation of the value-at-risk covers the trading units<br />
ZGS and ZGT, as well as the interest-rate and currency risk of Asset Management,<br />
the mortgage banks and other subsidiaries. The following table shows the<br />
value-at-risk of the Group and the largest units.<br />
Group ZGS ZGT Essen Hyp<br />
in 7 m 2003 2002 2003 2002 2003 2002 2003 2002<br />
Maximum 62.1 72.8 19.9 18.6 27.7 24.8 29.9 29.8<br />
Median 41.4 50.5 15.5 9.9 15.7 15.6 18.4 26.6<br />
Minimum 25.7 32.8 9.1 5.2 9.3 9.4 8.6 18.6<br />
Year-end figure 50.0 37.0 19.9 16.2 16.9 14.9 17.6 19.1<br />
RISK REPORT 71
72 MANAGEMENT REPORT<br />
Value-at-risk in the<br />
course of 2003<br />
Weekly averages, in 7 m<br />
1-day holding period,<br />
97.5% confidence level<br />
Percentage distribution<br />
of market risk<br />
as of 31.12.2003<br />
1-day holding period,<br />
97.5% confidence level<br />
Back-testing in the<br />
course of 2003<br />
in 7 m<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Group VaR ZGT VaR<br />
ZGS VaR Essen Hyp VaR<br />
Jan. Feb. March Apr. May June July Aug. Sep. Oct. Nov. Dec.<br />
32.5% ZGS<br />
28.9% Essen Hyp<br />
27.5% ZGT<br />
6.7% ZAM<br />
4.4% Other<br />
Back-testing<br />
In order to assess and steadily improve the forecasting quality of the internal<br />
market-risk model and also to meet supervisory requirements, the reliability of<br />
the VaR methods that are applied is regularly checked. This begins with a retrospective<br />
comparison of the forecast risks with the profits and losses which<br />
would have occurred under the assumption of unchanged positions (so-called<br />
”clean back-testing”).<br />
Accordingly, the VaR – based on a 1-day holding period – at the 99% confidence<br />
interval should be exceeded by such a loss in merely 1% of all the trading<br />
days that are examined. The total number of these exceptions is used by the<br />
supervisory authorities in evaluating internal risk models. Upon this basis, regulatory<br />
capital is calculated.<br />
30<br />
20<br />
10<br />
0<br />
-10<br />
-20<br />
Back-testing P&L VaR 97.5% VaR 99%<br />
-30<br />
Jan. Feb. March Apr. May June July Aug. Sep. Oct. Nov. Dec.<br />
In the 2003 financial year, one exception was noted at Group level due to a<br />
sharp rise in euro and US dollar interest-rate curves on June 17, 2003. This outcome<br />
is in line with statistical expectations and underlines the quality of the risk<br />
model used.
Apart from this approach, <strong>Commerzbank</strong> uses a series of additional methods<br />
for assessing and refining its risk model. These tests confirm the validity and<br />
forecasting power of <strong>Commerzbank</strong>’s internal models.<br />
Stress testing and sensitivity analysis<br />
As the value-at-risk method mostly fails to take extreme market movements into<br />
account, the quality and reliability of risk quantification are complemented by<br />
additional analyses. Among other things, these analyses consist of stress tests<br />
and, using stress scenarios, evaluate the scale of losses under extreme market<br />
conditions, such as those which could be observed in past crisis situations.<br />
The stress tests that are employed as part of daily reporting differ from business<br />
line to business line and are adapted to accommodate individual portfolios.<br />
In addition, a so-called global test was introduced in the year under review, in<br />
which several historical crisis scenarios – such as the 1992 currency crisis, September<br />
11, 2001 – and their impact are simulated at regular intervals throughout<br />
the Group.<br />
350<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
ZGT stress test ZGS stress test Essen Hyp stress test<br />
0<br />
Jan. Feb. March Apr. May June July Aug. Sep. Oct. Nov. Dec.<br />
The stress tests are complemented by various sensitivity analyses. These<br />
reveal the sensitivity with which the performance of a portfolio responds to a<br />
change in the risk factors – such as interest rates. The findings of the global<br />
stress tests and the sensitivity analyses are regularly presented to the Risk Committee<br />
and the Board of Managing Directors.<br />
Interest-rate risk<br />
The <strong>Commerzbank</strong> Group’s interest-rate risk results not only from the already<br />
identified general market risk of the trading books, but also from investmentbook<br />
positions. In the banking book, interest-rate risks mainly arise through different<br />
maturities for the Bank’s assets and liabilities – for example, due to the<br />
short-term funding of long-dated credits. In measuring interest-rate risks, we<br />
include both balance-sheet interest items and the related hedging transactions.<br />
As in the treatment of the trading book, the interest-rate risk of the banking<br />
book is measured using a net present value approach according to the historical<br />
simulation method (value-at-risk). This makes it possible to compare the interest-rate<br />
risk arising from both the trading book and the banking book and also<br />
to present the results in aggregated form at Group level, with portfolio effects<br />
included.<br />
Stress tests in the<br />
course of 2003<br />
Weekly averages,<br />
in 7 m<br />
RISK REPORT 73
74 MANAGEMENT REPORT<br />
Procedure for setting and monitoring limits<br />
<strong>Commerzbank</strong> has developed a comprehensive system of limits for restricting<br />
market risk. It is based on the already-specified risk ratios as well as on other factors<br />
such as sensitivity ratios for traded products. The market-risk limits are<br />
determined by the Board of Managing Directors or the Risk Committee. The<br />
global market-risk limits have been assigned to specific sub-portfolios within the<br />
respective trading units and may only be altered by means of a formal process<br />
for changing limits.<br />
The daily monitoring of market risk examines the risk figures that have been<br />
generated in order to ascertain the utilization of limits and possible breaches.<br />
The risk controllers responsible for the individual trading areas constantly<br />
monitor the open trading positions and the ensuing risk. Apart from monitoring<br />
the overall positions, ZRC also examines all proprietary-trading transactions to<br />
ensure that prices reflect market conditions in accordance with the MaH rules.<br />
Reporting for market risk<br />
Close cooperation between risk controllers at both the head-office and local<br />
levels ensures that decision makers on the Board of Managing Directors and at<br />
trading units are kept promptly informed. The local controllers report the risk<br />
figures that they have worked out to all decision makers within the trading units.<br />
At head office, these figures are collected and aggregated to form a Group risk<br />
figure. The Board of Managing Directors is informed daily – for one thing, by<br />
means of the so-called flash risk report, representing a preliminary form of information<br />
on the value-at-risk, and, for another, by the MaH report containing not<br />
only the risk figures but also the profit-and-loss data for all the relevant portfolio<br />
levels. In addition, all the market risks of the banking and trading books are<br />
included in the monthly risk report.<br />
In the year under review, the <strong>Commerzbank</strong> Group’s market-risk reporting<br />
was extended to cover the so-called market risk hot spots, which every second<br />
week present both the Risk Committee and the Board of Managing Directors with<br />
a detailed picture of the current exposure in the Group’s trading and banking<br />
books. In this connection, retroactively calculated data, such as the value-at-risk,<br />
are complemented by forward-looking forecast scenarios, in order to simulate<br />
their impact on current positions.<br />
In close coordination with their parent company, the mortgage banks affiliated<br />
with <strong>Commerzbank</strong> – Hypothekenbank in Essen and EEPK (Erste Europäische<br />
Pfandbrief- und Kommunalkreditbank) – and also other subsidiaries have<br />
established their own risk control. The risks arising at these subsidiaries are<br />
managed and controlled at the local level and the relevant data are made available<br />
without delay to <strong>Commerzbank</strong>’s central risk-control unit, which calculates<br />
and monitors the Group risk.<br />
3) Monitoring and controlling equity holding risk<br />
The monitoring of equity holding risk is performed by Risk Control, whereas the<br />
steering of such risks is handled by two different units of the Bank. Private equity<br />
business is coordinated by Securities (ZGS), while Strategy and Controlling<br />
(ZKE) is responsible for all the strategic and other equity holdings.
As far as new acquisitions of interests are concerned, the potential risks are<br />
analysed in advance by means of due diligence measures. However, alreadyexisting<br />
equity investments are steered on the basis of regular reports from the<br />
enterprises in question. In addition to these measures, the market risk stemming<br />
from the Bank’s listed equity investments, together with the risk from non-listed<br />
investments, is quantified – similarly to the calculation of trading positions –,<br />
monitored, and reported to the Board of Managing Directors by Risk Control.<br />
4) Monitoring and controlling liquidity risk<br />
Liquidity risk<br />
Group Treasury (ZGT) is responsible for managing liquidity risk. The task of<br />
liquidity management is to guarantee that <strong>Commerzbank</strong> is solvent at all times,<br />
not only under normal conditions but also in stress situations. ZGT prepares liquidity<br />
balances and makes cash-flow forecasts, which are subjected to constant<br />
examination in the course of the year. On the basis of these analyses, the future<br />
need for borrowed funds is worked out. The aim is to achieve efficient liquidity<br />
management by raising funds regularly and to cover the Bank against market<br />
fluctuations. The measures adopted by ZGT in this connection are geared closely<br />
to the Basel II proposals:<br />
ZGT pursues a policy of long-term matched maturities in financing; in other<br />
words, long-term credits are largely funded at long term.<br />
ZGT maintains substantial liquidity portfolios in the leading currency centres.<br />
Apart from eligible (commercial) credits and bills, the portfolios are made up<br />
exclusively of prime-quality securities, which may be pledged with central<br />
banks in order to raise short-term liquidity. At end-2003, the Bank had a liquidity<br />
reserve (unused security) of 721bn.<br />
In accordance with supervisory requirements (Principle II), an institution’s<br />
liquidity is deemed adequate if the weighted liquid assets available to it within<br />
30 days cover the weighted payment obligations callable during this period. In<br />
2003 (2002), the liquidity coefficient lay between 1.09 (1.13) and 1.18 (1.31) and<br />
was thus at all times well above the value of 1.0 required by the supervisory<br />
authorities. This shows that <strong>Commerzbank</strong> easily met the supervisory requirements<br />
for liquidity at all times.<br />
For internal steering purposes, ZGT regularly makes a projection of the<br />
development expected for Principle II over the next twelve months. This is based<br />
on information about planned trading activities, indications from foreign outlets<br />
and reports on the performance of customer-related business.<br />
At the same time, the structure of the balance sheet is analysed from the<br />
qualitative standpoint, applying the stable funding concept so that measures can<br />
be adopted in good time to deal with any gaps that are identified between stable<br />
assets and stable funding.<br />
RISK REPORT 75
76 MANAGEMENT REPORT<br />
Liquidity-risk measurement<br />
Last year, the liquidity-risk project initiated early in 2002 was successfully<br />
brought to a conclusion. The main objective of this project, run by ZRC in close<br />
cooperation with ZGT, was the daily calculation of the expected cash flow from<br />
all positions of the Parent Bank. Here, the expected payments are calculated<br />
under the assumption of both normal and – in terms of liquidity – “stressed”<br />
market conditions. Similarly on a daily basis, the assets are worked out that can<br />
readily be made liquid and are available for closing liquidity gaps. By means of<br />
these data and the key ratios established on their basis, ZGT will be put in a position<br />
to manage the Bank’s liquidity position even more efficiently (beyond the<br />
requirements of Principle II). At the same time, the implementation of this first<br />
stage of the project has already met the major requirements of Basel II with<br />
regard to the controlling of liquidity risk.<br />
A follow-up project planned for 2004 is intended to integrate further units<br />
such as the mortgage banks and asset management into the central calculation<br />
of liquidity risk in order to comply with the regulatory requirement of Basel II<br />
with regard to the monitoring of risk at Group level.<br />
Market-liquidity risk<br />
<strong>Commerzbank</strong> monitors market-liquidity risk with the aid of the liquidity VaR that<br />
is based on the results of historical simulation. This liquidity VaR is defined as<br />
the possible loss during the period in which a portfolio is being entirely liquidated<br />
in terms of risk, at a given level of probability (confidence level). Unlike the<br />
one-day VaR described in the section “Monitoring and controlling market risk”,<br />
it also takes into account the period needed to square the specific positions in<br />
terms of risk, which means to sell, cover or hedge them by means of the relevant<br />
transactions.<br />
In quantifying such risk, we take into consideration the market liquidity of the<br />
underlying transactions by means of portfolio-specific selling or squaring strategies.<br />
These strategies indicate the percentage of a portfolio which, if necessary,<br />
could be squared in terms of risk and in how many days. The selling strategies<br />
employed are regularly updated in consultations with the respective banking<br />
departments.<br />
5) Monitoring and controlling operational risk<br />
Operational risk management framework<br />
Last year, <strong>Commerzbank</strong>’s existing operational risk management framework was<br />
made more detailed through the addition of sets of rules, elaborated and firmly<br />
established. As a result, the Operational Risk Committee formed in 2002 and<br />
those responsible for the Bank’s individual organizational units performed their<br />
duties in terms of identifying, analysing, reporting and managing operational<br />
risk, in particular as regards the implementation of the Basel Committee’s<br />
“Sound practices for the management and supervision of operational risk” of<br />
February 2003.
Operational risk methods<br />
In order to calculate equity in accordance with Basel II by applying the Advanced<br />
Measurement Approach (AMA) in the future, we focused in the year under<br />
review on the main quantitative and qualitative methods for achieving this goal,<br />
taking account of the Basel requirements published to date. The structural collection<br />
of loss data – in line with Basel II – from operational risk was maintained<br />
and stepped up. Throughout the Group, all the losses stemming from operational<br />
risk that exceed 75,000 are systematically collected and centrally evaluated.<br />
The first findings were shared with and analysed by Operational Riskdata<br />
eXchange Association, Zurich (ORX). Through ORX, it is possible to exchange<br />
data both for the purpose of benchmarking with international participants and<br />
for modelling the risk or the need for capital.<br />
Furthermore, a pilot study in quality self-assessment was launched in individual<br />
areas of commercial banking and investment banking, for which methods<br />
and a system were worked out. This intranet-based tool integrated into the pool<br />
of loss data was used for the first time for investment-banking processes and<br />
will be extended to other areas of <strong>Commerzbank</strong> in 2004. This year, too, socalled<br />
key risk indicators are to be incorporated, which permit statements<br />
regarding the risk of future potential losses.<br />
The combination of loss data and qualitative information in an operationalrisk<br />
controlling system paves the way for the creation of operational-risk profiles<br />
for the individual business and service units. At the same time, mathematicalstatistical<br />
approaches to risk modelling have been refined on the basis of collected<br />
loss data and the technical conditions have been met for their integration<br />
into the Bank’s overall risk architecture.<br />
As some of the requirements have not yet been specified clearly in the<br />
Basel II consultative papers, we are also ensuring that it will be possible to<br />
implement the standardized approach or a planned so-called partial use – i.e.<br />
preparations are being made to use both the AMA and the standardized<br />
approach for various Group units. By participating in the relevant national and<br />
international bodies, <strong>Commerzbank</strong> is continuing to play an active role in the<br />
debate on such issues.<br />
Business contingency and continuity planning<br />
By means of regular self-assessments, the Bank creates for itself a standardized<br />
overview of the emergency measures for which the units subject to MaH assume<br />
responsibility. In addition, the Bank conducts numerous emergency tests in<br />
which, for example, the failure of the entire trading and service centre or individual<br />
locations or systems are simulated. For this purpose, business contingency<br />
managers have been appointed at the various units.<br />
Moreover, in a central business contingency policy the responsibilities of the<br />
diverse head-office departments and individual units are described. Starting in<br />
the year under review, these responsibilities are being adjusted to meet the<br />
requirements of the MaK and also the Sound Practices Paper.<br />
RISK REPORT 77
78 MANAGEMENT REPORT<br />
6) Monitoring and controlling business risk<br />
In line with their immediate responsibility for risk and earnings, the individual<br />
divisions and subsidiaries of the Bank also take charge of the operative management<br />
of business risks which occur in their area of activity.<br />
As part of the overall steering of the Bank, business risk was included last<br />
year for the first time in the calculation of economic capital. Business risk is<br />
worked out using an earnings-volatility model based on the historical monthly<br />
deviations of the actual from the planned result for fee income. As with the procedure<br />
applied for other types of risk, the calculation is based on a confidence<br />
level of 99.95% and a one-year time frame.<br />
7) Monitoring and controlling legal risk<br />
The management of the <strong>Commerzbank</strong> Group’s legal risk worldwide is entrusted<br />
to Legal Services (ZRA). The central function of ZRA is to recognize potential<br />
losses arising from legal risk at an early stage and to devise solutions for reducing,<br />
restricting or avoiding such risks. In this connection, ZRA produces guidelines<br />
and standard contracts for the entire Group, which are implemented in<br />
close cooperation with business lines, branches and subsidiaries. In addition to<br />
implementing and monitoring these uniform standards, ZRA advises all units of<br />
the Bank with regard to legal issues. The duties of ZRA also include informing<br />
the Board of Managing Directors and head-office departments about the impact<br />
of major legal changes and risks, as well as regularly adapting the Group’s<br />
guidelines and specimen contracts to new legal overall conditions.<br />
8) Monitoring and controlling strategic risk<br />
Responsibility for the strategic steering of <strong>Commerzbank</strong> lies with the Board of<br />
Managing Directors, with support in the case of strategic issues provided by<br />
Strategy and Controlling (ZKE). Some business-policy decisions also require the<br />
approval of the Supervisory Board.<br />
As strategic risk cannot be measured and controlled in quantitative terms,<br />
the management of such risk is subject to qualitative controlling. Constant<br />
observation of German and international competitors leads to an analysis of the<br />
major changes and developments, with conclusions being derived for the Bank’s<br />
strategic positioning.<br />
9) Monitoring and controlling reputational risk<br />
Reputational risk cannot be measured with the aid of quantitative methods<br />
either and it, too, is subject to qualitative controlling. As reputational risk may<br />
also primarily result from the wrong handling of other risk categories, the functioning<br />
and appropriateness of the risk-management system for all types of risk<br />
is important. In addition, <strong>Commerzbank</strong> avoids business-policy measures and<br />
transactions which entail extreme tax or legal risks, or violate business-policy<br />
principles published in either the articles of association or other declarations.
IV. Summary and outlook<br />
<strong>Commerzbank</strong>’s risk-management and risk-control system made an important<br />
contribution to the Bank’s overall result in 2003 as well. It is suited to identifying<br />
risks in good time which would endanger the Bank’s existence or impair its<br />
development and it is able to control such risks in a professional manner.<br />
The methods used to present and control risk were continually refined in the<br />
past business year, the focus being placed on credit risk and the integration of<br />
operational risk. The projects to implement the new supervisory provisions<br />
(Basel II, MaK) were maintained according to plan, with all the organizational<br />
MaK requirements now successfully implemented. Under the internal Basel II<br />
project, the ground has basically been prepared for the sophisticated IRB<br />
Advanced Approach to be applied as well as the advanced AMA approach (for<br />
operational risk).<br />
The management of credit risk from a single source with head-office and<br />
regional units and a professional intensive treatment section has proved its<br />
worth and – in addition to a marked reduction in credit volume and limits in<br />
some regions and sectors – has led to the loan portfolio being restructured to<br />
bring it into line with the credit-risk strategy. The Bank is confident that, thanks<br />
to its targeted risk-mitigation measures, it will be able to get its loan loss provisions<br />
down to under one billion euros.<br />
The further expansion of portfolio-management activities together with the<br />
integration of economic capital into the overall Bank management will be a main<br />
feature of risk-related activities in 2004; through an improved risk and returnoriented<br />
management of the Group, it will make a major contribution towards<br />
increasing shareholder value.<br />
In order to be able to guarantee <strong>Commerzbank</strong>’s core competency in risk<br />
management and controlling in the future as well, the Bank will continue to<br />
make every effort to maintain its high level in this area. <strong>Commerzbank</strong> believes<br />
that professional risk management and controlling represent a significant competitive<br />
edge.<br />
RISK REPORT 79
80<br />
financial statements in accordance with international<br />
accounting standards (ias) / international<br />
financial reporting standards (ifrs) for the<br />
commerzbank group as of december 31, 2003<br />
Income statement 83<br />
Basic earnings per share 84<br />
Balance sheet 85<br />
Statement of changes in equity 86<br />
Changes in minority interests 87<br />
Cash flow statement 88<br />
Notes<br />
Consolidated accounting principles 90<br />
Accounting and (1) Basic principles 90<br />
measurement methods (2) Changes in the method of disclosure 91<br />
(3) IAS, SIC and GASB rules applied 91<br />
(4) Consolidated companies 93<br />
(5) Principles of consolidation 94<br />
(6) Financial instruments: recognition and measurement (IAS 39) 95<br />
(7) Currency translation 97<br />
(8) Offsetting 97<br />
(9) Cash reserve 97<br />
(10) Claims 98<br />
(11) Provision for possible loan losses 98<br />
(12) Genuine repurchase agreements and securities-lending transactions 98<br />
(13) Positive fair values from derivative hedging instruments 98<br />
(14) Assets held for dealing purposes 99<br />
(15) Investments and securities portfolio 99<br />
(16) Intangible assets 99<br />
(17) Fixed assets 99<br />
(18) Leasing<br />
(19) Liabilities to banks and customers and also<br />
99<br />
Securitized liabilities 100<br />
(20) Negative fair values from derivative hedging instruments 100<br />
(21) Liabilities from dealing activities 100<br />
(22) Provisions for pensions and similar commitments 100<br />
(23) Other provisions 101<br />
(24) Taxes on income 101<br />
(25) Subordinated capital 102<br />
(26) Trust business 102<br />
(27) Treasury shares 102<br />
(28) Staff remuneration plans 102<br />
Expenses arising from special factors 104<br />
Major differences in accounting, measurement<br />
and consolidation methods: IAS/IFRS compared<br />
with HGB 105
Notes<br />
OVERVIEW 81<br />
Notes to the (29) Net interest income 107<br />
Income Statement (30) Provision for possible loan losses 107<br />
(31) Net commission income 108<br />
(32) Net result on hedge accounting 108<br />
(33) Trading profit<br />
(34) Net result on investments and securities portfolio<br />
108<br />
(available for sale) 109<br />
(35) Operating expenses 109<br />
(36) Other operating result 110<br />
(37) Regular amortization of goodwill 111<br />
(38) Expenses arising from special factors 111<br />
(39) Restructuring expenses 111<br />
(40) Taxes on income 112<br />
(41) Basic earnings per share 113<br />
(42) Cost/income ratio 113<br />
(43) Segment reporting 114<br />
Notes to the Assets (44) Cash reserve 123<br />
Balance Sheet (45) Claims on banks 123<br />
(46) Claims on customers<br />
(47) Claims on and liabilities to subsidiaries and<br />
123<br />
equity investments 124<br />
(48) Total lending 124<br />
(49) Provision for possible loan losses 125<br />
(50) Positive fair values from derivative hedging instruments 127<br />
(51) Assets held for dealing purposes 127<br />
(52) Investments and securities portfolio 128<br />
(53) Intangible assets 129<br />
(54) Fixed assets 129<br />
(55) Changes in book value of fixed assets and investments 130<br />
(56) Tax assets 131<br />
(57) Other assets 131<br />
Liabilities (58) Liabilities to banks 132<br />
(59) Liabilities to customers 132<br />
(60) Securitized liabilities 133<br />
(61) Negative fair values from derivative hedging instruments 134<br />
(62) Liabilities from dealing activities 135<br />
(63) Provisions 135<br />
(64) Tax liabilities 137<br />
(65) Other liabilities 137<br />
(66) Subordinated capital 138<br />
(67) Hybrid capital 139<br />
(68) Equity structure 140<br />
(69) Conditional capital 142<br />
(70) Authorized capital 143<br />
(71) The Bank’s foreign-currency position 144
82 OVERVIEW<br />
Notes<br />
Notes to (72) Derivative transactions 145<br />
financial instruments (73) Market risk arising from trading activities 148<br />
(74) Interest-rate risk 149<br />
(75) Concentration of credit risk 150<br />
(76) Assets pledged as security 151<br />
(77) Maturities, by remaining lifetime 152<br />
(78) Fair value of financial instruments 153<br />
Other notes (79) Subordinated assets 154<br />
(80) Off-balance-sheet commitments 154<br />
(81) Volume of managed funds 155<br />
(82) Genuine repurchase agreements 156<br />
(83) Securities-lending transactions 156<br />
(84) Trust transactions at third-party risk<br />
(85) Risk-weighted assets and capital ratios as<br />
157<br />
defined by the Basel Capital Accord (BIS) 157<br />
(86) Liquidity ratio of <strong>Commerzbank</strong> AG (Principle II) 159<br />
(87) Securitization of credits<br />
(88) Average number of staff employed by the Bank<br />
160<br />
during the year 161<br />
(89) Remuneration and loans to board members 161<br />
(90) Other commitments 163<br />
(91) Letter of comfort 164<br />
(92) Corporate Governance Code 165<br />
Boards of <strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong> 166<br />
Holdings in consolidated companies 167<br />
Group auditors’ report 172
income statement<br />
1.1.–31.12.2003 1.1.–31.12.2002 Change<br />
Notes 7 m 7 m in %<br />
Interest received 11,767 18,032 –34.7<br />
Interest paid 8,991 14,899 –39.7<br />
Net interest income (29) 2,776 3,133 –11.4<br />
Provision for possible loan losses (11, 30, 49) –1,084 –1,321 –17.9<br />
Net interest income after provisioning 1,692 1,812 –6.6<br />
Commissions received 2,505 2,416 3.7<br />
Commissions paid 369 296 24.7<br />
Net commission income (31) 2,136 2,120 0.8<br />
Net result on hedge accounting (32) 40 –56 •<br />
Trading profit<br />
Net result on investments and<br />
(33) 737 544 35.5<br />
securities portfolio (available for sale) (34) 291 –11 •<br />
Operating expenses (35) 4,511 5,155 –12.5<br />
Other operating result (36) 174 938 –81.4<br />
Operating profit 559 192 •<br />
Regular amortization of goodwill<br />
Profit from ordinary activities before<br />
expenses arising from special factors<br />
(37) 110 108 1.9<br />
and restructuring expenses 449 84 •<br />
Expenses arising from special factors (38) 2,325 247 •<br />
Restructuring expenses<br />
Profit from ordinary activities after<br />
expenses arising from special factors<br />
(39) 104 209 –50.2<br />
and restructuring expenses –1,980 –372 •<br />
Extraordinary profit – – –<br />
Pre-tax profit –1,980 –372 •<br />
Taxes on income (40) 249 –103 •<br />
After-tax profit –2,229 –269 •<br />
Profit/loss attributable<br />
to minority interests –91 –29 •<br />
Net loss (41) –2,320 –298 •<br />
83
84 INCOME STATEMENT<br />
Appropriation of profit 2003 2002 Change<br />
7 m 7 m in %<br />
Net loss –2,320 –298 •<br />
Transfer from capital reserve/retained earnings 2,320 352 •<br />
Consolidated loss/profit 0 54 •<br />
<strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong> did not achieve a distributable profit in the 2003 financial year. As a result, no dividend<br />
will be paid.<br />
Basic earnings per share 2003 2002 Change<br />
Notes 7 7 in %<br />
Loss per share (41) –4.26 –0.56 •<br />
The calculation of the loss per share according to IAS is based on the net loss, with minority interests not taken into consideration.<br />
The diluted loss per share is identical to the loss per share, since – as in the previous year – no conversion or<br />
option rights were outstanding on the balance-sheet date and consequently there was no dilution effect.
alance sheet<br />
Assets 31.12.2003 31.12.2002 Change<br />
Notes 7 m 7 m in %<br />
Cash reserve (9, 44) 7,429 8,466 –12.2<br />
Claims on banks (10, 45, 47, 48) 51,657 54,343 –4.9<br />
Claims on customers (10, 46, 47, 48) 138,438 148,514 –6.8<br />
Provision for possible loan losses<br />
Positive fair values from<br />
(11, 49) –5,510 –5,376 2.5<br />
derivative hedging instruments (13, 50) 2,552 3,131 –18.5<br />
Assets held for dealing purposes (14, 51) 87,628 117,192 –25.2<br />
Investments and securities portfolio (15, 48, 52, 55) 87,842 84,558 3.9<br />
Intangible assets (16, 53, 55) 802 1,151 –30.3<br />
Fixed assets (17, 18, 54, 55) 2,063 2,505 –17.6<br />
Tax assets (24, 56) 6,038 5,995 0.7<br />
Other assets (57) 2,646 1,655 59.9<br />
Total 381,585 422,134 –9.6<br />
Liabilities and equity 31.12.2003 31.12.2002 Change<br />
Notes 7 m 7 m in %<br />
Liabilities to banks (19, 47, 58) 95,249 114,984 –17.2<br />
Liabilities to customers (19, 47, 59) 100,000 95,700 4.5<br />
Securitized liabilities<br />
Negative fair values from<br />
(19, 60) 83,992 92,732 –9.4<br />
derivative hedging instruments (20, 61) 5,932 5,696 4.1<br />
Liabilities from dealing activities (21, 62) 67,014 83,238 –19.5<br />
Provisions (22, 23, 63) 3,307 3,528 –6.3<br />
Tax liabilities (24, 64) 4,495 3,664 22.7<br />
Other liabilities (65) 2,911 3,285 –11.4<br />
Subordinated capital (25, 66) 8,381 9,237 –9.3<br />
Minority interests 1,213 1,262 –3.9<br />
Equity (27, 68, 69, 70) 9,091 8,808 3.2<br />
Subscribed capital (68) 1,545 1,378 12.1<br />
Capital reserve (68) 4,475 6,131 –27.0<br />
Retained earnings (68) 3,286 3,268 0.6<br />
Revaluation reserve (15, 68) 1,240 –769 •<br />
Measurement of cash flow hedges (6, 68) –1,236 –1,248 1.0<br />
Reserve from currency translation (7, 68) –219 –6 •<br />
Consolidated loss/profit 0 54 •<br />
Total 381,585 422,134 –9.6<br />
85
86<br />
statement of changes in equity<br />
Sub- Capital Retained Reval- Valuation Reserve Consoli- Total<br />
scribed reserve earnings uation of from dated<br />
capital reserve cash flow currency profit<br />
7 m hedges translation<br />
Equity<br />
as of 1.1.2003 1,378 6,131 3,268 –769 –1,248 –6 54 8,808<br />
Capital increase<br />
Issue of shares<br />
139 603 742<br />
to employees<br />
Transfer from<br />
6 8 14<br />
capital reserve –2,320 –2,320<br />
Dividend payment<br />
Net changes in<br />
–54 –54<br />
revaluation reserve<br />
Net changes arising<br />
2,009 2,009<br />
from cash flow hedges 12 12<br />
Changes in treasury shares<br />
Changes in companies<br />
included in consolidation<br />
22 53 75<br />
and other changes<br />
Equity<br />
18 – – –213 –195<br />
as of 31.12.2003 1,545 4,475 3,286 1,240 –1,236 –219 0 9,091<br />
As of December 31, 2003, the subscribed capital of<br />
<strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong> stood at 71,554m pursuant<br />
to the Bank’s articles of association; it is divided<br />
into 597,858,005 no-par-value shares (notional value per<br />
share: 72.60). After the 3,489,912 treasury shares held by<br />
the Bank on December 31, 2003, are deducted, its subscribed<br />
capital amounts to 71,545m.<br />
The Bank made use of the authorization resolved by<br />
the Annual General Meeting of May 30, 2003 to purchase<br />
its own shares for the purpose of securities trading,<br />
pursuant to Art. 71, (1), no. 7, German Stock Corporation<br />
Act – AktG. Gains and losses from trading in the Bank’s<br />
own shares do not appear in the income statement.<br />
No use was made in the 2003 financial year of the resolution<br />
of the Annual General Meeting of May 30, 2003,<br />
authorizing the Bank to repurchase its own shares pursuant<br />
to Art. 71, (1), no. 8, AktG, for purposes other than<br />
securities trading.<br />
Other changes in retained earnings relate to changes<br />
in equity at associated companies which, in accordance<br />
with IAS 28, have to be shown on a pro-rata basis with no<br />
effect on the net profit.
Changes in minority interests<br />
STATEMENT OF CHANGES IN EQUITY 87<br />
Minority Reval- Valuation Reserve Gains/ Total<br />
interests uation of from losses<br />
reserve cash flow currency<br />
7 m hedges translation<br />
Minority interests<br />
as of 1.1.2003 1,043 334 –132 –12 29 1,262<br />
Capital increases<br />
Allocation of profit/<br />
offsetting of loss from<br />
17 17<br />
net result for the year<br />
Takeover of minority<br />
–21 21 0<br />
interests by the Group –85 2 –5 –88<br />
Distributions –50 –50<br />
Profits/losses 2003<br />
Net changes in<br />
91 91<br />
revaluation reserve<br />
Net changes arising<br />
–23 –23<br />
from cash flow hedges<br />
Changes in companies<br />
included in consolidation<br />
9 9<br />
and other changes<br />
Minority interests<br />
24 –29 – –5<br />
as of 31.12.2003 978 313 –123 –46 91 1,213<br />
The takeover of minority interests related to the increase in our shareholding in BRE Bank from 50.0% to 72.16%.
88<br />
cash flow statement<br />
2003 2002<br />
7 m 7 m<br />
Net profit<br />
Non-cash positions in net profit and adjustments to reconcile<br />
net profit with net cash provided by operating activities:<br />
Write-downs, depreciation, adjustments, write-ups to fixed<br />
and other assets, changes in provisions and net changes<br />
–2,320 –298<br />
due to hedge accounting<br />
Change in other non-cash positions:<br />
Positive and negative fair values from derivative<br />
929 1,114<br />
financial instruments (trading and hedging derivatives) 1,248 1,607<br />
Profit from the sale of assets –291 88<br />
Profit from the sale of fixed assets 4 –12<br />
Other adjustments (mainly net interest income) –2,299 –4,000<br />
Sub-total<br />
Change in assets and liabilities from operating activities<br />
after correction for non-cash components:<br />
–2,729 –1,501<br />
Claims on banks 2,686 9,049<br />
Claims on customers 10,076 71,801<br />
Securities held for dealing purposes 12,519 13,424<br />
Other assets from operating activities –2,603 2,604<br />
Liabilities to banks –19,735 5,898<br />
Liabilities to customers 4,300 –20,698<br />
Securitized liabilities –8,740 –97,938<br />
Other liabilities from operating activities 4,272 –3,102<br />
Interest and dividends received 11,767 18,032<br />
Interest paid –8,991 –14,899<br />
Income tax paid –145 –201<br />
Net cash provided by operating activities<br />
Proceeds from the sale of:<br />
2,677 –17,531<br />
Investments and securities portfolio 48,593 65,905<br />
Fixed assets<br />
Payments for the acquisition of:<br />
424 1,955<br />
Investments and securities portfolio –52,351 –47,039<br />
Fixed assets<br />
Effects of changes in the group of companies included in the consolidation<br />
–317 –738<br />
Payments from the acquisition of subsidiaries 68 –238<br />
Net cash used by investing activities –3,583 19,845<br />
Proceeds from capital increases 831 –82<br />
Dividends paid –54 –217<br />
Other financing activities –856 –1,287<br />
Net cash provided by financing activities –79 –1,586<br />
Cash and cash equivalents at end of previous period 8,466 7,632<br />
Net cash provided by operating activities 2,677 –17,531<br />
Net cash used by investing activities –3,583 19,845<br />
Net cash provided by financing activities –79 –1,586<br />
Effects of exchange-rate changes on cash and cash equivalents –52 106<br />
Cash and cash equivalents at end of period 7,429 8,466
The cash flow statement shows the structure of and<br />
changes in cash and cash equivalents during the financial<br />
year. It is broken down into operating activities,<br />
investing activities and financing activities.<br />
Under net cash provided by operating activities, payments<br />
(inflows and outflows) from claims on banks and<br />
customers and also securities from the trading portfolio<br />
and other assets are shown. Additions to and disposals<br />
from liabilities to banks and customers, securitized<br />
liabilities and other liabilities also belong to operating<br />
activities. The interest and dividend payments resulting<br />
from operating activities are similarly reflected in the net<br />
cash provided by operating activities.<br />
The net cash used by investing activities shows payments<br />
for the investments and securities portfolio as<br />
well as for fixed assets and payments for the acquisition<br />
of subsidiaries. The effects of changes in the list of consolidated<br />
companies are also recognized under this item.<br />
CASH FLOW STATEMENT 89<br />
The net cash provided by financing activities covers<br />
the proceeds from capital increases as well as payments<br />
received and made with regard to subordinated capital.<br />
Distributed dividends are also shown here.<br />
We consider cash and cash equivalents to be the<br />
Cash reserve, consisting of cash on hand, balances held<br />
at central banks and also debt issued by public-sector<br />
borrowers and bills of exchange eligible for rediscounting<br />
at central banks. Claims on banks which are due on<br />
demand are not included.<br />
As far as banks are concerned, the cash flow statement<br />
can be considered not very informative. For us, the<br />
cash flow statement replaces neither liquidity planning<br />
nor financial planning, nor do we look upon it as a steering<br />
instrument.
90<br />
notes<br />
Consolidated accounting principles<br />
The <strong>Commerzbank</strong> Group’s financial statements as of<br />
December 31, 2003 were prepared in accordance with the<br />
directives 83/349/EEC (directive on consolidated financial<br />
statements) and 86/635/EEC (directive on annual accounts<br />
of banks) on the basis of the International Accounting<br />
Standards (IASs) – in future: International Financial Reporting<br />
Standards (IFRS) – approved and published by the<br />
International Accounting Standards Board (IASB) and<br />
with their interpretation by the Standing Interpretations<br />
Committee (SIC), or International Financial Reporting<br />
Interpretation Committee (IFRIC). A summary of the regulations<br />
that have been applied can be found on pages<br />
91-92. The necessary compliance with the directive on<br />
the annual accounts of banks was achieved through the<br />
appropriate structuring of the items balance sheet,<br />
income statement and the notes. Pursuant to Art. 292a,<br />
German Commercial Code (HGB), these consolidated<br />
financial statements prepared in accordance with IAS<br />
Accounting and measurement methods<br />
(1) Basic principles<br />
The consolidated financial statements are based on the<br />
going concern principle. Income and expenses are recognized<br />
on a pro-rata temporis basis; they are shown for the<br />
period to which they may be assigned in economic terms.<br />
As in previous years, we applied IAS 39 (2000),<br />
together with the different classification and measurement<br />
principles prescribed by this standard, in our accounting<br />
in the 2003 financial year. In order to reflect the<br />
different rules of this standard, financial assets and financial<br />
liabilities have been assigned to the following categories:<br />
exempt the Bank from the need to prepare financial statements<br />
according to German accounting principles. We<br />
have presented the main differences between IAS financial<br />
statements and those prepared in accordance with<br />
German accounting rules on pages 105-106 of this report.<br />
The consolidated financial statements also reflect the<br />
standards approved by the German Accounting Standards<br />
Board (GASB) and published by the German Federal<br />
Ministry of Justice pursuant to Art. 342, (2), HGB.<br />
In addition to the consolidated balance sheet and the<br />
consolidated income statement, the consolidated financial<br />
statements also include a statement of changes in<br />
equity and in minority interests, a cash flow statement<br />
and the notes. Segment reporting appears in the notes on<br />
pages 114-122.<br />
The separate report on the risks related to future<br />
developments (Risk report pursuant to Art. 315, (1), HGB)<br />
appears on pages 52-79.<br />
Unless otherwise indicated, all the amounts are<br />
shown in millions of euros.<br />
1. Loans and claims originated by the Bank.<br />
2. Financial assets held to maturity.<br />
3. Financial assets held for trading (Assets held for dealing<br />
purposes) and certain financial liabilities (Liabilities<br />
from dealing activities).<br />
4. Available-for-sale financial assets.<br />
5. Other financial liabilities.<br />
The detailed rules for hedge accounting are applied in<br />
the case of derivative hedging instruments (further details<br />
may be found in note 6).<br />
All the companies included in the consolidation prepared<br />
their financial statements as of December 31, 2003.<br />
Uniform accounting and measurement methods are<br />
applied throughout the <strong>Commerzbank</strong> Group in preparing<br />
the financial statements.
(2) Changes in the method of disclosure<br />
In the past financial year, we maintained the recognition,<br />
measurement and disclosure methods in accordance with<br />
the F39 IAS/IFRS framework. This had no effect on the recognition<br />
and measurement methods of previous periods.<br />
(3) IAS, SIC and GASB rules applied<br />
There is regularly a time gap between the approval of an<br />
IAS, or a related interpretation, and its effective date. As a<br />
rule, however, the IASB recommends the early application<br />
of not yet effective, but already approved, standards and<br />
interpretations.<br />
NOTES 91<br />
Within the <strong>Commerzbank</strong> Group, as a matter of principle<br />
we base our accounting and measurement on all the<br />
IASs approved and published by December 31, 2003. The<br />
exceptions were the changes to various standards initiated<br />
by the improvement project as well as the first<br />
amendments to IAS 32 and 39 published by the IASB on<br />
December 17, 2003, which have to be applied in the 2005<br />
financial year at the latest.<br />
The 2003 consolidated financial statements are based on the IASC framework and the following IASs which are relevant<br />
for the <strong>Commerzbank</strong> Group:<br />
IAS 1 Presentation of financial statements<br />
IAS 7 Cash flow statements<br />
IAS 8 Net profit or loss for the period, fundamental errors and changes in accounting policies<br />
IAS 10 Events after the balance-sheet date<br />
IAS 12 Income taxes<br />
IAS 14 Segment reporting<br />
IAS 16 Property, plant and equipment<br />
IAS 17 Leases<br />
IAS 18 Revenue<br />
IAS 19 Employee benefits<br />
IAS 21 The effects of changes in foreign-exchange rates<br />
IAS 22 Business combinations<br />
IAS 23 Borrowing costs<br />
IAS 24 Related party disclosures<br />
IAS 27 Consolidated financial statements and accounting for investments in subsidiaries<br />
IAS 28 Accounting for investments in associates<br />
IAS 30 Disclosures in the financial statements of banks and similar financial institutions<br />
IAS 31 Financial reporting of interests in joint ventures<br />
IAS 32 Financial instruments: disclosure and presentation<br />
IAS 33 Earnings per share<br />
IAS 36 Impairment of assets<br />
IAS 37 Provisions, contingent liabilities and contingent assets<br />
IAS 38 Intangible assets<br />
IAS 39 Financial instruments: recognition and measurement<br />
IAS 40 Investment property<br />
We have not applied IFRS 1 and IAS 2, 11, 15, 20, 26, 29, 34,<br />
35 and 41, as they are either not relevant for our institution<br />
or did not have to be applied in the consolidated financial<br />
statements.<br />
For IAS 40, recognition is made at cost, as is permitted<br />
under this rule.
92 NOTES<br />
In addition to the standards mentioned, we have also taken into consideration in our consolidated financial statements<br />
the following interpretations of SIC or IFRIC that are relevant for us:<br />
relates to<br />
SIC-2 Consistency – capitalization of borrowing costs IAS 23<br />
SIC-3 Elimination of unrealized profits and losses on transactions with associates IAS 28<br />
SIC-5 Classification of financial instruments – contingent settlement provisions IAS 32<br />
SIC-6 Costs of modifying existing software IASC framework<br />
SIC-7 Introduction of the euro IAS 21<br />
SIC-9 Business combinations – classification either as acquisitions or unitings of interests IAS 22<br />
SIC-12 Consolidation – special-purpose entities IAS 27<br />
SIC-15 Operating leases – incentives IAS 17<br />
SIC-16 Share capital – reacquired own equity instruments (treasury shares) IAS 32<br />
SIC-17 Equity – costs of an equity transaction IAS 32<br />
SIC-18 Consistency – alternative methods IAS 1<br />
SIC-20 Equity accounting method – recognition of losses IAS 28<br />
SIC-21 Income taxes – recovery of revalued non-depreciable assets IAS 12<br />
SIC-24 Earnings per share – financial instruments and<br />
other contracts that may be settled in shares<br />
IAS 33<br />
SIC-25 Income taxes – changes in the tax status of an enterprise or its shareholders IAS 12<br />
SIC-27 Evaluating the substance of transactions in the legal form of a lease IAS 1, 17, 18<br />
SIC-28 Business combinations – “date of exchange” and<br />
fair value of equity instruments<br />
IAS 22<br />
SIC-30 Reporting currency – translation from measurement currency<br />
to presentation currency<br />
IAS 21, 29<br />
SIC-32 Intangible assets – web site costs IAS 38<br />
SIC-33 Consolidation and equity method – potential voting rights and<br />
allocation of ownership interests<br />
IAS 27, 28, 39<br />
The SIC, or IFRIC, interpretations 1, 10, 11, 13, 14, 19, 22, 23, 29 and 31 were irrelevant for our consolidated financial<br />
statements and did not, therefore, have to be taken into consideration.
Furthermore, in the present consolidated financial statements,<br />
the following German Accounting Standards<br />
(GAS) have been taken into consideration, which had<br />
to be applied and had been approved by the German<br />
(4) Consolidated companies<br />
The consolidated financial statements include in addition<br />
to the Parent Bank 102 subsidiaries (95 in 2002), in which<br />
<strong>Commerzbank</strong> AG holds more than 50% of the capital<br />
directly or indirectly, or exerts control over them. Of these,<br />
45 have their legal seat in Germany (44 in 2002) and 57<br />
(51 in 2002) elsewhere.<br />
156 subsidiaries and associated companies (167 in<br />
2002) of minor significance for the Group’s asset and<br />
financial position and earnings performance have not<br />
been included; instead, they have been shown under<br />
Investments and securities portfolio as holdings in subsidiaries<br />
or investments. These companies account for<br />
less than 0.1% (0.2% in 2002) of the Group’s overall balance-sheet<br />
total.<br />
The <strong>Commerzbank</strong> Group has three sub-groups:<br />
● CommerzLeasing und Immobilien AG, Düsseldorf<br />
● Jupiter International Group plc, London<br />
● comdirect bank AG, Quickborn<br />
which have presented sub-group financial statements.<br />
NOTES 93<br />
Accounting Standards Board (GASB) and announced by<br />
the German Federal Ministry of Justice up to December<br />
31, 2003, in accordance with Art. 342, (2), HGB:<br />
GAS 1 Exempting consolidated financial statements in accordance with §292a, HGB<br />
GAS 1a Exempting consolidated financial statements in accordance with §292a, HGB<br />
– goodwill and other non-current intangible assets<br />
GAS 2 Cash flow statements<br />
GAS 2-10 Cash flow statements of financial institutions<br />
GAS 3 Segment reporting<br />
GAS 3-10 Segment reporting of banks<br />
GAS 4 Purchase accounting in consolidated financial statements<br />
GAS 5 Risk reporting<br />
GAS 5-10 Risk reporting by financial enterprises<br />
GAS 7 Presenting equity in consolidated financial statements<br />
GAS 8 Accounting for investments in associates<br />
GAS 9 Financial reporting of interests in joint ventures<br />
GAS 10 Deferred taxes and consolidated financial statements<br />
GAS 11 Related-party disclosure<br />
GAS 12 Non-current intangible assets<br />
GAS 13 Consistency principle and correction of errors<br />
The following 15 subsidiaries – four of them based in<br />
Germany – were included in the consolidation for the first<br />
time in 2003:<br />
● ATBRECOM Limited, London<br />
● CCR Actions, Paris<br />
● CCR Chevrillon-Philippe, Paris<br />
● CCR Gestion Internationale, Paris<br />
● comdirect private finance AG, Quickborn<br />
● Commerz Advisory Management Co. Ltd.,<br />
British Virgin Islands<br />
● CORECD Commerz Real Estate Consulting and<br />
Development GmbH, Berlin<br />
● Hansa Automobil Leasing GmbH, Hamburg<br />
● Intermarket Bank AG, Vienna<br />
● Lanesborough Limited, Bermuda<br />
● NALF Holdings Limited, Bermuda<br />
● RHEINHYP-BRE Bank Hipoteczny SA, Warsaw<br />
● Service-Center Inkasso GmbH Düsseldorf, Düsseldorf<br />
● The New Asian Property Fund Limited, Bermuda<br />
● Transfinance a.s., Prague
94 NOTES<br />
In addition to the 102 (95 in 2002) subsidiaries, we<br />
included in the 2003 financial year the following four<br />
(2002: two) special-purpose entities and 13 (2002: 13) nonpublicly-offered<br />
funds in our consolidated financial statements<br />
in accordance with IAS 27 and SIC-12, or IFRIC 12.<br />
Comas Strategy Fund 1 Limited, Grand Cayman, and<br />
Plymouth Capital Limited, St. Helier/Jersey, were included<br />
as special-purpose entities for the first time.<br />
The inclusion of these special-purpose entities has no<br />
major effects on the presentation of the Group’s asset and<br />
financial position or earnings performance.<br />
The following companies have been removed from<br />
the list of consolidated companies:<br />
● ALTINUM Grundstücks-Vermietungsgesellschaft<br />
mbH & Co. Objekt Sonninhof KG i.L., Düsseldorf<br />
● CFM Commerz Finanz Management GmbH,<br />
Frankfurt am Main<br />
● <strong>Commerzbank</strong> Asset Management Italia S.p.A., Rome<br />
● <strong>Commerzbank</strong> International (Ireland), Dublin<br />
● <strong>Commerzbank</strong> Società di Gestione del Risparmio<br />
S.p.A., Rome<br />
● <strong>Commerzbank</strong> U.S. Finance, Inc.,<br />
Wilmington/Delaware<br />
● Molegra Grundstücks-Vermietungsgesellschaft mbH<br />
& Co. Objekt Projektentwicklungs KG, Düsseldorf<br />
● TI Limited i.L., Bermuda<br />
Eleven major associated companies (16 in 2002)<br />
– eight of them based in Germany (2002: eight) – are measured<br />
using the equity method. As a major associated<br />
company, our equity holding in Eurohypo <strong>Aktiengesellschaft</strong>,<br />
Frankfurt am Main, is included in the consolidated<br />
financial statements, as it was in the previous year. For<br />
the first time, ComSystems GmbH, Düsseldorf, appears at<br />
equity.<br />
The following companies have been removed from<br />
the list of associated companies:<br />
● Clearing Bank Hannover <strong>Aktiengesellschaft</strong> i.L.,<br />
Hanover<br />
● Hispano <strong>Commerzbank</strong> (Gibraltar) Ltd., Gibraltar<br />
● Korea Exchange Bank (KEB), Seoul<br />
● RHEINHYP-BRE Bank Hipoteczny SA, Warsaw<br />
● The New Asian Land Fund Limited, Bermuda<br />
● The New Asian Property Fund Limited, Bermuda<br />
In the fourth quarter of 2003, we sold 26.2m KEB<br />
shares, representing a stake of 7.1%, to a foreign investor.<br />
At the same time, KEB effected a capital increase, in which<br />
we did not participate. Due to these measures, our interest<br />
in KEB was reduced from 32.6% to 14.8%. Once these<br />
transactions had been concluded, we changed the<br />
accounting for this equity holding from the at equity<br />
method to the fair value approach. This has no major<br />
effects on our asset and financial position or on earnings<br />
performance.<br />
Commerz Net Business AG, Frankfurt am Main, was<br />
renamed Commerz Business Consulting AG, Frankfurt am<br />
Main, and NIV Vermögensverwaltungsgesellschaft mbH,<br />
Frankfurt am Main, was renamed Commerz Immobilien<br />
und Vermögensverwaltungsgesellschaft mbH, Frankfurt<br />
am Main. Both companies remain fully consolidated.<br />
RHEINHYP-BRE Bank Hipoteczny SA, Warsaw, and The<br />
New Asian Property Fund Limited, Bermuda, have been<br />
fully consolidated since December 31, 2003.<br />
A complete list of the subsidiaries, associated companies<br />
and special-purpose entities and non-publiclyoffered<br />
funds included in our consolidated financial statements<br />
can be found on pages 167-170.<br />
(5) Principles of consolidation<br />
The consolidation of the capital accounts is based on the<br />
book-value method, whereby the historical cost of the<br />
holding in the subsidiary is set off against the share of the<br />
equity that was acquired at that time. As far as possible,<br />
any residual differences in amount are assigned to<br />
the subsidiary’s assets and liabilities, reflecting the percentage<br />
share of equity held. If any positive differences<br />
remain after such assignment, these are shown as goodwill<br />
under Intangible assets in the balance sheet and are<br />
depreciated to reflect their probable useful economic lives<br />
over a period of 15 years, using the straight-line method.<br />
Claims and liabilities deriving from business relations<br />
between Group companies, as well as expenses and<br />
income, are eliminated as part of the consolidation of<br />
earnings; intra-Group book gains or losses registered<br />
during the financial year are eliminated unless they are of<br />
minor importance.<br />
Associated companies are measured according to the<br />
equity method and are shown as investments in associated<br />
companies under Investments and securities portfolio.<br />
The purchase cost of these investments and the<br />
goodwill are determined at the time of their first inclusion<br />
in the consolidated financial statements, applying the<br />
same rules as for subsidiaries. The equity book value
which is carried and either appears or does not appear in<br />
the income statement is based on the financial statements<br />
of associated companies that are prepared in accordance<br />
with local accounting rules or on auxiliary calculations<br />
in accordance with IAS/IFRS rules by the associated company.<br />
Holdings in subsidiaries not consolidated because of<br />
their marginal significance and investments are shown at<br />
their fair value, or if this cannot be reliably established, at<br />
cost under Investments and securities portfolio.<br />
(6) Financial instruments: recognition and measurement<br />
(IAS 39)<br />
In accordance with IAS 39, all financial assets and liabilities<br />
– which also includes derivative financial instruments<br />
– have to be shown in the balance sheet. For this<br />
purpose, the entire portfolio has to be broken down into<br />
various groups and measured in accordance with the<br />
respective classification.<br />
The following remarks present an overview of how<br />
we have applied the rules of this standard within the<br />
<strong>Commerzbank</strong> Group:<br />
a) Categorization of financial assets and liabilities and<br />
their measurement<br />
● Loans and claims originated by the Bank:<br />
Loans granted directly to the borrower and claims due<br />
directly from the borrower are assigned to this category.<br />
They are measured at amortized cost. Premiums<br />
and discounts appear under Net interest income over<br />
the entire lifetime.<br />
● Held-to-maturity financial assets:<br />
Non-derivative financial assets with a fixed maturity<br />
may be included in this category if they cannot be<br />
assigned to the ”Loans and claims originated by the<br />
Bank” category and if both the intent and the ability<br />
exist to hold them to final maturity. They are measured<br />
at amortized cost, with premiums and discounts being<br />
recognized over the entire lifetime to maturity. The<br />
<strong>Commerzbank</strong> Group has not used the ”Held-to-maturity<br />
financial assets” category with respect to the 2003<br />
financial year either.<br />
NOTES 95<br />
● Assets held for dealing purposes and Liabilities from<br />
dealing activities:<br />
All financial assets which are held for dealing purposes<br />
are assigned to this class. These include original<br />
financial instruments (especially interest-bearing<br />
securities, equities and promissory notes), precious<br />
metals and derivative financial instruments with a<br />
positive fair value.<br />
All financial liabilities from dealing activities are<br />
assigned to this class. These include derivative financial<br />
instruments insofar as they have a negative fair<br />
value and delivery obligations arising from short sales<br />
of securities.<br />
In accordance with IAS 39, derivative financial<br />
instruments are classified as part of the trading portfolio<br />
insofar as they do not qualify as hedging derivatives<br />
used in hedge accounting.<br />
Assets held for dealing purposes and liabilities<br />
from dealing activities are measured at their fair value<br />
on the balance-sheet date. Measurement gains and<br />
losses appear under Trading profit in the income statement.<br />
● Available-for-sale financial assets:<br />
All non-derivative financial assets not covered by one<br />
of the above classes are assigned to this category. Primarily,<br />
these are interest-bearing securities, equities,<br />
promissory notes and investments. This group is also<br />
referred to as the Available-for-sale portfolio.<br />
They are initially measured at cost and subsequently<br />
at their fair value. After deferred taxes have<br />
been taken into consideration, measured gains and<br />
losses are recognized with no effect on the income<br />
statement in a separate equity item (revaluation<br />
reserve). If the financial asset is sold, the cumulative<br />
valuation previously recognized in the revaluation<br />
reserve is released and shown in the income statement.<br />
Should the asset’s value be permanently<br />
impaired, the revaluation reserve has to be reduced by<br />
the amount of the impairment, and this amount has to<br />
be reflected in the income statement. If the fair value<br />
cannot be reliably ascertained, measurement is made<br />
at amortized cost. Premiums and discounts are recognized<br />
under Net interest income over the entire lifetime.
96 NOTES<br />
● Other financial liabilities:<br />
These include all original financial liabilities, especially<br />
liabilities to banks and customers and also securitized<br />
liabilities. Measurement is made at amortized<br />
cost. Premiums and discounts are recognized under<br />
interest income over the entire lifetime.<br />
b) Embedded derivatives<br />
IAS 39 also regulates the treatment of embedded<br />
derivatives. These are derivatives which are part of<br />
an original financial instrument and are inseparably<br />
linked to it. Such financial instruments are also<br />
referred to as hybrid financial instruments in IAS 39.<br />
Hybrid financial instruments include reverse convertible<br />
bonds (bonds whose repayment may take the<br />
form of equities) or bonds with indexed interest payments.<br />
In accordance with IAS 39, the embedded<br />
derivative should be separated from the original host<br />
contract under certain conditions and accounted for<br />
and measured separately at fair value as a stand-alone<br />
derivative. Such separation has to be made if the characteristics<br />
and risks of the embedded derivative are<br />
not closely related to those of the host contract. In this<br />
case, the embedded derivative has to be regarded as<br />
part of the trading portfolio and recognized at its fair<br />
value. Changes in the fair value have to be shown in<br />
the income statement. The host contract is accounted<br />
for and measured applying the rules of the relevant<br />
category of the financial instrument. However, if the<br />
characteristics and risks of the embedded derivative<br />
are closely linked to those of the host contract, the<br />
embedded derivative is not separated from the latter<br />
and the hybrid financial instrument is measured in<br />
accordance with the general provisions.<br />
c) Hedge accounting<br />
IAS 39 entails extensive and quite complicated regulations<br />
concerning accounting for hedging instruments,<br />
which are superimposed upon the general accounting<br />
rules for derivatives described above and also for<br />
secured, underlying transactions. In line with general<br />
regulations, derivatives are classified as trading transactions<br />
(assets held for dealing purposes or liabilities<br />
from dealing activities) and are measured at their fair<br />
value. The result of such measurement is shown in the<br />
income statement under Trading profit.<br />
If derivatives are used to hedge risks from nontrading<br />
transactions, IAS 39 permits, under certain<br />
conditions, the application of special regulations in<br />
hedge accounting. For the most part, two forms of<br />
hedge accounting are distinguished:<br />
● Fair value hedge accounting:<br />
For derivatives which serve to hedge the fair value<br />
of recognized assets or liabilities (so-called fair value<br />
hedges), IAS 39 prescribes the use of fair value hedge<br />
accounting. The risk of a change in fair value exists<br />
above all for loans, securities and liabilities with a<br />
fixed interest rate.<br />
In line with the regulations for fair value hedge<br />
accounting, the hedging derivative is shown at fair<br />
value, with changes in its fair value appearing in the<br />
income statement. Any changes in the fair value of the<br />
hedged asset or hedged liability resulting from the<br />
hedged risk also have to be recognized in the income<br />
statement. Given a perfect hedge, the changes in<br />
measurement recognized in the income statement for<br />
the hedge and the hedged transaction will largely balance<br />
one another.<br />
If the asset or liability is recognized at amortized<br />
cost according to the general regulations (e.g. an extended<br />
loan or an outstanding bond), the book value<br />
has to be adjusted for the accumulated changes in fair<br />
value resulting from the hedged risk. However, if the<br />
asset is recognized at fair value (e.g. an available-forsale<br />
security), the changes in fair value resulting from<br />
the hedged risk have to be recognized, contrary to the<br />
general rule, in the income statement.<br />
● Cash flow hedge accounting:<br />
For derivatives which serve to hedge future cash flows<br />
(cash flow hedges), IAS 39 prescribes the use of cash<br />
flow hedge accounting. A risk relating to the size of<br />
future cash flows exists in particular for floating-interest-rate<br />
loans, securities and liabilities as well as<br />
forecasted transactions (e.g. forecasted fund-raising<br />
or financial investments). At the same time, IAS 39<br />
also prescribes the application of cash flow hedge<br />
accounting rules for the hedging of future cash flows<br />
from pending business.<br />
Derivative financial instruments used in cash flow<br />
hedge accounting are carried at fair value. Reporting of<br />
the gain or loss has to be divided into an effective and<br />
an ineffective part. The effective portion is that which<br />
represents an effective hedge of the cash flow risk.
After deferred taxes have been taken into consideration,<br />
this is recognized directly in a separate item<br />
under equity (Measurement of cash flow hedges). By<br />
contrast, the ineffective portion is shown in the income<br />
statement. For the underlying transactions of<br />
cash flow hedges, there is no change in the general<br />
accounting rules described above.<br />
The application of hedge accounting rules is tied to<br />
a number of additional conditions. These relate above<br />
all to the documentation of the hedge and also to its<br />
effectiveness.<br />
The hedge has to be documented at the time of<br />
its conclusion. Documentation extends above all to<br />
an identification of the hedging derivative and the<br />
hedged transaction and also details of the hedged risk<br />
and the method employed to determine the effectiveness<br />
of the hedge. Documentation for a transaction<br />
hedged with a derivative may relate to either an individual<br />
asset, liability, pending business or forecasted<br />
transaction or to a portfolio of such items which are<br />
given similar accounting treatment. However, it is not<br />
sufficient to document a net risk position to be hedged.<br />
In addition to such disclosure, IAS 39 calls for<br />
evidence of an effective hedge for the application of<br />
hedge accounting rules. Effectiveness in this connection<br />
means the relationship between the change in fair<br />
value or the cash flow resulting from the hedged<br />
underlying transaction and the change in fair value<br />
or the cash flow resulting from the hedge. If these<br />
changes almost entirely balance one another, a high<br />
degree of effectiveness exists. Proof of effectiveness<br />
requires, on the one hand, that a high degree of effectiveness<br />
can be expected from a hedging relationship<br />
in the future (prospective effectiveness). On the other<br />
hand, when a hedging relationship exists, it must be<br />
regularly demonstrated that this was highly effective<br />
during the period under review (retrospective effectiveness).<br />
A high degree of retrospective effectiveness<br />
exists if the ratio of changes in the fair value or the cash<br />
flow lies between 0.8 and 1.25. Here the methods used<br />
for determining effectiveness have to be disclosed.<br />
By means of a fair value hedge, the Bank hedges<br />
the fair value of a financial instrument against the risks<br />
resulting from the change in the reference interest<br />
rate, share price and/or the exchange rate. In order to<br />
hedge these risks, above all interest-rate and interest/currency<br />
swaps are employed. This primarily<br />
relates to the Group’s new issues business and the<br />
securities portfolio used for liquidity management,<br />
NOTES 97<br />
insofar as these are interest-bearing securities. Equities<br />
from these portfolios are hedged by derivatives<br />
with option character. The same holds true for the<br />
other price risks of structured issues.<br />
Interest-rate risks resulting from open interest-rate<br />
positions in asset/liability management are mainly<br />
hedged at the <strong>Commerzbank</strong> Group by means of cash<br />
flow hedges using interest-rate swaps.<br />
(7) Currency translation<br />
Assets and liabilities and also items from the income<br />
statement denominated in foreign currencies, as well as<br />
immatured spot foreign-exchange transactions, are translated<br />
at the spot rates, and foreign-exchange forward contracts<br />
at the forward rate of the balance-sheet date. Currency<br />
translation for investments and holdings in subsidiaries<br />
that are denominated in foreign currencies is<br />
effected at historical cost. Translation gains and losses<br />
from the consolidation of the capital accounts appear in<br />
the balance sheet under Equity.<br />
As a result of their economically independent business<br />
activity, the financial statements of our units abroad<br />
that are prepared in foreign currencies are translated at<br />
the spot rates of the balance-sheet date.<br />
The expenses and income generated by the translation<br />
of balance-sheet items are recognized in the income<br />
statement. Hedged expenses and income are translated at<br />
the hedging rate.<br />
The following translation rates apply for the currencies<br />
that are most important to the <strong>Commerzbank</strong> Group<br />
(amount per 71 in the respective currency):<br />
2003 2002<br />
USD 1.2630 1.0422<br />
JPY 135.05 124.27<br />
GBP 0.7048 0.6500<br />
CHF 1.5579 1.4548<br />
(8) Offsetting<br />
We set liabilities off against claims if these are on the<br />
same account-holder, are due at call, and agreement has<br />
been reached with the business associate that interest<br />
and commissions be calculated as if only a single account<br />
existed.<br />
(9) Cash reserve<br />
With the exception of debt issued by public-sector borrowers,<br />
which is shown at its fair value, all the items<br />
appear at their nominal value.
98 NOTES<br />
(10) Claims<br />
Claims on banks and customers originated by the<br />
<strong>Commerzbank</strong> Group, which are not held for trading, are<br />
shown at either their nominal value or at amortized cost.<br />
Premiums and discounts appear under Net interest<br />
income over the entire lifetime. The book values of claims<br />
which qualify for hedge accounting are adjusted for the<br />
gain or loss attributable to the hedged risk.<br />
Claims not originated by <strong>Commerzbank</strong> – mainly<br />
promissory notes – which do not form part of the trading<br />
portfolio are included in the Investments and securities<br />
portfolio.<br />
(11) Provision for possible loan losses<br />
We fully provide for the particular risks associated with<br />
banking business by forming individual valuation allowances,<br />
country valuation allowances and global valuation<br />
allowances.<br />
In order to cover the lending risks represented by<br />
claims on customers and banks, we have formed individual<br />
valuation allowances according to uniform Group<br />
standards. Valuation allowances have to be formed for a<br />
loan if it is probable that not all the interest payments and<br />
repayments of principal can be made according to the<br />
agreement. The size of the valuation allowance corresponds<br />
to the difference between the book value of the<br />
loan after valuable security has been taken into consideration<br />
and the cash value of the expected future cash flow,<br />
discounted by the original effective interest rate.<br />
In the case of loans to borrowers in countries involving<br />
an enhanced transfer risk (country risk), an assessment of<br />
the economic situation is made, based on the appropriate<br />
economic data. The findings are weighted by the respective<br />
internal country rating. Wherever necessary, country<br />
valuation allowances are formed.<br />
We cover latent credit risks by means of global valuation<br />
allowances. Past loan losses serve as a yardstick for<br />
the scale on which such valuation allowances have to be<br />
formed.<br />
Insofar as it relates to claims in the balance sheet, the<br />
aggregate amount of provision for possible loan losses is<br />
shown separately from Claims on banks and Claims on<br />
customers. However, provision for risks in off-balancesheet<br />
business – guarantees, endorsement liabilities,<br />
lending commitments – is shown as a provision for lending<br />
risks.<br />
Unrecoverable accounts are written down immediately.<br />
Amounts received on written-down claims appear<br />
in the income statement.<br />
(12) Genuine repurchase agreements and<br />
securities-lending transactions<br />
Repo transactions combine the spot purchase or sale of<br />
securities with their forward sale or repurchase, the counterparty<br />
being identical in either case. The securities sold<br />
under repurchase agreements (spot sale) still appear, and<br />
are measured, in the consolidated balance sheet as part<br />
of the securities portfolio. According to counterparty, the<br />
inflow of liquidity from the repo transaction is shown in<br />
the balance sheet as a liability to either banks or customers.<br />
The agreed interest payments are booked as<br />
interest paid, reflecting the various maturities.<br />
The outflows of liquidity caused by reverse repos<br />
appear as claims on banks or customers and are measured<br />
accordingly. The securities bought under repurchase<br />
agreements and on which the financial transaction<br />
is based (spot purchase) are not carried in the balance<br />
sheet, nor are they measured. The agreed interest from<br />
reverse repos is counted as interest income, reflecting the<br />
various maturities. Claims arising from reverse repos are<br />
not netted against liabilities from repos involving the<br />
same counterparty.<br />
We show securities-lending transactions in a similar<br />
manner to securities in genuine repurchase agreements.<br />
Lent securities remain in our securities portfolio and are<br />
measured according to the rules of IAS 39. Borrowed<br />
securities – insofar as they remain in our portfolio – do not<br />
appear in our balance sheet, nor are they measured. We<br />
show cash security furnished by us for securities-lending<br />
transactions as a claim and received security as a liability.<br />
(13) Positive fair values from derivative hedging<br />
instruments<br />
Derivative financial instruments used for hedging which<br />
qualify for hedge accounting and have a positive value<br />
appear under this item. The instruments are measured at<br />
fair value.<br />
Listed instruments are measured at market prices; for<br />
non-listed products, internal price models (net presentvalue<br />
or option-price models) are used. The hedge<br />
accounting results for fair value hedges appear in the<br />
income statement under Net result on hedge accounting.<br />
By contrast, effective portions of the gains and losses on<br />
cash flow hedges are recognized under Measurement of<br />
cash flow hedges in Equity.
(14) Assets held for dealing purposes<br />
Securities held for dealing purposes, promissory notes<br />
and precious metals appear in the balance sheet at their<br />
fair value on the balance-sheet date. Also shown at fair<br />
value are all derivative financial instruments which are<br />
not used as hedging instruments in hedge accounting and<br />
have a positive fair value. For listed products, market<br />
prices are used; non-listed products are measured on the<br />
basis of the net present-value method or other suitable<br />
measurement models (e.g. option-price models). All the<br />
realized gains and losses and also the non-realized<br />
changes appear as part of the Trading profit in the income<br />
statement. Under this item, interest and dividend income<br />
from trading portfolios are also shown, less the expenses<br />
required to finance them.<br />
Spot transactions are recognized immediately they<br />
are concluded; they appear in the balance sheet at the<br />
time of performance.<br />
(15) Investments and securities portfolio<br />
Our investments and securities portfolio comprises all the<br />
bonds, notes and other fixed-income securities, shares<br />
and other variable-yield securities and all the investments<br />
and investments in associated companies, as well as holdings<br />
in non-consolidated subsidiaries which are not held<br />
for dealing purposes. In addition, in accordance with IAS<br />
39, we include here all the claims on banks and customers<br />
not originated by the Bank, in particular promissory notes.<br />
These portfolios are accounted for and measured at<br />
fair value, or according to the equity method in the case of<br />
investments in associated companies. If the fair value cannot<br />
be reliably calculated, the item is shown at cost; this<br />
primarily holds true for non-listed assets. Net changes are<br />
shown – after deferred taxes have been taken into consideration<br />
– under the Revaluation reserve in Equity. Realized<br />
gains and losses only affect the income statement when<br />
the holdings are sold. Premiums and discounts are recognized<br />
in interest income over the lifetime of the investment<br />
or security. If, however, an effective hedge with a<br />
derivative financial instrument exists for investments,<br />
securities or claims not originated by the Bank, that part of<br />
the change in fair value attributable to the hedged risk<br />
is shown under the Net result on hedge accounting in the<br />
income statement. In the case of permanent impairment,<br />
the recoverable amount is shown; the required writedown<br />
is charged to the income statement.<br />
NOTES 99<br />
(16) Intangible assets<br />
Apart from special software produced in-house and stockexchange<br />
seats acquired by the Bank, we include above<br />
all acquired goodwill under Intangible assets. On each<br />
balance-sheet date, all goodwill is examined with a view<br />
to its future economic utility. If it appears that the<br />
expected utility will not materialize, an extraordinary<br />
depreciation is made. Otherwise, goodwill is amortized<br />
over the assumed useful economic life of 15 years, using<br />
the straight-line method. We depreciate software over a<br />
period of two to five years.<br />
Probable useful life<br />
in years<br />
Goodwill 15<br />
Software 2 – 5<br />
Other 2 – 10<br />
(17) Fixed assets<br />
The land and buildings, and also office furniture and equipment,<br />
shown under this item are capitalized at cost, less<br />
regular depreciation. Extraordinary depreciation and writeoffs<br />
are made in the case of permanently impaired value.<br />
In determining the useful life, the likely physical wear<br />
and tear, technical obsolescence and also legal and contractual<br />
restrictions are taken into consideration. All fixed<br />
assets are depreciated or written off over the following<br />
periods, using the straight-line method:<br />
Buildings<br />
Probable useful life<br />
in years<br />
30 – 50<br />
Office furniture and equipment 2 – 10<br />
Purchased IT equipment 2 – 8<br />
In line with the materiality principle, purchases of<br />
low-value fixed assets in the past financial year are recognized<br />
immediately as operating expenses. Profits realized<br />
on the disposal of fixed assets appear under Other operating<br />
income, losses are shown under Other operating<br />
expenses.<br />
(18) Leasing<br />
In accordance with IAS 17, a lease is classified as an operating<br />
lease if it does not substantially transfer to the<br />
lessee all the risks and rewards that are incident to ownership.<br />
By contrast, finance leases are considered to be<br />
those agreements which substantially transfer all the risks<br />
and rewards to the lessee.
100 NOTES<br />
– The Group as lessor –<br />
Insofar as the leasing companies within the <strong>Commerzbank</strong><br />
Group are involved in operating lease business, economic<br />
ownership of the object of the agreement remains<br />
with the Group company. Leased objects appear in the<br />
consolidated balance sheet under Fixed assets. Leased<br />
objects are shown at cost or production cost, less regular<br />
depreciation over their useful economic lives or extraordinary<br />
depreciation necessary on account of permanent<br />
impairment of value. Unless a different distribution suggests<br />
itself in individual cases, the proceeds from leasing<br />
transactions are recognized on a straight-line basis over<br />
the lifetime of the agreement and are shown under Net<br />
interest income.<br />
If virtually all the risks and rewards relating to the<br />
leased property are transferred to the lessee (finance<br />
leases), the <strong>Commerzbank</strong> Group recognizes a claim on<br />
the lessee. The claim is shown at its net investment value<br />
at the inception of the agreement. Leasing payments<br />
received are divided into an interest portion which<br />
appears as interest income and a repayment portion. The<br />
income is recognized as interest income for the respective<br />
period.<br />
– The Group as lessee –<br />
The payments made under operating lease agreements<br />
are included under Operating expenses. The costs are<br />
computed like a rental payment on a regular basis corresponding<br />
to the useful life of the leased object. No contractual<br />
obligations existed in the 2003 financial year<br />
which require classification as finance leases.<br />
(19) Liabilities to banks and customers and<br />
also Securitized liabilities<br />
Financial liabilities are accounted for at amortized cost.<br />
The derivatives embedded in liabilities (embedded derivatives)<br />
have been separated from their host debt instrument,<br />
measured at fair value and shown under either<br />
Assets held for dealing purposes or Liabilities from dealing<br />
activities. As part of hedge accounting, hedged liabilities<br />
were adjusted for the book gain or loss attributable to<br />
the hedged risk.<br />
(20) Negative fair values from derivative hedging<br />
instruments<br />
Under this item, we show derivative hedging instruments<br />
with a negative fair value which do not serve dealing<br />
purposes. The financial instruments are measured at fair<br />
value, with market prices used as a basis for measuring<br />
listed instruments; internal price models (net presentvalue<br />
or option-price models) are applied in the case of<br />
non-listed products. The net results from hedge accounting<br />
for instruments classified as fair value hedges appear<br />
in the income statement. We show the effective portions<br />
of the gains or losses on cash flow hedges under Measurement<br />
of cash flow hedges in Equity.<br />
(21) Liabilities from dealing activities<br />
Derivative financial instruments which have a negative<br />
fair value, and delivery obligations from short sales of<br />
securities, are shown as Liabilities from dealing activities.<br />
Such liabilities are measured at their fair value.<br />
(22) Provisions for pensions and similar commitments<br />
Virtually all employees at the Parent Bank as well as staff<br />
at some subsidiaries in Germany are covered by at least<br />
two forms of company provision for old age.<br />
In the first case, employees are given an indirect – contribution-based<br />
– commitment (defined-contribution plan),<br />
for which the Group, with employees also involved, pays<br />
a fixed amount for old-age provision to external providers,<br />
including Versicherungsverein des Bankgewerbes<br />
a.G. (BVV), Berlin, and to Versorgungskasse des Bankgewerbes<br />
e.V., Berlin.<br />
The size of future pension benefits is determined here<br />
by the amounts paid in and – for the non-guaranteed portion<br />
of the benefits – by the accrued income on the assets.<br />
The classification of this provision as an indirect commitment<br />
means that the contributions to BVV and Versorgungskasse<br />
are recognized as current expenses, eliminating<br />
the need to form provisions.<br />
In the second case, employees are given a direct commitment,<br />
under which the promised benefit is defined and<br />
depends upon such factors as age, salary and length of<br />
service (defined-benefit plan).<br />
In order to meet promised pension benefits, we accumulate<br />
the assets required to meet the pension commitment<br />
for the most part internally and show the corresponding<br />
provision under Liabilities. A small part of these<br />
assets is invested in a trust to provide additional protection<br />
against insolvency. The trustee of these assets held in<br />
trust is <strong>Commerzbank</strong> Pension-Trust e.V. Allocation was<br />
made to this trust in November 2003.<br />
The pension expenses for direct commitments, which<br />
have to appear in the income statement, consist of several<br />
components. First and foremost, the service cost has to be<br />
considered. In addition, there is the interest cost on the<br />
cash value of the commitment, as the time at which the
commitment must be met has moved one period closer.<br />
The net earnings achieved on the separated plan assets<br />
(assets held in trust) are deducted from expenses. If amortization<br />
amounts arise for actuarial gains and losses due<br />
to the 10% fluctuation-band rule, the expenses for the<br />
period rise or fall accordingly.<br />
The size of the provisions formed is initially determined<br />
by the cash value of the commitment to be met. The<br />
part which is covered by the separate assets held in trust<br />
has to be netted with the commitment. On account of the<br />
fluctuation-band rule, the amount of provision to be<br />
formed each year is as follows:<br />
Cash value of commitment for direct commitments<br />
less separate pension assets<br />
less/plus not recognized actuarial gains or losses<br />
= size of provision for pensions<br />
The pension commitment is calculated annually by<br />
an independent actuary, using the projected-unit-credit<br />
method. This calculation is based not only on biometric<br />
assumptions but above all on a current market interest<br />
rate for prime-quality long-dated bonds as well as the<br />
rates of increase for salaries and pensions to be expected<br />
in the future. We only recognize higher or lower commitments<br />
as a result of actuarial calculations if they lie outside<br />
a 10% fluctuation band of the actuarially estimated<br />
value. The assumptions on which the actuarial calculations<br />
have been based are:<br />
31.12.2003 31.12.2002<br />
Calculatory interest rate 5.50% 5.75%<br />
Change in salaries 2.50% 2.75%<br />
Adjustment to pensions 1.25% 1.50%<br />
The second pillar of the pension commitments has<br />
been terminated as of December 31, 2004. All the pension<br />
expectancies existing up to this date will be preserved.<br />
According to the report of our actuary, the termination<br />
had no impact on the evaluation of pension commitments<br />
as of December 31, 2003.<br />
The commitments similar to those for pensions<br />
include commitments under early-retirement schemes<br />
and under part-time work schemes for older staff, which<br />
have been computed with the aid of actuarial rules.<br />
NOTES 101<br />
(23) Other provisions<br />
We form Other provisions on the scale deemed necessary<br />
for liabilities of uncertain amount towards third parties<br />
and for anticipated losses related to immatured contracts.<br />
We are not permitted by IAS rules to form provisions for<br />
expenses not related to an external commitment. In the<br />
2003 financial year, we formed provisions of 7209m for<br />
restructuring measures. The basis for the formation of<br />
this provision was a detailed overall plan, coordinated<br />
with the boards and bodies of the companies affected,<br />
providing information on concrete individual measures –<br />
above all, staff reductions.<br />
(24) Taxes on income<br />
Current tax assets and liabilities were calculated by applying<br />
the valid tax rates at which a refund from, or a payment<br />
to, the relevant fiscal authorities is expected.<br />
Deferred tax assets and liabilities derive from differences<br />
between the value of an asset or liability as shown<br />
in the balance sheet and its assigned value in tax terms. In<br />
the future, these will probably either increase or reduce<br />
taxes on income (temporary differences). They were<br />
measured at the specific income-tax rates which apply in<br />
the country where the company in question has its seat<br />
and which can be expected to apply for the period in<br />
which they are realized. Deferred taxes on as yet unused<br />
losses carried forward are shown in the balance sheet<br />
if taxable profits are likely to occur at the same unit. Tax<br />
assets and liabilities are not netted against one another;<br />
no discounting is practised. Deferred tax assets and liabilities<br />
are formed and carried such that – depending on the<br />
treatment of the underlying item – they are recognized<br />
either under Taxes on income in the income statement or<br />
they are set off against the relevant equity items with no<br />
effect on the income statement.<br />
Income-tax expenses or income which are attributable<br />
to the Profit from ordinary activities after restructuring expenses<br />
and to Expenses arising from special factors are<br />
shown under Taxes on income in the consolidated income<br />
statement and divided in the notes into current and<br />
deferred taxes in the financial year. Other taxes which are<br />
independent of income are subsumed under Other operating<br />
result. Current and deferred tax assets and tax liabilities<br />
appear as separate asset or liability items in the<br />
balance sheet. No taxes on income arose in the past financial<br />
year in connection with extraordinary business developments.
102 NOTES<br />
(25) Subordinated capital<br />
Under Subordinated capital, we carry issues of profitsharing<br />
certificates as well as securitized and non-securitized<br />
subordinated liabilities. After their initial recognition<br />
at cost, they are shown at amortized cost. Premiums and<br />
discounts are recognized under Net interest income over<br />
the entire lifetime.<br />
(26) Trust business<br />
Trust business involving the management or placing of<br />
assets for the account of others is not shown in the balance<br />
sheet. Commissions received from such business<br />
are included under Net commission income in the income<br />
statement.<br />
(27) Treasury shares<br />
Treasury shares held by the Parent Bank in its portfolio on<br />
the balance-sheet date are deducted directly from Equity.<br />
Gains and losses resulting from the Bank’s own shares are<br />
set off against one another, with no effect on net profit.<br />
(28) Staff remuneration plans<br />
For its executives and selected other members of staff, the<br />
Group has approved five ”long-term performance plans”<br />
(LTP). These plans permit a remuneration in cash geared<br />
to the performance of the share price or a stock index;<br />
under the currently valid classification, they are considered<br />
to be ”virtual” stock option plans. The programmes<br />
entail a payment commitment if the <strong>Commerzbank</strong> share<br />
outperforms the Dow Jones Euro Stoxx ® Bank index (LTP<br />
1999, 2000, 2001, 2002 and 2003) and/or the absolute performance<br />
of the <strong>Commerzbank</strong> share is at least 25% (LTP<br />
2000, 2001, 2002 and 2003).<br />
LTP 1999 will run for three years, which, depending<br />
on the target being attained (outperformance), may be<br />
extended to a maximum of five years. Payment will be<br />
linked to a rise in the performance of the <strong>Commerzbank</strong><br />
share against the Dow Jones Euro Stoxx ® Bank index<br />
within a range of 1 to 10 percentage points. Depending on<br />
the employee’s function group and assessed performance<br />
at the time when the plan was introduced and also on the<br />
percentage of outperformance, the employee can receive<br />
between 710,000 and 7150,000. Should the target not be<br />
attained after three or four years, which was the case at<br />
the end of the first quarter of both 2002 and 2003, a fresh<br />
and final evaluation will be made after five years in 2004.<br />
If no minimal level of outperformance has been attained<br />
by that time, the claim to payment under LTP 1999 will<br />
expire.<br />
LTP 2000, 2001, 2002 and 2003 require eligible participants<br />
in the plan to purchase <strong>Commerzbank</strong> shares. The<br />
scale of such participation for staff who are not members<br />
of the Board of Managing Directors depends on their function<br />
group (possible participation: between 100 and 1,200<br />
shares). Payments under these plans will be determined<br />
by two criteria:<br />
For 50% of the shares:<br />
● the <strong>Commerzbank</strong> share outperforms the Dow Jones<br />
Euro Stoxx ® Bank index (payment guaranteed by outperformance<br />
of at least 1 percentage point to a maximum<br />
of 10 percentage points).<br />
For 50% of the shares:<br />
● an absolute rise in the price of the <strong>Commerzbank</strong><br />
share (payment guaranteed by a rise of at least 25 percentage<br />
points to a maximum of 52 percentage<br />
points).<br />
Given maximal achievement of the two criteria, eligible<br />
participants will receive 7100 per share of their own<br />
participation, whereby <strong>Commerzbank</strong> shares will be delivered<br />
to the participant’s custody account for 50% of this<br />
gross amount.<br />
Payment and the delivery of shares is dependent upon<br />
the Parent Bank paying a dividend for the financial year.<br />
The first comparison of the base prices of the first<br />
quarter of 2000 (LTP 2000), the first quarter of 2001 (LTP<br />
2001), the first quarter of 2002 (LTP 2002) or the first quarter<br />
of 2003 (LTP 2003) with the data for the comparable<br />
period will be made after three years in either case.<br />
Should none of the exercising criteria have been met after<br />
this time has elapsed, comparison will be made with the<br />
base data at annual intervals. The first comparison for LTP<br />
2000 with the prices for the first quarter of 2003 revealed<br />
that the exercise criteria had not been fulfilled. If none of<br />
the performance targets have been achieved after five<br />
years, the plan will be terminated.<br />
For the commitments arising from the LTPs described,<br />
we calculate annually, in accordance with the relevant<br />
GASB standard model, the pro-rata overall value of the<br />
LTP; wherever necessary, we form a provision and charge<br />
it to Operating expenses. Given the high base prices for<br />
LTPs 1999 to 2002, there was no need to form a provision<br />
for the 2003 financial year. For LTP 2003, where utilization<br />
on the basis of the share price level on 31.12.2003 seems<br />
likely, the necessary provisions of 76.3m have been<br />
formed.
Within the Jupiter International Group plc (JIG), three<br />
staff remuneration/stock-option plans existed as of<br />
December 31, 2003. Under the terms of the so-called B<br />
shares or Profit Shares Plan, eligible members of staff<br />
receive a contractually assured payment, linked to possession<br />
of virtual shares and to the Jupiter Group’s<br />
respective net profit at the end of the years 2002 to 2004.<br />
Each payment will be made in three annual instalments,<br />
the size of the payment being geared to the 2000 profit.<br />
Insofar as the net profit in subsequent years falls below<br />
this base value, payments will also be reduced. In 2003, no<br />
new B shares were issued, as this plan is being terminated.<br />
The necessary allocations to provisions have been<br />
made to the required extent and charged to operating<br />
expenses.<br />
The so-called C shares or Growth Shares Plan gives<br />
those eligible – a group of senior staff – the right to subscribe<br />
to shares of Commerz Asset Management (UK) plc,<br />
which are also subject to an obligation to purchase on the<br />
part of the Parent Bank. The value of these shares is oriented<br />
to the typified change in value of the JIG Group.<br />
Those eligible do not receive a guaranteed payment, as<br />
the reference figure may alter either positively or negatively.<br />
Employees have the right to tender delivery of<br />
shares annually, within certain limits, but they also have<br />
the possibility of disposing of their entire portfolio after<br />
four years. In addition, certain rights exist in connection<br />
with a change-of-control clause. The reference base for<br />
this plan was adjusted in 2003, with the adjusted profit for<br />
2000 being replaced by that for 2002. As of December 31,<br />
2003, no provision was required on account of the development<br />
of Jupiter International Group’s value.<br />
NOTES 103<br />
At the same time, an ongoing “options programme”<br />
was launched in 2003 in favour of the employees of JIG,<br />
which entails a cash compensation based on the performance<br />
of JIG and can be considered to be a virtual<br />
stock option plan. Internally, this plan is known as the<br />
“D options plan” and entitles all those to participate who<br />
had joined Jupiter by December 31, 2003, and were<br />
already entitled under the C Shares Plan. Under this plan,<br />
a payment falls due if the adjusted profit in the year prior<br />
to the exercising of the option is higher than the level of<br />
the basis year. For the options granted in 2003, the 2003<br />
adjusted profit was established as the reference figure. A<br />
third of the options may be exercised three years after<br />
they are granted and a further third after four years, while<br />
all options must be exercised five years after they are<br />
granted, otherwise they expire. As of December 31, 2003,<br />
no payments seemed likely under this plan. As a result, no<br />
provisions have to be formed.<br />
In addition, it is possible at other subsidiaries, including<br />
in Asset Management, for selected employees to participate<br />
through private equity models in the performance<br />
of the respective company. Payment in such cases<br />
depends on the extent to which fixed performance targets<br />
are attained. These models include direct investment in<br />
shares of the respective company. Frequently, these are<br />
offered at reduced prices and in combination with call or<br />
put options. In addition, warrants and share subscription<br />
rights are issued. Premiums are also granted which may<br />
similarly be used to subscribe to shares. The observance<br />
of blocking periods and agreements for later repurchase<br />
determine whether additional income is received. For<br />
such models, we calculate the need for provisions annually,<br />
using suitable methods, and show this under Operating<br />
expenses.
104 NOTES<br />
Expenses arising from special factors<br />
In connection with an impairment test, we subjected our<br />
equity investments portfolio to a revaluation. This impairment<br />
test yielded an amount of 72,325m to be written<br />
down. For the impairment test, we drew upon all the available<br />
information (market prices, annual or interim financial<br />
accounts, ratings, analysts’ opinions). Even though in<br />
accordance with the principles which we apply, a – possibly<br />
– protracted weak market price does not necessarily<br />
lead to an impairment, we decided to take this step<br />
because our expectations as regards a recovery in value<br />
had not been realized. The valuations were reduced in<br />
accordance with the <strong>Commerzbank</strong> Group’s applied<br />
measurement principles to the value that could be realized<br />
in the market at that point in time and were taken<br />
through the income statement.<br />
We have written down listed available-for-sale investments,<br />
investments in associated companies and also<br />
goodwill. In addition, the expenses for cancelling the<br />
related funding of the written-down financial investments<br />
and industrial participations were assigned to Expenses<br />
arising from special factors.<br />
The increase in value of the relevant listed investments<br />
between the write-down date and December 31<br />
2003, appears under the asset item Investments and securities<br />
portfolio. By contrast, these increases in equity were<br />
shown under the Revaluation reserve.
Major differences in accounting,<br />
measurement and consolidation methods:<br />
IAS/IFRS compared with HGB<br />
The objective of financial statements based on IAS/IFRS is<br />
to provide information on the group’s asset and financial<br />
position and its earnings performance and also changes<br />
in these over time. By contrast, financial statements based<br />
on HGB are primarily geared to investor protection and<br />
are also influenced by tax-law provisions due to their<br />
authoritative character for the balance sheet prepared for<br />
tax purposes. Given these different objectives, the following<br />
major differences in accounting and measurement<br />
methods arise between IAS/IFRS and HGB:<br />
Provision for possible loan losses<br />
Provision for possible loan losses is shown as a charge on<br />
the assets side. Hidden reserves pursuant to Art. 340f,<br />
HGB may not be formed in IAS/IFRS financial statements.<br />
Trading portfolios and derivative financial instruments<br />
In accordance with IAS 39, financial assets held for dealing<br />
purposes (Assets held for dealing purposes) and certain<br />
financial liabilities (Liabilities from dealing activities)<br />
as well as derivative financial instruments not held for<br />
trading purposes (hedging derivatives) always have to be<br />
measured at fair value. Depending on how these financial<br />
instruments are classified, all gains and losses are either<br />
shown in the income statement or under Equity with no<br />
effect on net profit, regardless of whether they are realized<br />
or not. Under HGB rules, however, unrealized gains<br />
may not be recognized.<br />
Investments and securities portfolio<br />
Investments and securities as well as available-for-sale<br />
claims not originated by the Bank are measured at fair<br />
value in accordance with IAS 39 or, insofar as this cannot<br />
be reliably ascertained, they are shown at cost. The result<br />
of measurement has no effect on income and is shown in<br />
the Revaluation reserve. Under German accounting principles,<br />
investments are part of fixed assets and have to be<br />
shown at cost. If their value is likely to be permanently<br />
impaired, they have to be written down at their lower<br />
value.<br />
NOTES 105<br />
In terms of their character, securities in the availablefor-sale<br />
portfolio are held as part of the liquidity reserve<br />
according to HGB and have thus to be classified as current<br />
assets. Under HGB rules, the strict lower-of-cost-or-market<br />
principle applies in the measurement of such securities<br />
portfolios. In accordance with German accounting<br />
rules, claims not originated by the Bank have to be recognized<br />
at amortized cost, less write-downs.<br />
Hedge accounting<br />
Pursuant to IAS 39, hedges may be created between a<br />
hedged item and a derivative financial instrument for<br />
hedge accounting purposes. Hedged items may be financial<br />
assets (e.g. claims or securities) and financial commitments<br />
(e.g. liabilities or bonds issued). Both for fair value<br />
hedges and for cash flow hedges, detailed rules exist<br />
which call for the fair value of a derivative hedging instrument<br />
to be shown in gross form. Under German accounting<br />
principles, however, hedging transactions are taken<br />
account of by means of the lower-of-cost-or-market principle,<br />
applied in measuring the hedged items.<br />
Intangible assets developed in-house and goodwill<br />
Whereas intangible assets developed in-house may not<br />
be recognized under HGB rules, IAS/IFRS requires this, if<br />
certain conditions are fulfilled. Goodwill, resulting from<br />
full consolidation, which in accordance with HGB provisions<br />
may be set off directly against retained earnings in<br />
the consolidated financial statements, has to be recognized<br />
as an asset and amortized under IAS rules.<br />
Pension commitments<br />
In accordance with IAS, pension commitments are calculated<br />
using the projected-unit-credit method. The calculation<br />
takes account of future commitments, reflecting<br />
future increases in pay and pensions and also inflation.<br />
The discount factor under IAS/IFRS rules is related to the<br />
long-term interest rate. By contrast, HGB accounting is<br />
regularly geared to the respective valid income-tax regulations,<br />
in particular the normal entry-age method.
106 NOTES<br />
Other provisions<br />
In accordance with IAS/IFRS, provisions may only be<br />
formed if they relate to an external commitment. Provisions<br />
for expenses, possible under HGB, for the purpose<br />
of recognizing future outlays as expenses in the past<br />
financial year are not permitted. IAS/IFRS rules require<br />
more concrete details than HGB as regards the formation<br />
of provisions for restructuring, covering among other<br />
things the development, adoption and announcement of a<br />
detailed plan.<br />
Deferred tax assets and liabilities<br />
Under IAS/IFRS rules, deferred tax assets and liabilities<br />
are calculated with reference to the balance sheet. Advantages<br />
deriving from tax loss carry-forwards have to be<br />
capitalized if it can be assumed that they will be used at a<br />
later date. The income-tax rates employed to measure the<br />
differences between the values assigned in the balance<br />
sheet and those for tax purposes are future-oriented. No<br />
netting occurs. By contrast, the HGB approach to recognizing<br />
deferred tax assets and liabilities is geared to the<br />
income statement and currently valid income-tax rates<br />
are applied. The differences in approach tend to make<br />
deferred taxes more significant under IAS/IFRS rules.<br />
Equity<br />
In IAS financial statements, minority interests appear as a<br />
separate balance-sheet item. In accordance with Art. 307,<br />
HGB, interests held by other shareholders have to be<br />
shown separately within equity. With the rules of IAS 39<br />
applied, changes attributable to the investments and<br />
securities portfolio and also effective portions of the gains<br />
and losses on cash flow hedges have to be shown in<br />
equity with no effect on net income. This type of incomeneutral<br />
accounting is not found in German accounting<br />
rules. Under IAS/IFRS rules, treasury shares held on the<br />
balance-sheet date are deducted from equity; the gains<br />
and losses attributable to treasury shares are set off<br />
against reserves with no effect on income. Pursuant to<br />
HGB rules, a reserve for treasury shares has to be formed<br />
equivalent in amount to the treasury shares shown on the<br />
assets side of the balance sheet, while measurement and<br />
trading results are reflected in the income statement.<br />
Trust business<br />
Trust business, which appears in the balance sheet in HGB<br />
accounting, does not appear there under IAS/IFRS rules.<br />
Tax valuation<br />
In line with the so-called reverse authority principle, valuation<br />
principles are applied under HGB rules that comply<br />
with tax-law provisions. Financial statements prepared<br />
under IAS/IFRS rules may not contain special depreciation<br />
and valuation principles that are permissible under tax<br />
regulations insofar as they deviate from valuations<br />
required by IAS/IFRS rules. As from the 2003 financial<br />
year, this ban also applies to consolidated financial statements<br />
prepared pursuant to HGB, due to the legal<br />
changes produced by the German legislation on transparency<br />
and publications.
Notes to the income statement<br />
(29) Net interest income<br />
NOTES 107<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Interest income from lending and money-market transactions<br />
and also from available-for-sale securities portfolio 11,396 17,681 –35.5<br />
Dividends from securities 104 84 23.8<br />
Current result from investments and subsidiaries 91 120 –24.2<br />
Current result from investments in associated companies 85 58 46.6<br />
Current income from leasing 91 89 2.2<br />
Interest income 11,767 18,032 –34.7<br />
Interest paid on subordinated capital 550 623 –11.7<br />
Interest paid on securitized liabilities 3,262 5,318 –38.7<br />
Interest paid on other liabilities 5,117 8,934 –42.7<br />
Current expenses from leasing 62 24 •<br />
Interest expenses 8,991 14,899 –39.7<br />
Total 2,776 3,133 –11.4<br />
Interest margins:<br />
The average interest margin, based on the average risk-weighted assets in balance-sheet business according to BIS,<br />
was 2.39% (previous year: 2.16%).<br />
(30) Provision for possible loan losses<br />
Provision for possible loan losses appears as follows in the consolidated income statement:<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Allocation to provisions –1,562 –1,974 –20.9<br />
Reversals of provisions 597 690 –13.5<br />
Direct write-downs –145 –99 46.5<br />
Income received on written-down claims 26 62 –58.1<br />
Total –1,084 –1,321 –17.9
108 NOTES<br />
(31) Net commission income<br />
(32) Net result on hedge accounting<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Net result on derivatives used as hedging instruments –358 –281 27.4<br />
Net result on hedged items 398 225 76.9<br />
Total 40 –56 •<br />
This item reflects the gains and losses attributable to effective hedges in connection with hedge accounting. The result<br />
deriving from hedging instruments and the related hedged items represents only the effects on measurement arising<br />
from fair value hedges.<br />
(33) Trading profit<br />
Trading profit has been split into two components:<br />
● Net result on proprietary trading in securities, promissory<br />
notes, precious metals and derivative instruments.<br />
● Net result on the measurement of derivative financial<br />
instruments which do not form part of the trading<br />
book and do not qualify for hedge accounting.<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Securities transactions 802 823 –2.6<br />
Asset management 509 511 –0.4<br />
Payment transactions and foreign commercial business 388 346 12.1<br />
Guarantees 134 140 –4.3<br />
Income from syndicated business 94 80 17.5<br />
Other net commission income 209 220 –5.0<br />
Total 2,136 2,120 0.8<br />
All the financial instruments held for dealing purposes<br />
are measured at their fair value. We use market prices to<br />
measure listed products, while internal price models<br />
(above all, net present-value and option-price models) are<br />
used in determining the current value of non-listed trading<br />
transactions. Apart from the realized and unrealized<br />
gains and losses attributable to trading activities, the<br />
Trading profit also includes the interest and dividend<br />
income related to such transactions and also their funding<br />
costs.<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Net result on proprietary trading 841 565 48.8<br />
Net result on the measurement of derivative financial instruments –104 –21 •<br />
Total 737 544 35.5
(34) Net result on investments and securities portfolio (available for sale)<br />
NOTES 109<br />
Under the Net result on investments and securities portfolio, we show the disposal proceeds and the gains and losses<br />
on available-for-sale securities, claims not originated by the Bank, investments, investments in associated companies<br />
and holdings in subsidiaries which have not been consolidated.<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Result on available-for-sale securities and<br />
claims not originated by the Bank 174 –127 •<br />
Result on disposals and measurement of investments,<br />
investments in associated companies and<br />
holdings in subsidiaries 117 116 0.9<br />
Total 291 –11 •<br />
From the year-earlier Result on disposals and measurement of investments in associated companies, an amount of<br />
777m was transferred to Expenses arising from special factors.<br />
(35) Operating expenses<br />
The Group’s Operating expenses consist of personnel and<br />
other expenses, and depreciation on office furniture and<br />
equipment, real property, and also on other intangible<br />
assets. In a year-on-year comparison, we achieved a<br />
Personnel expenses:<br />
reduction of 12.5% from 75,155m to 74,511m, which is<br />
due above all to the measures adopted under the second<br />
cost-cutting offensive project. The expenses break down<br />
as follows:<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Wages and salaries 1,925 2,113 –8.9<br />
Compulsory social-security contributions 294 307 –4.2<br />
Expenses for pensions and other employee benefits<br />
of which:<br />
223 259 –13.9<br />
contributions to BVV and Versorgungskasse des Bankgewerbes 53 53 0.0<br />
company pension scheme 170 206 –17.5<br />
Total 2,442 2,679 –8.8
110 NOTES<br />
Other expenses:<br />
(36) Other operating result<br />
The Other operating result primarily comprises allocations<br />
to and reversals of provisions, as well as interim<br />
expenses and income attributable to hire-purchase agreements.<br />
Expenses and income arising from building and<br />
architects’ fees occur in connection with the construction<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Expenses for office space 482 604 –20.2<br />
IT costs<br />
Compulsory contributions, other administrative and<br />
467 527 –11.4<br />
company-law expenses 229 277 –17.3<br />
Advertising, PR and promotional costs, consulting 91 111 –18.0<br />
Workplace costs 185 247 –25.1<br />
Sundry expenses 140 143 –2.1<br />
Total 1,594 1,909 –16.5<br />
Depreciation of office furniture and equipment, real property and other intangible assets:<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Office furniture and equipment 426 511 –16.6<br />
Real property 19 27 –29.6<br />
Other intangible assets 30 29 3.4<br />
Total 475 567 –16.2<br />
management of our sub-group CommerzLeasing und<br />
Immobilien AG. Other taxes are also included in this item.<br />
Last year, we also showed the proceeds from the disposal<br />
of the RHEINHYP Group under this item.<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Major Other operating expenses 224 188 19.1<br />
Expenses arising from building and architects’ services 45 63 –28.6<br />
Allocations to provisions 111 63 76.2<br />
Hire-purchase expenses and interim costs 68 62 9.7<br />
Major Other operating income 214 985 –78.3<br />
Income from the disposal of RHEINHYP Group – 721 •<br />
Reversals of provisions 73 78 –6.4<br />
Hire-purchase proceeds and interim income 70 70 0.0<br />
Income from building and architects’ services 53 69 –23.2<br />
Income from disposal of fixed assets 18 47 –61.7<br />
Balance of sundry Other operating expenses/income 184 141 30.5<br />
Other operating result 174 938 –81.4<br />
From the year-earlier figure for major Other operating expenses, an amount of 7170m was transferred to Expenses<br />
arising from special factors.
(37) Regular amortization of goodwill<br />
(38) Expenses arising from special factors<br />
We made the value adjustments to our portfolio of financial<br />
assets and participations. For the impairment test, we<br />
have drawn upon all the available information (market<br />
prices, annual and interim financial accounts, ratings,<br />
analysts’ opinions, etc.). On principle, a – possibly protracted<br />
– weak market price in itself does not lead to an<br />
impairment in accordance with the principles we apply.<br />
All the same, our expectations as regards a recovery in<br />
NOTES 111<br />
The regular amortization of goodwill amounted to 7110m (previous year: 7108m). This also includes the amortization of<br />
goodwill in companies included at equity.<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Value adjustments to the financial assets and<br />
participations portfolio, including the costs of<br />
cancelling related funding 2,325 247 •<br />
Total 2,325 247 •<br />
(39) Restructuring expenses<br />
In March 2003, we decided to launch the second cost-cutting<br />
offensive. As part of this project, procedures are to be<br />
streamlined and made more efficient by means of a series<br />
of concrete individual measures at both head office and<br />
value have not been realized. We therefore now assume<br />
an impairment of value. Against this background, we saw<br />
ourselves obliged to make valuation adjustments on the<br />
scale of 72.3bn to major parts of our portfolio of financial<br />
assets and industrial shareholdings in 2003.<br />
The year-earlier figure was transferred from the items<br />
Net result on investments and securities portfolio (available-for-sale<br />
portfolio) and Other operating result.<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Expenses for restructuring<br />
measures introduced 104 209 –50.2<br />
Total 104 209 –50.2<br />
various subsidiaries. In addition, it was resolved to discontinue<br />
various uneconomical activities. The expenses<br />
incurred through these measures to reduce personnel and<br />
related other expenses come to 7104m.
112 NOTES<br />
(40) Taxes on income<br />
Income-tax expenses break down as follows:<br />
2003 2002 Change<br />
7 m 7 m in %<br />
Current taxes on income 197 356 –44.7<br />
Deferred taxes 52 –459 •<br />
Total 249 –103 •<br />
Deferred taxes on the assets side include tax expenses of 726m (previous year: 726m) from the writing-back of capitalized<br />
advantages deriving from loss carry-forwards, which were used in the past financial year.<br />
The following transitional presentation shows the connection between the Profit from ordinary activities and Taxes on<br />
income in the past financial year:<br />
2003 2002<br />
7 m 7 m<br />
Net pre-tax profit according to IAS –1,980 –372<br />
Group’s income-tax rate 39.9 39.9<br />
Calculated income-tax paid in financial year<br />
Effects due to differing tax rates affecting income<br />
–790 –148<br />
during periods in question –28 40<br />
Effects of taxes from previous years recognized in past financial year 49 92<br />
Effects of non-deductible operating expenses and tax-exempt income 741 –1,021<br />
Regular amortization of goodwill 43 43<br />
Deferred tax assets not reported 158 821<br />
Other effects 76 70<br />
Taxes on income 249 –103<br />
The Group income-tax rate selected as a basis for the transitional<br />
presentation is made up of the corporate incometax<br />
rate of 25% to be applied in Germany in future, plus the<br />
solidarity surcharge of 5.5%, and an average rate of 18.4%<br />
for trade earnings tax. With the deductibility of trade earnings<br />
tax taken into consideration, the German income-tax<br />
rate is roughly 39.9%.<br />
Income-tax effects reflect discrepancies between<br />
effective tax rates caused by differences between the<br />
German income-tax rate and those of the various countries<br />
where Group companies are based, which as in the<br />
previous year range between 0% and 46%, and are also<br />
due to differences in the municipal factors affecting trade<br />
tax in Germany.
(41) Basic earnings per share<br />
NOTES 113<br />
Loss/profit per share 31.12.2003 31.12.2002 Change<br />
in %<br />
Operating profit ( 7 m) 559 192 •<br />
Net loss (7 m) –2,320 –298 •<br />
Average number of ordinary shares issued (units) 544,202,112 533,637,824 2.0<br />
Operating profit per share (7) 1.03 0.36 •<br />
Loss per share (7) –4.26 –0.56 •<br />
The loss per share, calculated in accordance with IAS 33,<br />
is based on net loss without the loss/profit attributable to<br />
minority interests.<br />
(42) Cost/income ratio<br />
In the past financial year and on December 31, 2003,<br />
no conversion or option rights were outstanding. The<br />
diluted loss per share, therefore, corresponds to the loss<br />
per share.<br />
2003 2002 Change<br />
in %<br />
Cost/income ratio before<br />
regular amortization of goodwill,<br />
expenses arising from special factors<br />
and restructuring expenses 73.3 77.3 –5.2
114 NOTES<br />
(43) Segment reporting<br />
The results of the operative business lines forming the<br />
<strong>Commerzbank</strong> Group are reflected in segment reporting.<br />
The basis is provided by our internal management information<br />
memoranda, which are prepared monthly in line<br />
with IAS rules.<br />
Segmentation into business lines is based on the<br />
Group’s internal organization structure, which since January<br />
1, 2001, has consisted of two divisions: Retail Banking<br />
and Asset Management, on the one hand, and Corporate<br />
and Investment Banking, on the other.<br />
Survey of the structure of the operative divisions valid in the past financial year:<br />
Retail Banking and<br />
Asset Management<br />
division<br />
Corporate and<br />
Investment Banking<br />
division<br />
Mortgage banks<br />
The Retail Banking and Asset Management division is<br />
made up of the Retail Banking, Private Banking and Asset<br />
Management departments.<br />
The Corporate and Investment Banking division comprises<br />
our corporate activities and business involving<br />
institutions, as well as investment-banking operations.<br />
We show the mortgage banks as a separate business<br />
line. We also present Group Treasury separately.<br />
Retail Banking<br />
department<br />
Private Banking<br />
department<br />
Asset Management<br />
department<br />
Corporate Banking<br />
department<br />
Multinational Corporates<br />
department<br />
Financial Institutions<br />
department<br />
Real Estate<br />
department<br />
Securities<br />
department<br />
1) Grouped together in segment reporting<br />
under Corporate customers and<br />
institutions<br />
1)<br />
1)<br />
1)<br />
1)
Our segment reporting breaks down into the following<br />
seven segments:<br />
● Retail banking, which also includes private banking<br />
and direct banking through our subsidiary comdirect<br />
bank <strong>Aktiengesellschaft</strong>.<br />
● Asset management, above all consisting of COMINVEST<br />
Asset Management GmbH, ADIG-Investment Luxemburg<br />
S.A., Jupiter International Group plc and Montgomery<br />
Asset Management, LLC.<br />
● Corporate customers and institutions, with the Corporate<br />
Banking, Multinational Corporates, and Financial<br />
Institutions departments, as well as real-estate business<br />
and the commercial corporate activities of our<br />
domestic and foreign units.<br />
● Securities, with all the equity and bond-trading activities,<br />
trading in derivative instruments, interest-rate<br />
and currency management, and also M&A business.<br />
● Group Treasury, which is responsible for domestic<br />
liquidity management and also for managing the<br />
Bank’s capital structure.<br />
● Mortgage banks, consisting of Eurohypo <strong>Aktiengesellschaft</strong>,<br />
Hypothekenbank in Essen AG and also Erste<br />
Europäische Pfandbrief- und Kommunalkreditbank in<br />
Luxemburg. Eurohypo <strong>Aktiengesellschaft</strong> is consolidated<br />
at equity.<br />
● The ”others and consolidation” segment, where the<br />
profit contributions appear for which the individual<br />
banking departments are not responsible. These also<br />
include those expenses and income items that are<br />
necessary in order to reconcile the control variables of<br />
internal accounting, shown in the segment reporting<br />
of the operative departments, with the corresponding<br />
external accounting data.<br />
The result generated by the segments is measured in<br />
terms of the operating profit and the pre-tax profit, as well<br />
as the figures for the return on equity and the cost/income<br />
ratio. Through the presentation of pre-tax profits, minority<br />
interests are included in both the result and the average<br />
equity tied up. All the income for which a segment is<br />
responsible is thus reflected in the pre-tax profit.<br />
The operative return on equity or the return on equity<br />
of the pre-tax profit, as one of the <strong>Commerzbank</strong> Group’s<br />
control variables, is calculated from the relationship<br />
between the operating profit or the pre-tax profit and the<br />
average amount of equity that is tied up; it shows the<br />
return on the equity that is invested in a given business<br />
line.<br />
NOTES 115<br />
The cost/income ratio is another central control variable,<br />
reflecting the cost efficiency of the various segments.<br />
The cost/income ratio in operating business represents<br />
the quotient formed by operating expenses and<br />
income before provisioning.<br />
Income and expenses are shown such that they reflect<br />
the originating unit and appear at market prices, with the<br />
market interest rate applied in the case of interest-rate<br />
instruments. The net interest income of the respective<br />
segment also includes return on equity and investment<br />
yield as imputed variables. Segments with equity or<br />
which have been endowed with capital are charged interest<br />
on their capital in order to ensure comparability<br />
with units which do not have equity. The investment yield<br />
achieved by the Group on its equity is assigned to various<br />
units such that it reflects the average amount of equity<br />
that is tied up. The interest rate that is applied corresponds<br />
to that of a risk-free investment in the long-term<br />
capital market. Equity is calculated in accordance with<br />
Principle I of German banking supervision on the basis of<br />
the established average amount of risk-weighted assets<br />
and the capital charges for market risk (risk-weighted<br />
asset equivalents).<br />
Direct and indirect expenditure represent the operating<br />
expenses which are shown in the operating profit.<br />
They consist of personnel costs, other expenses and<br />
depreciation of fixed assets and other intangible assets,<br />
excluding goodwill. Regular amortization of goodwill,<br />
expenses arising from special factors and restructuring<br />
expenses appear below the operating profit in the pre-tax<br />
profit. Operating expenses are assigned to the individual<br />
segments on the basis of the causation principle. The indirect<br />
expenses arising in connection with internal services<br />
are charged to the beneficiary or credited to the segment<br />
performing the service.<br />
The balance on expenses arising from special factors<br />
in the Others and consolidation segment relates to<br />
expenses arising from the revaluation of our equity participations.
116 NOTES<br />
Breakdown, by segment<br />
2003 financial year Retail Asset Corporate Securities Group Mortgage Others Total<br />
banking manage- customers Treasury banking and<br />
ment and insti- consoli-<br />
7 m tutions dation<br />
Net interest income<br />
Provision for<br />
1,075 –17 1,596 62 238 273 –451 2,776<br />
possible loan losses<br />
Net interest income<br />
–159 – –885 – – –40 – –1,084<br />
after provisioning 916 –17 711 62 238 233 –451 1,692<br />
Net commission income<br />
Net result on<br />
911 436 726 96 –1 –12 –20 2,136<br />
hedge accounting – 1 – – –1 40 – 40<br />
Trading profit<br />
Net result on investments<br />
4 12 30 783 8 –127 27 737<br />
and securities portfolio 5 12 55 10 32 142 35 291<br />
Other operating result 13 –9 64 –16 – –2 124 174<br />
Income 1,849 435 1,586 935 276 274 –285 5,070<br />
Operating expenses 1,591 345 1,231 932 56 32 324 4,511<br />
Operating profit<br />
Regular amortization<br />
258 90 355 3 220 242 –609 559<br />
of goodwill<br />
Expenses arising<br />
– 77 9 1 – 18 5 110<br />
from special factors<br />
Restructuring<br />
– – – – – – 2,325 2,325<br />
expenses – 8 25 34 – – 37 104<br />
Pre-tax profit 258 5 321 –32 220 224 –2,976 –1,980<br />
Average equity tied up<br />
Operative return<br />
1,804 639 5,154 995 108 888 1,769 11,357<br />
on equity (%)<br />
Cost/income ratio in<br />
14.3 14.1 6.9 0.3 203.7 27.3 • 4.9<br />
operating business (%)<br />
Return on equity of<br />
79.2 79.3 49.8 99.7 20.3 10.2 • 73.3<br />
pre-tax profit (%) 14.3 0.8 6.2 –3.2 203.7 25.2 • –17.4<br />
Staff (average no.) 10,726 1,598 9,335 1,374 42 156 9,667 32,898
Breakdown, by segment<br />
NOTES 117<br />
2002 financial year Retail Asset Corporate Securities Group Mortgage Others Total<br />
banking manage- customers Treasury banking and<br />
ment and insti- consoli-<br />
7 m tutions dation<br />
Net interest income<br />
Provision for<br />
1,156 –19 2,011 95 214 444 –768 3,133<br />
possible loan losses<br />
Net interest income<br />
–150 – –1,068 – – –103 – –1,321<br />
after provisioning 1,006 –19 943 95 214 341 –768 1,812<br />
Net commission income<br />
Net result on<br />
809 508 606 229 – –32 – 2,120<br />
hedge accounting – – –3 – 26 –79 – –56<br />
Trading profit<br />
Net result on investments<br />
– –6 120 500 –25 12 –57 544<br />
and securities portfolio 1 –6 –15 –7 24 128 –136 –11<br />
Other operating result 24 17 93 4 – 22 778 938<br />
Income 1,840 494 1,744 821 239 392 –183 5,347<br />
Operating expenses 1,787 481 1,291 1,117 70 111 298 5,155<br />
Operating profit<br />
Regular amortization<br />
53 13 453 –296 169 281 –481 192<br />
of goodwill<br />
Expenses arising<br />
– 86 5 – – 12 5 108<br />
from special factors<br />
Restructuring<br />
– 247 – – – – – 247<br />
expenses 97 10 8 52 – – 42 209<br />
Pre-tax profit –44 –330 440 –348 169 269 –528 –372<br />
Average equity tied up<br />
Operative return<br />
1,644 799 5,339 1,302 168 1,931 688 11,871<br />
on equity (%)<br />
Cost/income ratio in<br />
3.2 1.6 8.5 –22.7 100.6 14.6 • 1.6<br />
operating business (%)<br />
Return on equity of<br />
89.8 97.4 45.9 136.1 29.3 22.4 • 77.3<br />
pre-tax profit (%) –2.7 –41.3 8.2 –26.7 100.6 13.9 • –3.1<br />
Staff (average no.) 12,159 2,252 9,614 1,510 83 657 10,175 36,450
118 NOTES<br />
Quarterly results, by segment<br />
1 st quarter 2003 Retail Asset Corporate Securities Group Mortgage Others Total<br />
banking manage- customers Treasury banking and<br />
ment and insti- consoli-<br />
7 m tutions dation<br />
Net interest income<br />
Provision for<br />
267 –3 426 17 109 33 –144 705<br />
possible loan losses<br />
Net interest income<br />
–44 – –205 – – –3 – –252<br />
after provisioning 223 –3 221 17 109 30 –144 453<br />
Net commission income<br />
Net result on<br />
240 91 172 36 0 –4 –15 520<br />
hedge accounting – 2 – – 3 5 – 10<br />
Trading profit<br />
Net result on investments<br />
1 3 6 232 –17 7 –1 231<br />
and securities portfolio 1 9 41 1 35 25 –7 105<br />
Other operating result –2 2 29 1 – – 2 32<br />
Income 463 104 469 287 130 63 –165 1,351<br />
Operating expenses 430 89 317 242 13 7 81 1,179<br />
Operating profit<br />
Regular amortization<br />
33 15 152 45 117 56 –246 172<br />
of goodwill<br />
Expenses arising<br />
– 21 2 – – 6 1 30<br />
from special factors<br />
Restructuring<br />
– – – – – – – –<br />
expenses – 8 25 34 – – 37 104<br />
Pre-tax profit 33 –14 125 11 117 50 –284 38
NOTES 119<br />
2 nd quarter 2003 Retail Asset Corporate Securities Group Mortgage Others Total<br />
banking manage- customers Treasury banking and<br />
ment and insti- consoli-<br />
7 m tutions dation<br />
Net interest income<br />
Provision for<br />
265 –2 395 17 61 95 –85 746<br />
possible loan losses<br />
Net interest income<br />
–44 – –256 – – –3 – –303<br />
after provisioning 221 –2 139 17 61 92 –85 443<br />
Net commission income<br />
Net result on<br />
227 93 181 18 – –3 – 516<br />
hedge accounting – –1 1 – –1 16 – 15<br />
Trading profit<br />
Net result on investments<br />
1 4 47 226 –12 -25 37 278<br />
and securities portfolio 2 3 24 – 3 9 13 54<br />
Other operating result 26 3 5 –7 – –1 3 29<br />
Income 477 100 397 254 51 88 –32 1,335<br />
Operating expenses 393 84 288 237 22 8 109 1,141<br />
Operating profit<br />
Regular amortization<br />
84 16 109 17 29 80 –141 194<br />
of goodwill<br />
Expenses arising<br />
– 21 2 – – 5 2 30<br />
from special factors<br />
Restructuring<br />
– – – – – – – –<br />
expenses – – – – – – – –<br />
Pre-tax profit 84 –5 107 17 29 75 –143 164
120 NOTES<br />
3 rd quarter 2003 Retail Asset Corporate Securities Group Mortgage Others Total<br />
banking manage- customers Treasury banking and<br />
ment and insti- consoli-<br />
7 m tutions dation<br />
Net interest income<br />
Provision for<br />
278 –10 386 13 55 67 –127 662<br />
possible loan losses<br />
Net interest income<br />
–44 – –219 – – –10 – –273<br />
after provisioning 234 -10 167 13 55 57 –127 389<br />
Net commission income<br />
Net result on<br />
225 107 167 20 -1 –2 –7 509<br />
hedge accounting – – –1 – –1 14 – 12<br />
Trading profit<br />
Net result on investments<br />
2 3 –20 124 30 –35 3 107<br />
and securities portfolio – 5 –23 4 –2 30 50 64<br />
Other operating result –11 2 18 1 – – 88 98<br />
Income 450 107 308 162 81 64 7 1,179<br />
Operating expenses 379 65 311 218 13 9 83 1,078<br />
Operating profit<br />
Regular amortization<br />
71 42 –3 –56 68 55 –76 101<br />
of goodwill<br />
Expenses arising<br />
– 21 2 – – 5 1 29<br />
from special factors<br />
Restructuring<br />
– – – – – – 2,325 2,325<br />
expenses – – – – – – – –<br />
Pre-tax profit 71 21 –5 –56 68 50 –2,402 –2,253
NOTES 121<br />
4 th quarter 2003 Retail Asset Corporate Securities Group Mortgage Others Total<br />
banking manage- customers Treasury banking and<br />
ment and insti- consoli-<br />
7 m tutions dation<br />
Net interest income<br />
Provision for<br />
265 –2 389 15 13 78 –95 663<br />
possible loan losses<br />
Net interest income<br />
–27 – –205 – – –24 – –256<br />
after provisioning 238 –2 184 15 13 54 –95 407<br />
Net commission income<br />
Net result on<br />
219 145 206 22 – –3 2 591<br />
hedge accounting – – – – -2 5 – 3<br />
Trading profit<br />
Net result on investments<br />
– 2 –3 201 7 –74 –12 121<br />
and securities portfolio 2 –5 13 5 –4 78 –21 68<br />
Other operating result – –16 12 –11 – –1 31 15<br />
Income 459 124 412 232 14 59 –95 1,205<br />
Operating expenses 389 107 315 235 8 8 51 1,113<br />
Operating profit<br />
Regular amortization<br />
70 17 97 –3 6 51 –146 92<br />
of goodwill<br />
Expenses arising<br />
– 14 3 1 – 2 1 21<br />
from special factors<br />
Restructuring<br />
– – – – – – – –<br />
expenses – – – – – – – –<br />
Pre-tax profit 70 3 94 –4 6 49 –147 71
122 NOTES<br />
Results, by geographical market<br />
Assignment to the respective segments on the basis of the seat of the branch or consolidated company produces the<br />
following breakdown:<br />
2003 financial year Europe America Asia Other Total<br />
including countries<br />
7 m Germany<br />
Net interest income 2,470 244 52 10 2,776<br />
Provision for possible loan losses –986 –94 –4 – –1,084<br />
Net interest income after provisioning 1,484 150 48 10 1,692<br />
Net commission income 1,920 135 78 3 2,136<br />
Hedging result 40 5 –6 1 40<br />
Trading profit<br />
Net result on investments<br />
and securities portfolio<br />
715 9 12 1 737<br />
(available for sale) 260 31 – – 291<br />
Operating expenses 4,246 176 84 5 4,511<br />
Other operating result 147 27 1 –1 174<br />
Operating profit 320 181 49 9 559<br />
Risk-weighted assets according to BIS 1) 123,112 9,316 2,751 650 135,829<br />
1) excluding market risk<br />
In the previous year, we achieved the following results in the geographical markets:<br />
2002 financial year Europe America Asia Other Total<br />
including countries<br />
7 m Germany<br />
Net interest income 2,596 379 147 11 3,133<br />
Provision for possible loan losses 1,263 –77 19 – –1,321<br />
Net interest income after provisioning 1,333 302 166 11 1,812<br />
Net commission income 1,892 142 82 4 2,120<br />
Hedging result –53 –3 – – –56<br />
Trading profit<br />
Net result on investments<br />
and securities portfolio<br />
513 19 12 – 544<br />
(available for sale) –16 7 –2 – –11<br />
Operating expenses 4,723 278 150 4 5,155<br />
Other operating result 925 17 –4 – 938<br />
Operating profit –129 206 104 11 192<br />
Risk-weighted assets according to BIS 1) 137,886 13,899 4,140 615 156,540<br />
1) excluding market risk
Notes to the balance sheet<br />
(44) Cash reserve<br />
We include the following items in the cash reserve:<br />
NOTES 123<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Cash on hand 917 898 2.1<br />
Balances with central banks<br />
Debt issued by public-sector borrowers, and<br />
4,794 5,714 –16.1<br />
bills of exchange rediscountable at central banks<br />
Treasury bills and discountable treasury notes,<br />
1,718 1,854 –7.3<br />
as well as similar debt issues by public-sector borrowers 1,383 1,511 –8.5<br />
Bills of exchange 335 343 –2.3<br />
Total 7,429 8,466 –12.2<br />
The balances with central banks include claims on the Bundesbank totalling 73,744m (previous year: 74,371m). The<br />
minimum reserve requirement to be met at end-December 2003 amounted to 71,964m (previous year: 72,166m).<br />
(45) Claims on banks<br />
total due on demand other claims<br />
31.12.2003 31.12.2002 Change 31.12.2003 31.12.2002 31.12.2003 31.12.2002<br />
7 m 7 m in % 7 m 7 m 7 m 7 m<br />
German banks 18,868 22,226 –15.1 5,437 3,111 13,431 19,115<br />
Foreign banks 32,789 32,117 2.1 11,536 10,685 21,253 21,432<br />
Total 51,657 54,343 –4.9 16,973 13,796 34,684 40,547<br />
The claims on banks include 75,342m of public-sector loans (previous year: 76,560m) extended by the mortgage banks.<br />
(46) Claims on customers<br />
The claims on customers break down as follows:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Claims on domestic customers 96,364 95,843 0.5<br />
Claims on foreign customers 42,074 52,671 –20.1<br />
Total 138,438 148,514 –6.8<br />
The claims on customers include 726,855m (previous year: 725,718) of loans secured by mortgages or other security<br />
interests in real property as well as 719,597m (previous year: 719,174m) of public-sector credits.
124 NOTES<br />
(47) Claims on and liabilities to subsidiaries and equity investments<br />
The claims on and liabilities to unconsolidated subsidiaries, associated companies and companies in which an equity<br />
investment exists are as follows:<br />
(48) Total lending<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Loans to banks 1) 10,759 10,223 5.2<br />
Claims on customers 1) 130,692 139,522 –6.3<br />
Bills discounted 338 347 –2.6<br />
Claims not originated by the Bank 2) 22,918 21,379 7.2<br />
Total 164,707 171,471 –3.9<br />
1) excluding reverse repos; 2) included in Investments and securities portfolio<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Claims on banks 1,208 954 26.6<br />
Subsidiaries<br />
Associated companies and companies<br />
14 18 –22.2<br />
in which an equity investment exists 1,194 936 27.6<br />
Claims on customers 288 304 –5.3<br />
Subsidiaries<br />
Associated companies and companies<br />
239 234 2.1<br />
in which an equity investment exists 49 70 –30.0<br />
Bonds, notes and other fixed-income securities 1,620 932 73.8<br />
Subsidiaries<br />
Associated companies and companies<br />
28 30 –6.7<br />
in which an equity investment exists 1,592 902 76.5<br />
Shares and other variable-yield securities<br />
Associated companies and companies<br />
319 358 –10.9<br />
in which an equity investment exists 319 358 –10.9<br />
Total 3,435 2,548 34.8<br />
Liabilities to banks 46 71 –35.2<br />
Subsidiaries<br />
Associated companies and companies<br />
3 2 50.0<br />
in which an equity investment exists 43 69 –37.7<br />
Liabilities to customers 840 47 •<br />
Subsidiaries 826 34 •<br />
Associated companies and companies<br />
in which an equity investment exists 14 13 7.7<br />
Total 886 118 •<br />
We distinguish loans to banks from claims on banks such that only those claims are shown as loans to banks for which<br />
special loan agreements have been concluded with the borrowers. Therefore, interbank money-market transactions, for<br />
example, do not count as loans to banks.
(49) Provision for possible loan losses<br />
1) including provisions<br />
NOTES 125<br />
Provision for possible loan losses is made in accordance with rules that apply Group-wide and covers all discernible<br />
creditworthiness and country risks. On the basis of past experience, we have formed global valuation allowances for the<br />
latent credit risk.<br />
Individual Country Global Total<br />
valuation valuation valuation<br />
allowances1) allowances allowances<br />
2003 2002 2003 2002 2003 2002 2003 2002 Change<br />
7 m 7 m 7 m 7 m 7 m 7 m 7 m 7 m in %<br />
As of 1.1. 5,320 5,402 71 134 314 410 5,705 5,946 –4.1<br />
Allocations 1,492 1,927 14 10 56 37 1,562 1,974 –20.9<br />
Deductions 1,217 1,388 34 55 45 27 1,296 1,470 –11.8<br />
utilized 698 760 1 20 – – 699 780 –10.4<br />
reversals<br />
Changes in conso-<br />
519 628 33 35 45 27 597 690 –13.5<br />
lidated companies<br />
Exchange-rate<br />
7 –449 – – 0 –101 7 –550 •<br />
changes/transfers<br />
Provision for possible<br />
–96 –172 –3 –18 –25 –5 –124 –195 –36.4<br />
loan losses as of 31.12. 5,506 5,320 48 71 300 314 5,854 5,705 2.6<br />
With direct write-downs and income received on written-down claims taken into account, the allocations and reversals<br />
reflected in the income statement gave rise to provision of 71,084m (previous year: 71,321m) for lending risks.<br />
Provision for possible risks was formed for:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Claims on banks 39 83 –53.0<br />
Claims on customers 5,471 5,293 3.4<br />
Provision to cover balance-sheet items 5,510 5,376 2.5<br />
Guarantees, endorsement liabilities, credit commitments 344 329 4.6<br />
Total 5,854 5,705 2.6<br />
After conservatively valued security in an amount of 71,857m had been deducted, the value-adjusted claims producing<br />
neither interest nor income amounted to 75,220m.
126 NOTES<br />
The provision for credit risk breaks down as follows:<br />
Individual valuation Loan losses1) Net allocation2) to<br />
allowances and in 2003 valuation allowances<br />
provisions for and provisions in<br />
7 m lending business lending business<br />
German customers 4,711 415 752<br />
Companies and self-employed 4,005 384 675<br />
Manufacturing 815 77 167<br />
Construction 298 9 30<br />
Distributive trades 499 64 73<br />
Services, incl. professions, and others 2,393 234 405<br />
Other retail customers 706 31 77<br />
Foreign customers 795 428 221<br />
Banks 25 5 –1<br />
Corporate and retail customers 770 423 222<br />
Total 5,506 843 973<br />
1) Direct write-downs, utilized individual valuation allowances and provisions in lending business<br />
2) Allocation less reversals<br />
Data on provision for credit risk:<br />
in % 2003 2002<br />
Allocation ratio 1) 0.66 0.77<br />
Write-off ratio 2) 0.50 0.48<br />
Cover ratio 3) 3.55 3.33<br />
1) Net provisioning (new provisions less reversals of valuation allowances and provision for both commercial and country loans and also<br />
general provision, plus the balance of direct write-downs and income received on previously written-down claims) as a percentage of<br />
total lending<br />
2) Defaults (utilized valuation allowances and provision for both commercial and country loans, plus the balance of direct write-downs and<br />
income received on previously written-down claims) as a percentage of total lending<br />
3) Existing provisions (level of valuation allowances and provisions for credit risk in commercial lending, country risk and in general provision)<br />
as a percentage of total lending
(50) Positive fair values from derivative hedging instruments<br />
Derivative instruments used for hedging purposes and for<br />
hedge accounting and also showing a positive fair value<br />
appear under this item in the balance sheet.<br />
(51) Assets held for dealing purposes<br />
The Group’s trading activities include trading in bonds,<br />
notes and other fixed-income securities, shares and other<br />
variable-yield securities, promissory notes, foreign exchange<br />
and precious metals as well as derivative financial<br />
instruments. All the items in the trading portfolio are<br />
shown at their fair value.<br />
NOTES 127<br />
These instruments are measured at their fair value.<br />
For the most part, interest-rate and interest-rate/currency<br />
swaps are used.<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Positive fair values from related effective fair value hedges 1,649 2,110 –21.8<br />
Positive fair values from related effective cash flow hedges 903 1,021 –11.6<br />
Total 2,552 3,131 –18.5<br />
The positive fair values also include financial instruments<br />
which cannot be used as hedging instruments in<br />
hedge accounting.<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Bonds, notes and other fixed-income securities 19,099 35,148 –45.7<br />
Money-market instruments 1,020 983 3.8<br />
issued by public-sector borrowers 212 359 –40.9<br />
issued by other borrowers 808 624 29.5<br />
Bonds and notes 18,079 34,165 –47.1<br />
issued by public-sector borrowers 5,478 20,916 –73.8<br />
issued by other borrowers 12,601 13,249 –4.9<br />
Shares and other variable-yield securities 8,510 5,412 57.2<br />
Promissory notes held in the trading portfolio 559 515 8.5<br />
Positive fair values attributable to derivative financial instruments 59,460 76,117 –21.9<br />
Currency-based transactions 11,142 9,721 14.6<br />
Interest-based transactions 44,544 59,197 –24.8<br />
Other transactions 3,774 7,199 –47.6<br />
Total 87,628 117,192 –25.2<br />
725,197m (previous year: 735,550m) of the bonds, notes and other fixed-income securities and also shares and other<br />
variable-yield securities were listed securities.
128 NOTES<br />
(52) Investments and securities portfolio<br />
The Investments and securities portfolio consists of<br />
claims not originated by the Bank, all bonds, notes and<br />
other fixed-income securities, shares and other variableyield<br />
securities not held for trading purposes, as well<br />
as investments, holdings in associated companies measured<br />
at equity and holdings in subsidiaries not included<br />
in the consolidation.<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Claims on banks and customers not originated by the Bank 22,918 21,379 7.2<br />
Bonds, notes and other fixed-income securities 56,311 53,400 5.5<br />
Money-market instruments 987 431 •<br />
issued by public-sector borrowers 418 74 •<br />
issued by other borrowers 569 357 59.4<br />
Bonds and notes 55,324 52,969 4.4<br />
issued by public-sector borrowers 26,975 26,878 0.4<br />
issued by other borrowers 28,349 26,091 8.7<br />
Shares and other variable-yield securities 2,013 1,999 0.7<br />
Investments 3,783 3,629 4.2<br />
of which: in banks 2,353 1,999 17.7<br />
Investments in associated companies 2,300 3,584 –35.8<br />
of which: in banks 2,163 3,250 –33.4<br />
Holdings in subsidiaries 517 567 –8.8<br />
of which: in banks 7 60 –88.3<br />
Total 87,842 84,558 3.9<br />
of which: measured at amortized cost 1,320 1,609 –18.0<br />
Fair values of listed financial investments:<br />
31.12.2003 31.12.2002<br />
7 m Fair value Fair value<br />
Bonds, notes and other fixed-income securities 50,609 49,139<br />
Shares and other variable-yield securities 864 811<br />
Investments and investments in associated companies 5,280 5,815<br />
Total 56,753 55,765
NOTES 129<br />
Investments in large incorporated companies held by the <strong>Commerzbank</strong> Group, pursuant to Art. 313, (2), no. 4, HGB:<br />
Name Seat Percentage share<br />
of capital held<br />
31.12.2003 31.12.2002<br />
Al Wataniya Casablanca 9.0 9.0<br />
Banque Marocaine du Commerce Extérieur, S.A. Casablanca 5.0 10.0<br />
Buderus <strong>Aktiengesellschaft</strong> Wetzlar – 10.5<br />
Heidelberger Druckmaschinen <strong>Aktiengesellschaft</strong> Heidelberg 10.0 10.0<br />
Holsten-Brauerei <strong>Aktiengesellschaft</strong> Hamburg – 7.2<br />
Korea Exchange Bank Seoul 14.8 32.6<br />
Linde <strong>Aktiengesellschaft</strong> Wiesbaden 10.0 10.0<br />
MAN <strong>Aktiengesellschaft</strong> Munich 6.8 6.8<br />
Sachsenring Automobiltechnik AG i.L. Zwickau 7.9 1) 10.0<br />
Unibanco – União de Bancos Brasileiros S.A. São Paulo 5.1 2) –<br />
Unibanco Holdings S.A. São Paulo – 11.5<br />
Willy Vogel Beteiligungsgesellschaft mbH Berlin 19.0 19.0<br />
1) as of 31.12.2003, the company was no longer a large incorporated company<br />
2) directly and indirectly held<br />
(53) Intangible assets<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Goodwill 690 1,040 –33.7<br />
Other intangible assets 112 111 0.9<br />
Total 802 1,151 –30.3<br />
Using the straight-line method, we amortize goodwill<br />
over the probable useful economic lifetime of 15 years.<br />
Further goodwill arising from companies shown at<br />
equity is contained in investments in associated companies<br />
(7108m).<br />
(54) Fixed assets<br />
Of the other intangible assets, capitalized software<br />
produced in-house accounted for 7100m (previous year:<br />
790m).<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Land and buildings 877 709 23.7<br />
Office furniture and equipment 1,010 1,417 –28.7<br />
Leased equipment 176 379 –53.6<br />
Total 2,063 2,505 –17.6
130 NOTES<br />
(55) Changes in book value of fixed assets and investments<br />
The following changes were registered for intangible and fixed assets, and also for investments, investments in associated<br />
companies and subsidiaries in the past financial year:<br />
Intangible assets Fixed assets<br />
Goodwill Other Land and Office<br />
intangible buildings furniture and<br />
7 m assets equipment<br />
Book value as of 1.1.2003<br />
Cost of acquisition/manufacture<br />
1,040 111 709 1,417<br />
as of 1.1.2003 1,597 178 867 3,725<br />
Additions in 2003 41 27 29 99<br />
Disposals in 2003<br />
Transfers/changes in<br />
215 9 27 285<br />
consolidated companies<br />
Cost of acquisition/manufacture<br />
– 7 211 –13<br />
as of 31.12.2003 1,423 203 1,080 3,526<br />
Cumulative write-downs as of 31.12.2002 557 67 158 2,308<br />
Changes in exchange rates – – –5 –18<br />
Additions in 2003 410 30 19 426<br />
Disposals in 2003<br />
Transfers/changes in<br />
215 9 4 187<br />
consolidated companies –19 3 35 –13<br />
Cumulative write-downs as of 31.12.2003 733 91 203 2,516<br />
Book value as of 31.12.2003 690 112 877 1,010<br />
Fixed assets Investments Investments Holdings in<br />
Leased in associated subsidiaries<br />
7 m equipment companies<br />
Book value as of 1.1.2003<br />
Cost of acquisition/manufacture<br />
379 3,629 3,584 567<br />
as of 1.1.2003 435 4,406 3,750 604<br />
Additions in 2003 121 45 – 4<br />
Disposals in 2003<br />
Transfers/changes in<br />
358 1,517 101 21<br />
consolidated companies<br />
Cumulative changes arising from<br />
– 395 –629 –33<br />
measurement at fair value or at equity<br />
Cost of acquisition/manufacture/fair value<br />
– 1,576 –91 –<br />
as of 31.12.2003 198 4,905 2,929 554<br />
Cumulative write-downs as of 31.12.2002 56 785 166 37<br />
Additions in 2003 17 856 571 –<br />
Disposals in 2003<br />
Transfers/changes in<br />
51 519 – –<br />
consolidated companies – – –108 –<br />
Cumulative write-downs as of 31.12.2003 22 1,122 629 37<br />
Book value as of 31.12.2003 176 3,783 2,300 517
(56) Tax assets<br />
NOTES 131<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Current tax assets 270 704 –61.6<br />
Germany 203 607 –66.6<br />
Abroad 67 97 –30.9<br />
Deferred tax assets 5,768 5,291 9.0<br />
Deferred tax assets 5,768 5,291 9.0<br />
Total 6,038 5,995 0.7<br />
Deferred taxes represent the potential income-tax relief<br />
from temporary differences between the values assigned<br />
to assets and liabilities in the consolidated balance sheet<br />
in accordance with IAS and their values for tax-accounting<br />
purposes in accordance with the local tax regulations for<br />
consolidated companies.<br />
Deferred tax assets were formed in connection with the following balance-sheet items:<br />
No deferred taxes have been recognized for loss carryforwards<br />
of 73,084m (previous year: 72,796m), as it is<br />
uncertain at present whether they will be realized.<br />
For the most part, there are no time limits on the use of<br />
the existing tax loss carry-forwards.<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Fair values of derivative hedging instruments 2,567 2,050 25.2<br />
Assets held for dealing purposes and liabilities from dealing activities 2,130 1,537 38.6<br />
Claims on banks and customers 103 139 –25.9<br />
Provisions 118 318 –62.9<br />
Securitized liabilities 34 287 –88.2<br />
Liabilities to banks and customers 19 148 –87.2<br />
Sundry balance-sheet items 425 470 –9.6<br />
Capitalized tax loss carry-forwards 372 342 8.8<br />
Total 5,768 5,291 9.0<br />
(57) Other assets<br />
Other assets mainly comprise the following items:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Collection items 385 284 35.6<br />
Precious metals 464 373 24.4<br />
Sundry assets, including deferred items 1,797 998 80.1<br />
Total 2,646 1,655 59.9
132 NOTES<br />
(58) Liabilities to banks<br />
total<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
German banks 41,015 42,893 –4.4<br />
Foreign banks 54,234 72,091 –24.8<br />
Total 95,249 114,984 –17.2<br />
of which: due on demand other liabilities<br />
31.12.2003 31.12.2002 31.12.2003 31.12.2002<br />
7 m 7 m 7 m 7 m<br />
German banks 6,407 3,608 34,608 39,285<br />
Foreign banks 11,034 9,500 43,200 62,591<br />
Total 17,441 13,108 77,808 101,876<br />
(59) Liabilities to customers<br />
Liabilities to customers consist of savings deposits, demand deposits and time deposits, including savings certificates.<br />
total<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
German customers 73,601 69,539 5.8<br />
Corporate customers 43,313 37,708 14.9<br />
Retail customers and others 27,243 28,245 –3.5<br />
Public sector 3,045 3,586 –15.1<br />
Foreign customers 26,399 26,161 0.9<br />
Corporate and retail customers 25,876 23,631 9.5<br />
Public sector 523 2,530 –79.3<br />
Total 100,000 95,700 4.5
Savings deposits Other liabilities<br />
NOTES 133<br />
due on demand with agreed lifetime<br />
or period of notice<br />
7 m 31.12.2003 31.12.2002 31.12.2003 31.12.2002 31.12.2003 31.12.2002<br />
German customers 11,180 11,035 26,932 26,857 35,489 31,647<br />
Corporate customers 44 41 17,444 16,782 25,825 20,885<br />
Retail customers and others 11,130 10,989 8,927 9,684 7,186 7,572<br />
Public sector 6 5 561 391 2,478 3,190<br />
Foreign customers<br />
Corporate and<br />
1,093 1,038 7,362 6,251 17,944 18,872<br />
retail customers 1,092 1,037 7,213 6,072 17,571 16,522<br />
Public sector 1 1 149 179 373 2,350<br />
Total 12,273 12,073 34,294 33,108 53,433 50,519<br />
Savings deposits break down as follows:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Savings deposits with agreed period of notice of three months<br />
Savings deposits with agreed period of notice<br />
11,556 11,262 2.6<br />
of more than three months 717 811 –11.6<br />
Total 12,273 12,073 1.7<br />
(60)Securitized liabilities<br />
Securitized liabilities consist of bonds and notes, including mortgage and public-sector Pfandbriefe, money-market<br />
instruments (e.g. certificates of deposit, Euro-notes, commercial paper), index certificates, own acceptances and promissory<br />
notes outstanding.<br />
total of which: issued by<br />
mortgage banks<br />
31.12.2003 31.12.2002 31.12.2003 31.12.2002<br />
7 m 7 m 7 m 7 m<br />
Bonds and notes outstanding 71,100 74,905 53,433 53,967<br />
Money-market instruments outstanding 12,680 17,502 5,180 1,477<br />
Own acceptances and promissory notes outstanding 212 325 – –<br />
Total 83,992 92,732 58,613 55,444<br />
The nominal interest paid on money-market paper ranges<br />
from 0.18% to 21.0% (previous year: 0.10% to 29.1%);<br />
for bonds and notes, from 0.05% to 32.0% (previous<br />
year: 0.05% to 32.0%). The original maturity periods for<br />
money-market paper may be up to one year. 744bn (previous<br />
year: 754bn) of the bonds and notes have an original<br />
lifetime of more than four years.
134 NOTES<br />
The following table presents the most important bonds and notes issued in 2003:<br />
Equivalent Currency Issuer Interest rate Maturity<br />
in 7 m % date<br />
2,200 EUR Hypothekenbank in Essen AG 3.500 2008<br />
2,000 EUR Hypothekenbank in Essen AG 3.500 2006<br />
1,950 EUR Hypothekenbank in Essen AG 4.000 2009<br />
1,500 EUR Hypothekenbank in Essen AG 3.250 2004<br />
1,000 EUR Hypothekenbank in Essen AG 4.750 2006<br />
767 EUR Hypothekenbank in Essen AG 6.500 2005<br />
732 EUR Hypothekenbank in Essen AG 4.750 2008<br />
582 EUR Hypothekenbank in Essen AG 2.600 2018<br />
385 CHF Erste Europäische Pfandbrief und Kommunalkreditbank AG 0.266 2006<br />
324 EUR Hypothekenbank in Essen AG 7.500 2004<br />
289 CHF Erste Europäische Pfandbrief und Kommunalkreditbank AG 1.750 2007<br />
283 GBP <strong>Commerzbank</strong> AG 3.940 2004<br />
251 EUR Hypothekenbank in Essen AG 1.000 2005<br />
250 EUR Hypothekenbank in Essen AG 2.201 2004<br />
250 EUR Hypothekenbank in Essen AG 2.154 2004<br />
250 EUR Hypothekenbank in Essen AG 2.158 2004<br />
250 EUR Hypothekenbank in Essen AG 2.000 2004<br />
250 EUR Hypothekenbank in Essen AG 2.000 2005<br />
250 EUR Hypothekenbank in Essen AG 2.258 2004<br />
250 EUR Hypothekenbank in Essen AG 2.435 2005<br />
250 EUR Hypothekenbank in Essen AG 2.301 2005<br />
250 EUR Hypothekenbank in Essen AG 1.500 2004<br />
250 EUR Erste Europäische Pfandbrief und Kommunalkreditbank AG 2.105 2004<br />
(61) Negative fair values from derivative hedging instruments<br />
Derivative instruments not serving trading purposes but<br />
used for effective hedging and showing a negative fair<br />
value appear under this item in the balance sheet.<br />
These financial instruments are measured at their fair<br />
value. For the most part, interest-rate and interest-rate/<br />
currency swaps are used as hedging instruments.<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Negative fair values from related effective fair value hedges 3,211 3,546 –9.4<br />
Negative fair values from related effective cash flow hedges 2,721 2,150 26.6<br />
Total 5,932 5,696 4.1
(62) Liabilities from dealing activities<br />
(63) Provisions<br />
Provisions break down as follows:<br />
NOTES 135<br />
In Liabilities from dealing activities, the negative fair values of financial derivative instruments not employed as hedging<br />
instruments in connection with hedge accounting are shown. Delivery commitments arising from short sales of securities<br />
are also included under Liabilities from dealing activities.<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Provisions for pensions and similar commitments 1,432 1,516 –5.5<br />
Other provisions 1,875 2,012 –6.8<br />
Total 3,307 3,528 –6.3<br />
The changes in provisions for pensions were as follows:<br />
as of Pension Allocation Fair value Transfers/changes as of<br />
1.1.2003 payments of plan in consolidated 31.12.2003<br />
7 m assets companies<br />
Pension expectancies of<br />
active and former employees<br />
and also pensioners 1,444 75 125 96 4 1,402<br />
Early retirement<br />
Part-time scheme<br />
30 14 8 – – 24<br />
for older staff 42 9 16 43 – 6<br />
Total 1,516 98 149 139 4 1,432<br />
For the most part, provisions for pensions and similar<br />
commitments represent provisions for commitments to<br />
pay company retirement pensions on the basis of direct<br />
pledges of benefits. The type and scale of the retirement<br />
pensions for employees entitled to benefits are determined<br />
by the terms of the pension arrangement that<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Currency-based transactions 11,761 10,978 7.1<br />
Interest-based transactions 43,058 58,982 –27.0<br />
Delivery commitments arising from short sales of securities 8,389 8,131 3.2<br />
Sundry transactions 3,806 5,147 –26.1<br />
Total 67,014 83,238 –19.5<br />
The assets of 7139m invested in a pension fund were deducted in the 2003 financial year from the provisions for pensions<br />
and similar commitments. A year previously, no allocation had yet been made to this pension fund.<br />
finds application (including pension guidelines, pension<br />
scheme, contribution-based pension plan, individual pension<br />
commitments), which mainly depends upon when<br />
the employee joined the Bank. On this basis, pensions are<br />
paid to employees reaching retirement age, or earlier in<br />
the case of invalidity or death (see also Note 22).
136 NOTES<br />
Changes in the assets held in trust at <strong>Commerzbank</strong> Pension Trust e.V., which count as plan assets pursuant to IAS 19:<br />
7 m 2003<br />
– Allocation to plan assets as of November 1, 2003 138<br />
– Income from plan assets 1<br />
Fair value of plan assets 139<br />
The pension commitments are worked out annually by an<br />
independent actuary, applying the projected unit credit<br />
method.<br />
The projected unit credit for pension commitments<br />
as of December 31, 2003, was 71,644m (previous year:<br />
Changes in Other provisions:<br />
as of Utilized Reversals Allocation/changes as of<br />
1.1.2003 in consolidated 31.12.2003<br />
7 m companies<br />
Personnel area 529 368 12 403 552<br />
Restructuring measures 285 117 13 54 209<br />
Risks in lending 329 16 79 110 344<br />
Bonuses for special savings schemes 116 116 0 94 94<br />
Legal proceedings and recourse claims 95 44 13 33 71<br />
Sundry items 658 217 46 210 605<br />
Total 2,012 878 163 904 1,875<br />
The provisions in the personnel area basically relate to<br />
provisions for various types of bonuses, to be paid to<br />
employees of the Group in the first quarter of 2004. An<br />
amount of 754m was allocated to the provisions for the<br />
71,576m). The difference between this figure and the pension<br />
provisions is the result of changes in the actuarial<br />
parameters and the bases of calculation amounting to<br />
773m (previous year: 760m) and of the fair value of the<br />
plan assets of 7139m.<br />
The allocation to provisions for pension schemes to which the Bank contributes breaks down as follows:<br />
2003 2002<br />
7 m 7 m<br />
– Service cost 35 40<br />
– Interest cost 90 91<br />
– Cost of early retirement and part-time scheme for older staff 24 39<br />
Allocations to provisions for schemes to which the Bank contributes 149 170<br />
restructuring measures – second cost-cutting offensive –<br />
introduced and announced in the 2003 financial year. The<br />
allocated amount is included in Restructuring expenses in<br />
the income statement.
(64) Tax liabilities<br />
(65) Other liabilities<br />
Other liabilities break down as follows:<br />
NOTES 137<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Current income-tax liabilities 154 278 –44.6<br />
Income-tax liabilities to tax authorities 1 3 –66.7<br />
Provisions for income taxes 153 275 –44.4<br />
Deferred income-tax liabilities 4,341 3,386 28.2<br />
Deferred taxes carried as liabilities 4,341 3,386 28.2<br />
Total 4,495 3,664 22.7<br />
Provisions for taxes on income are possible tax liabilities<br />
for which no final formal assessment note has been received.<br />
The liabilities to tax authorities represent payment<br />
obligations from current taxes towards German and foreign<br />
tax authorities. Deferred taxes on the liabilities side<br />
represent the potential income-tax burden from tempo-<br />
Deferred income-tax liabilities were formed in connection with the following items:<br />
rary differences between the values assigned to assets<br />
and liabilities in the consolidated balance sheet in accordance<br />
with IAS and their values for tax-accounting purposes<br />
in accordance with the local tax regulations for consolidated<br />
companies.<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Assets held for dealing purposes and liabilities from dealing activities 1,270 777 63.4<br />
Fair values of derivative hedging instruments 1,783 885 •<br />
Investments and securities portfolio 795 1,276 –37.7<br />
Claims on banks and customers 290 259 12.0<br />
Liabilities to banks and customers 21 8 •<br />
Sundry balance-sheet items 182 181 0.6<br />
Total 4,341 3,386 28.2<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Deferred interest expenses for subordinated capital 295 324 –9.0<br />
Effects of measuring hedged subordinated capital items (IAS 39) 735 820 –10.4<br />
Sundry liabilities, including deferred items 1,881 2,141 –12.1<br />
Total 2,911 3,285 –11.4
138 NOTES<br />
(66) Subordinated capital<br />
Subordinated capital breaks down as follows:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Subordinated liabilities 5,958 6,845 –13.0<br />
of which: tier-III capital as defined in Art. 10, (7), KWG 125 774 –83.9<br />
of which: maturing within two years 617 974 –36.7<br />
Profit-sharing certificates outstanding 2,423 2,392 1.3<br />
of which: maturing within two years 522 266 96.2<br />
Total 8,381 9,237 –9.3<br />
In order to meet the regulatory requirements regarding<br />
such subordinated liabilities, we have shown the effects<br />
of measuring hedged items in accordance with IAS 39,<br />
and also the deferred interest payments for such transactions,<br />
separately under Other liabilities.<br />
At end-2003, the following major subordinated liabilities were outstanding:<br />
Subordinated liabilities are liable funds as defined in<br />
Art. 10, (5a), KWG. The claims of creditors to repayment<br />
of these liabilities are subordinate to those of other creditors.<br />
The issuers cannot be obliged to make premature<br />
repayment. In the event of insolvency or winding-up, subordinated<br />
liabilities may only be repaid after the claims of<br />
all senior creditors have been met.<br />
Start of maturity 7 m Currency in m Issuer Interest rate Maturity date<br />
2000 590 590 EUR <strong>Commerzbank</strong> AG 6.500 2010<br />
1999 550 550 EUR <strong>Commerzbank</strong> AG 4.750 2009<br />
2001 490 490 EUR <strong>Commerzbank</strong> AG 6.125 2011<br />
1997 284 200 GBP <strong>Commerzbank</strong> AG 7.875 2007<br />
1999 300 300 EUR <strong>Commerzbank</strong> AG 6.250 2009<br />
2002 275 275 EUR <strong>Commerzbank</strong> AG 5.500 2008<br />
2001 250 250 EUR <strong>Commerzbank</strong> AG 5.100 2011<br />
1999 213 150 GBP <strong>Commerzbank</strong> AG 6.625 2019<br />
In the year under review, the interest paid by the Group for subordinated liabilities totalled 7375m (previous year:<br />
7432m). This includes 7138m (previous year: 7151m) of deferred interest expenses for interest due but not yet paid.<br />
This is shown under Other liabilities.
Profit-sharing certificates outstanding form part of the<br />
Bank’s liable equity capital in accordance with the provisions<br />
of the German Banking Act (Art. 10, (5), KWG). They<br />
are directly affected by current losses. Interest payments<br />
At end-2003, the following major subordinated profit-sharing certificates were outstanding:<br />
NOTES 139<br />
are made solely if the issuing institution achieves a distributable<br />
profit. The claims of holders of profit-sharing<br />
certificates to a repayment of principal are subordinate to<br />
those of other creditors.<br />
Start of maturity 7 m Issuer Interest rate Maturity date<br />
1993 409 <strong>Commerzbank</strong> AG 7.250 2005<br />
2000 320 <strong>Commerzbank</strong> AG 6.375 2010<br />
1991 256 <strong>Commerzbank</strong> AG 9.500 2003<br />
1992 256 <strong>Commerzbank</strong> AG 9.150 2004<br />
1994 256 <strong>Commerzbank</strong> AG 2.780 2006<br />
1996 256 <strong>Commerzbank</strong> AG 7.900 2008<br />
Interest to be paid on the profit-sharing certificates outstanding for the 2003 financial year amounts to 7175m (previous<br />
year: 7191m). Under Other liabilities, 7157m (previous year: 7173m) has been shown.<br />
(67) Hybrid capital<br />
As in previous years, the <strong>Commerzbank</strong> Group raised no hybrid capital in the 2003 financial year.
140 NOTES<br />
(68) Equity structure<br />
31.12.2003 31.12.2002<br />
7 m 7 m<br />
a) Subscribed capital 1,545 1,378<br />
b) Capital reserve 4,475 6,131<br />
c) Retained earnings 3,286 3,268<br />
d) Revaluation reserve 1,240 –769<br />
e) Measurement of cash flow hedges –1,236 –1,248<br />
f) Reserve from currency translation –219 –6<br />
g) Consolidated profit 0 54<br />
Equity 9,091 8,808<br />
a) Subscribed capital<br />
The subscribed capital (share capital) of <strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong> is divided into no-par-value shares, each with<br />
a notional value of 72.60. The shares are issued in the form of bearer shares.<br />
1,000 units<br />
Number of shares outstanding on 1.1.2003 529,944<br />
plus: treasury shares on 31.12. of the previous year 12,263<br />
Capital increase 53,334<br />
Issue of shares to employees 2,317<br />
Number of shares issued on 31.12.2003 597,858<br />
less: treasury shares on balance-sheet date 3,490<br />
Number of shares outstanding on 31.12.2003 594,368<br />
Before treasury shares are deducted, the subscribed capital<br />
stands at 71,554m.<br />
The value of issued, outstanding and authorized shares is as follows:<br />
No preferential rights exist or restrictions on the payment<br />
of dividends at <strong>Commerzbank</strong> AG. All the issued<br />
shares have been fully paid in.<br />
31.12.2003 31.12.2002<br />
7 m 1,000 units 7 m 1,000 units<br />
Shares issued 1,554 597,858 1,410 542,207<br />
– Treasury shares 9 3,490 32 12,263<br />
= Shares outstanding (subscribed capital) 1,545 594,368 1,378 529,944<br />
+ Shares not yet issued from authorized capital 349 134,054 493 189,705<br />
Total 1,894 728,422 1,871 719,649<br />
The number of authorized shares is 731,912 thousand<br />
units (previous year: 731,912 thousand units). The amount<br />
represented by authorized shares is 71,903m (previous<br />
year: 71,903m).<br />
As of December 31, 2003, 6,574 thousand shares (previous<br />
year: 7,891 thousand shares) had been pledged with<br />
the Group as security. This represents 1.1% (previous year:<br />
1.5%) of the shares outstanding on the balance-sheet date.
) Capital reserve<br />
In the capital reserve, premiums from the issue of shares<br />
are shown. In addition, the capital reserve contains<br />
amounts which were realized for conversion and option<br />
rights entitling holders to purchase shares when bonds<br />
and notes were issued.<br />
The Group’s capital reserve is the amount shown<br />
for <strong>Commerzbank</strong> AG, less the treasury shares held. The<br />
values represented by subsidiaries in the capital reserve<br />
are eliminated as part of the consolidation of capital<br />
accounts or appear as minority interests. The net loss for<br />
the year of 72,320m shown as of December 31, 2003, was<br />
offset against the capital reserve.<br />
Transaction costs of 718.2m were incurred in connection<br />
with the capital increase. These were recognized as a<br />
deduction item upon transfer to the capital reserve.<br />
c) Retained earnings<br />
Retained earnings consist of the legal reserve and other<br />
reserves. The legal reserve contains those reserves which<br />
have to be formed in accordance with national law; in the<br />
individual financial statements, the amounts assigned to<br />
this reserve may not be distributed. The overall amount of<br />
retained earnings shown in the balance sheet consists of<br />
73m of legal reserves (previous year: 73m) and 73,283m<br />
(previous year: 73,265m) of other revenue reserves.<br />
d) Revaluation reserve<br />
NOTES 141<br />
The results of measuring the investments and securities<br />
portfolio – consisting of interest-bearing and dividendbased<br />
instruments – at fair value, with deferred taxes<br />
taken into consideration, are assigned to the revaluation<br />
reserve. Gains or losses appear in the income statement<br />
only when the asset has been disposed of or written off.<br />
e) Measurement of cash flow hedges<br />
The result of measuring effective hedges used in cash<br />
flow hedges appears, after deferred taxes have been<br />
taken into consideration, under this equity item.<br />
f) Reserve from currency translation<br />
The reserve from currency translation relates to translation<br />
gains and losses arising through the consolidation<br />
of capital accounts. Here exchange-rate differences are<br />
included that arise through the consolidation of subsidiaries<br />
and associated companies.
142 NOTES<br />
(69) Conditional capital<br />
Conditional capital is intended to be used for the issue of convertible bonds or bonds with warrants and also of profitsharing<br />
certificates with conversion or option rights.<br />
Changes in the Bank’s conditional capital:<br />
Date of Conditional Additions Conditional of which:<br />
resolution capital capital used avai-<br />
1.1.2003 31.12.2003 conditional lable<br />
7 m capital lines<br />
Convertible bonds/bonds with warrants/<br />
profit-sharing rights<br />
Convertible bonds/bonds with warrants/<br />
21.5.1999 200 – 200 – 200<br />
profit-sharing rights 30.5.2003 – 403 403 – 403<br />
Total 200 403 603 – 603<br />
As resolved by the AGM of May 21, 1999, the Bank’s share<br />
capital has been conditionally increased by up to<br />
7200,070,000. Such conditional capital increase will only<br />
be effected to the extent that the holders of the convertible<br />
bonds, bonds with warrants or profit-sharing certificates<br />
carrying conversion or option rights to be issued by April<br />
30, 2004, by either <strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong> or<br />
companies in which the Bank directly or indirectly holds<br />
a majority interest exercise their conversion or option<br />
rights, or the holders of the convertible bonds or profitsharing<br />
certificates carrying conversion rights to be<br />
issued by April 30, 2004, by either <strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong><br />
or companies in which <strong>Commerzbank</strong><br />
<strong>Aktiengesellschaft</strong> directly or indirectly holds a majority<br />
interest meet the obligation to exercise their conversion<br />
rights.<br />
As resolved by the AGM of May 30, 2003, the Bank’s<br />
share capital has been conditionally increased by up to<br />
7403,000,000. Such conditional capital increase will only<br />
be effected to the extent that the holders or creditors of<br />
the convertible bonds, bonds with warrants or profitsharing<br />
rights – carrying conversion or option rights – to<br />
be issued by May 30, 2008, by either <strong>Commerzbank</strong><br />
<strong>Aktiengesellschaft</strong> or companies in which <strong>Commerzbank</strong><br />
<strong>Aktiengesellschaft</strong> directly or indirectly holds a majority<br />
interest (group companies as defined in Art. 18, (1), AktG)<br />
exercise their conversion or option rights, or the holders<br />
or creditors of the convertible bonds or convertible profitsharing<br />
rights to be issued by May 30, 2008 by either<br />
<strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong> or companies in which<br />
<strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong> directly or indirectly<br />
holds a majority interest (group companies as defined in<br />
Art. 18, (1), AktG) meet their obligation to exercise their<br />
conversion rights.
(70) Authorized capital<br />
NOTES 143<br />
Date Original Used in previous years Used in 2003 Remaining Authorization<br />
of AGM amount for capital increases for capital increases amount expires<br />
resolution 7 m 7 m 7 m 7 m<br />
21.05.1999 175 – – 175 30.04.2004<br />
21.05.1999 175 25 – 150 30.04.2004<br />
21.05.1999 86 12 74 – 30.04.2004<br />
31.05.2002 30 – 6 24 30.04.2007<br />
31.05.2002 65 – 65 – 30.04.2007<br />
Total 531 37 145 349<br />
The Board of Managing Directors is authorized to increase,<br />
with the approval of the Supervisory Board, the<br />
share capital of the Company by April 30, 2004 through<br />
the issue of no-par-value shares against cash contributions,<br />
in either one or several tranches, by a maximum<br />
amount of 7175,000,000. The Board of Managing Directors<br />
may, with the approval of the Supervisory Board,<br />
exclude shareholders’ subscription rights to the extent<br />
necessary to offer to the holders of conversion or option<br />
rights, either already issued or still to be issued by<br />
<strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong> or its subsidiaries, subscription<br />
rights to the extent to which they would be entitled<br />
as shareholders after they have exercised their<br />
conversion or option rights. In addition, any fractional<br />
amounts of shares may be excluded from shareholders’<br />
subscription rights.<br />
The Board of Managing Directors is authorized to<br />
increase, with the approval of the Supervisory Board, the<br />
share capital of the Company by April 30, 2004 through<br />
the issue of no-par-value shares against cash or contributions<br />
in kind, in either one or several tranches, by a maximum<br />
amount of 7149,563,570.80. On principle, shareholders<br />
are to be offered subscription rights; however, the<br />
Board of Managing Directors may, with the approval of<br />
the Supervisory Board, exclude shareholders’ subscription<br />
rights to the extent necessary to offer to the holders of<br />
conversion or option rights, either already issued or still<br />
to be issued by <strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong> or its<br />
subsidiaries, subscription rights to the extent to which<br />
they would be entitled as shareholders after they have<br />
exercised their conversion or option rights. In addition,<br />
any fractional amounts of shares may be excluded from<br />
shareholders’ subscription rights. Furthermore, the Board<br />
of Managing Directors may, with the approval of the<br />
Supervisory Board, exclude shareholders’ subscription<br />
rights insofar as the capital increase is made against contributions<br />
in kind for the purpose of acquiring companies<br />
or holdings in companies.<br />
The Board of Managing Directors is authorized to increase,<br />
with the approval of the Supervisory Board, the<br />
share capital of the Bank by April 30, 2007, through the<br />
issue of new no-par-value shares against cash, in either<br />
one or several tranches, by a maximum amount of altogether<br />
723,976,099, thereby excluding the subscription<br />
rights of shareholders for the purpose of issuing these<br />
shares to the Bank’s staff.
144 NOTES<br />
(71) The Bank’s foreign-currency position<br />
On December 31, 2003, the <strong>Commerzbank</strong> Group had the following foreign-currency assets and liabilities (excluding fair<br />
values of derivatives):<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
USD JPY GBP Others Total Total<br />
Cash reserve 12 559 6 451 1,028 1,212 –15.2<br />
Claims on banks 9,570 6,861 3,543 4,138 24,112 21,535 12.0<br />
Claims on customers<br />
Assets held for<br />
23,914 4,782 2,800 3,983 35,479 43,098 –17.7<br />
dealing purposes<br />
Investments and<br />
4,608 1,446 1,952 1,423 9,429 9,463 –0.4<br />
securities portfolio 5,536 1,005 389 848 7,778 10,129 –23.2<br />
Other balance-sheet items 4,547 70 135 1,467 6,219 7,904 –21.3<br />
Foreign-currency assets 48,187 14,723 8,825 12,310 84,045 93,341 –10.0<br />
Liabilities to banks 18,746 4,785 9,076 6,027 38,634 46,927 –17.7<br />
Liabilities to customers 12,345 822 2,333 4,584 20,084 21,079 –4.7<br />
Securitized liabilities<br />
Liabilities from<br />
7,419 88 925 3,937 12,369 20,086 –38.4<br />
dealing activities 2,182 300 4 512 2,998 3,224 –7.0<br />
Other balance-sheet items 2,932 293 1,142 920 5,287 8,793 –39.9<br />
Foreign-currency liabilities 43,624 6,288 13,480 15,980 79,372 100,109 –20.7<br />
Due to exchange-rate movements in the 2003 financial year, the consolidated balance-sheet total contracted by roughly<br />
712bn (previous year: –715bn). Total lending declined by 77bn (previous year: –77bn).
Notes to financial instruments<br />
(72) Derivative transactions<br />
The following tables present the respective nominal<br />
amounts and fair values of OTC derivatives and derivatives<br />
traded on a stock exchange.<br />
In order to minimize (reduce) both the economic and<br />
the regulatory credit risk arising from these instruments,<br />
our Legal Services department concludes master agreements<br />
(bilateral netting agreements) with our business<br />
associates (such as 1992 ISDA Master Agreement Multicurrency<br />
Cross-Border; German Master Agreement for<br />
Financial Futures). By means of such bilateral netting<br />
agreements, the positive and negative fair values of the<br />
derivatives contracts included under a master agreement<br />
can be offset against one another and the future regulatory<br />
risk add-ons for these products can be reduced.<br />
Through this netting process, the credit risk is limited to<br />
a single net claim on the party to the contract (close-out<br />
netting).<br />
For both regulatory reports and the internal measurement<br />
and monitoring of our credit commitments, we use<br />
such risk-reducing techniques only if we consider them<br />
enforceable under the respective legal system, should the<br />
business associate become insolvent. In order to check<br />
enforceability, we avail ourselves of legal opinions from<br />
various international law firms.<br />
Breakdown, by reference assets<br />
NOTES 145<br />
Similar to the master agreements are the collateral<br />
agreements (e.g. collateralization annex for financial<br />
futures contracts, Credit Support Annex), which we conclude<br />
with our business associates to secure the net claim<br />
or liability remaining after netting (receiving or furnishing<br />
of security). As a rule, this collateral management reduces<br />
credit risk by means of prompt (mostly daily or weekly)<br />
measurement and adjustment of the exposure to customers.<br />
On average, we achieve a credit-risk mitigation of 82%<br />
of the exposure for the derivatives contracts and security<br />
which are covered by the process of risk-reducing techniques.<br />
In the credit derivatives area, we registered a 23.3%<br />
higher volume than a year earlier. We employ these products,<br />
which serve to transfer credit risk, both in trading for<br />
arbitrage purposes and in investing for diversifying our<br />
loan portfolios. The following table illustrates our risk<br />
structure in terms of the various risk assets that have been<br />
hedged.<br />
31.12.2003 31.12.2002<br />
Nominal amounts Nominal amounts<br />
Protection Protection Protection Protection<br />
7 m bought sold bought sold<br />
OECD central governments 1,925 2,111 1,932 2,109<br />
OECD banks 4,261 3,428 3,918 2,867<br />
OECD financial institutions 5,006 5,134 4,682 5,143<br />
Other companies, private individuals 39,803 40,546 32,545 29,518<br />
Non-OECD banks 261 151 321 162<br />
Total 51,256 51,370 43,398 39,799
146 NOTES<br />
31.12.2003 Nominal amount Fair value<br />
Remaining lifetimes<br />
under 1-5 more Total positive negative<br />
1 year years than<br />
7 m 5 years<br />
Foreign-currency-based forward transactions<br />
OTC products 325,473 106,449 55,896 487,818 11,228 12,598<br />
Spot and forward currency transactions 205,883 13,857 634 220,374 5,237 6,484<br />
Interest-rate and currency swaps 57,304 81,434 52,882 191,620 4,962 5,059<br />
Currency call options 32,840 5,917 1,159 39,916 1,029 –<br />
Currency put options 29,446 5,241 1,221 35,908 – 1,055<br />
Other foreign-exchange contracts – – – – – –<br />
Products traded on a stock exchange 816 226 – 1,042 – –<br />
Currency futures 815 226 – 1,041 – –<br />
Currency options 1 – – 1 – –<br />
Total 326,289 106,675 55,896 488,860 11,228 12,598<br />
Interest-based futures transactions<br />
OTC products 1,017,271 1,000,787 791,759 2,809,817 46,456 47,539<br />
Forward-rate agreements 209,036 3,322 – 212,358 100 81<br />
Interest-rate swaps 767,819 843,414 685,480 2,296,713 43,013 44,248<br />
Call options on interest-rate futures 21,652 49,010 44,901 115,563 2,399 –<br />
Put options on interest-rate futures 14,169 56,107 49,255 119,531 – 2,682<br />
Other interest-rate contracts 4,595 48,934 12,123 65,652 944 528<br />
Products traded on a stock exchange 168,501 6,026 8,580 183,107 – –<br />
Interest-rate futures 66,157 3,347 3,892 73,396 – –<br />
Interest-rate options 102,344 2,679 4,688 109,711 – –<br />
Total 1,185,772 1,006,813 800,339 2,992,924 46,456 47,539<br />
Other forward transactions<br />
OTC products 27,110 115,056 11,644 153,810 4,328 4,420<br />
Structured equity/index products 1,480 4,850 1,110 7,440 837 738<br />
Equity call options 6,805 9,617 675 17,097 1,480 –<br />
Equity put options 7,212 10,576 753 18,541 – 1,688<br />
Credit derivatives 6,986 86,837 8,803 102,626 1,474 1,484<br />
Precious metal contracts 4,627 3,176 303 8,106 537 510<br />
Other transactions – – – – – –<br />
Products traded on a stock exchange 25,327 5,115 86 30,528 – –<br />
Equity futures 4,492 10 – 4,502 – –<br />
Equity options 20,835 5,105 86 26,026 – –<br />
Other futures – – – – – –<br />
Other options – – – – – –<br />
Total 52,437 120,171 11,730 184,338 4,328 4,420<br />
Total immatured forward transactions<br />
OTC products 1,369,854 1,222,292 859,299 3,451,445 62,012 64,557<br />
Products traded on a stock exchange 194,644 11,367 8,666 214,677 – –<br />
Total 1,564,498 1,233,659 867,965 3,666,122 62,012 64,557
As of December 31, 2002, the figures were as follows:<br />
31.12.2002 Nominal amount Fair value<br />
NOTES 147<br />
Remaining lifetimes<br />
under 1-5 more Total positive negative<br />
1 year years than<br />
7 m 5 years<br />
Foreign-currency-based forward transactions<br />
OTC products 399,133 96,456 38,591 534,180 10,633 12,296<br />
Spot and forward currency transactions 284,190 19,522 1,366 305,078 6,563 8,141<br />
Interest-rate and currency swaps 49,270 70,830 36,787 156,887 3,489 3,417<br />
Currency call options 33,577 3,417 219 37,213 581 –<br />
Currency put options 32,096 2,687 219 35,002 – 738<br />
Other foreign-exchange contracts – – – – – –<br />
Products traded on a stock exchange 291 72 – 363 – –<br />
Currency futures 289 72 – 361 – –<br />
Currency options 2 – – 2 – –<br />
Total 399,424 96,528 38,591 534,543 10,633 12,296<br />
Interest-based futures transactions<br />
OTC products 1,334,628 939,749 762,201 3,036,578 61,276 63,158<br />
Forward-rate agreements 341,578 2,306 – 343,884 361 454<br />
Interest-rate swaps 951,349 773,229 632,982 2,357,560 56,863 57,680<br />
Call options on interest-rate futures 13,796 56,978 54,341 125,115 3,372 –<br />
Put options on interest-rate futures 14,944 66,682 62,237 143,863 – 3,641<br />
Other interest-rate contracts 12,961 40,554 12,641 66,156 680 1,383<br />
Products traded on a stock exchange 153,362 16,009 6,064 175,435 – –<br />
Interest-rate futures 68,916 8,463 2,521 79,900 – –<br />
Interest-rate options 84,446 7,546 3,543 95,535 – –<br />
Total 1,487,990 955,758 768,265 3,212,013 61,276 63,158<br />
Other forward transactions<br />
OTC products 27,411 53,409 58,440 139,260 7,339 5,349<br />
Structured equity/index products 2,405 4,409 470 7,284 2,472 418<br />
Equity call options 7,892 12,166 197 20,255 3,648 –<br />
Equity put options 7,037 11,932 260 19,229 – 3,735<br />
Credit derivatives 782 24,902 57,513 83,197 1,185 1,137<br />
Precious metal contracts 9,295 – – 9,295 34 59<br />
Other transactions – – – – – –<br />
Products traded on a stock exchange 23,036 4,204 – 27,240 – –<br />
Equity futures 4,666 2 – 4,668 – –<br />
Equity options 18,370 4,202 – 22,572 – –<br />
Other futures – – – – – –<br />
Other options – – – – – –<br />
Total 50,447 57,613 58,440 166,500 7,339 5,349<br />
Total immatured forward transactions<br />
OTC products 1,761,172 1,089,614 859,232 3,710,018 79,248 80,803<br />
Products traded on a stock exchange 176,689 20,285 6,064 203,038 – –<br />
Total 1,937,861 1,109,899 865,296 3,913,056 79,248 80,803
148 NOTES<br />
Breakdown of derivatives business, by borrower group:<br />
31.12.2003 31.12.2002<br />
Fair value Fair value<br />
7 m positive negative positive negative<br />
OECD central governments 1,109 368 308 150<br />
OECD banks 49,439 50,361 73,407 74,363<br />
OECD financial institutions 8,256 8,978 2,197 2,560<br />
Other companies, private individuals 2,609 4,391 2,790 3,135<br />
Non-OECD banks 599 459 546 595<br />
Total 62,012 64,557 79,248 80,803<br />
Fair values appear as the sum totals of the positive and negative amounts per contract, from which no pledged security<br />
has been deducted and no possible netting agreements have been taken into consideration. By definition, no positive<br />
fair values exist for put options.<br />
(73) Market risk arising from trading activities<br />
For the daily quantification and monitoring of market risk,<br />
especially that arising in proprietary trading, mathematical-statistical<br />
methods are used to calculate the value-atrisk.<br />
The underlying statistical parameters are based on<br />
an observation period of the past 255 trading days, a 10day<br />
holding period and a confidence level of 99%. The<br />
value-at-risk models are constantly being adapted to the<br />
changing environment.<br />
Risk position of the trading portfolio (Principle I risks):<br />
On the basis of the risk ratios, the Group manages<br />
the market risk for all operative units by a system of risk<br />
limits, primarily by means of limits for the potential risk<br />
(value-at-risk) and stress scenarios, as well as loss-review<br />
triggers.<br />
The risk position of the Group’s trading portfolio at<br />
year-end shows the value-at-risk, broken down by the<br />
various business lines engaged in proprietary trading.<br />
The value-at-risk shows the potential losses which will not<br />
be exceeded with a 99% degree of probability.<br />
Portfolio Holding period 31.12.2003 31.12.2002<br />
7 m Confidence level 99%<br />
Group 10 days 66.8* ) 49.3* )<br />
Securities department 10 days 57.7 50.8<br />
Treasury department 10 days 16.8 29.1<br />
* ) The relatively low value-at-risk at Group level is the result of strong portfolio effects between the Securities and Treasury departments.
(74) Interest-rate risk<br />
The interest-rate risk of the <strong>Commerzbank</strong> Group results<br />
from the items in both the trading book and the banking<br />
book. In the latter, interest-rate risk mainly arises through<br />
maturity mismatches between the Bank’s interest-bearing<br />
assets and liabilities – for instance, through the short-term<br />
NOTES 149<br />
funding of long-dated loans. The interest-rate items<br />
shown in the balance sheet and also the derivatives<br />
employed to steer them are drawn upon in the measurement<br />
of interest-rate risk.<br />
The interest-rate risk of the banking book is measured on the basis of a net present value approach, applying the historical<br />
simulation method:<br />
31.12.2003 Holding period Banking book Trading book Overall<br />
Portfolio interest-rate risk<br />
7 m Confidence level: 99%<br />
Group 10 days 195.72 61.96 213.77<br />
31.12.2002 Holding period Banking book Trading book Overall<br />
Portfolio interest-rate risk<br />
7 m Confidence level: 99%<br />
Group 10 days 103.44 46.01 142.04<br />
The value-at-risk figures show the potential losses in 7 m, which at the given holding period of 10 days will not be<br />
exceeded with a probability of 99%.
150 NOTES<br />
(75) Concentration of credit risk<br />
Concentrations of credit risks may arise through business<br />
relations with individual borrowers or groups of borrowers<br />
who share a number of features and whose individual<br />
ability to service debt is influenced to the same extent by<br />
changes in certain overall economic conditions. These<br />
risks are managed by the Credit Risk Management department.<br />
Credit risk throughout the Group is monitored by<br />
the use of limits for each individual borrower and borrower<br />
unit, through the furnishing of the appropriate<br />
security and through the application of a uniform lending<br />
policy. In order to minimize credit risk, the Bank has<br />
entered into a number of master netting agreements ensuring<br />
the right to set off the claims on and liabilities to a<br />
client in the case of default by the latter or insolvency. In<br />
addition, the management regularly monitors individual<br />
portfolios. The Group’s lending does not reveal any special<br />
dependence on individual sectors.<br />
In terms of book values, the credit risks relating to balance-sheet financial instruments were as follows on December<br />
31, 2003:<br />
Claims<br />
7 m 31.12.2003 31.12.2002<br />
Customers in Germany 96,364 95,843<br />
Companies and self-employed 44,037 46,269<br />
Manufacturing 10,808 12,612<br />
Construction 824 871<br />
Distributive trades 5,370 5,824<br />
Services, incl. professions and others 27,035 26,962<br />
Public sector 16,141 15,658<br />
Other retail customers 36,186 33,916<br />
Customers abroad 42,074 52,671<br />
Corporate and retail customers 38,618 49,155<br />
Public sector 3,456 3,516<br />
Sub-total 138,438 148,514<br />
less valuation allowances –5,471 –5,293<br />
Total 132,967 143,221
(76) Assets pledged as security<br />
NOTES 151<br />
Assets in the amounts shown below were pledged as security for the following liabilities and liabilities from dealing<br />
activities:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Liabilities to banks 35,293 45,993 –23.3<br />
Liabilities to customers 10,261 10,436 –1.7<br />
Liabilities from dealing activities 1,983 0 •<br />
Total 47,537 56,429 –15.8<br />
The following assets were pledged as security for the above-mentioned liabilities:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Claims on banks 1,916 582 •<br />
Claims on customers<br />
Assets held for dealing purposes and<br />
11,208 11,346 –1.2<br />
investments and securities portfolio 42,613 45,904 –7.2<br />
Total 55,737 57,832 –3.6<br />
The furnishing of security in order to borrow funds took the form of genuine securities repurchase agreements (repos).<br />
At the same time, security was furnished for funds borrowed for fixed specific purposes and securities-lending transactions.
152 NOTES<br />
(77) Maturities, by remaining lifetime<br />
Remaining lifetimes as of 31.12.2003<br />
due on demand and up to 3 months 1 year more than<br />
7 m unlimited in time 3 months to 1 year to 5 years 5 years<br />
Claims on banks 16,973 20,946 6,956 3,298 3,484<br />
Claims on customers<br />
Bonds and notes from the<br />
18,015 24,731 15,402 31,631 48,659<br />
assets held for dealing purposes<br />
Bonds, notes and other fixed-income<br />
securities and also claims not<br />
originated by the Bank held in<br />
255 1,896 3,336 8,132 5,480<br />
investments and securities portfolio 306 3,767 5,342 28,523 41,291<br />
Total 35,549 51,340 31,036 71,584 98,914<br />
Liabilities to banks 17,441 47,845 13,031 5,414 11,518<br />
Liabilities to customers 34,294 52,740 3,240 3,040 6,686<br />
Securitized liabilities 78 18,025 13,194 34,555 18,140<br />
Subordinated capital – 291 478 2,702 4,910<br />
Total 51,813 118,901 29,943 45,711 41,254<br />
Remaining lifetimes as of 31.12.2002<br />
due on demand and up to 3 months 1 year more than<br />
7 m unlimited in time 3 months to 1 year to 5 years 5 years<br />
Claims on banks 13,796 26,136 5,670 4,433 4,308<br />
Claims on customers<br />
Bonds and notes from the<br />
17,110 34,124 14,243 32,638 50,399<br />
assets held for dealing purposes<br />
Bonds, notes and other fixed-income<br />
securities and also claims not<br />
originated by the Bank held in<br />
5 2,408 7,128 15,094 10,513<br />
investments and securities portfolio 388 3,411 7,802 30,027 33,151<br />
Total 31,299 66,079 34,843 82,192 98,371<br />
Liabilities to banks 13,108 76,792 10,703 4,846 9,535<br />
Liabilities to customers 33,108 47,888 4,549 3,545 6,610<br />
Securitized liabilities 23 20,996 18,094 34,683 18,936<br />
Subordinated capital – 133 901 2,593 5,610<br />
Total 46,239 145,809 34,247 45,667 40,691<br />
The remaining lifetime is defined as the period between the balance-sheet date and the contractual maturity of the claim<br />
or liability. In the case of claims or liabilities which are paid in partial amounts, the remaining lifetime has been recognized<br />
for each partial amount.
(78) Fair value of financial instruments<br />
The table below compares the fair values of the balancesheet<br />
items with their book values. Fair value is the<br />
amount at which financial instruments may be sold or purchased<br />
at fair terms on the balance-sheet date. Insofar as<br />
market prices (e.g. for securities) were available, we have<br />
used these for measurement purposes. For a large number<br />
of financial instruments, internal measuring models<br />
NOTES 153<br />
Fair value Book value Difference<br />
7 bn 31.12.2003 31.12.2002 31.12.2003 31.12.2002 31.12.2003 31.12.2002<br />
Assets<br />
involving current market parameters were used in the<br />
absence of market prices. In particular, the net presentvalue<br />
method and option-price models were applied.<br />
Wherever claims on and liabilities to banks and customers<br />
had a remaining lifetime of less than a year, the fair value<br />
was considered for simplicity’s sake to be that shown in<br />
the balance sheet.<br />
Cash reserve 7.4 8.5 7.4 8.5 – –<br />
Claims on banks 51.7 54.3 51.7 54.3 – –<br />
Claims on customers 140.4 150.6 138.4 148.5 2.0 2.1<br />
Hedging instruments<br />
Assets held for<br />
2.6 3.1 2.6 3.1 – –<br />
dealing purposes<br />
Investments and<br />
87.6 117.2 87.6 117.2 – –<br />
securities portfolio<br />
Liabilities<br />
87.9 84.6 87.9 84.6 – –<br />
Liabilities to banks 95.2 115.1 95.2 115.0 – 0.1<br />
Liabilities to customers 100.1 95.9 100.0 95.7 0.1 0.2<br />
Securitized liabilities 84.4 93.0 84.0 92.7 0.4 0.3<br />
Hedging instruments<br />
Liabilities from<br />
5.9 5.7 5.9 5.7 – –<br />
dealing activities 67.0 83.2 67.0 83.2 – –<br />
Subordinated capital 8.3 9.2 8.4 9.2 –0.1 –<br />
In net terms, the difference between the book value and<br />
fair value, which can be seen as a hidden reserve,<br />
amounted for all items to 71.6bn (previous year: 71.5bn)<br />
as of December 31, 2003. For covering these items, cash<br />
flow hedges are used for the most part. As of December<br />
31, 2003, the measurement of cash flow hedges yielded a<br />
figure of –71.2bn (previous year: –71.2bn). As of both<br />
December 31, 2003 and December 31, 2002, the hidden<br />
reserves in interest-bearing assets and liabilities exceeded<br />
the negative valuation of the cash flow hedges.
154 NOTES<br />
Other notes<br />
(79) Subordinated assets<br />
The following subordinated assets are included in the assets shown in the balance sheet:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Claims on customers 88 89 –1.1<br />
Bonds and notes 81 53 52.8<br />
Other variable-yield securities 345 388 –11.1<br />
Total 514 530 –3.0<br />
including: banks in which an equity investment exists 319 358 –10.9<br />
Assets are considered to be subordinated if the claims they represent may not be met before those of other creditors in<br />
the case of the liquidation or insolvency of the issuer.<br />
(80) Off-balance-sheet commitments<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Contingent liabilities 26,404 29,057 –9.1<br />
from rediscounted bills of exchange credited to borrowers 3 4 –25.0<br />
from guarantees and indemnity agreements 26,401 29,053 –9.1<br />
Credit guarantees 3,640 3,144 15.8<br />
Other guarantees 14,390 15,206 –5.4<br />
Letters of credit 5,964 8,052 –25.9<br />
Other items 2,407 2,651 –9.2<br />
Irrevocable lending commitments 39,136 45,979 –14.9<br />
Book credits to banks 1,929 2,523 –23.5<br />
Book credits to customers 35,031 41,420 –15.4<br />
Credits by way of guarantee 1,162 673 72.7<br />
Letters of credit 1,014 1,363 –25.6<br />
Other commitments 28 27 3.7<br />
Provision for risks arising from off-balance-sheet commitments has been deducted from the respective items.
(81) Volume of managed funds<br />
By type of managed fund, the assets which we manage break down as follows:<br />
NOTES 155<br />
31.12.2003 31.12.2002<br />
Number Fund assets Number Fund assets<br />
of funds 7 bn of funds 7 bn<br />
Retail investment funds 436 50.0 361 42.3<br />
Equity-based and mixed funds 286 23.7 243 19.5<br />
Bond-based funds 125 12.2 97 10.8<br />
Money-market funds 25 14.1 21 12.0<br />
Non-publicly-offered funds 1,309 28.2 1,356 29.1<br />
Property-based funds 3 12.0 3 10.6<br />
Total 1,748 90.2 1,720 82.0<br />
The regional breakdown of the funds launched is shown in the following chart:<br />
31.12.2003 31.12.2002<br />
Number Fund assets Number Fund assets<br />
of funds 7 bn of funds 7 bn<br />
Germany 421 45.7 499 46.5<br />
United Kingdom 994 14.3 989 12.6<br />
Other European countries 281 27.2 172 19.0<br />
America 10 1.4 20 2.1<br />
Other countries 42 1.6 40 1.8<br />
Total 1,748 90.2 1,720 82.0
156 NOTES<br />
(82) Genuine repurchase agreements<br />
Under its genuine repurchase agreements, the <strong>Commerzbank</strong><br />
Group sells or purchases securities with the obligation<br />
to repurchase or return them. The money equivalent<br />
deriving from repurchase agreements in which the<br />
<strong>Commerzbank</strong> Group is a borrower (commitment to take<br />
the securities back) is shown in the balance sheet as a liability<br />
to banks or customers.<br />
The genuine repurchase agreements concluded up to the balance-sheet date break down as follows:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Genuine repurchase agreements as a borrower<br />
(repo agreements)<br />
Liabilities to banks 19,111 27,913 –31.5<br />
Liabilities to customers 13,252 9,746 36.0<br />
Total<br />
Genuine repurchase agreements as a lender<br />
(reverse repo agreements)<br />
32,363 37,659 –14.1<br />
Claims on banks 20,880 21,076 –0.9<br />
Claims on customers 7,746 8,992 –13.9<br />
Total 28,626 30,068 –4.8<br />
(83) Securities-lending transactions<br />
Securities-lending transactions are conducted with other<br />
banks and customers in order to cover our need to meet<br />
delivery commitments or to enable us to effect securities<br />
repurchase agreements in the money market. We show<br />
lent securities in our balance sheet under our trading portfolio<br />
or under the investments and securities portfolio,<br />
whereas borrowed securities do not appear in the balance<br />
sheet. The expenses and income from securities-lending<br />
transactions, insofar as they relate to the past financial<br />
year, appear under interest paid or received in the income<br />
statement and reflect the respective maturities.<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Lent securities 8,821 9,546 –7.6<br />
Borrowed securities 8,576 11,953 –28.3
(84) Trust transactions at third-party risk<br />
NOTES 157<br />
Trust transactions which do not have to be shown in the balance sheet amounted to the following on the balance-sheet<br />
date:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Claims on banks 4 27 –85.2<br />
Claims on customers 73 168 –56.5<br />
Other assets 581 466 24.7<br />
Assets on a trust basis at third-party risk 658 661 –0.5<br />
Liabilities to banks 52 56 –7.1<br />
Liabilities to customers 606 605 0.2<br />
Liabilities on a trust basis at third-party risk 658 661 –0.5<br />
(85) Risk-weighted assets and capital ratios as defined by the Basel capital accord (BIS)<br />
Like other internationally active banks, the <strong>Commerzbank</strong><br />
Group has committed itself to meeting the demands on<br />
capital adequacy contained in the Basel accord. This imposes<br />
on banks a minimum requirement of 8% of own<br />
funds to risk-weighted assets (own funds ratio). A minimum<br />
requirement of 4% applies universally for the ratio<br />
between core capital and risk-weighted assets (core capital<br />
ratio).<br />
Own funds are defined as liable capital that is made up<br />
of core and supplementary capital, plus Tier III capital.<br />
Core capital mainly consists of subscribed capital plus<br />
reserves and minority interests, less goodwill. Supplementary<br />
capital comprises outstanding profit-sharing<br />
certificates and subordinated long-term liabilities. Tier III<br />
capital consists of short-term subordinated liabilities.<br />
The structure of the <strong>Commerzbank</strong> Group’s capital in accordance with the Basel capital accord yields the following<br />
picture:<br />
31.12.2003 31.12.2002 Change<br />
7 m 7 m in %<br />
Core capital 10,257 11,691 –12.3<br />
of which: hybrid capital – – –<br />
Supplementary capital 7,868 7,762 1.4<br />
Liable capital 18,125 19,453 –6.8<br />
Tier III capital 125 209 –40.2<br />
Eligible own funds 18,250 19,662 –7.2
158 NOTES<br />
as of 31.12.2003 Capital charges in % Total<br />
7 m 100 50 25 20 10 4<br />
Balance-sheet business<br />
Traditional off-balance-sheet<br />
91,455 5,709 – 11,020 – – 108,184<br />
business<br />
Derivatives business in<br />
4,748 14,946 11 571 344 47 20,667<br />
investment portfolio – 2,578 – 4,400 – – 6,978<br />
Risk-weighted assets, total 96,203 23,233 11 15,991 344 47 135,829<br />
Risk-weighted market risk position<br />
multiplied by 12.5 5,000<br />
Total items to be risk-weighted 140,829<br />
Eligible own funds 18,250<br />
Core capital ratio (excluding market-risk position) 7.6<br />
Core capital ratio (including market-risk position) 7.3<br />
Own funds ratio (including market-risk position) 13.0<br />
as of 31.12.2002 Capital charges in % Total<br />
7 m 100 50 25 20 10 4<br />
Balance-sheet business<br />
Traditional off-balance-sheet<br />
105,733 6,265 – 10,562 – – 122,560<br />
business<br />
Derivatives business in<br />
5,369 17,061 14 781 325 50 23,600<br />
investment portfolio – 3,699 – 6,681 – – 10,380<br />
Risk-weighted assets, total 111,102 27,025 14 18,024 325 50 156,540<br />
Risk-weighted market risk position<br />
multiplied by 12.5 3,650<br />
Total items to be risk-weighted 160,190<br />
Eligible own funds 19,662<br />
Core capital ratio (excluding market-risk position) 7.5<br />
Core capital ratio (including market-risk position) 7.3<br />
Own funds ratio (including market-risk position) 12.3
Reconciliation of reported capital with eligible equity in accordance with BIS<br />
NOTES 159<br />
31.12.2003 Core capital/ Minority Supplementary/ Tier III Total<br />
7 m equity interests subordinated capital capital<br />
Reported in balance sheet<br />
Reclassifications<br />
9,091 1,213 8,381 – 18,685<br />
Minority interests1) 932 –1,023 –91<br />
Tier III capital<br />
Deduction of goodwill,<br />
if relevant for Basel<br />
–125 125 0<br />
consolidation<br />
Changes in consolidated<br />
–187 –187<br />
companies<br />
Parts of subordinated capital<br />
not eligible due to limited<br />
374 374<br />
remaining lifetime<br />
Revaluation reserve<br />
and measurement of<br />
–1,010 –1,010<br />
cash flow hedges<br />
Latent revaluation<br />
–4 –190 –194<br />
reserves for securities<br />
General provisions/<br />
477 477<br />
reserves for defaults 300 300<br />
Other differences 51 –155 –104<br />
Eligible equity 10,257 0 7,868 125 18,250<br />
1) excluding net profit<br />
(86) Liquidity ratio of <strong>Commerzbank</strong> AG (Principle II)<br />
Pursuant to Art. 11, KWG, banks are obliged to invest their<br />
funds such that adequate liquidity for payment purposes<br />
is guaranteed at all times. They have to demonstrate that<br />
they have adequate liquidity in the form of a liquidity<br />
analysis (Principle II). The liquidity-weighted assets<br />
(claims, securities, etc.), structured to reflect their respective<br />
maturity brackets, are set off against certain liquidityweighted<br />
balance-sheet and off-balance-sheet liabilities<br />
(liabilities, lending commitments), broken down by<br />
remaining lifetime. The ratio between the funds in the first<br />
maturity bracket (remaining life of up to one month) and<br />
the payment obligations which may fall due during this<br />
period has to reach a value of one every day. If the ratio<br />
registers the value of one, liquidity is considered to be<br />
adequate. As of December 31, 2003, the liquidity ratio<br />
worked out by <strong>Commerzbank</strong> AG was 1.12 (previous year:<br />
1.13). Excess liquidity stood at 714.6bn (previous year:<br />
714.8bn).
160 NOTES<br />
(87) Securitization of credits<br />
The use of credit derivatives (such as credit default swaps,<br />
total return swaps, and credit-linked notes) can reduce the<br />
imputed risk of a loan portfolio, whereby the hedging<br />
effect of a credit derivative may relate both to individual<br />
credits or securities and to entire portfolios of loans or<br />
securities. As a rule, security is furnished by means of<br />
a synthetic securitization (credit default swap) or in the<br />
form of cash security. But forms of traditional cover (e.g.<br />
the disposal of claims) are also possible. The hedging programmes<br />
launched by the <strong>Commerzbank</strong> Group are<br />
intended to ease the strain on regulatory capital.<br />
By the end of the 2003 financial year, <strong>Commerzbank</strong><br />
AG and two of its subsidiaries had launched ten securitization<br />
programmes as the buyers of protection.<br />
The time band stretches from 4 to 32 years. All told, credits to customers of 713.3bn had been hedged by end-December<br />
2003. This eased the burden on the Bank’s risk-weighted assets by 79.4bn.<br />
Name of Year of Duration of Type of claim Size of Reduction Buyer of protection<br />
transaction conclusion transaction credit of riskin<br />
years weighted<br />
assets<br />
7 m 7 m<br />
Kaiserplatz 263 1999 6 1) Corporate loans 1,500 1,182 <strong>Commerzbank</strong> AG<br />
Residence 2000-1 2000 32 Private home loans 707 455 <strong>Commerzbank</strong> AG<br />
(CLN)<br />
Residence 2000-1 2000 32 Private home loans 983 436 <strong>Commerzbank</strong> AG<br />
(CDS)<br />
Residence 2001-1 2001 30 Private home loans 1,262 517 <strong>Commerzbank</strong> AG<br />
Paneuropean CLO 2001 6 Corporate loans 3,243 2,432 <strong>Commerzbank</strong> AG<br />
Paneuropean CLO 2001 6 Corporate loans 37 30 <strong>Commerzbank</strong><br />
(Nederland) N.V.<br />
Paneuropean CLO 2001 6 Corporate loans 55 44 <strong>Commerzbank</strong><br />
International S.A.,<br />
Luxembourg2) Promise C 2002-1 2002 8 Corporate loans 1,470 1,243 <strong>Commerzbank</strong> AG<br />
Residence 2002-1 2002 31 Private home loans 1,310 1,310 <strong>Commerzbank</strong> AG<br />
Residence 2002-2 2002 31 Private home loans 1,324 826 <strong>Commerzbank</strong> AG<br />
Residence 2003-1 2003 30 Private home loans 1,397 889 <strong>Commerzbank</strong> AG<br />
1) extended by two years<br />
13,288 9,364<br />
2) after <strong>Commerzbank</strong> International (Europe), Dublin, was merged with <strong>Commerzbank</strong> International S.A. Luxembourg
(88) Average number of staff employed by the Bank during the year<br />
2003 2002<br />
NOTES 161<br />
total male female total male female<br />
Group 32,898 17,515 15,383 36,450 19,082 17,368<br />
in Germany 25,559 12,747 12,812 28,785 14,375 14,410<br />
abroad 7,339 4,768 2,571 7,665 4,707 2,958<br />
The above figures include both full-time and part-time personnel. Not included in the figures are the average number of<br />
employees undergoing training within the Group. The average time worked by part-time staff is 55% (previous year:<br />
58%) of the standard working time.<br />
total male female<br />
2003 2002 2003 2002 2003 2002<br />
Trainees 1,437 1,526 559 576 878 950<br />
(89) Remuneration and loans to board members<br />
The following remuneration was paid to members of the Board of Managing Directors and the Supervisory Board:<br />
2003 2002<br />
71,000 71,000<br />
Board of Managing Directors 7,014 11,097<br />
Supervisory Boards 520 613<br />
Retired managing directors and their dependents 7,022 7,567<br />
The Board of Managing Directors’ overall remuneration<br />
amounted to 7,014 thousand euros, which includes the<br />
Chairman’s remuneration of 1,420 thousand euros. The<br />
remuneration of the Board of Managing Directors is made<br />
up of the following components<br />
1. Fixed remuneration<br />
The fixed remuneration of the members of the Board of<br />
Managing Directors amounted to 7360,000 each in the<br />
2003 financial year; the chairman received an additional<br />
premium. The fixed remuneration remained unchanged<br />
on the previous year.<br />
2. Variable remuneration (bonus)<br />
The variable remuneration received by a member of the<br />
Board of Managing Directors is based on the Group’s business<br />
success and the attainment of individual targets. As<br />
variable remuneration is dependent upon the presentation<br />
of established and audited consolidated financial<br />
statements as the basis for assessing the Group’s business<br />
success, it is paid in the current year for performance<br />
in the past year and is included in the published remuneration<br />
of the Board in the current year. The aggregate<br />
amount of variable remuneration paid in 2003 for the 2002<br />
financial year to active members of the Board of Managing<br />
Directors of <strong>Commerzbank</strong> AG as the parent company<br />
of the Group was 73.0m as against 74.9m a year earlier.<br />
This represents a decline of 38.8%.<br />
3. Remuneration of the boards of subsidiaries<br />
The above table also includes the remuneration paid to<br />
members of the Board of Managing Directors in selected<br />
cases for taking on board functions at subsidiaries.<br />
4. Share-based remuneration<br />
Active members of the Board of Managing Directors have<br />
participated in the Long-Term Performance plans of 1999<br />
to 2003, described in note 28, by investing in altogether
162 NOTES<br />
36,200 <strong>Commerzbank</strong> shares at the currently valid daily<br />
price. No payments were made under these plans in the<br />
2003 financial year. A provision of 76.3m has been formed<br />
to cover expected payments in the future under LTP 2003;<br />
of this amount, 70.3m relates to active members of the<br />
Board of Managing Directors.<br />
5. Remuneration in kind<br />
Members of the Board of Managing Directors are granted<br />
remuneration in kind on the usual scale. In 2003, these<br />
benefits were equivalent to 7598,869.<br />
6. Shares, stock options and similar rights<br />
In line with the German Corporate Governance Code,<br />
purchases and disposals of <strong>Commerzbank</strong> shares and<br />
options by members of the Board of Managing Directors<br />
have to be reported if they exceed the amount of 725,000<br />
within 30 days. The Bank publishes these on its internet<br />
site. On November 13, 2003, 2,000 shares were bought by<br />
a member of the Board of Managing Directors to the value<br />
of 30 thousand euros.<br />
7. Pension commitments<br />
For active and former members of the Board of Managing<br />
Directors and their surviving dependents, the Bank has<br />
established a provision for old age, which, as planned and<br />
explained in detail last year, was partially invested with<br />
<strong>Commerzbank</strong> Pension Trust e.V. in this financial year.<br />
As a result, the subsequently remaining provisions for<br />
pension commitments as of end-2003 amounted to 73.6m<br />
for active members and 78.4m for former members of<br />
the Board of Managing Directors and their surviving dependents.<br />
The pension commitments (defined-benefit<br />
obligations) pursuant to IAS for members of the Board of<br />
Managing Directors or their dependents amounted to<br />
772.3m on December 31, 2003.<br />
In the course of adapting the articles of association of<br />
<strong>Commerzbank</strong> AG to the rules of the German Corporate<br />
Governance Code, the remuneration of the Supervisory<br />
Board was also altered with effect from July 1, 2003, as<br />
resolved by the AGM on May 30, 2003. In accordance with<br />
both the former and the new provision contained in the<br />
articles of association, no variable remuneration could be<br />
paid to the Supervisory Board in the 2003 financial year. For<br />
their activity on the Supervisory Board in the past financial<br />
year, the Bank paid members the following fixed remuneration,<br />
which was calculated on the basis of different provisions<br />
in either the first or the second half of the year.<br />
● The Chairman of the Supervisory Board, who belonged<br />
to the Supervisory Board throughout the entire<br />
2003 financial year, received 733,050.71 and additionally<br />
for chairing both the Presiding and the Risk Committees<br />
altogether 720,000.<br />
● Nine members who belonged to the Supervisory<br />
Board throughout the entire financial year received<br />
711,525.35 each. In addition, one member received<br />
715,000 for chairing the Audit Committee and being a<br />
member of the Risk Committee. Four other members<br />
of the Supervisory Board received an additional<br />
75,000 each as they were members of a Supervisory<br />
Board committee.<br />
● Nine members of the Supervisory Board whose term<br />
of office began after the Annual General Meeting on<br />
May 30, 2003, received 710,255.65 each, and four of<br />
them an extra 75,000 each as they were members of<br />
aSupervisory Board committee. The newly elected<br />
Deputy Chairman of the Supervisory Board received<br />
720,383.47 and an additional 75,000 for being a member<br />
of a Supervisory Board committee.<br />
All told, 7262,795.10 was paid to the Chairman, Deputy<br />
Chairman and members of the Supervisory Board and<br />
780,000 for the chairman and members of the Presiding,<br />
Audit and Risk Committees. At the same time, the members<br />
of the Supervisory Board had their expenses reimbursed<br />
as well as the turnover tax levied on their remuneration.<br />
Altogether 799,000 was paid by way of meeting<br />
attendance fees for participation in the meetings of the<br />
Supervisory Board and the three above-mentioned committees<br />
during the second half of 2003, i.e. 71,500 per<br />
meeting attended. The members of the Supervisory<br />
Board and its committees may be found on p. 177f. of this<br />
annual report.<br />
No purchases or disposals by members of the Supervisory<br />
Board of <strong>Commerzbank</strong> shares and options exceeding<br />
725,000 overall within 30 days were reported in<br />
the 2003 financial year.<br />
All told, the Board of Managing Directors and Supervisory<br />
Board held no more than 1% of the issued shares<br />
and option rights of <strong>Commerzbank</strong> AG on December 31,<br />
2003.
NOTES 163<br />
On the balance-sheet date, the aggregate amount of advances and loans granted, as well as contingent liabilities, was<br />
as follows:<br />
31.12.2003 31.12.2002<br />
71,000 71,000<br />
Board of Managing Directors 3,382 5,231<br />
Supervisory Boards 1,631 1,318<br />
Interest at normal market rates is paid on all the loans to members of the Board of Managing Directors and the Supervisory<br />
Boards.<br />
(90) Other commitments<br />
Commitments towards companies both outside the Group<br />
and not included in the consolidation for uncalled payments<br />
on shares in private limited-liability companies<br />
issued but not fully paid amount to 77m (previous year:<br />
717m).<br />
The Bank is responsible for the payment of assessments<br />
of up to 738m to Liquiditäts-Konsortialbank (Liko)<br />
GmbH, Frankfurt am Main, the ”lifeboat” institution of the<br />
German banking industry. The individual banking associations<br />
have also declared themselves responsible for the<br />
payment of assessments to Liko. To cover such assessments,<br />
Group companies have pledged to Liko that they<br />
will meet any payment in favour of their respective associations.<br />
Under Art. 5, (10) of the statutes of the German banks’<br />
Deposit Insurance Fund, we have undertaken to indemnify<br />
the Association of German Banks, Berlin, for any<br />
losses incurred through support provided for banks in<br />
which <strong>Commerzbank</strong> holds a majority interest.<br />
Obligations towards futures and options exchanges<br />
and also towards clearing centres, for which securities<br />
have been deposited as collateral, amount to 7960m (previous<br />
year: 71,957m).<br />
Our subsidiaries Caisse Centrale de Réescompte S.A.,<br />
Paris, and ADIG-Investment Luxemburg S.A., Luxembourg,<br />
have provided performance guarantees for<br />
selected funds.<br />
The Group’s existing obligations arising from rental<br />
and leasing agreements – buildings, office furniture and<br />
equipment – will lead to expenses of 7239m in 2004,<br />
7176m per year in the years 2005-2007, and 7124m as<br />
from the year 2008.
164 NOTES<br />
(91) Letter of comfort<br />
In respect of the subsidiaries listed below and included in the consolidated financial statements of our Bank, we ensure<br />
that, except in the case of political risks, they are able to meet their contractual liabilities.<br />
Name Seat<br />
ADIG-Investment Luxemburg S.A. Luxembourg<br />
ATBRECOM Limited London<br />
BRE Bank SA Warsaw<br />
BRE Leasing Sp. z o.o. Warsaw<br />
Caisse Centrale de Réescompte, S.A. Paris<br />
CBG Commerz Beteiligungsgesellschaft mbH Frankfurt am Main<br />
CCR Actions Paris<br />
CCR Chevrillon-Philippe Paris<br />
CCR Gestion Paris<br />
CCR Gestion Internationale Paris<br />
CICM Fund Management Limited Dublin<br />
comdirect bank <strong>Aktiengesellschaft</strong> (sub-group) Quickborn<br />
COMINVEST Asset Management GmbH Frankfurt am Main<br />
Commerz (East Asia) Ltd. Hong Kong<br />
Commerz Advisory Management Co. Ltd. British Virgin Islands<br />
Commerz Asset Management (UK) plc London<br />
Commerz Asset Management Asia Pacific Pte Ltd. Singapore<br />
Commerz Asset Management Holding GmbH Frankfurt am Main<br />
Commerz Equity Investments Ltd. London<br />
Commerz Europe (Ireland), Inc. Wilmington/Delaware<br />
Commerz Futures, LLC. Wilmington/Delaware<br />
Commerz International Capital Management (Japan) Ltd. Tokyo<br />
Commerz Securities (Japan) Company Ltd. Hong Kong/Tokyo<br />
<strong>Commerzbank</strong> (Budapest) Rt. Budapest<br />
<strong>Commerzbank</strong> (Eurasija) SAO Moscow<br />
<strong>Commerzbank</strong> (Nederland) N.V. Amsterdam<br />
<strong>Commerzbank</strong> (South East Asia) Ltd. Singapore<br />
<strong>Commerzbank</strong> (Switzerland) Ltd Zurich<br />
<strong>Commerzbank</strong> Asset Management Asia Ltd. Singapore<br />
<strong>Commerzbank</strong> Auslandsbanken Holding AG Frankfurt am Main<br />
<strong>Commerzbank</strong> Belgium S.A. N.V. Brussels<br />
<strong>Commerzbank</strong> Capital Markets Corporation New York<br />
<strong>Commerzbank</strong> Europe (Ireland) Unlimited Dublin<br />
<strong>Commerzbank</strong> Europe Finance (Ireland) plc Dublin<br />
<strong>Commerzbank</strong> Inlandsbanken Holding AG Frankfurt am Main<br />
<strong>Commerzbank</strong> International S.A. Luxembourg<br />
<strong>Commerzbank</strong> Overseas Finance N.V. Curaçao<br />
CommerzLeasing und Immobilien AG (sub-group) Düsseldorf<br />
Erste Europäische Pfandbrief- und Kommunalkreditbank <strong>Aktiengesellschaft</strong> in Luxemburg Luxembourg<br />
European Bank for Fund Services GmbH (ebase) Haar near Munich<br />
Gracechurch TL Ltd. London<br />
Hypothekenbank in Essen AG Essen
Name Seat<br />
Intermarket Bank AG Vienna<br />
Jupiter Administration Services Limited London<br />
Jupiter Asset Management (Asia) Limited Hong Kong<br />
Jupiter Asset Management (Bermuda) Limited Bermuda<br />
Jupiter Asset Management Limited London<br />
Jupiter Asset Managers (Jersey) Limited Jersey<br />
Jupiter International Group plc London<br />
Jupiter Unit Trust Managers Limited London<br />
OLEANDRA Grundstücks-Vermietungsgesellschaft mbH & Co., Objekt Jupiter KG Düsseldorf<br />
OLEANDRA Grundstücks-Vermietungsgesellschaft mbH & Co., Objekt Luna KG Düsseldorf<br />
OLEANDRA Grundstücks-Vermietungsgesellschaft mbH & Co., Objekt Neptun KG Düsseldorf<br />
OLEANDRA Grundstücks-Vermietungsgesellschaft mbH & Co., Objekt Pluto KG Düsseldorf<br />
OLEANDRA Grundstücks-Vermietungsgesellschaft mbH & Co., Objekt Uranus KG Düsseldorf<br />
OLEANDRA Grundstücks-Vermietungsgesellschaft mbH & Co., Objekt Venus KG Düsseldorf<br />
P.T. Bank Finconesia Jakarta<br />
RHEINHYP-BRE Bank Hipoteczny SA Warsaw<br />
Stampen S.A. Brussels<br />
Transfinance a.s. Prague<br />
Tyndall Holdings Limited London<br />
Tyndall International Holdings Limited Bermuda<br />
Tyndall Investments Limited London<br />
Tyndall Trust International I.O.M. Limited Isle of Man<br />
NOTES 165<br />
von der Heydt-Kersten & Söhne Wuppertal-Elberfeld<br />
(92) Corporate Governance Code<br />
We have issued our declaration of compliance with the German Corporate Governance Code pursuant to Art. 161, German<br />
Stock Corporation Act – AktG and made it available to shareholders on the internet (www.commerzbank.com).
166 NOTES<br />
Boards of <strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong><br />
Supervisory Board<br />
Dr. Walter Seipp<br />
Honorary Chairman<br />
Dr. h.c. Martin Kohlhaussen<br />
Chairman<br />
Uwe Tschäge* )<br />
Deputy Chairman<br />
Hans-Hermann Altenschmidt* )<br />
Dott. Sergio Balbinot<br />
Herbert Bludau-Hoffmann* )<br />
Astrid Evers* )<br />
Uwe Foullong<br />
Daniel Hampel* )<br />
Dr.-Ing. Otto Happel<br />
* ) since May 30, 2003<br />
Board of Managing Directors<br />
Klaus-Peter Müller<br />
Chairman<br />
Martin Blessing<br />
Mehmet Dalman<br />
Dr. jur. Heiner Hasford* )<br />
Sonja Kasischke* )<br />
Wolfgang Kirsch* )<br />
Werner Malkhoff* )<br />
Klaus Müller-Gebel<br />
Dr. Sabine Reiner* )<br />
Dr. Erhard Schipporeit<br />
Prof. Dr.-Ing. Ekkehard Schulz<br />
Prof. Dr. Jürgen F. Strube<br />
Dr. Klaus Sturany<br />
Dr.-Ing. E.h. Heinrich Weiss<br />
Wolfgang Hartmann<br />
Andreas de Maizière<br />
Klaus M. Patig<br />
The following members left the<br />
Supervisory Board on May 30, 2003,<br />
when their period of office ended:<br />
Hans-Georg Jurkat<br />
Deputy Chairman<br />
Heinz-Werner Busch<br />
Oswald Danzer<br />
Detlef Kayser<br />
Dieter Klinger<br />
Dr. Torsten Locher<br />
Mark Roach<br />
Werner Schönfeld<br />
Alfred Seum<br />
Hermann Josef Strenger<br />
Dr. Axel Frhr. v. Ruedorffer<br />
(until May 30, 2003)<br />
Dr. Eric Strutz (since April 1, 2004)<br />
Nicholas Teller (since April 1, 2003)
Holdings in affiliated and other companies<br />
Affiliated companies included in the consolidation<br />
NOTES 167<br />
Name Seat Share of of which: Equity<br />
capital held indirectly in 1,000<br />
in % in %<br />
Atlas-Vermögensverwaltungs-Gesellschaft mbH Bad Homburg v.d.H. 100.0 7 691,667<br />
ATBRECOM Limited London 100.0 100.0 7 11<br />
TOMO Vermögensverwaltungsgesellschaft mbH<br />
Zweite Umbra Vermögensverwaltungs-<br />
Frankfurt am Main 100.0 100.0 7 22,778<br />
gesellschaft mbH Frankfurt am Main 100.0 100.0 7 46<br />
BRE Bank SA Warsaw 72.2 ZI 1,583,287<br />
BRE Leasing Sp. z o.o. Warsaw 100.0 100.0 ZI 28,037<br />
Intermarket Bank AG Vienna 54.8 54.8 7 16,194<br />
RHEINHYP-BRE Bank Hipoteczny SA Warsaw 50.0 50.0 ZI 140,912<br />
Transfinance a.s. Prague 100.0 100.0 Kc˘ 195,477<br />
Caisse Centrale de Réescompte, S.A. Paris 99.6 7 170,315<br />
CCR Actions Paris 92.0 92.0 7 1,872<br />
CCR Chevrillon-Philippe Paris 85.0 85.0 7 2,661<br />
CCR Gestion Paris 96.0 96.0 7 7,037<br />
CCR Gestion Internationale Paris 100.0 100.0 7 2,514<br />
Commerz (East Asia) Ltd. Hong Kong 100.0 7 44,801<br />
Commerz Asset Management (UK) plc London 100.0 £ 184,091<br />
Jupiter International Group plc (sub-group) London 100.0 100.0 £ 180,581<br />
Jupiter Asset Management Limited London 100.0 100.0<br />
Jupiter Unit Trust Managers Limited London 100.0 100.0<br />
Tyndall Holdings Limited London 100.0 100.0<br />
Jupiter Administration Services Limited London 100.0 100.0<br />
Tyndall Investments Limited London 100.0 100.0<br />
Tyndall International Holdings Limited Bermuda 100.0 100.0<br />
Jupiter Asset Management (Asia) Limited<br />
Jupiter Asset Management<br />
Hong Kong 100.0 100.0<br />
(Bermuda) Limited Bermuda 100.0 100.0<br />
Jupiter Asset Management (Jersey) Limited Jersey 100.0 100.0<br />
Jupiter Asset Managers (Jersey) Limited Jersey 100.0 100.0<br />
Tyndall Trust International I.O.M. Limited Isle of Man 100.0 100.0<br />
Tyndall International Group Limited Bermuda 100.0 100.0<br />
Lanesborough Limited Bermuda 52.9 52.9<br />
NALF Holdings Limited Bermuda 100.0 100.0<br />
The New Asian Property Fund Limited Bermuda 66.8 66.8<br />
Commerz Asset Management Holding GmbH Frankfurt am Main 100.0 7 505,574<br />
ADIG-Investment Luxemburg S.A. Luxembourg 100.0 100.0 7 46,972<br />
CICM Fund Management Limited Dublin 100.0 100.0 7 4,578<br />
COMINVEST Asset Management GmbH Frankfurt am Main 100.0 100.0 7 121,351<br />
Commerz Asset Management Asia Pacific Pte Ltd. Singapore 100.0 100.0 S$ 29,152<br />
Commerz Advisory Management Co. Ltd. British Virgin Islands 100.0 100.0 TWD 472,271<br />
<strong>Commerzbank</strong> Asset Management Asia Ltd.<br />
Commerz International Capital<br />
Singapore 100.0 100.0 S$ 31,284<br />
Management (Japan) Ltd. Tokyo 100.0 100.0 ¥ 467,375
168 NOTES<br />
Affiliated companies included in the consolidation<br />
Name Seat Share of of which: Equity<br />
capital held indirectly in 1,000<br />
in % in %<br />
European Bank for Fund Services GmbH (ebase) Haar near Munich 100.0 100.0 7 39,018<br />
CBG Commerz Beteiligungsgesellschaft Holding mbH Bad Homburg v.d.H. 100.0 7 6,137<br />
CBG Commerz Beteiligungsgesellschaft mbH Frankfurt am Main 100.0 100.0 7 12,244<br />
Commerz Business Consulting AG Frankfurt am Main 100.0 7 3,899<br />
Commerz Equity Investments Ltd. London 100.0 £ 50,012<br />
Commerz Futures, LLC. Wilmington/Delaware 100.0 1.0 US$ 15,145<br />
Commerz Grundbesitzgesellschaft mbH Wiesbaden 100.0 7 109,147<br />
Commerz Grundbesitz-Investmentgesellschaft mbH Wiesbaden 75.0 75.0 7 46,033<br />
Commerz Securities (Japan) Company Ltd.<br />
Commerz Service Gesellschaft<br />
Hong Kong/Tokyo 100.0 ¥ 7,534,302<br />
für Kundenbetreuung mbH Quickborn 100.0 7 26<br />
<strong>Commerzbank</strong> (Budapest) Rt. Budapest 100.0 Ft 14,933,298<br />
<strong>Commerzbank</strong> (Eurasija) SAO Moscow 100.0 Rbl 1,169,041<br />
<strong>Commerzbank</strong> (South East Asia) Ltd. Singapore 100.0 7 125,514<br />
<strong>Commerzbank</strong> Auslandsbanken Holding AG Frankfurt am Main 100.0 7 3,571,458<br />
<strong>Commerzbank</strong> (Nederland) N.V. Amsterdam 100.0 100.0 7 227,097<br />
<strong>Commerzbank</strong> (Switzerland) Ltd Zurich 100.0 100.0 sfr 207,159<br />
<strong>Commerzbank</strong> International S.A. Luxembourg 100.0 100.0 7 1,154,812<br />
<strong>Commerzbank</strong> Belgium S.A. N.V. Brussels 100.0 7 44,923<br />
<strong>Commerzbank</strong> Capital Markets (Eastern Europe) a.s. Prague 100.0 Kc˘ 533,318<br />
<strong>Commerzbank</strong> Capital Markets Corporation New York 100.0 US$ 190,136<br />
<strong>Commerzbank</strong> Europe (Ireland) Unlimited Dublin 44.0 4.0 7 534,348<br />
Commerz Europe (Ireland), Inc. Wilmington/Delaware 100.0 100.0 US$ 5<br />
<strong>Commerzbank</strong> Europe Finance (Ireland) plc<br />
<strong>Commerzbank</strong> Immobilien- und<br />
Dublin 100.0 100.0 7 47<br />
Vermögensverwaltungsgesellschaft mbH Frankfurt am Main 100.0 7 30<br />
<strong>Commerzbank</strong> Inlandsbanken Holding AG Frankfurt am Main 100.0 7 2,482,491<br />
comdirect bank <strong>Aktiengesellschaft</strong> (sub-group) Quickborn 58.7 58.7 7 559,531<br />
comdirect ltd. London 100.0 100.0<br />
comdirect private finance AG Quickborn 100.0 100.0<br />
<strong>Commerzbank</strong> Overseas Finance N.V. Curaçao 100.0 7 1,089<br />
CommerzLeasing und Immobilien AG (sub-group) Düsseldorf 100.0 94.5 7 97,223<br />
ASTRIFA Mobilien-Vermietungsgesellschaft mbH Düsseldorf 100.0 100.0<br />
CFB Commerz Fonds Beteiligungsgesellschaft mbH Düsseldorf 100.0 100.0<br />
CFB Verwaltung und Treuhand GmbH Düsseldorf 100.0 100.0<br />
COBA Vermögensverwaltungsgesellschaft mbH Düsseldorf 100.0 100.0<br />
CommerzProjektconsult GmbH Frankfurt am Main 100.0 100.0<br />
Commerz Immobilien GmbH Düsseldorf 100.0 100.0<br />
CommerzBaucontract GmbH Düsseldorf 100.0 100.0<br />
CommerzBaumanagement GmbH<br />
CommerzBaumanagement GmbH und<br />
CommerzImmobilien GmbH GbR<br />
Düsseldorf 100.0 100.0<br />
– Neubau Molegra Düsseldorf 100.0 100.0
Affiliated companies included in the consolidation<br />
NOTES 169<br />
Name Seat Share of of which: Equity<br />
capital held indirectly in 1,000<br />
in % in %<br />
CommerzLeasing Mobilien GmbH Düsseldorf 100.0 100.0<br />
CommerzLeasing Auto GmbH Düsseldorf 100.0 100.0<br />
CommerzLeasing Mietkauf GmbH Düsseldorf 100.0 100.0<br />
FABA Vermietungsgesellschaft mbH Düsseldorf 95.0 95.0<br />
Hansa Automobil Leasing GmbH Hamburg 100.0 100.0<br />
NESTOR GVG mbH & Co. Objekt ITTAE Frankfurt KG Düsseldorf 100.0 95.0<br />
NOVELLA GVG mbH Düsseldorf 100.0 100.0<br />
SECUNDO GVG mbH<br />
CORECD Commerz Real Estate<br />
Düsseldorf 100.0 100.0<br />
Consulting and Development GmbH<br />
Erste Europäische Pfandbrief- und Kommunal-<br />
Berlin 100.0 48.8 7 999<br />
kreditbank <strong>Aktiengesellschaft</strong> in Luxemburg Luxembourg 75.0 7 53,743<br />
Gracechurch TL Ltd. London 100.0 7 20,049<br />
Hypothekenbank in Essen AG Essen 51.0 7 665,039<br />
Montgomery Asset Management, LLC San Francisco/<br />
Wilmington 100.0 0.3 US$ 11,479<br />
OLEANDRA Grundstücks-Vermietungsgesellschaft<br />
mbH & Co., Objekt Jupiter KG<br />
OLEANDRA Grundstücks-Vermietungs-<br />
Düsseldorf 100.0 7 13,640<br />
gesellschaft mbH & Co., Objekt Luna KG<br />
OLEANDRA Grundstücks-Vermietungs-<br />
Düsseldorf 100.0 7 1,918<br />
gesellschaft mbH & Co., Objekt Neptun KG<br />
OLEANDRA Grundstücks-Vermietungs-<br />
Düsseldorf 100.0 7 6,396<br />
gesellschaft mbH & Co., Objekt Pluto KG<br />
OLEANDRA Grundstücks-Vermietungs-<br />
Düsseldorf 100.0 7 21,750<br />
gesellschaft mbH & Co., Objekt Uranus KG<br />
OLEANDRA Grundstücks-Vermietungs-<br />
Düsseldorf 100.0 7 23,818<br />
gesellschaft mbH & Co., Objekt Venus KG Düsseldorf 100.0 7 13,374<br />
P.T. Bank Finconesia Jakarta 51.0 Rp. 182,894,000<br />
Service-Center Inkasso GmbH Düsseldorf Düsseldorf 100.0 7 125<br />
Stampen S.A. Brussels 99.4 7 11,001<br />
von der Heydt-Kersten & Söhne Wuppertal-Elberfeld 100.0 7 5,113
170 NOTES<br />
Associated companies included in the consolidation at equity<br />
Name Seat Share of of which: Equity<br />
capital held indirectly in 1,000<br />
in % in %<br />
Capital Investment Trust Corporation<br />
Commerz Unternehmensbeteiligungs-<br />
Taipei/Taiwan 24.3 5.0 TWD 1,338,191<br />
<strong>Aktiengesellschaft</strong> Frankfurt am Main 40.0 7 118,609<br />
ComSystems GmbH Düsseldorf 49.0 49.0 7 –492<br />
COMUNITHY Immobilien AG Düsseldorf 49.9 49.9 7 –6,294<br />
Deutsche Schiffsbank <strong>Aktiengesellschaft</strong> Bremen/Hamburg 40.0 40.0 7 372,787<br />
Eurohypo <strong>Aktiengesellschaft</strong><br />
ILV Immobilien-Leasing<br />
Frankfurt am Main 31.8 31.8 7 4,736,542<br />
Verwaltungsgesellschaft Düsseldorf mbH Düsseldorf 50.0 47.0 7 28,124<br />
IMMOPOL GmbH & Co. KG<br />
KEB Commerz Investment<br />
Munich 40.0 40.0 7 0<br />
Trust Management Co. Ltd. Seoul 45.0 W 32,483,672<br />
Prospect Poland UK, L.P. St.Helier/Jersey 39.1 1.2 US$ 4,505<br />
Second Interoceanic GmbH Hamburg 24.8 24.8 7 102,207<br />
Special-purpose entities and non-publicly-offered funds included in the consolidation pursuant to IAS 27 and SIC-12<br />
Name Seat/ Share of capital Equity<br />
seat of held or share of or fund’s<br />
management investor in fund assets<br />
Special-purpose entities<br />
company in % in 1,000<br />
Comas Strategy Fund I Limited Grand Cayman 0.0 US$ 0<br />
Four Winds Funding Corporation Wilmington/Delaware 0.0 US$ –5,983<br />
Hanging Gardens 1 Limited Grand Cayman 0.0 7 7<br />
Plymouth Capital Limited St.Helier/Jersey 0.0 7 0<br />
Non-publicly-offered funds<br />
ABN AMRO-Credit Spread-Fonds Frankfurt am Main 100.0 7 107,800<br />
CDBS-Cofonds Frankfurt am Main 100.0 7 105,183<br />
CICO-Fonds I Frankfurt am Main 100.0 7 122,219<br />
CICO-Fonds II Frankfurt am Main 100.0 7 229,072<br />
<strong>Commerzbank</strong> Alternative Strategies-Global Hedge Luxembourg 100.0 US$ 110,095<br />
dbi-Fonds HIE1 Frankfurt am Main 100.0 7 104,442<br />
DEGEF-Fonds HIE 1 Frankfurt am Main 100.0 7 112,803<br />
DEVIF-Fonds Nr. 533 Frankfurt am Main 100.0 7 158,336<br />
GRUGAFONDS Anteile Munich 100.0 7 104,750<br />
HIE-Cofonds I Frankfurt am Main 100.0 7 88,712<br />
HIE-Cofonds II Frankfurt am Main 100.0 7 168,541<br />
HIE-Cofonds III Frankfurt am Main 100.0 7 168,538<br />
HIE-Cofonds IV Frankfurt am Main 100.0 7 84,354
Other major companies not included in the consolidation<br />
NOTES 171<br />
Name Seat Share of of which: Equity<br />
capital held indirectly in 1,000<br />
in % in %<br />
ALNO <strong>Aktiengesellschaft</strong> Pfullendorf 28.7 7 15,709<br />
Regina Verwaltungsgesellschaft Munich 25.0 25.0 7 403,847<br />
Frankfurt am Main, March 5, 2004<br />
The Board of Managing Directors
172<br />
Group Auditors' report<br />
We have audited the consolidated financial statements<br />
of <strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong>, Frankfurt am Main,<br />
consisting of the balance sheet, the income statement and<br />
the statements of changes in equity and cash flows as well<br />
as the notes to the financial statements for the business<br />
year from January 1 to December 31, 2003. The preparation<br />
and the content of the consolidated financial statements<br />
according to International Financial Reporting<br />
Standards of the IASB (IFRS) are the responsibility of<br />
the Company’s Board of Managing Directors. Our responsibility<br />
is to express an opinion, based on our audit,<br />
whether the consolidated financial statements are in<br />
accordance with IFRS.<br />
We conducted our audit of the consolidated financial<br />
statements in accordance with German auditing regulations<br />
and generally accepted standards for the audit<br />
of financial statements promulgated by the Institut<br />
der Wirtschaftsprüfer (IDW), and additionally observed<br />
the International Standards on Auditing (ISA). Those<br />
standards require that we plan and perform the audit to<br />
obtain reasonable assurance about whether the consolidated<br />
financial statements are free of material misstatements.<br />
Knowledge of the business activities and the economic<br />
and legal environment of the Group and evaluations<br />
of possible misstatements are taken into account in<br />
the determination of audit procedures. The evidence supporting<br />
the amounts and disclosures in the consolidated<br />
financial statements are examined on a test basis within<br />
the framework of the audit. The audit includes assessing<br />
the accounting principles used and significant estimates<br />
made by the Board of Managing Directors, as well as<br />
evaluating the overall presentation of the consolidated<br />
financial statements. We believe that our audit provides a<br />
reasonable basis for our opinion.<br />
In our opinion, the consolidated financial statements<br />
give a true and fair view of the net assets, financial position,<br />
results of operations and cash flows for the business<br />
year in accordance with IFRS.<br />
Our audit, which according to German auditing rules<br />
also extends to the Group management report prepared<br />
by the Board of Managing Directors for the business year<br />
from January 1 to December 31, 2003, has not led to any<br />
reservations. In our opinion, on the whole the Group management<br />
report together with the other information of<br />
the consolidated financial statements provides a suitable<br />
understanding of the Group’s position and suitably presents<br />
the risks of future development. In addition, we confirm<br />
that the consolidated financial statements and the<br />
Group management report for the business year from<br />
January 1 to December 31, 2003 satisfy the conditions<br />
required for the Company’s exemption from its duty to<br />
prepare consolidated financial statements and the Group<br />
management report in accordance with German accounting<br />
law.<br />
Frankfurt am Main, March 8, 2004<br />
PwC Deutsche Revision<br />
<strong>Aktiengesellschaft</strong><br />
Wirtschaftsprüfungsgesellschaft<br />
(Friedhofen) (Rausch)<br />
Wirtschaftsprüfer Wirtschaftsprüfer<br />
(German public (German public<br />
accountant) accountant)
Martin Kohlhaussen<br />
Report of the Supervisory Board<br />
Dear shareholders,<br />
In the past business year, we carried out our full duties under the law and the<br />
Bank’s statutes – advising and monitoring the Board of Managing Directors in<br />
their conduct of the Bank’s affairs. We were included in all the Bank’s major decisions<br />
requiring the approval of the Supervisory Board. The Board of Managing<br />
Directors informed us regularly, promptly and extensively, in both written and<br />
verbal form about business progress, strategy and corporate planning, as well<br />
as about all transactions of major significance for the Bank and the Group. We<br />
held particularly detailed discussions on the outcome of special meetings of the<br />
Board of Managing Directors, presented to us by the latter. The Supervisory<br />
Board or its committees approved measures of the Board of Managing Directors<br />
wherever such approval was required by law. In addition, the Chairman of the<br />
Supervisory Board maintained close contact with the Board of Managing Directors,<br />
and especially with its Chairman. He received the minutes of meetings of<br />
the Board of Managing Directors together with the proposed resolutions, and<br />
had himself constantly informed about the current business and risk situation<br />
and also on all important occurrences for the Bank.<br />
All told, we held six meetings in the past financial year and had intensive<br />
discussions with the Board of Managing Directors on the business situation.<br />
No member of the Supervisory Board attended fewer than half of the meetings.<br />
No conflicts of interest occurred in the year under review.<br />
173
174 REPORT OF THE SUPERVISORY BOARD<br />
Main points dealt with<br />
At plenary sessions, we arranged for regular reports on the implementation of<br />
the Bank’s cost-cutting programmes and discussed the planned and adopted<br />
measures in depth with the Board of Managing Directors. We noted with appreciation<br />
the great progress made by the Bank in this respect. We found it especially<br />
positive that the Board of Managing Directors managed to realize the<br />
resolved staff reductions in the year under review practically without having to<br />
dismiss personnel.<br />
We dealt repeatedly and in some detail with the changes in the German<br />
and international banking scene as well as the resulting strategic options for<br />
<strong>Commerzbank</strong>, discussing possible measures and alternatives with the Board of<br />
Managing Directors. We support the efforts of the Board of Managing Directors<br />
to achieve a sustained improvement in the Bank’s earnings power in this difficult<br />
economic setting. Asset management and retail banking in particular produced<br />
encouraging results. We received detailed reports on the Asset Management and<br />
Corporate Banking areas.<br />
An intensive discussion was triggered by <strong>Commerzbank</strong>’s revaluation measure<br />
in autumn 2003, when the Bank freed itself from unrealized losses by<br />
writing down altogether 72.3bn on the book value of investments and subsequently<br />
effecting a capital increase. We had the Board of Managing Directors<br />
explain the reasons for this measure in detail and discussed it with them at<br />
length. After exhaustive consultation, we supported the transaction in the interest<br />
of creating the conditions for dynamic growth on the part of the Bank.<br />
Work in the committees<br />
The Presiding Committee met five times altogether in the year under review. It<br />
also adopted four resolutions outside meetings. Apart from business progress<br />
and the individual business lines, its main topic was the revaluation measure.<br />
The Presiding Committee dealt with personnel issues relating to the Board of<br />
Managing Directors and had the latter report on all strategic decisions and also<br />
on the outcome of internal auditing. Insofar as the Presiding Committee covered<br />
topics which were also treated at plenary sessions, it discussed them in more<br />
detail.<br />
Last year, the Risk Committee devoted itself intensively in four meetings to<br />
the Bank’s risk management. In addition to the general risk of the <strong>Commerzbank</strong><br />
Group, detailed reports on major credit exposures were presented at the meetings.<br />
The members received regular risk reports. Discussion focused on approving<br />
a Risk Manual describing the Bank’s risk policy and on implementing the<br />
Minimum requirements for the lending business of credit institutions (MaK). The<br />
Risk Committee also dealt with credits requiring its approval. A further topic was<br />
the changes in the Bank’s investments portfolio. At its meetings, the Risk Committee<br />
received reports on the planned measures and also the current position.<br />
As a very quick decision was often needed in order to conclude transactions, the<br />
Risk Committee adopted six resolutions in all during the year under review by<br />
circulating the documents instead of convening a meeting.<br />
The Audit Committee met five times altogether in the past year, the auditors<br />
attending four of the meetings to report on their work. The Board of Managing<br />
Directors also provided information on issues relevant to the audit. Between<br />
meetings, the chairman of the Audit Committee was constantly in contact with
the auditors. The Committee subjected the financial statements and consolidated<br />
financial statements to intensive scrutiny, discussing these and the results<br />
of the audit with the auditors. The Audit Committee established the independence<br />
of the auditors before proposing their appointment to the AGM. It commissioned<br />
the appointed auditors to conduct the audit and after extensive<br />
discussion it reached agreement with them on the main points of the audit and<br />
their fee.<br />
The Social Welfare Committee met once in the 2003 business year and primarily<br />
received reports on staff reductions and their impact, as well as on other<br />
measures in the personnel and social welfare areas. The Conciliation Committee<br />
did not have to be convened in the year under review.<br />
The committees regularly reported on their work at plenary sessions.<br />
Corporate governance<br />
We frequently discussed the implementation of the German Corporate Governance<br />
Code. In November 2002, we issued a declaration of compliance pursuant<br />
to Art. 161, AktG together with the Board of Managing Directors, which was<br />
updated in February 2003. Last July’s amendments to the German Corporate<br />
Governance Code were taken into account in a declaration of compliance on<br />
November 11, 2003. A detailed report by the Board of Managing Directors and<br />
Supervisory Board on corporate governance at <strong>Commerzbank</strong> AG appears on<br />
pages 14-17 of this annual report.<br />
Financial statements and consolidated financial statements<br />
PwC Deutsche Revision <strong>Aktiengesellschaft</strong> Wirtschaftsprüfungsgesellschaft has<br />
audited the annual financial statements and the consolidated financial statements<br />
for the 2003 financial year, giving each their unqualified certification. The<br />
financial statements and the management report of the Parent Bank were prepared<br />
according to the accounting rules of the German Commercial Code (HGB),<br />
the consolidated financial statements and the Group management report according<br />
to International Accounting Standards (IAS). The financial statements<br />
and the consolidated financial statements, the Parent Bank’s management report<br />
and the Group management report were sent to all members of the Supervisory<br />
Board in good time. In addition, the members of the Audit Committee received<br />
the complete annexes and notes relating to the auditors’ reports. At today’s<br />
meeting, the Audit Committee considered the financial statements in detail. At<br />
our meeting today for this purpose, we also discussed and examined the documents<br />
at length. The auditors attended both meetings in order to explain the<br />
main findings of the audit and to be available for questions.<br />
In view of the final outcome of our own examination as well as that of the<br />
Audit Committee, we concur with the findings of the auditors. The financial<br />
statements of the Parent Bank and the Group have given rise to no objections.<br />
At today’s meeting, we approved the financial statements for the Parent Bank<br />
and the Group presented by the Board of Managing Directors, which accordingly<br />
may be regarded as adopted.<br />
REPORT OF THE SUPERVISORY BOARD 175
176 REPORT OF THE SUPERVISORY BOARD<br />
Changes in Board of Managing Directors and Supervisory Board<br />
With the close of the AGM on May 30, 2003, the five-year term of office of the<br />
members of the Supervisory Board came to an end. On the shareholder representative<br />
side, Hermann Josef Strenger and of the employee representatives<br />
Heinz-Werner Busch, Oswald Danzer, Hans-Georg Jurkat, Detlef Kayser, Dieter<br />
Klinger, Dr. Torsten Locher, Mark Roach, Werner Schönfeld and Alfred Seum<br />
did not seek re-election. We wish to thank these former members once again<br />
for their trustworthy and committed efforts on our Supervisory Board during the<br />
past term of office.<br />
On the shareholder representative side, Dr. jur. Heiner Hasford was newly<br />
elected to the Supervisory Board. Dr. Sergio Balbinot, Dr.-Ing. Otto Happel,<br />
Dr. h.c. Martin Kohlhaussen, Klaus Müller-Gebel, Dr. Erhard Schipporeit, Prof.<br />
Dr.-Ing. Ekkehard Schulz, Prof. Dr. Jürgen F. Strube, Dr. Klaus Sturany and<br />
Dr.-Ing. E.h. Heinrich Weiss were re-elected. In the election of employee representatives,<br />
which took place before the AGM, Uwe Foullong was re-elected.<br />
Hans-Hermann Altenschmidt, Herbert Bludau-Hoffmann, Astrid Evers, Daniel<br />
Hampel, Sonja Kasischke, Wolfgang Kirsch, Werner Malkhoff, Dr. Sabine Reiner<br />
and Uwe Tschäge are the new employee representatives on the Supervisory<br />
Board.<br />
In the constituent meeting immediately after the AGM, Dr. h.c. Martin<br />
Kohlhaussen was elected Chairman and Uwe Tschäge Deputy Chairman of the<br />
Supervisory Board. At this meeting, we also elected the members of the five<br />
committees of the Supervisory Board.<br />
For age reasons, Dr. Axel Frhr. v. Ruedorffer resigned from the Board of Managing<br />
Directors at the close of the last AGM. We are greatly indebted to him for<br />
his long and successful activity on behalf of the Group. Upon Dr. v. Ruedorffer’s<br />
retirement from the Board of Managing Directors, Dr. Eric Strutz assumed the<br />
function of Chief Financial Officer (CFO) as from June 1, 2003. His appointment<br />
as a member of the Board of Managing Directors, resolved by the Supervisory<br />
Board, will become effective on April 1, 2004. We also appointed Nicholas Teller<br />
to the Board of Managing Directors with effect from April 1, 2003. On the same<br />
date, the function of personnel director passed from Klaus M. Patig to Andreas<br />
de Maizière.<br />
We thank the Board of Managing Directors as well as all the Bank’s staff for<br />
their great commitment and efforts in the 2003 financial year.<br />
Frankfurt am Main, March 23, 2004<br />
The Supervisory Board<br />
Martin Kohlhaussen<br />
Chairman
supervisory board<br />
Dr. Walter Seipp<br />
Honorary Chairman<br />
Frankfurt am Main<br />
Dr. h.c. Martin Kohlhaussen<br />
Chairman<br />
Frankfurt am Main<br />
Uwe Tschäge<br />
Deputy Chairman<br />
<strong>Commerzbank</strong> AG<br />
Düsseldorf<br />
Hans-Hermann Altenschmidt<br />
<strong>Commerzbank</strong> AG<br />
Essen<br />
Dott. Sergio Balbinot<br />
Managing Director<br />
Assicurazioni Generali S.p.A.<br />
Trieste<br />
Herbert Bludau-Hoffmann<br />
Trade Union Secretary<br />
Financial Services<br />
North Rhine-Westphalia<br />
ver.di Essen Branch<br />
Essen<br />
Astrid Evers<br />
<strong>Commerzbank</strong> AG<br />
Hamburg<br />
Uwe Foullong<br />
Head of Coordination<br />
Financial Services<br />
ver.di National Administration<br />
Berlin<br />
Daniel Hampel<br />
<strong>Commerzbank</strong> AG<br />
Berlin<br />
Dr.-Ing. Otto Happel<br />
Luserve AG<br />
Lucerne<br />
Dr. jur. Heiner Hasford<br />
Member of the Board of<br />
Managing Directors<br />
Münchener Rückversicherungs-<br />
Gesellschaft AG<br />
Munich<br />
Sonja Kasischke<br />
<strong>Commerzbank</strong> AG<br />
Brunswick<br />
Wolfgang Kirsch<br />
<strong>Commerzbank</strong> AG<br />
Frankfurt am Main<br />
Werner Malkhoff<br />
<strong>Commerzbank</strong> AG<br />
Frankfurt am Main<br />
Klaus Müller-Gebel<br />
Bad Soden<br />
Dr. Sabine Reiner<br />
Trade Union Specialist<br />
Economic Policy<br />
ver.di National Administration<br />
Berlin<br />
Dr. Erhard Schipporeit<br />
Member of the Board of<br />
Managing Directors<br />
E.ON <strong>Aktiengesellschaft</strong><br />
Düsseldorf<br />
Prof. Dr.-Ing. Ekkehard Schulz<br />
Chairman of the Board of<br />
Managing Directors<br />
ThyssenKrupp AG<br />
Duisburg<br />
Prof. Dr. Jürgen F. Strube<br />
Chairman of the<br />
Supervisory Board<br />
BASF <strong>Aktiengesellschaft</strong><br />
Ludwigshafen<br />
Dr. Klaus Sturany<br />
Member of the Board of<br />
Managing Directors<br />
RWE <strong>Aktiengesellschaft</strong><br />
Essen<br />
Dr.-Ing. E.h. Heinrich Weiss<br />
Chairman of the Board of<br />
Managing Directors<br />
SMS <strong>Aktiengesellschaft</strong><br />
Düsseldorf<br />
177
178<br />
Committees of the supervisory board<br />
Presiding Committee Dr. h.c. Martin Kohlhaussen, Chairman<br />
Werner Malkhoff<br />
Prof. Dr. Jürgen F. Strube<br />
Uwe Tschäge<br />
Audit Committee Klaus Müller-Gebel, Chairman<br />
Hans-Hermann Altenschmidt<br />
Dott. Sergio Balbinot<br />
Dr.-Ing. Otto Happel<br />
Wolfgang Kirsch<br />
Risk Committee Dr. h.c. Martin Kohlhaussen, Chairman<br />
Dr. jur. Heiner Hasford<br />
Klaus Müller-Gebel<br />
Dr.-Ing. E.h. Heinrich Weiss<br />
Social Welfare Committee Dr. h.c. Martin Kohlhaussen, Chairman<br />
Astrid Evers<br />
Daniel Hampel<br />
Klaus Müller-Gebel<br />
Uwe Tschäge<br />
Dr.-Ing. E.h. Heinrich Weiss<br />
Conciliation Committee Dr. h.c. Martin Kohlhaussen, Chairman<br />
(Art. 27, (3), German Co-determination Act) Werner Malkhoff<br />
Prof. Dr. Jürgen F. Strube<br />
Uwe Tschäge
central advisory board<br />
Dr.-Ing. Burckhard Bergmann<br />
Member of the Board of<br />
Managing Directors<br />
E.ON <strong>Aktiengesellschaft</strong><br />
Düsseldorf<br />
Chairman of the Board of<br />
Managing Directors<br />
Ruhrgas <strong>Aktiengesellschaft</strong><br />
Essen<br />
Dr. Michael E. Crüsemann<br />
Member of the Board of<br />
Managing Directors<br />
OTTO (GmbH + Co KG)<br />
Hamburg<br />
Christian R. Eisenbeiss<br />
Chairman of the<br />
Supervisory Board<br />
Holsten-Brauerei AG<br />
Hamburg<br />
Dr. Hubertus Erlen<br />
Chairman of the Board of<br />
Managing Directors<br />
Schering AG<br />
Berlin<br />
Dietrich-Kurt Frowein<br />
Frankfurt am Main<br />
Dr. Manfred Gentz<br />
Member of the Board of<br />
Managing Directors<br />
DaimlerChrysler AG<br />
Stuttgart<br />
Prof. Dr.-Ing. E.h. Hans-Olaf Henkel<br />
President<br />
Leibniz-Gemeinschaft<br />
Berlin<br />
Dr.-Ing. Dr.-Ing. E.h.<br />
Hans-Peter Keitel<br />
Chairman of the Board of<br />
Managing Directors<br />
HOCHTIEF AG<br />
Essen<br />
Uwe Lüders<br />
Wetzlar<br />
Friedrich Lürssen<br />
Chief Executive<br />
Fr. Lürssen Werft GmbH & Co. KG<br />
Bremen<br />
Wolfgang Mayrhuber<br />
Chairman of the Board of<br />
Managing Directors<br />
Deutsche Lufthansa<br />
<strong>Aktiengesellschaft</strong><br />
Cologne/Frankfurt am Main<br />
Friedrich Merz, MdB<br />
Lawyer<br />
C B H Rechtsanwälte<br />
Cologne/Berlin<br />
Dr. Jörg Mittelsten Scheid<br />
General Partner<br />
Vorwerk & Co. KG<br />
Wuppertal<br />
Dr. Christoph M. Müller<br />
Lawyer<br />
Member of the<br />
Shareholders’ Committee<br />
and the Supervisory Board<br />
Vaillant GmbH<br />
Remscheid<br />
Jürgen Radomski<br />
Member of the Board of<br />
Managing Directors<br />
Siemens AG<br />
Munich<br />
Hans Reischl<br />
Chairman of the Board of<br />
Managing Directors<br />
REWE-Zentral AG<br />
Cologne<br />
Dr. Axel Frhr. v. Ruedorffer<br />
Bad Homburg<br />
Dr. Ernst F. Schröder<br />
General Partner<br />
Dr. August Oetker KG<br />
Bielefeld<br />
Dr.-Ing. Ulrich Schumacher<br />
Chairman of the Board of<br />
Managing Directors<br />
Infineon Technologies AG<br />
Munich<br />
Dr. Walter Thiessen<br />
Chairman of the Board of<br />
Managing Directors<br />
AMB Generali Holding AG<br />
Aachen<br />
Dr. Klaus Trützschler<br />
Member of the Board of<br />
Managing Directors<br />
Franz Haniel & Cie. GmbH<br />
Duisburg<br />
Wilhelm Werhahn<br />
General Partner<br />
Wilh. Werhahn KG<br />
Neuss<br />
Dr. Wendelin Wiedeking<br />
Chairman of the Board of<br />
Managing Directors<br />
Dr. Ing. h.c. F. Porsche AG<br />
Stuttgart<br />
179
180<br />
board of managing directors<br />
from left to right:<br />
Klaus-Peter Müller<br />
Chairman of the Board of<br />
Managing Directors<br />
Staff departments<br />
Accounting and Taxes<br />
Compliance and Security<br />
Corporate Communications<br />
and Economic Research<br />
Financial Controlling<br />
Internal Auditing<br />
Strategy and Controlling<br />
Wolfgang Hartmann<br />
Staff department<br />
Risk Control<br />
Banking departments<br />
Credit Operations<br />
Private Customers<br />
Global Credit Operations<br />
Real Estate<br />
Mehmet Dalman<br />
Banking department<br />
Securities<br />
Martin Blessing<br />
Banking departments<br />
Private Banking<br />
Retail Banking<br />
Andreas de Maizière<br />
Staff department<br />
Human Resources<br />
Service departments<br />
Global Operations<br />
Investment Banking<br />
Information Technology:<br />
IT Development<br />
IT Investment Banking<br />
IT Production<br />
IT Support<br />
Organization<br />
Transaction Banking<br />
Klaus M. Patig<br />
Staff departments<br />
Group Treasury<br />
Legal Services<br />
Banking department<br />
Asset Management<br />
Dr. Eric Strutz*<br />
Chief Financial Officer<br />
* The appointment by the<br />
Supervisory Board to the<br />
Board of Managing Directors<br />
will become effective on<br />
April 1, 2004.<br />
BOARD OF MANAGING DIRECTORS 181<br />
Nicholas Teller<br />
Banking departments<br />
Corporate Banking<br />
Financial Institutions<br />
Multinational Corporates
182<br />
regional board members<br />
Corporate customers<br />
Hermann Bürger<br />
(until March 31, 2004)<br />
Regions abroad<br />
USA, Canada,<br />
Latin America<br />
Andreas Kleffel<br />
Main branches<br />
Bielefeld, Cologne,<br />
Dortmund, Düsseldorf,<br />
Essen, Wuppertal<br />
Wojciech Kostrzewa<br />
Regions abroad<br />
Central and Eastern Europe,<br />
CIS<br />
Klaus Kubbetat<br />
Main branches<br />
Berlin, Dresden,<br />
Erfurt, Leipzig<br />
Burkhard Leffers<br />
Main branches<br />
Frankfurt, Mainz,<br />
Mannheim, Munich,<br />
Nuremberg, Stuttgart<br />
Michael J. Oliver<br />
Regions abroad<br />
Asia, Oceania<br />
Mariano Riestra<br />
Region abroad<br />
Western Europe<br />
Werner Weimann<br />
Main branches<br />
Bremen, Hamburg,<br />
Hanover, Kiel<br />
Region abroad<br />
Scandinavia<br />
chief information officer<br />
Frank Annuscheit<br />
Information Technology<br />
Transaction Banking<br />
Private customers<br />
Joachim Hübner<br />
Main branches<br />
Bielefeld, Bremen,<br />
Cologne, Dortmund,<br />
Düsseldorf, Essen,<br />
Hamburg, Hanover,<br />
Kiel, Wuppertal<br />
Dr. Dirk Mattes<br />
Main branches<br />
Berlin, Dresden,<br />
Erfurt, Frankfurt,<br />
Leipzig, Mainz,<br />
Mannheim, Munich,<br />
Nuremberg, Stuttgart
group managers<br />
Jochen Appell<br />
Chief Legal Adviser<br />
Legal Services<br />
Jürgen Berger<br />
IT Development<br />
Udo Braun<br />
IT Investment Banking<br />
Dr. Thorsten Broecker<br />
Financial Controlling<br />
Peter Bürger<br />
Multinational Corporates<br />
Peter Bürger<br />
Risk Control<br />
Dr. Rudolf Duttweiler<br />
Group Treasury<br />
Klaus-Peter Frohmüller<br />
Transaction Banking<br />
Global Operations<br />
Investment Banking<br />
Dr. Peter Hennig<br />
Financial Institutions<br />
Dr. Bernhard Heye<br />
Human Resources<br />
Wolfgang Kirsch<br />
Organization<br />
Dr. Sebastian Klein<br />
Private Banking<br />
Hartwig Kock<br />
Internal Auditing<br />
Peter Kraemer<br />
IT Production<br />
Dr. Renate Krümmer<br />
Strategy and Controlling<br />
(as from March 15, 2004)<br />
Ulrich H. Leistner<br />
Corporate Banking<br />
Corinna Barbara Linner<br />
Accounting and Taxes<br />
Torsten Lüttich<br />
Credit Operations<br />
Private Customers<br />
Ulrich Ramm<br />
Corporate Communications and<br />
Economic Research<br />
Michael Schmid<br />
Global Credit Operations<br />
Dr. Friedrich Schmitz<br />
Asset Management<br />
Hubert Spechtenhauser<br />
Real Estate<br />
Thomas Steidle<br />
Compliance and Security<br />
Roland Wolf<br />
IT Support<br />
Martin Zielke<br />
Retail Banking<br />
183
184<br />
managers of domestic main branches<br />
Berlin<br />
Klaus Heyer<br />
Jörg Schauerhammer<br />
Bielefeld<br />
Thomas Elshorst<br />
Edwin Kieltyka<br />
Bremen<br />
Carl Kau<br />
Wolfgang Schönecker<br />
Cologne<br />
Dr. Waldemar Abel<br />
Michael Hoffmann<br />
Dortmund<br />
Dieter Mahlmann<br />
Karl-Friedrich Schwagmeyer<br />
Dresden<br />
Wilhelm von Carlowitz<br />
Michael Koch<br />
Frank Schulz<br />
Düsseldorf<br />
Andreas Vogt<br />
Wolf Wirsing<br />
Erfurt<br />
Hans Engelmann<br />
Thomas Vetter<br />
Essen<br />
Manfred Breuer<br />
Manfred Schlaak<br />
Frankfurt am Main<br />
Dr. Franz-Georg Brune<br />
Wilhelm Nüse<br />
Hamburg<br />
Erhard Mohnen<br />
Jürgen Werthschulte<br />
Hanover<br />
Dirk Dreiskämper<br />
Volker Schönfeld<br />
Kiel<br />
Peter Ahls<br />
Michael Goertz<br />
Leipzig<br />
Wilhelm Plöger<br />
Heinrich Röhrs<br />
Mainz<br />
Herbert Enders<br />
Michael Sonnenschein<br />
Mannheim<br />
Klaus Altenheimer<br />
Ilse Maria Arnst<br />
Dr. Mathias Ullrich<br />
Munich<br />
Franz Jung<br />
Hans-Peter Rien<br />
Nuremberg<br />
Bernd Grossmann<br />
Frank Haberzettel<br />
Stuttgart<br />
Hans-Jürgen Hirner<br />
René Kaselitz<br />
Dr. Gert Wünsche<br />
Wuppertal<br />
Paul Krüger<br />
Irmgard Röhm<br />
managers of larger corporates centres<br />
Düsseldorf<br />
Martin Fischedick<br />
Frankfurt am Main<br />
Andreas Schmidt<br />
Hamburg<br />
François de Belsunce<br />
Munich<br />
Sven Gohlke<br />
Stuttgart<br />
Dr. Bernd Laber
managers of foreign branches<br />
Antwerp<br />
Philippe van Hyfte<br />
Atlanta<br />
Harry Yergey<br />
Barcelona<br />
Alois Brüggemann<br />
Brno<br />
Bronislav Hybl<br />
Brussels<br />
Erik Puttemans<br />
Felix Rüther<br />
Chicago<br />
Timothy J. Shortly<br />
Hong Kong<br />
Harald W. A. Vogt<br />
Johannesburg<br />
Götz Hagemann<br />
Cornelius Obert<br />
Labuan<br />
Geoff Ho<br />
London<br />
Chris Jolly<br />
Günter Jerger<br />
Los Angeles<br />
Christian Jagenberg<br />
Madrid<br />
Antonio Martínez<br />
Milan<br />
Cristina Sironi-Sommer<br />
New York<br />
Werner Bönsch<br />
Joachim Döpp<br />
Paris<br />
Lionel Caron<br />
Ulrich Thomas Bartoszek<br />
Prague<br />
Burkhard Dallosch<br />
Günter Steiner<br />
Shanghai<br />
Joachim G. Fuchs<br />
Singapore<br />
Dr. Thomas Roznovsky<br />
Tokyo<br />
Norio Yatomi<br />
board of trustees of commerzbank foundation<br />
Dr. h.c. Martin Kohlhaussen<br />
Chairman<br />
Frankfurt am Main<br />
Prof. Dr. Dr. h.c. mult.<br />
Jürgen Mittelstrass<br />
Constance<br />
Klaus-Peter Müller<br />
Frankfurt am Main<br />
Klaus Müller-Gebel<br />
Bad Soden<br />
Michael Hocks<br />
Frankfurt am Main<br />
Executive Board<br />
Ulrich Ramm<br />
Dr. Christoph Uhsadel<br />
185
186<br />
managers of domestic group companies<br />
CBG Commerz Beteiligungsgesellschaft<br />
Holding mbH<br />
Dr. Gert Schorradt<br />
Dr. Armin Schuler<br />
comdirect bank AG<br />
Dr. Andre Carls<br />
Dr. Achim Kassow<br />
COMINVEST<br />
Asset Management GmbH<br />
Dr. Volker Doberanzke<br />
Hans-Jürgen Löckener<br />
Wolfgang Plum<br />
Claus Weltermann<br />
Commerz Business Consulting AG<br />
Dr. Ralf Klinge<br />
Commerz Grundbesitzgesellschaft<br />
mbH<br />
Dr. Detlev Dietz<br />
Arnold L. de Haan<br />
CommerzLeasing und<br />
Immobilien AG<br />
Eberhard Graf<br />
Roland Potthast<br />
Günter Ress<br />
Hubert Spechtenhauser<br />
Commerz Service Gesellschaft<br />
für Kundenbetreuung mbH<br />
Alberto Kunze<br />
Manfred Stock<br />
Hypothekenbank in Essen AG<br />
Michael Fröhner<br />
Harald Pohl<br />
Hubert Schulte-Kemper
managers of foreign group companies<br />
ADIG-Investment Luxemburg S.A.<br />
Luxembourg<br />
Heinrich Echter<br />
BRE Bank SA<br />
Warsaw<br />
Wojciech Kostrzewa<br />
Anton M. Burghardt<br />
Krzysztof Kokot<br />
Slawomir Lachowski<br />
Alicja Kos-Golaszewska<br />
Rainer Ottenstein<br />
(as from April 21, 2004)<br />
Wieslaw Thor<br />
CICM Fund Management Ltd.<br />
Dublin<br />
Peter Leisentritt<br />
<strong>Commerzbank</strong> (Budapest) Rt.<br />
Budapest<br />
Támas Hák-Kovács<br />
Oliver Sipeer<br />
<strong>Commerzbank</strong> (Eurasija) SAO<br />
Moscow<br />
Andreas D. Schwung<br />
<strong>Commerzbank</strong> Europe (Ireland)<br />
Dublin<br />
John Bowden<br />
<strong>Commerzbank</strong> International S.A.<br />
Luxembourg<br />
Bernd Holzenthal<br />
Adrien Ney<br />
<strong>Commerzbank</strong> (Nederland) N.V.<br />
Amsterdam<br />
Gerhard Liebchen<br />
Eugène v. d. Berg<br />
<strong>Commerzbank</strong><br />
(South East Asia) Ltd.<br />
Singapore<br />
Michael J. Oliver<br />
Dr. Thomas Roznovsky<br />
<strong>Commerzbank</strong> (Switzerland) Ltd<br />
Zurich<br />
Wolfgang Perlwitz<br />
Wolfgang Präuner<br />
Geneva<br />
Jean-Pierre de Glutz<br />
<strong>Commerzbank</strong> Capital<br />
Markets Corporation<br />
New York<br />
Omar Bayoumi<br />
Bernd Loewen<br />
Commerz (East Asia) Ltd.<br />
Hong Kong<br />
Harald W. A. Vogt<br />
Commerz Securities (Japan)<br />
Company Ltd.<br />
Hong Kong/Tokyo<br />
Robert John Windsor<br />
Caisse Centrale de<br />
Réescompte, S.A.<br />
Paris<br />
Hervé de Boisson<br />
Daniel Terminet<br />
Pierre Vincent<br />
Jupiter International Group plc<br />
London<br />
Jonathan Carey<br />
Edward Bonham Carter<br />
Marcus Nagel<br />
187
188<br />
regional advisory committees<br />
Baden-Württemberg<br />
Heinz Georg Baus<br />
Chairman of the<br />
Board of Directors<br />
Bauhaus AG, Zurich<br />
Mannheim<br />
Senator E.h. Hans Brandau<br />
Chairman of the Boards of<br />
Managing Directors<br />
Badischer Gemeinde-<br />
Versicherungs-Verband<br />
Badische Allgemeine<br />
Versicherung AG<br />
Karlsruhe<br />
Dr. Ulrich Brocker<br />
General Manager<br />
SÜDWESTMETALL<br />
Verband der Metall- und<br />
Elektroindustrie<br />
Baden-Württemberg e. V.<br />
Stuttgart<br />
Manfred Häner<br />
Member of the<br />
Group Executive Board<br />
Micronas Semiconductor<br />
Holding AG<br />
Zurich/Switzerland<br />
Dipl.-Ing. Jörg Menno Harms<br />
Chairman of the Executive Board<br />
Hewlett-Packard GmbH<br />
Böblingen<br />
Prof. Dr. Dr. Ulrich Hemel<br />
Chief Executive Officer<br />
Paul Hartmann AG<br />
Heidenheim<br />
Dr. Stefan von Holtzbrinck<br />
Chairman of the Executive Board<br />
Georg von Holtzbrinck GmbH<br />
Publishing Group<br />
Stuttgart<br />
Dipl.-Ing. Bernhard Jucker<br />
Chairman of the Board of<br />
Managing Directors<br />
ABB AG<br />
Mannheim<br />
Dr. Hermann Jung<br />
Member of the Board of<br />
Managing Directors<br />
Voith AG<br />
Heidenheim<br />
Dipl.-Kaufmann Sigmund Kiener<br />
Managing Partner<br />
InFoScore Management- und<br />
Beteiligungs GmbH<br />
Baden-Baden<br />
Prof. Dr. Renate Köcher<br />
General Manager<br />
INSTITUT FÜR DEMOSKOPIE<br />
ALLENSBACH<br />
Allensbach am Bodensee<br />
Detlef Konter<br />
Manager<br />
Head of Finance and Accounting<br />
Robert Bosch GmbH<br />
Stuttgart<br />
Dr. Thomas Lindner<br />
Chairman of the Executive Board<br />
and General Partner<br />
GROZ-BECKERT KG<br />
Albstadt (Ebingen)<br />
Hon. Senator<br />
Dr. h.c. Adolf Merckle<br />
Lawyer<br />
Proprietor Merckle/ratiopharm<br />
Group<br />
Blaubeuren<br />
Dipl.-Volkswirt Jörg-Viggo Müller<br />
Member of the Board of<br />
Managing Directors<br />
Hugo Boss AG<br />
Metzingen<br />
Winfried Paul<br />
Vice-President<br />
Alcan Holdings Switzerland Ltd.<br />
Zurich/Switzerland<br />
Bernhard Schreier<br />
Chairman of the Board of<br />
Managing Directors<br />
Heidelberger<br />
Druckmaschinen AG<br />
Heidelberg<br />
Georg Weisweiler<br />
Member of the Executive Board<br />
MAHLE GmbH<br />
Stuttgart<br />
Dr. Hans-Peter Wild<br />
Managing Partner<br />
Rudolf-Wild-Werke<br />
Eppelheim<br />
Kurt Wontorra<br />
General Manager<br />
Corposan Holding GmbH<br />
Baden-Baden
Bavaria<br />
Dr. Wilfried Backes<br />
Member of the Board of<br />
Managing Directors<br />
EPCOS AG<br />
Munich<br />
Dr. Ferdinand Graf von Ballestrem<br />
Member of the Board of<br />
Managing Directors<br />
MAN <strong>Aktiengesellschaft</strong><br />
Munich<br />
Dipl.-Betriebswirt Dieter Bellé<br />
Member of the Board of<br />
Managing Directors<br />
LEONI AG<br />
Nuremberg<br />
Frank A. Bergner<br />
Managing Partner<br />
Richard Bergner Holding<br />
GmbH & Co. KG<br />
Schwabach<br />
Dr. sc. pol. Wolfgang Colberg<br />
General Manager<br />
BSH Bosch und Siemens<br />
Hausgeräte GmbH<br />
Munich<br />
Klaus Conrad<br />
Partner<br />
Conrad Holding GmbH<br />
Hirschau<br />
Carl Friedrich Eckart<br />
Managing Partner<br />
ECKART GmbH & Co. KG<br />
Fürth (Bavaria)<br />
Peter J. Fischl<br />
Member of the Board of<br />
Managing Directors<br />
Infineon Technologies AG<br />
Munich<br />
Dr. Reinhard Fuchs<br />
Chairman of the Board of<br />
Managing Directors<br />
WWK Lebensversicherung a. G.<br />
WWK Allgemeine<br />
Versicherung AG<br />
Munich<br />
Michael Glos, MdB<br />
Leader of<br />
CSU parliamentary group<br />
Deutscher Bundestag<br />
Berlin<br />
Dipl.-Wirtsch.-Ing.<br />
Dirk Heidenreich<br />
Chief Executive Officer<br />
Semikron International<br />
Dr. Fritz Martin GmbH & Co. KG<br />
Nuremberg<br />
Rainer Hilpert<br />
Member of the Board of<br />
Managing Directors<br />
GEMA Gesellschaft für<br />
musikalische Aufführungsund<br />
mechanische<br />
Vervielfältigungsrechte<br />
Munich<br />
Dipl.-Wirtsch.-Ing. Thomas Kaeser<br />
General Manager<br />
KAESER KOMPRESSOREN GmbH<br />
Coburg<br />
Prof. Dr. Anton Kathrein<br />
Managing General Partner<br />
KATHREIN-Werke KG<br />
Rosenheim<br />
Dr. Karl-Hermann Lowe<br />
Member of the Board of<br />
Managing Directors<br />
Allianz Versicherungs-AG<br />
Munich<br />
REGIONAL ADVISORY COMMITTEES 189<br />
Dipl.-Ing. Thomas Netzsch<br />
Managing Partner<br />
Erich Netzsch GmbH & Co.<br />
Holding KG<br />
Selb<br />
Prof. Susanne Porsche<br />
Producer<br />
sanset Film & Fernsehproduktionen<br />
GmbH<br />
Munich<br />
Dr. Lorenz M. Raith<br />
Herzogenaurach<br />
Urs Rohner<br />
Chairman of the Board of<br />
Managing Directors<br />
ProSiebenSat.1 Media AG<br />
Unterföhring<br />
Dipl.-Ing. Helmuth Schaak<br />
Chairman of the<br />
Supervisory Board<br />
Leistritz AG<br />
Nuremberg<br />
Dr. Hans Seidl<br />
Chairman of the<br />
Supervisory Board<br />
Vinnolit Kunststoff<br />
GmbH & Co. KG<br />
Ismaning<br />
Dr. Rudolf Staudigl<br />
General Manager<br />
Wacker-Chemie GmbH<br />
Munich<br />
Klaus Steger<br />
Member of the Board of<br />
Managing Directors<br />
ERWO Holding AG<br />
Nuremberg
190 REGIONAL ADVISORY COMMITTEES<br />
Dr. Jürgen Terrahe<br />
Munich<br />
Dr. Klaus Warning<br />
Member of the Board of<br />
Managing Directors<br />
SGL Carbon AG<br />
Wiesbaden<br />
Berlin<br />
Prof. Dr. Peter von Dierkes<br />
Berlin<br />
Dr. Peter E. Gutsche<br />
Member of the<br />
Administration Board<br />
Versorgungswerk der<br />
Zahnärztekammer Berlin<br />
Berlin<br />
Dipl.-Ing. Hermann Hauertmann<br />
Managing Partner<br />
Schwartauer Werke GmbH & Co.<br />
Kakao Verarbeitung Berlin<br />
Berlin<br />
Joachim Hunold<br />
Managing Partner<br />
Air Berlin GmbH & Co.<br />
Luftverkehrs KG<br />
Berlin<br />
Dipl.-Kaufmann Joachim Klein<br />
Managing Partner<br />
Umlauf & Klein Group<br />
GmbH & Co.<br />
Berlin<br />
Dipl.-Kaufmann Peter J. Klein<br />
Managing Partner<br />
Ärzte-Treuhand<br />
Vermögensverwaltung GmbH<br />
Berlin<br />
Dr. Hartmann Kleiner<br />
Lawyer<br />
Chief Manager<br />
VME Verband der Metall- und<br />
Elektro-Industrie in Berlin und<br />
Brandenburg e.V.<br />
Berlin<br />
Universitäts-Prof. Dr. Dr. h.c. mult.<br />
Heinz-Georg Klös<br />
Member of the<br />
Supervisory Board<br />
Zoologischer Garten Berlin AG<br />
Berlin<br />
Hans-Ulrich Klose<br />
Member of<br />
Deutscher Bundestag<br />
Deputy Chairman of<br />
Foreign Affairs Committee<br />
Deutscher Bundestag<br />
Berlin<br />
Dr. Joachim Lemppenau<br />
Chairman of the Boards of<br />
Managing Directors<br />
Volksfürsorge Gruppe<br />
Hamburg<br />
Joachim Lubitz<br />
Member of the Board of<br />
Managing Directors<br />
Vattenfall Europe AG<br />
Berlin<br />
Dr.-Ing. E.h. Hartmut Mehdorn<br />
Chairman of the Board of<br />
Managing Directors<br />
Deutsche Bahn AG<br />
Berlin<br />
Dipl.-Volkswirt Manfred Neubert<br />
Chief Executive Officer<br />
Willy Vogel AG<br />
Berlin<br />
Dipl.-Ing. Jürgen Reuning, MBA<br />
President<br />
Central & East European Area<br />
OTIS International<br />
Holdings GmbH<br />
Berlin<br />
Manfred Freiherr von Richthofen<br />
President<br />
Deutscher Sportbund<br />
Berlin<br />
Dr. Uwe Runge<br />
President of the Consistory<br />
Protestant Church of<br />
Berlin-Brandenburg<br />
Berlin<br />
Detlef Schulz<br />
Public Accountant and<br />
Tax Consultant<br />
General Manager<br />
alltreu GmbH<br />
Wirtschaftsprüfungsgesellschaft,<br />
Partner<br />
Detlef Schulz und Partner GbR<br />
Wirtschaftsprüfer,<br />
Rechtsanwälte, Steuerberater<br />
Berlin<br />
Dr. Attilio Sebastio<br />
Member of the Board of<br />
Managing Directors<br />
Berlin-Chemie AG<br />
Berlin<br />
Dipl.-oec. Felix Strehober<br />
Manager<br />
Natural Gas, Finances and<br />
Project Development<br />
ZGG-Zarubezhgaz-Erdgashandel-<br />
Gesellschaft mbH<br />
Berlin<br />
Volker Ullrich<br />
Managing Partner<br />
Zuckerhandelsunion GmbH<br />
Berlin
Brandenburg<br />
Dipl.-Kaufmann Hubert Marbach<br />
Member of the Board of<br />
Managing Directors<br />
Vattenfall Europe<br />
Mining & Generation AG<br />
Berlin and Senftenberg<br />
Hartmut Meyer, Minister (retired)<br />
Potsdam<br />
Dr. Rainer Peters<br />
Chief Executive Officer<br />
E.DIS <strong>Aktiengesellschaft</strong><br />
Fürstenwalde/Spree<br />
Bremen<br />
Edgar Grönda<br />
General Manager/Lawyer<br />
Schultze & Braun<br />
Rechtsanwaltsgesellschaft mbH<br />
Bremen<br />
Jürgen Holtermann<br />
General Manager<br />
bremenports GmbH & Co. KG<br />
Bremen<br />
Dipl.-Kaufmann Ulrich Mosel<br />
General Manager<br />
H. Siedentopf GmbH & Co. KG<br />
Bremen<br />
Senator Dr. Ulrich Josef Nussbaum<br />
Senat der Finanzen der<br />
Freien und Hansestadt Bremen<br />
Bremen<br />
Hillert Onnen<br />
Chief Financial Officer<br />
BLG LOGISTICS<br />
GROUP AG & Co. KG<br />
Bremen<br />
Bernd Schopf<br />
General Manager<br />
BrainMedia GmbH & Co. KG<br />
Bremen<br />
Hamburg<br />
Thomas Cremer<br />
Managing Partner<br />
Peter Cremer Holding<br />
GmbH & Co.<br />
Hamburg<br />
Rainer Detering<br />
Member of the Executive Board<br />
Finance and Accounting<br />
HELM AG<br />
Hamburg<br />
Kurt Döhmel<br />
Chairman of the Executive Board<br />
Shell Deutschland Holding GmbH<br />
Hamburg<br />
Dr. Karin Fischer<br />
Majority Shareholder<br />
DKV EURO SERVICE<br />
GmbH & Co. KG<br />
Hamburg<br />
Herbert Fronert<br />
Member of the Board of<br />
Managing Directors<br />
Volksfürsorge<br />
Versicherungsgruppe<br />
Hamburg<br />
REGIONAL ADVISORY COMMITTEES 191<br />
Hansjoachim Fruschki<br />
Chief Executive<br />
Deutsche Angestellten-<br />
Krankenkasse<br />
Hamburg<br />
Mogens Granborg<br />
Executive Vice President<br />
Danisco A/S<br />
Copenhagen/Denmark<br />
Prof. Dr. Ernst Haider<br />
Chairman of the Executive Board<br />
Verwaltungs-Berufsgenossenschaft<br />
Hamburg<br />
Hon. Senator Horst R. A. Hansen<br />
Member of the<br />
Supervisory Board<br />
and Shareholders’ Committee<br />
Otto (GmbH & Co. KG)<br />
Hamburg<br />
Steffen Harpøth<br />
SHC – Steffen Harpøth Company<br />
London/United Kingdom<br />
Rolf Ide<br />
General Manager<br />
Asset Management<br />
Heinrich Bauer Verlag KG<br />
Hamburg<br />
Dr. Thomas Klischan<br />
Chief Manager<br />
NORDMETALL Verband der<br />
Metall- und Elektroindustrie e.V.<br />
Hamburg, Schleswig-Holstein<br />
und Mecklenburg-Vorpommern<br />
Hamburg
192 REGIONAL ADVISORY COMMITTEES<br />
Prof. Dr. Norbert Klusen<br />
Chief Executive<br />
Techniker Krankenkasse<br />
Hamburg<br />
Hans Jürgen Kuczera<br />
Member of the Executive Board<br />
Lawyer<br />
Imtech Deutschland<br />
GmbH & Co. KG<br />
Hamburg<br />
Ralph P. Liebke<br />
General Manager<br />
Aon Jauch & Hübener<br />
Holdings GmbH<br />
Hamburg<br />
Hans Joachim Oltersdorf<br />
Member of the Board of<br />
Managing Directors<br />
Fielmann AG<br />
Hamburg<br />
Dr. Cletus von Pichler<br />
Chairman of the Board of<br />
Managing Directors<br />
Jungheinrich AG<br />
Hamburg<br />
Prof. Jobst Plog<br />
Director General<br />
Norddeutscher Rundfunk<br />
Hamburg<br />
Dr. Walter Richtberg<br />
Chairman of the Executive Board<br />
dpa Deutsche Presse-Agentur<br />
GmbH<br />
Hamburg<br />
Erck Rickmers<br />
Managing Partner<br />
Nordcapital Holding<br />
GmbH & Cie. KG<br />
Hamburg<br />
Andreas Rost<br />
Chairman of the Board of<br />
Managing Directors<br />
Holsten-Brauerei AG<br />
Hamburg<br />
Dipl.-Finanzwirt Albert C. Schmidt<br />
Tax Consultant<br />
Hamburg<br />
Peter-Joachim Schönberg<br />
Member of the Board of<br />
Managing Directors<br />
Behn Meyer Holding AG<br />
Hamburg<br />
Dr. Bernhard von Schweinitz<br />
Notary<br />
Notariat am Gänsemarkt<br />
Hamburg<br />
Prof. Dr. Fritz Vahrenholt<br />
Chairman of the Board of<br />
Managing Directors<br />
REpower Systems AG<br />
Hamburg<br />
Dr. Gerd G. Weiland<br />
Lawyer<br />
Hamburg<br />
Karl Udo Wrede<br />
Member of the Board of<br />
Managing Directors<br />
Ganske Verlagsgruppe GmbH<br />
Hamburg<br />
Dipl.-Kaufmann<br />
Hans-Joachim Zwarg<br />
Member of the Board of<br />
Managing Directors<br />
Phoenix AG<br />
Hamburg<br />
Hesse<br />
Manfred Behrens<br />
Member of the Board of<br />
Managing Directors<br />
Volksfürsorge<br />
Versicherungsgruppe<br />
Hamburg<br />
Dipl.-Wirtsch.-Ing.<br />
Heinz-Werner Binzel<br />
Member of the Board of<br />
Managing Directors<br />
RWE Energy AG<br />
Dortmund<br />
Dr. Erich Coenen<br />
Frankfurt am Main<br />
Dr. Harald Dombrowski<br />
General Manager<br />
EKF Finanz Frankfurt GmbH<br />
Hofheim-Wallau<br />
Norbert Fiebig<br />
General Manager<br />
Deutsches Reisebüro GmbH<br />
Frankfurt am Main<br />
Dr. Rolf-Jürgen Freyberg<br />
Chief Executive Officer<br />
BGAG Beteiligungsgesellschaft<br />
der Gewerkschaften AG<br />
Frankfurt am Main<br />
Dr. Jürgen W. Gromer<br />
President<br />
Tyco Electronics Corporation<br />
Bensheim<br />
Gerd Grünenwald<br />
Group Managing Director/<br />
Chairman of the Executive Board<br />
Goodyear Dunlop Tires<br />
Germany GmbH<br />
Hanau
Dipl.-Kaufmann<br />
Wolfgang Gutberlet<br />
Chief Executive Officer<br />
tegut… Gutberlet Stiftung & Co.<br />
Fulda<br />
Wolf Hoppe<br />
Managing Director<br />
HOPPE AG<br />
Stadtallendorf<br />
Roland D’Ieteren<br />
Président<br />
SA D’Ieteren NV<br />
Brussels<br />
Dr. Dagobert Kotzur<br />
Chairman of the Executive Board<br />
Schunk GmbH<br />
Giessen<br />
Dipl.-Ing. Roland Lacher<br />
Chairman of the Board of<br />
Managing Directors<br />
Singulus Technologies AG<br />
Kahl<br />
Jürgen Lemmer<br />
Bad Homburg v.d.H.<br />
Dr. Edgar Lindermann<br />
Member of the Board of<br />
Managing Directors<br />
Samson AG<br />
Frankfurt am Main<br />
Dipl.-Ing. Klaus K. Moll<br />
Member of the Board of<br />
Managing Directors<br />
mg technologies ag<br />
Frankfurt am Main<br />
Aleksander M.C. Ruzicka<br />
Chief Executive Officer<br />
Central Europe & Africa<br />
Aegis Media GmbH & Co. KG<br />
Central Services<br />
Wiesbaden<br />
Dr. Hermann Otto Solms, MdB<br />
Vice-President<br />
Deutscher Bundestag<br />
Berlin<br />
Dr. Dieter Truxius<br />
Member of the Executive Board<br />
Heraeus Holding GmbH<br />
Hanau<br />
Alexander Wiegand<br />
Managing Partner<br />
WIKA Alexander Wiegand<br />
GmbH & Co. KG<br />
Klingenberg<br />
Lower Saxony<br />
Dr. Dirk Basting<br />
Member of the<br />
Supervisory Board<br />
Sartorius AG<br />
Göttingen<br />
Kaj Burchardi<br />
Executive Director<br />
Sappi International S.A.<br />
Brussels<br />
Claas E. Daun<br />
Chief Executive Officer<br />
DAUN & CIE. AG<br />
Rastede<br />
Dr. Heiner Feldhaus<br />
Chairman of the Board of<br />
Managing Directors<br />
Concordia Versicherungsgesellschaft<br />
a.G.<br />
Hanover<br />
Jens Fokuhl<br />
Member of the Board of<br />
Managing Directors<br />
Nordzucker AG<br />
Brunswick<br />
REGIONAL ADVISORY COMMITTEES 193<br />
Klaus Friedland<br />
Hemmingen<br />
Dr.-Ing. Heinz Jörg Fuhrmann<br />
Member of the Board of<br />
Managing Directors<br />
Salzgitter AG<br />
Salzgitter<br />
Herbert Haas<br />
Member of the Board of<br />
Managing Directors<br />
Talanx AG<br />
Hanover<br />
Carl Graf von Hardenberg<br />
Chairman of the<br />
Supervisory Board<br />
Hardenberg-Wilthen AG<br />
Nörten-Hardenberg<br />
Alfred Hartmann<br />
Captain and Shipowner<br />
Chairman of the Board of<br />
Managing Directors<br />
Atlas Reederei AG<br />
Leer<br />
Albrecht Hertz-Eichenrode<br />
Chief Executive Officer<br />
HANNOVER Finanz GmbH<br />
Hanover<br />
Andreas R. Herzog<br />
Chief Financial Officer<br />
Bühler AG<br />
Uzwill/Switzerland<br />
Dipl.-Kaufmann Axel Höbermann<br />
Deputy Chairman of the<br />
Supervisory Board<br />
Lucia Strickwarenfabrik AG<br />
Lüneburg
194 REGIONAL ADVISORY COMMITTEES<br />
Ingo Kailuweit<br />
Chief Executive<br />
Kaufmännische Krankenkasse –<br />
KKH<br />
Hanover<br />
Dr. Gernot Kalkoffen<br />
Member of the Board of<br />
Managing Directors<br />
Esso Deutschland GmbH<br />
Hamburg<br />
Dr. Joachim Kreuzburg<br />
Chairman of the Board of<br />
Managing Directors<br />
Sartorius AG<br />
Göttingen<br />
Dr. Günter Mahlke<br />
Deputy Chairman of the<br />
Administration Committee<br />
Ärzteversorgung Niedersachsen<br />
Hanover<br />
Andreas Maske<br />
Managing Director<br />
Maske AG<br />
Hamburg<br />
Dr. Volker von Petersdorff<br />
Chairman of the<br />
Executive Committee<br />
Altersversorgungswerk<br />
der Zahnärztekammer<br />
Niedersachsen<br />
Hanover<br />
Andreas Picolin<br />
Member of the Board of<br />
Managing Directors<br />
Nordenia International AG<br />
Greven<br />
Friedrich Popken<br />
Chairman of the<br />
Supervisory Board<br />
Popken Group<br />
Rastede<br />
Dipl.-Volkswirt Ernst H. Rädecke<br />
Managing Partner<br />
C. Hasse & Sohn,<br />
Inh. E. Rädecke GmbH & Co.<br />
Uelzen<br />
Joachim Reinhart<br />
President + COO<br />
Matsushita Electric Europe<br />
(HQ) Ltd.<br />
Wiesbaden<br />
Wolfgang Rusteberg<br />
Hannoversch Münden<br />
Dr. Peter Schmidt<br />
Chairman of the Executive Board<br />
TROESTER GmbH & Co. KG<br />
Hanover<br />
Dipl.-Kaufmann Peter Seeger<br />
Manager<br />
Shared Service Center TUI AG<br />
Hanover<br />
Bruno Steinhoff<br />
Chairman<br />
Steinhoff International<br />
Holdings Ltd.<br />
Johannesburg/South Africa<br />
Reinhold Stöver<br />
Proprietor<br />
Stöver Group<br />
Wildeshausen<br />
Dr. rer. pol. Bernd Jürgen Tesche<br />
Chairman of the Executive Board<br />
Solvay Deutschland GmbH<br />
Hanover<br />
Dipl.-Kaufmann Klaus Treiber<br />
Chairman of the Board of<br />
Managing Directors<br />
CG Nordfleisch AG<br />
Hamburg<br />
Wilhelm Wackerbeck<br />
Chairman of the Board of<br />
Managing Directors<br />
WERTGARANTIE<br />
Technische Versicherung AG<br />
Hanover<br />
Dipl.-Math. Hans-Artur Wilker<br />
General Manager<br />
Jos. L. Meyer GmbH<br />
Papenburg<br />
Mecklenburg-Western<br />
Pomerania<br />
Prof. Dr. med. Dietmar Enderlein<br />
Chairman of the Board of<br />
Managing Directors<br />
MEDIGREIF-Unternehmensgruppe<br />
Greifswald<br />
North Rhine-Westphalia<br />
Jan A. Ahlers<br />
Deputy Chairman of the<br />
Supervisory Board<br />
Ahlers AG<br />
Herford<br />
Theo Albrecht<br />
Member of the<br />
Administrative Board<br />
Aldi GmbH & Co. KG’s<br />
Essen<br />
Werner Andree<br />
Member of the Board of<br />
Managing Directors<br />
Vossloh AG<br />
Werdohl
Dipl.-Betriebswirt<br />
A. Udo Bachmann<br />
Chief Executive Officer<br />
GAGFAH<br />
Gemeinnützige Aktien-<br />
Gesellschaft für Angestellten-<br />
Heimstätten<br />
Essen<br />
Peter Bagel<br />
General Partner<br />
A. Bagel<br />
Düsseldorf,<br />
Bagel Druck GmbH & Co. KG<br />
Ratingen,<br />
Karl Rauch Verlag KG<br />
Düsseldorf<br />
Dipl.-Kaufmann<br />
Michael von Bartenwerffer<br />
Chairman of the Executive Board<br />
Aug. Winkhaus GmbH & Co. KG<br />
Telgte<br />
Dr. Thomas Beck<br />
Member of the Board of<br />
Managing Directors<br />
Renault Nissan Deutschland AG<br />
Brühl<br />
Wolfgang van Betteray<br />
Senior Partner<br />
Kanzlei Metzeler – van Betteray<br />
Rechtsanwälte – Steuerberater<br />
Düsseldorf<br />
Ulrich Bettermann<br />
Managing Partner<br />
OBO Bettermann GmbH & Co.<br />
Menden<br />
Dr. Uwe Bilstein<br />
General Manager<br />
UGA-Niederrhein GmbH<br />
Straelen<br />
Dr. rer. comm. Wolfgang Böllhoff<br />
Managing Partner<br />
Wilhelm Böllhoff GmbH & Co. KG<br />
Bielefeld<br />
Dieter Bongert<br />
Chief Town Clerk (retired)<br />
Chairman of the Executive Board<br />
Ruhrverband<br />
Essen<br />
Wilhelm Bonse-Geuking<br />
Chairman of the Board of<br />
Managing Directors<br />
Deutsche BP AG<br />
BP Group Vice-President Europe<br />
Bochum<br />
Dipl.-Volkswirt Peter Bosbach<br />
General Manager<br />
Schäfer Werke GmbH<br />
Neunkirchen<br />
Hans-Jürgen Bremer<br />
Executive Board Member<br />
Kirchliche Zusatzversorgungskasse<br />
Rheinland-Westfalen<br />
Gemeinsame Versorgungskasse<br />
für Pfarrer und Kirchenbeamte<br />
Dortmund<br />
Dr. Joachim Breuer<br />
Chief Manager<br />
Hauptverband der gewerblichen<br />
Berufsgenossenschaften<br />
Sankt Augustin<br />
Norbert Brodersen<br />
Member of the<br />
Supervisory Board<br />
KM Europa Metal AG<br />
Osnabrück<br />
Holger Brückmann-Turbon<br />
Chief Executive Officer<br />
Turbon AG<br />
Hattingen<br />
REGIONAL ADVISORY COMMITTEES 195<br />
Dr. Klaus Bussfeld<br />
Gelsenkirchen<br />
Rudolph Erbprinz von Croÿ<br />
Herzog von Croÿ’sche<br />
Verwaltung<br />
Dülmen<br />
Jörg Deisel<br />
Management Consultant<br />
Witten<br />
Dr. jur. Hansjörg Döpp<br />
Chief Manager<br />
Verband der Metallund<br />
Elektro-Industrie<br />
Nordrhein-Westfalen e.V. and<br />
Landesvereinigung der<br />
Arbeitgeberverbände<br />
Nordrhein-Westfalen e.V.<br />
Düsseldorf<br />
Klaus Dohle<br />
General Manager<br />
Dohle Handelsgruppe Service<br />
GmbH & Co. KG<br />
Siegburg<br />
Dr. Udo Eckel<br />
General Manager<br />
V & I Management<br />
GmbH & Co. KG,<br />
General Manager<br />
BFH Beteiligungsholding GmbH<br />
Wachtendonk<br />
Christian Eigen<br />
Deputy Chairman of the Board<br />
of Managing Directors<br />
MEDION AG<br />
Essen<br />
Jens Gesinn<br />
Member of the Board of<br />
Managing Directors<br />
Ferrostaal AG<br />
Essen
196 REGIONAL ADVISORY COMMITTEES<br />
Claes Göransson<br />
General Manager<br />
Vaillant GmbH<br />
Remscheid<br />
Dr. Hans-Ulrich Günther<br />
General Manager<br />
Deilmann-Montan GmbH<br />
Bad Bentheim<br />
Rüdiger Andreas Günther<br />
Chairman of the Executive Board<br />
CLAAS KGaA mbH<br />
Harsewinkel<br />
Dieter Gundlach<br />
Chairman of the Executive Board<br />
ARDEX GmbH<br />
Witten<br />
Margrit Harting<br />
Executive Manager<br />
Harting KGaA<br />
Espelkamp<br />
Dr. h.c. Erivan Karl Haub<br />
Chairman of the Executive Board<br />
Tengelmann<br />
Warenhandelsgesellschaft<br />
Mülheim an der Ruhr<br />
Dr. Kurt Hochheuser<br />
Düsseldorf<br />
Prof. Dr. Bernd J. Höfer<br />
Deputy Chairman of the Board<br />
DLR Deutsches Zentrum für<br />
Luft- und Raumfahrt e.V.<br />
Cologne<br />
Hermann Hövelmann<br />
Managing Partner<br />
Chairman of the Executive Board<br />
Mineralquellen und Getränke<br />
H. Hövelmann GmbH<br />
Duisburg<br />
Dr. Hans-Ulrich Holst<br />
Chief Financial Officer<br />
RTL Television GmbH<br />
Cologne<br />
Dr. jur. Stephan J. Holthoff-Pförtner<br />
Lawyer and Notary<br />
Partner<br />
Hopf-Unternehmensgruppe<br />
Essen<br />
Dipl.-Wirtsch.-Ing.<br />
Hans-Dieter Honsel<br />
Chairman of the Board<br />
Honsel International<br />
Technologies S.a.r.l.<br />
Luxembourg<br />
Wilfried Jacobs<br />
Chief Executive<br />
AOK Rheinland – Die Gesundheitskasse<br />
Düsseldorf<br />
Heiner Kamps<br />
Managing Partner<br />
BHVG Beteiligungs- Beratungs- &<br />
Vermögensgesellschaft mbH<br />
Düsseldorf<br />
Dr. Hans-H. Kasten<br />
Member of the Board of<br />
Managing Directors<br />
AMB Generali Holding AG<br />
Aachen<br />
Dr. Gerhard Kinast<br />
Vice-President<br />
Petro-Canada<br />
London<br />
Dr. Franz Josef King<br />
Chairman of the Executive Board<br />
Saint-Gobain Glass<br />
Deutschland GmbH<br />
Aachen<br />
Dipl.-Ing. Dipl.-Wirtsch.-Ing.<br />
Dieter Köster<br />
Chief Executive Officer<br />
Köster AG<br />
Osnabrück<br />
Gustav-Adolf Kümpers<br />
Partner<br />
F. A. Kümpers GmbH & Co. KG<br />
Kümpers GmbH & Co.<br />
Rheine<br />
Hans-Joachim Küpper<br />
General Manager<br />
Küpper Group<br />
Velbert/Heiligenhaus<br />
Kurt Küppers<br />
Managing Partner<br />
Hülskens GmbH & Co. KG<br />
Wesel<br />
Assessor Georg Kunze<br />
General Manager<br />
Landesverband Rheinland-<br />
Westfalen der gewerblichen<br />
Berufsgenossenschaften<br />
Düsseldorf<br />
Dipl.-Kaufmann Ulrich Leitermann<br />
Member of the Board of<br />
Managing Directors<br />
SIGNAL IDUNA Group<br />
Dortmund/Hamburg<br />
Dr. Dirk Lepelmeier<br />
General Manager<br />
Nordrheinische Ärzteversorgung<br />
Düsseldorf<br />
Jyri Luomakoski<br />
Chief Financial Officer<br />
Deputy Chief Executive Officer<br />
Uponor Corporation<br />
Vantaa/Finland
Klaus J. Maack<br />
ERCO Leuchten GmbH<br />
Lüdenscheid<br />
Dipl.-Kaufmann Peter Mazzucco<br />
Member of the Board of<br />
Managing Directors<br />
Edscha AG<br />
Remscheid<br />
Dipl.-Kaufmann Helmut Meyer<br />
Member of the Board of<br />
Managing Directors<br />
DEUTZ AG<br />
Cologne<br />
Friedrich Neukirch<br />
Chairman of the Executive Board<br />
Klosterfrau Deutschland GmbH<br />
Cologne<br />
Dipl.-oec. Jan Peter Nonnenkamp<br />
General Manager<br />
Leopold Kostal GmbH & Co. KG<br />
Lüdenscheid<br />
Dipl.-oec. Bernd Pederzani<br />
Managing Partner<br />
EUROPART Holding GmbH<br />
Hagen<br />
Dipl.-Ing. Volkmar Peters<br />
Managing Partner<br />
Peters Beteiligungs<br />
GmbH & Co. KG<br />
Moers<br />
Dipl.-Kaufmann<br />
Eberhard Pothmann<br />
Executive Vice President<br />
Vorwerk & Co. KG<br />
Wuppertal<br />
Dipl.-Kaufmann<br />
Ulrich Reifenhäuser<br />
Managing Partner<br />
Reifenhäuser GmbH & Co. KG<br />
Maschinenfabrik<br />
Troisdorf<br />
Hans Reinert<br />
Member of the Advisory Board<br />
H. & E. Reinert<br />
Westfälische Privat-Fleischerei<br />
GmbH & Co. KG<br />
Versmold<br />
Dr. Joachim F. Reuter<br />
General Manager<br />
Gebrüder Trox GmbH<br />
Neukirchen-Vluyn<br />
Klaus H. Richter<br />
Member of the Executive Board<br />
Barmer Ersatzkasse<br />
Wuppertal<br />
Robert Röseler<br />
Chief Executive Officer<br />
ara Shoes AG<br />
Langenfeld<br />
Martin Rohm<br />
Member of the Board of<br />
Managing Directors<br />
Volkswohl Bund Versicherungen<br />
Dortmund<br />
Peter Rostock<br />
Managing General Partner<br />
BPW Bergische Achsen KG<br />
Wiehl<br />
Dipl.-Kaufmann Albert Sahle<br />
Managing Partner<br />
SAHLE WOHNEN<br />
Greven<br />
REGIONAL ADVISORY COMMITTEES 197<br />
Hans Schafstall<br />
Managing Partner<br />
Schafstall Holding<br />
GmbH & Co. KG<br />
Mülheim an der Ruhr<br />
Peter Nikolaus Schmetz<br />
Managing Partner<br />
Schmetz Capital<br />
Management GmbH<br />
Aachen<br />
Heinz G. Schmidt<br />
Member of the<br />
Supervisory Board<br />
Douglas Holding AG<br />
Hagen<br />
Dr. Peter Schörner<br />
Member of the Board of<br />
Managing Directors<br />
RAG <strong>Aktiengesellschaft</strong><br />
Essen<br />
Dipl.-Betriebswirt Horst Schübel<br />
General Manager<br />
Miele & Cie. KG<br />
Gütersloh<br />
Reinhold Semer<br />
Public Accountant and<br />
Tax Consultant<br />
Partner<br />
Hellweg Group<br />
Die Profi-Baumärkte<br />
GmbH & Co. KG<br />
Dortmund<br />
Dr. Reiner Spatke<br />
General Manager<br />
Johnson Controls GmbH<br />
Burscheid
198 REGIONAL ADVISORY COMMITTEES<br />
Werner Stickling<br />
Proprietor<br />
Nobilia-Werke<br />
J. Stickling GmbH & Co. KG<br />
Verl<br />
Karl-Heinz Stiller<br />
Chairman of the Executive Board<br />
Wincor Nixdorf Holding GmbH<br />
Paderborn<br />
Dipl.-Kaufmann Christian Sutter<br />
Managing Partner<br />
A. Sutter GmbH<br />
Essen<br />
Dr. Wolfgang Theis<br />
Chief Executive Officer<br />
Kiekert AG<br />
Heiligenhaus<br />
Detlef Thielgen<br />
Member of the Board of<br />
Managing Directors<br />
Schwarz Pharma AG<br />
Monheim<br />
Dipl.-Kaufmann Eugen Timmer<br />
Member of the Board of<br />
Managing Directors<br />
AVA Allgemeine Handelsgesellschaft<br />
der Verbraucher AG<br />
Bielefeld<br />
Dr. Hans-Georg Vater<br />
Member of the Board of<br />
Managing Directors<br />
Hochtief AG<br />
Essen<br />
Michael Willems<br />
Member of the Board of<br />
Managing Directors<br />
STEAG AG<br />
Essen<br />
Konsul<br />
Dipl.-Kaufmann Michael Wirtz<br />
Managing Partner<br />
Grünenthal GmbH,<br />
Partner<br />
Dalli-Werke Mäurer & Wirtz<br />
GmbH & Co. KG<br />
Stolberg<br />
Horst Wortmann<br />
p.h.G. Managing Partner<br />
Wortmann Schuh Holding KG<br />
Detmold<br />
Dipl.-Kaufmann Ulrich Ziolkowski<br />
Member of the Board of<br />
Managing Directors<br />
ThyssenKrupp Technologies AG<br />
Essen<br />
Rhineland-Palatinate<br />
Benoît Claire<br />
Chief Executive Officer<br />
Allgemeine Kredit Coface<br />
Holding AG<br />
Mainz<br />
Dipl.-Kaufmann Folkhart Fissler<br />
Managing Partner<br />
VESTA GmbH<br />
Idar-Oberstein<br />
Dr. Heinz Geenen<br />
Managing Partner<br />
KANN GmbH & Co. KG<br />
Baustoffwerke<br />
Bendorf<br />
Andreas Land<br />
Managing Partner<br />
Griesson – de Beukelaer<br />
GmbH & Co. KG<br />
Polch<br />
Dr. Eckhard Müller<br />
Chief Financial Officer<br />
BASF <strong>Aktiengesellschaft</strong><br />
Ludwigshafen<br />
Prof. Dr. Marbod Muff<br />
Member of the Management<br />
Finance and Personnel Divisions<br />
Boehringer Ingelheim GmbH<br />
Ingelheim am Rhein<br />
Matthäus Niewodniczanski<br />
General Manager<br />
Bitburger Getränke<br />
Verwaltungsgesellschaft mbH<br />
Bitburg<br />
Karlheinz Röthemeier<br />
Chairman of the Executive Board<br />
Verlagsgruppe Rhein Main<br />
GmbH & Co. KG<br />
Mainz<br />
Klaus Rübenthaler<br />
Member of the Board of<br />
Managing Directors<br />
Schott Glas<br />
Mainz<br />
Dipl. oec. Berta Schuppli<br />
Partner<br />
Helvetic Grundbesitzverwaltung<br />
GmbH<br />
Wiesbaden<br />
Hans Joachim Suchan<br />
Administrative Director<br />
ZDF<br />
Mainz<br />
Herbert Verse<br />
Nieder-Olm<br />
Dr. Alois Wittmann<br />
Member of the Board of<br />
Managing Directors<br />
KSB <strong>Aktiengesellschaft</strong><br />
Frankenthal
Saarland<br />
Dipl.-Kaufmann<br />
Wendelin von Boch-Galhau<br />
Chairman of the Board of<br />
Managing Directors<br />
Villeroy & Boch AG<br />
Mettlach<br />
Dipl.-Kaufmann Thomas Bruch<br />
Managing Partner<br />
Globus Holding GmbH & Co. KG<br />
St. Wendel<br />
Dipl.-Kaufmann Christian Erhorn<br />
Business Manager<br />
Saarbrücker Zeitung<br />
Verlag und Druckerei GmbH<br />
Saarbrücken<br />
Sanitätsrat<br />
Dr. med. Franz Gadomski<br />
President<br />
Ärztekammer des Saarlandes<br />
Saarbrücken<br />
Dr. rer. oec. Michael Karrenbauer<br />
Member of the Board of<br />
Managing Directors<br />
RAG Saarberg AG<br />
Saarbrücken<br />
Michel Maulvault<br />
Chairman of the Board of<br />
Managing Directors<br />
AG der Dillinger Hüttenwerke<br />
Dillingen (Saar)<br />
Dipl.-Volkswirt Dr. Richard Weber<br />
Managing Partner<br />
Karlsberg Brauerei KG Weber<br />
Homburg (Saar)<br />
Saxony<br />
Linden Blue<br />
Chairman of the Executive Board<br />
Spezialtechnik Dresden GmbH<br />
Dresden<br />
Karl Gerhard Degreif<br />
Member of the Executive Board<br />
Stadtwerke Chemnitz AG<br />
Chemnitz<br />
Günter Errmann<br />
General Manager<br />
NARVA Lichtquellen<br />
GmbH & Co. KG<br />
Brand-Erbisdorf<br />
Dr. Friedrich Josef Glatzel<br />
Member of the Board of<br />
Managing Directors<br />
envia Mitteldeutsche Energie AG<br />
Chemnitz<br />
Dr. Wolfgang Gross<br />
Managing Partner<br />
f i t GmbH<br />
Hirschfelde<br />
Konsul Dr.-Ing. Klaus-Ewald Holst<br />
Chief Executive Officer<br />
VNG-Verbundnetz Gas AG<br />
Leipzig<br />
Dr. Hans J. Naumann<br />
General Manager<br />
Niles-Simmons<br />
Industrieanlagen GmbH,<br />
Managing Partner<br />
Niles-Simmons-Hegenscheidt<br />
GmbH<br />
Chemnitz<br />
REGIONAL ADVISORY COMMITTEES 199<br />
Jürgen Preiss-Daimler<br />
Managing Partner<br />
P-D Management<br />
Consulting GmbH<br />
Preiss-Daimler Group<br />
Wilsdruff/Dresden<br />
Thilo von Selchow<br />
Chief Executive Officer<br />
ZMD Zentrum Mikroelektronik<br />
Dresden AG<br />
Dresden<br />
Dipl.-Betriebswirtin<br />
Angelika Spreng<br />
General Manager<br />
StarragHeckert GmbH<br />
Chemnitz<br />
Rolf Steinbronn<br />
Chief Executive<br />
AOK Sachsen<br />
Dresden<br />
Prof. Hanspeter Stihl<br />
Dresden<br />
Axel F. Strotbek<br />
General Manager<br />
Volkswagen Sachsen GmbH<br />
Zwickau<br />
Holger Tanhäuser<br />
Administrative Director<br />
Mitteldeutscher Rundfunk<br />
Leipzig
200 REGIONAL ADVISORY COMMITTEES<br />
Saxony-Anhalt<br />
Dr.-Ing. Klaus Hieckmann<br />
Managing Partner<br />
Symacon Engineering<br />
Barleben/Magdeburg,<br />
President<br />
Magdeburg Chamber of Industry<br />
and Commerce<br />
Magdeburg<br />
Hans Hübner<br />
Managing Director<br />
Unternehmensgruppe Hübner<br />
Neugattersleben<br />
Heiner Krieg<br />
General Manager<br />
MIBRAG mbH<br />
Theissen<br />
Schleswig-Holstein<br />
Prof. Dr. Hans Heinrich Driftmann<br />
Managing General Partner<br />
Peter Kölln<br />
Kommanditgesellschaft<br />
auf Aktien<br />
Elmshorn<br />
Volker Friedrichsen<br />
Chief Executive Officer<br />
BGZ Beteiligungsgesellschaft<br />
Zukunftsenergien AG<br />
Husum<br />
Lothar-Joachim Jenne<br />
General Partner<br />
Max Jenne Arzneimittel-<br />
Grosshandlung KG<br />
Kiel<br />
Dr. jur. Klaus Murmann<br />
Chairman<br />
Sauer-Danfoss Inc.<br />
Neumünster<br />
Lincolnshire, Illinois/USA<br />
Dr. Lutz Peters<br />
General Manager<br />
AOH Nahrungsmittel<br />
GmbH + Co. KG<br />
Bad Schwartau<br />
Hans Wilhelm Schur<br />
Group Director<br />
Schur International a/s<br />
Horsens/Denmark<br />
Dr. Ernst J. Wortberg<br />
Chief Executive Officer<br />
L. Possehl & Co. mbH<br />
Lübeck<br />
Thuringia<br />
Reinhard Böber<br />
General Manager<br />
Glatt Ingenieurtechnik GmbH<br />
Weimar<br />
Dr. Hans-Werner Lange<br />
Chief Executive Officer<br />
TUPAG-Holding AG<br />
Mühlhausen<br />
Klaus Lantzsch<br />
Chairman of the Executive Board<br />
Managing Partner<br />
FER Fahrzeugelektrik GmbH<br />
Eisenach<br />
Dr.-Ing. Michael Militzer<br />
Chief Executive Officer<br />
MITEC Automotive AG<br />
Eisenach<br />
Eugeen Theunis<br />
Chairman of the Board of<br />
Managing Directors<br />
THEUMA NV<br />
Bekkevoort/Belgium<br />
Andreas Trautvetter<br />
Minister of the Interior<br />
Free State of Thuringia<br />
Erfurt
seats on supervisory boards<br />
and similar bodies<br />
Members of the Board of<br />
Managing Directors of<br />
<strong>Commerzbank</strong> AG<br />
Information pursuant to Art. 285,<br />
no. 10, HGB<br />
As of December 31, 2003<br />
a) Seats on mandatory supervisory boards<br />
b) Seats on similar bodies<br />
Klaus-Peter Müller<br />
a) Ford Deutschland Holding GmbH<br />
Ford-Werke AG<br />
Linde AG* )<br />
Steigenberger Hotels AG<br />
b) Assicurazioni Generali S.p.A.* )<br />
Parker Hannifin Corporation* )<br />
within <strong>Commerzbank</strong> Group:<br />
<strong>Commerzbank</strong> International S.A.<br />
(Chairman)<br />
<strong>Commerzbank</strong> (Switzerland) Ltd<br />
(Chairman)<br />
Martin Blessing<br />
a) AMB Generali Holding AG* )<br />
EUROHYPO AG* )<br />
Heidelberger<br />
Druckmaschinen AG* )<br />
ThyssenKrupp Services AG<br />
within <strong>Commerzbank</strong> Group:<br />
comdirect bank AG<br />
(Chairman)<br />
<strong>Commerzbank</strong> Inlandsbanken<br />
Holding AG<br />
(Chairman)<br />
b) within <strong>Commerzbank</strong> Group:<br />
CFM Commerz Finanz<br />
Management GmbH i.L.<br />
(Chairman)<br />
COMMERZ PARTNER Beratungsgesellschaft<br />
für Vorsorge- und<br />
Finanzprodukte GmbH<br />
(Chairman)<br />
Mehmet Dalman<br />
a) Deutsche Börse AG* )<br />
b) Tosca Limited<br />
(non-executive director)<br />
within <strong>Commerzbank</strong> Group:<br />
<strong>Commerzbank</strong> Capital<br />
Markets Corporation<br />
(Chairman)<br />
Commerz Securities<br />
(Japan) Company Ltd.<br />
(Chairman)<br />
Wolfgang Hartmann<br />
a) ProSiebenSat.1 Media AG* )<br />
Vaillant GmbH<br />
within <strong>Commerzbank</strong> Group:<br />
Commerz Grundbesitzgesellschaft<br />
mbH<br />
(Chairman)<br />
Commerz Grundbesitz-<br />
Investmentgesellschaft mbH<br />
(Chairman)<br />
Commerz Grundbesitz<br />
Spezialfondsgesellschaft mbH<br />
(Chairman)<br />
CommerzLeasing und<br />
Immobilien AG<br />
(Chairman)<br />
b) within <strong>Commerzbank</strong> Group:<br />
<strong>Commerzbank</strong> (Nederland) N.V.<br />
(Chairman)<br />
Andreas de Maizière<br />
a) ABB AG<br />
Borgers AG<br />
efiport (Educational Financial<br />
Portal) AG<br />
MAN AG* )<br />
RAG Saarberg AG<br />
Rheinische Bodenverwaltung AG<br />
(Chairman)<br />
RWE Power AG<br />
Thyssen Krupp Stahl AG<br />
within <strong>Commerzbank</strong> Group:<br />
Hypothekenbank in Essen AG<br />
b) Arenberg-Schleiden GmbH<br />
(Chairman)<br />
BVV Versicherungsverein<br />
des Bankgewerbes a.G.<br />
within <strong>Commerzbank</strong> Group:<br />
BRE Bank SA<br />
(Deputy chairman)<br />
<strong>Commerzbank</strong> (Eurasija) SAO<br />
(Chairman)<br />
Klaus M. Patig<br />
a) Ferrostaal AG<br />
G. Kromschröder AG* )<br />
(Deputy chairman)<br />
within <strong>Commerzbank</strong> Group:<br />
COMINVEST<br />
Asset Management GmbH<br />
(Chairman)<br />
Pensor Pensionsfonds AG<br />
(Deputy chairman)<br />
201
202 SEATS ON OTHER BOARDS<br />
b) Fördergesellschaft für Börsen<br />
und Finanzmärkte in Mittelund<br />
Osteuropa mbH<br />
within <strong>Commerzbank</strong> Group:<br />
ADIG-Investment<br />
Luxemburg S.A.<br />
(Chairman)<br />
AFINA Bufete de Socios<br />
Financieros S.A.<br />
Caisse Centrale de<br />
Réescompte S.A.<br />
(Chairman)<br />
<strong>Commerzbank</strong> Capital<br />
Markets Corporation<br />
<strong>Commerzbank</strong> Europe<br />
(Ireland) Unlimited<br />
(Chairman)<br />
Commerz Asset Management<br />
(UK) plc<br />
(Chairman)<br />
Commerz Securities<br />
(Japan) Company Ltd.<br />
Jupiter International Group plc<br />
(Chairman)<br />
Korea Exchange Bank<br />
(non-standing director)<br />
Montgomery Asset<br />
Management, LLC<br />
Dr. Eric Strutz** )<br />
a) within <strong>Commerzbank</strong> Group:<br />
comdirect bank AG<br />
COMINVEST<br />
Asset Management GmbH<br />
<strong>Commerzbank</strong> Auslandsbanken<br />
Holding AG<br />
<strong>Commerzbank</strong> Inlandsbanken<br />
Holding AG<br />
CommerzLeasing und<br />
Immobilien AG<br />
(Deputy chairman)<br />
Hypothekenbank in Essen AG<br />
b) Banca Intesa S.p.A.* )<br />
within <strong>Commerzbank</strong> Group:<br />
<strong>Commerzbank</strong> International S.A.<br />
Erste Europäische Pfandbriefund<br />
Kommunalkreditbank AG<br />
Nicholas Teller<br />
a) within <strong>Commerzbank</strong> Group:<br />
<strong>Commerzbank</strong> Auslandsbanken<br />
Holding AG<br />
(Chairman)<br />
Commerz Unternehmensbeteiligungs-AG<br />
b) within <strong>Commerzbank</strong> Group:<br />
BRE Bank SA<br />
**) listed company outside group<br />
**) The appointment by the Supervisory Board to the Board of Managing Directors<br />
will become effective on April 1, 2004.<br />
Former members of the<br />
Board of Managing Directors<br />
Dr. Axel Frhr. v. Ruedorffer<br />
a) Allgemeine Kreditversicherung<br />
Coface AG<br />
(Deputy chairman)<br />
Allgemeine Kredit Coface<br />
Holding AG<br />
(Deputy chairman)<br />
AUDI AG* )<br />
Commerz Unternehmensbeteiligungs-AG<br />
(Chairman)<br />
within <strong>Commerzbank</strong> Group:<br />
Hypothekenbank in Essen AG<br />
(Chairman)<br />
b) AKA Ausfuhrkredit-<br />
Gesellschaft mbH<br />
(2nd Deputy chairman)<br />
Avis Europe plc* )<br />
HANNOVER Finanz GmbH<br />
Mediobanca – Banca di Credito<br />
Finanziario S.p.A.* )<br />
Stiebel Eltron-Gruppe<br />
(Chairman)<br />
Viking Schiffsfinanz AG<br />
Viking Ship Finance<br />
(Overseas) Ltd.<br />
within <strong>Commerzbank</strong> Group:<br />
Erste Europäische Pfandbriefund<br />
Kommunalkreditbank AG<br />
(Chairman)
Members of the Supervisory<br />
Board of <strong>Commerzbank</strong> AG<br />
a) Seats on other mandatory<br />
supervisory boards<br />
b) Seats on similar bodies<br />
Dr. h.c. Martin Kohlhaussen<br />
a) Bayer AG<br />
Heraeus Holding GmbH<br />
HOCHTIEF AG<br />
Infineon Technologies AG<br />
(Deputy chairman)<br />
KARSTADT QUELLE AG<br />
(until May 2003)<br />
Linde AG (until May 2003)<br />
Schering AG<br />
ThyssenKrupp AG<br />
b) Verlagsgruppe<br />
Georg von Holtzbrinck GmbH<br />
Uwe Tschäge<br />
–<br />
Hans-Hermann Altenschmidt<br />
–<br />
Dott. Sergio Balbinot<br />
a) within group:<br />
Aachener und Münchener<br />
Lebensversicherung AG<br />
Aachener und Münchener<br />
Versicherung AG<br />
AMB Generali Holding AG<br />
b) within group:<br />
Banco Vitalicio de España,<br />
C.A. de Seguros y Réaseguros<br />
Europ Assistance Holding<br />
Generali China Life<br />
Insurance Co. Ltd.<br />
Generali España, Holding de<br />
Entidades de Seguros, S.A.<br />
(Chairman)<br />
Generali Finance B.V.<br />
Generali France S.A.<br />
(Deputy chairman)<br />
(formerly: Generali France<br />
Holding S.A.)<br />
Generali Holding Vienna AG<br />
(Deputy chairman)<br />
Generali (Schweiz) Holding<br />
Generali Sigorta S.A.<br />
(Deputy chairman)<br />
(until July 31, 2003)<br />
G. F. Participations, S.A.<br />
(Chairman)<br />
(since August 13, 2003)<br />
La Estrella S.A.<br />
Migdal Insurance Co. Ltd.<br />
Migdal Insurance Holdings Ltd.<br />
Participatie Maatschappij<br />
Graafschap Holland N.V.<br />
Transocean Holding Corporation<br />
Herbert Bludau-Hoffmann<br />
–<br />
Astrid Evers<br />
–<br />
Uwe Foullong<br />
a) DBV-Winterthur Holding AG<br />
DBV-Winterthur<br />
Lebensversicherung AG<br />
Daniel Hampel<br />
–<br />
Dr.-Ing. Otto Happel<br />
a) mg technologies AG<br />
SEATS ON OTHER BOARDS 203<br />
Dr. jur. Heiner Hasford<br />
a) D.A.S. Deutscher Automobil<br />
Schutz – Allgemeine Rechtsschutz-Versicherungs-AG<br />
ERGO<br />
Versicherungsgruppe AG* )<br />
Europäische<br />
Reiseversicherung AG<br />
(Chairman)<br />
MAN AG* )<br />
(since May 2003)<br />
MAN Nutzfahrzeuge AG<br />
(until April 2003)<br />
Nürnberger Beteiligungs-AG* )<br />
VICTORIA<br />
Lebensversicherung AG<br />
VICTORIA Versicherung AG<br />
WMF Württembergische<br />
Metallwarenfabrik AG* )<br />
b) American Re Corporation<br />
Sonja Kasischke<br />
–<br />
Wolfgang Kirsch<br />
a) Commerz Business<br />
Consulting AG<br />
(Chairman)<br />
b) COLLEGIUM GLASHÜTTEN<br />
Zentrum für Kommunikation<br />
GmbH<br />
Werner Malkhoff<br />
–<br />
Klaus Müller-Gebel<br />
a) comdirect bank AG<br />
(Deputy chairman)<br />
Deutsche Schiffsbank AG<br />
(Deputy chairman)<br />
EUROHYPO AG<br />
Holsten-Brauerei AG
204 SEATS ON OTHER BOARDS<br />
Dr. Sabine Reiner<br />
–<br />
Dr. Erhard Schipporeit<br />
a) HDI Privatversicherung AG<br />
(until July 16, 2003)<br />
HDI V.a.G.<br />
Talanx AG<br />
(since June 27, 2003)<br />
within group:<br />
Degussa AG<br />
E.ON Energie AG<br />
(until April 3, 2003)<br />
VIAG Telecom AG<br />
Ruhrgas AG<br />
(since March 25, 2003)<br />
b) Connect Austria GmbH<br />
(until December 31, 2003)<br />
within group:<br />
E.ON Risk Consulting GmbH<br />
(Chairman)<br />
Prof. Dr.-Ing. Ekkehard Schulz<br />
a) AXA Konzern AG* )<br />
Deutsche Bahn AG<br />
MAN AG* )<br />
RAG AG<br />
RWE Plus AG<br />
(until September 30, 2003)<br />
TUI AG* )<br />
within group:<br />
ThyssenKrupp Automotive AG<br />
(Chairman)<br />
ThyssenKrupp Services AG<br />
(Chairman)<br />
(formerly: ThyssenKrupp<br />
Materials AG)<br />
ThyssenKrupp Steel AG<br />
(Chairman)<br />
b) within group:<br />
ThyssenKrupp Budd Company<br />
*) listed company outside group<br />
Prof. Dr. Jürgen F. Strube<br />
a) Allianz Lebensversicherungs<br />
AG* )<br />
BASF AG* )<br />
(Chairman)<br />
(since May 6, 2003)<br />
Bayerische Motorenwerke AG* )<br />
Bertelsmann AG<br />
Fuchs Petrolab<br />
(Chairman)<br />
(since June 5, 2003)<br />
Hapag-Lloyd AG<br />
HOCHTIEF AG* )<br />
(until June 4, 2003)<br />
Linde AG* )<br />
Dr. Klaus Sturany<br />
a) Hannover Rückversicherungs<br />
AG* )<br />
HOCHTIEF AG* )<br />
RAG AG<br />
within group:<br />
Heidelberger Druckmaschinen AG<br />
(Chairman)<br />
(since September 12, 2003)<br />
RWE Dea AG<br />
(until October 31, 2003)<br />
RWE Power AG<br />
RWE Solutions AG<br />
(until September 30, 2003)<br />
RWE Energy AG<br />
(since October 1, 2003)<br />
RWE Umwelt AG<br />
(since July 18, 2003)<br />
b) within group:<br />
RWE Innogy Holdings plc<br />
RWE Thames Water plc<br />
RWE Trading GmbH<br />
Dr.-Ing. E.h. Heinrich Weiss<br />
a) Deutsche Bahn AG<br />
Ferrostaal AG<br />
HOCHTIEF AG* )<br />
Voith AG<br />
within group:<br />
SMS Demag AG<br />
(Chairman)<br />
b) Thyssen-Bornemisza Group<br />
within group:<br />
Concast AG<br />
(Chairman)<br />
Concast Holding AG<br />
(Chairman)<br />
Former members of the<br />
Supervisory Board<br />
Heinz-Werner Busch<br />
–<br />
Oswald Danzer<br />
–<br />
Hans-Georg Jurkat<br />
b) BVV Versicherungsverein des<br />
Bankgewerbes a.G.<br />
Detlef Kayser<br />
b) BVV Versicherungsverein des<br />
Bankgewerbes a.G.<br />
Dieter Klinger<br />
–<br />
Dr. Torsten Locher<br />
–
Mark Roach<br />
a) FIDUCIA<br />
Informationszentrale AG<br />
Werner Schönfeld<br />
–<br />
Alfred Seum<br />
–<br />
Hermann Josef Strenger<br />
–<br />
Employees of<br />
<strong>Commerzbank</strong> AG<br />
Information pursuant to Art. 340a, (4),<br />
no. 1, HGB<br />
As of December 31, 2003<br />
Jürgen Berger<br />
CFM Commerz Finanz<br />
Management GmbH i.L.<br />
Manfred Breuer<br />
Isola AG<br />
Schumag AG<br />
Bernd Förster<br />
SE Spezial Electronic AG<br />
Herbert Huber<br />
Saarländische Investitionskreditbank<br />
AG<br />
Andreas Kleffel<br />
Honsel Management GmbH<br />
Dr. Sebastian Klein<br />
COMINVEST<br />
Asset Management GmbH<br />
CFM Commerz Finanz<br />
Management GmbH i.L.<br />
CommerzLeasing und<br />
Immobilien AG<br />
Wojciech Kostrzewa<br />
Hochtief Construction AG (HTC)<br />
Peter Kroll<br />
SchmidtBank AG<br />
Klaus Kubbetat<br />
CommerzLeasing und<br />
Immobilien AG<br />
Ulrich Leistner<br />
COMINVEST<br />
Asset Management GmbH<br />
Commerz Grundbesitz-<br />
Investmentgesellschaft mbH<br />
CommerzLeasing und<br />
Immobilien AG<br />
Burkhard Leffers<br />
Kolbenschmidt Pierburg AG<br />
Dr. Dirk Mattes<br />
CFM Commerz Finanz<br />
Management GmbH i.L.<br />
COMMERZ PARTNER Beratungsgesellschaft<br />
für Vorsorge- und<br />
Finanzprodukte mbH<br />
MEWA Textil-Service AG & Co.<br />
Management OHG<br />
SEATS ON OTHER BOARDS 205<br />
Wilhelm Nüse<br />
Rasmussen GmbH<br />
Michael Schmid<br />
CommerzLeasing und<br />
Immobilien AG<br />
Dr. Friedrich Schmitz<br />
COMINVEST<br />
Asset Management GmbH<br />
Dr. Gert Schorradt<br />
Carmeile AG<br />
Frank Schulz<br />
Woba Dresden GmbH<br />
Monika Serreck<br />
Spielbanken Niedersachsen<br />
GmbH<br />
Dr. Rainer Wedel<br />
JC INSITU<br />
Beteiligungsgesellschaft mbH<br />
Martin Zielke<br />
COMINVEST<br />
Asset Management GmbH<br />
Commerz Grundbesitz-<br />
Investmentgesellschaft mbH<br />
COMMERZ PARTNER Beratungsgesellschaft<br />
für Vorsorge- und<br />
Finanzprodukte mbH<br />
ConCardis GmbH
206<br />
glossary<br />
Asset-backed securities (ABS)<br />
Securities whose interest payment<br />
and repayment of principal<br />
are covered, or backed, by the<br />
underlying pool of claims. As a<br />
rule they are issued by a specialpurpose<br />
entity in securitized form.<br />
Assets held for dealing purposes<br />
Under this balance-sheet item,<br />
securities, promissory notes,<br />
foreign exchange and derivative<br />
financial instruments which are<br />
used for dealing purposes are<br />
shown. They appear at their fair<br />
value.<br />
Associated company<br />
A company included in the consolidated<br />
financial statements<br />
neither on a fully or partially<br />
consolidated basis, but rather<br />
according to the equity method;<br />
however, a company which is included<br />
in the consolidation has a<br />
significant influence on its business<br />
and financial policies.<br />
Available for sale<br />
A term used to refer to financial<br />
assets that may be disposed of.<br />
Back-testing<br />
A procedure for monitoring the<br />
quality of value-at-risk models.<br />
For this purpose, the potential<br />
losses projected by the VaR<br />
approach are examined over<br />
alengthy period to ascertain<br />
whether in retrospect they were<br />
not exceeded far more frequently<br />
than the applied confidence level<br />
would have suggested.<br />
Benchmarks<br />
Reference figures like indices,<br />
which are used, for instance,<br />
in portfolio management. For<br />
one thing, they can determine<br />
the direction of an investment<br />
strategy by providing the portfolio<br />
manager with orientation<br />
as regards the composition of<br />
portfolios. For another, they serve<br />
as a yardstick for investment performance.<br />
Business continuity planning<br />
A company’s emergency planning,<br />
covering all of its units.<br />
Cash flow hedge<br />
This entails covering the risk<br />
related to future interest payments<br />
from a floating-interest balance-sheet<br />
transaction by means<br />
of a swap. It is measured at fair<br />
value.<br />
Cash flow statement<br />
This shows the breakdown and<br />
changes in a company’s cash and<br />
cash equivalents during the business<br />
year. It is divided up into the<br />
items operating, investing and<br />
financing activities.<br />
Collateral agreement<br />
An agreement covering the security<br />
or collateral to be furnished.<br />
Confidence level<br />
The probability with which a<br />
potential loss will not exceed the<br />
loss ceiling defined by the valueat-risk.<br />
Corporate governance<br />
Corporate governance establishes<br />
guidelines for transparent corporate<br />
management and supervision.<br />
The recommendations of<br />
the German Corporate Governance<br />
Code create transparency<br />
and strengthen confidence in<br />
responsible management; in particular,<br />
they serve shareholder<br />
protection.<br />
Cost/income ratio<br />
This represents the ratio of operating<br />
expenses to income before<br />
provisioning, indicating the costefficiency<br />
of the company or of<br />
one of its business units.<br />
Credit default swap (CDS)<br />
A financial instrument for taking<br />
over the credit risk from a reference<br />
asset (e.g. a security or<br />
credit). For this purpose, the<br />
buyer of protection pays the seller<br />
of protection a premium and receives<br />
a compensation payment<br />
if a previously specified credit<br />
event occurs.<br />
Credit derivative<br />
A financial instrument whose<br />
value depends on an underlying<br />
claim, e.g. a loan or security. As<br />
arule, these contracts are concluded<br />
on an OTC basis. They are<br />
used in both proprietary trading<br />
and managing risk. The most frequently<br />
used credit derivative<br />
product is the credit default swap.
Credit-linked note (CLN)<br />
A security whose performance is<br />
tied to a credit event. CLNs are<br />
frequently part of a securitization<br />
transaction or serve to restructure<br />
credit risk in order to satisfy specific<br />
customer wishes.<br />
Credit VaR<br />
The concept stems from the<br />
application of the value-at-risk<br />
concept for market risk to the<br />
area of credit-risk measurement.<br />
In substantive terms, the credit<br />
VaR is an estimate of the amount<br />
by which the losses arising from<br />
credit risk might potentially<br />
exceed the expected loss within a<br />
single year; for this reason: also<br />
unexpected loss. This approach<br />
is based on the idea that the expected<br />
loss merely represents the<br />
long-term median value for loan<br />
losses, which may differ (positively<br />
or negatively) from the<br />
actual loan losses in the current<br />
business year.<br />
DAX 30<br />
Deutscher Aktienindex (German<br />
stock index), which covers the<br />
30 largest German blue chips with<br />
the highest turnover in official<br />
trading.<br />
Deferred taxes<br />
These are taxes on income to be<br />
paid or received in the future,<br />
resulting from discrepancies in<br />
assigned values between the balance<br />
sheet for tax purposes and<br />
the commercial balance sheet.<br />
At the time the accounts are<br />
prepared, they represent neither<br />
actual claims on nor liabilities to<br />
the tax authorities.<br />
Derivatives<br />
Financial instruments whose<br />
value depends on the value of<br />
another financial instrument. The<br />
price of the derivative is determined<br />
by the price of an underlying<br />
object (security, interest<br />
rate, currency, credit). These<br />
instruments offer greater possibilities<br />
for managing and<br />
steering risk.<br />
Due diligence<br />
The term is used to describe the<br />
process of intensive examination<br />
of the financial and economic<br />
situation and planning of a company<br />
by external experts (mostly<br />
banks, lawyers, auditors). In the<br />
run-up to an IPO or a capital increase,<br />
due diligence is needed<br />
before an offering prospectus can<br />
be compiled.<br />
Economic capital<br />
The amount which, to a high<br />
degree of certainty, is required to<br />
cover unexpected losses from<br />
risk-bearing items. It is not identical<br />
to equity as shown in the balance<br />
sheet or regulatory capital.<br />
At <strong>Commerzbank</strong>, credit risk,<br />
market risk, operational risk and<br />
business risk are all included<br />
in the calculation of economic<br />
capital.<br />
Embedded derivatives<br />
Embedded derivatives are components<br />
of an original financial<br />
instrument and inseparably linked<br />
to the latter, so-called hybrid<br />
financing instruments such as<br />
reverse convertible bonds. Legally<br />
and economically, they are bound<br />
up with one another.<br />
GLOSSARY 207<br />
Equity method<br />
A consolidation method in a<br />
group’s accounting to cover holdings<br />
in associated companies. The<br />
company’s pro-rata net profit/loss<br />
for the year is included in the consolidated<br />
income statement as<br />
income/loss from equity investments.<br />
Expected loss<br />
Yardstick for the potential loss of<br />
a loan portfolio which can be<br />
expected within a single year on<br />
the basis of historical loss data.<br />
Fair value<br />
The price at which financial<br />
instruments may be sold or purchased<br />
on fair conditions. For<br />
measurement purposes, either<br />
market prices (e.g. stock-exchange<br />
prices) or – if these are unavailable<br />
– internal measurement<br />
models are used.<br />
Fair value hedge<br />
This is a fixed-interest balancesheet<br />
item (e.g. a claim or a security)<br />
which is hedged against market<br />
risk by means of a swap. It is<br />
measured at fair value.<br />
Financial instruments<br />
Above all, credits or claims, interest-bearing<br />
securities, shares,<br />
equity investments, liabilities and<br />
derivatives are subsumed here.<br />
Futures<br />
The futures contract is a binding<br />
agreement committing both parties<br />
to deliver or take delivery of a<br />
certain number or amount of an<br />
underlying security or asset at a<br />
fixed price on an agreed date.<br />
Unlike options, futures contracts<br />
are very strongly standardized.
208 GLOSSARY<br />
Goodwill<br />
The difference between the purchase<br />
price and the value of the<br />
net assets thereby acquired,<br />
which remains after the hidden<br />
reserves have been disclosed<br />
when an equity investment is<br />
acquired or a company is taken<br />
over.<br />
Hedge accounting<br />
The presentation of discrepancies<br />
between the change in value of a<br />
hedging device (e.g. an interestrate<br />
swap) and the hedged item<br />
(e.g. a loan). Hedge accounting is<br />
designed to reduce the influence<br />
on the income statement of the<br />
measurement and recognition<br />
of changes in the fair value of<br />
derivative transactions.<br />
Hedging<br />
A strategy under which transactions<br />
are effected with the aim<br />
of providing cover against the risk<br />
of unfavourable price movements<br />
(interest rates, prices, commodities).<br />
International Accounting<br />
Standards (IAS)<br />
Accounting regulations approved<br />
by the International Accounting<br />
Standards Committee. The objective<br />
of financial statements prepared<br />
according to IAS is to provide<br />
investors with information to<br />
help them reach a decision with<br />
regard to the company’s asset and<br />
financial position and also its<br />
earnings performance, including<br />
changes in the course of time.<br />
By contrast, financial statements<br />
according to HGB (German Commercial<br />
Code) are primarily<br />
geared to investor protection.<br />
Investor relations<br />
The terms describes the dialogue<br />
between a company and its shareholders<br />
or creditors. Investor relations<br />
targets this special group<br />
with the intention of using communicative<br />
means to ensure an<br />
appropriate evaluation of the<br />
company by the capital market.<br />
Letter of comfort<br />
Usually, the commitment of a<br />
parent company towards third<br />
parties (e.g. banks) to ensure<br />
orderly business conduct on<br />
the part of its subsidiary and<br />
the latter’s ability to its meet<br />
liabilities.<br />
Liabilities from dealing activities<br />
Under this balance-sheet item, the<br />
derivative instruments of proprietary<br />
trading with a negative fair<br />
value appear, and also delivery<br />
commitments arising from the<br />
short-selling of securities. They<br />
are measured at fair value.<br />
Loss review trigger<br />
A warning signal that a trading<br />
unit might exceed its prescribed<br />
maximum loss. If this trigger is<br />
reached, appropriate measures<br />
are taken to prevent further<br />
losses.<br />
Mark-to-market<br />
Measurement of items at current<br />
market prices, including unrealized<br />
profits – without purchase<br />
costs being taken into consideration.<br />
Mergers & acquisitions<br />
In banking, M&A represents the<br />
advisory service offered to companies<br />
involved in such transactions,<br />
especially the purchase and<br />
sale of companies or parts of<br />
them.<br />
Mezzanine<br />
An Italian word meaning an intermediate<br />
storey in a building. A<br />
flexible financing instrument<br />
between equity and borrowed<br />
funds in balance-sheet terms. It<br />
is especially suitable for smaller<br />
businesses seeking to strengthen<br />
their capital base but not wishing<br />
to alter their ownership structure.<br />
Netting<br />
The setting-off of items (amounts<br />
or risks) which appear on different<br />
sides of a balance.<br />
Online banking<br />
A whole series of banking services<br />
handled with IT support<br />
and offered to customers electronically<br />
(by telephone line).<br />
Options<br />
Options are agreements giving<br />
the one party the unilateral right<br />
to buy or sell a previously determined<br />
amount of goods or securities<br />
at a price established in<br />
advance within a defined period<br />
of time.<br />
OTC<br />
Abbreviation for ”over the<br />
counter”, which is used to refer<br />
to the off-the-floor trading of<br />
financial instruments.
Positive/negative fair value<br />
The positive/negative fair value<br />
of a derivative financial instrument<br />
is the change in fair value<br />
between the conclusion of the<br />
transaction and the date of measurement,<br />
which has arisen due<br />
to favourable or unfavourable<br />
overall conditions.<br />
Profit-sharing certificate<br />
Securitization of profit and losssharing<br />
rights which are issued by<br />
companies of various legal forms<br />
and are introduced to official<br />
(stock-exchange) trading. Under<br />
certain conditions, profit-sharing<br />
certificates may be counted as<br />
part of banks’ liable funds.<br />
Rating<br />
Standardized assessment of the<br />
creditworthiness of companies,<br />
countries or of debt instruments<br />
issued by them, on the basis of<br />
standardized qualitative and<br />
quantitative criteria. The rating<br />
process forms the basis for<br />
determining the probability of<br />
default, which in turn is used in<br />
calculating the capital needed<br />
to back the credit risk. Ratings<br />
may be worked out by the Bank<br />
itself (internal ratings) or by specialized<br />
rating agencies such<br />
as Standard&Poor’s, Fitch and<br />
Moody’s (external ratings).<br />
Repo transactions<br />
Abbreviation for repurchase<br />
agreements; these are combinations<br />
of spot purchases or sales<br />
of securities and the simultaneous<br />
forward sale or repurchase of<br />
these securities in an agreement<br />
involving the same counterparty.<br />
Return on equity<br />
This is calculated by the ratio<br />
between the pre- and after-tax<br />
profit and the average amount of<br />
equity as shown in the balance<br />
sheet; it indicates the return<br />
which the company achieves on<br />
the capital which it employs.<br />
Revaluation reserve<br />
In the revaluation reserve,<br />
changes in the fair value of securities<br />
and equity investments<br />
appear, with no effect on the<br />
income statement.<br />
Securitization<br />
In a securitization, claims (e.g.<br />
loans, trade bills or leasing<br />
claims) are pooled and transferred<br />
to a special-purpose entity or<br />
vehicle (SPV). The SPV raises<br />
funds by issuing securities (e.g.<br />
ABS or CLNs), placed with potential<br />
investors. Repayment and the<br />
interest payments on the securities<br />
are directly linked to the performance<br />
of the underlying claims<br />
rather than to that of the issuer.<br />
Shareholder value<br />
Shareholder value gives priority<br />
to the interests of proprietors or,<br />
in the case of listed companies,<br />
shareholders.<br />
Under this approach, the company’s<br />
management is committed<br />
to increasing the value of the<br />
company over the long term<br />
and thus to lifting its share price.<br />
This contrasts with a ”stakeholder<br />
policy”, which aims to achieve a<br />
balance between the interests of<br />
shareholders and other groups<br />
involved, such as customers,<br />
employees, providers of outside<br />
funds, banks, etc.<br />
GLOSSARY 209<br />
One major component of the<br />
shareholder value principle is also<br />
a shareholder-oriented, transparent<br />
information policy, which<br />
above all at major listed companies<br />
is entrusted to investor relations.<br />
Spread<br />
The difference between prices or<br />
interest rates, e.g. the differential<br />
between the buying and the selling<br />
price of securities, or the premium<br />
paid on a market interest<br />
rate in the case of weaker creditworthiness.<br />
Standard risk costs<br />
These represent the average<br />
expected calculatory risk costs in<br />
a given year (expected loss) or<br />
the valuation allowances due to<br />
the default of customers or counterparties.<br />
Stop-loss limit<br />
This type of limit serves to restrict<br />
or prevent losses, such that if the<br />
fair value falls below a previously<br />
determined level, the trading<br />
position in question has to be<br />
closed or the asset sold.<br />
Stoxx<br />
The Stoxx ”family” of indices is a<br />
system of European benchmark,<br />
blue chip and sectoral indices.<br />
Stoxx Limited itself is a joint venture<br />
between Deutsche Börse AG,<br />
Dow Jones & Company, SBF-<br />
Bourse de France and the Swiss<br />
Stock Exchange.
210 GLOSSARY<br />
Stress testing<br />
Stress tests are used in an<br />
attempt to model the losses produced<br />
by extreme market fluctuations,<br />
as these cannot as a rule be<br />
adequately presented by VaR<br />
models. Generally, VaR risk ratios<br />
are based on ”normal” market<br />
fluctuations, rather than on very<br />
rare extreme situations which<br />
cannot, as a result, be represented<br />
statistically – such as the<br />
1987 stock-market crash or the<br />
Asian crisis. Stress tests therefore<br />
represent a rational complement<br />
to VaR analyses, and also one that<br />
is required by regulators.<br />
Subsidiary<br />
Company controlled by its parent<br />
and fully consolidated. If it is of<br />
minor significance, it is not included<br />
in the consolidation. In<br />
this case, the company appears<br />
at amortized cost.<br />
Sustainability<br />
Sustainability describes business<br />
management on a long-term basis<br />
which is compatible with acceptable<br />
living conditions now and in<br />
the future. Its guiding objectives<br />
are responsibility for the environment<br />
and balanced social relations.<br />
Swaps<br />
Financial instruments in which the<br />
swapping of payment flows (interest<br />
and/or currency amounts)<br />
is agreed over a fixed period.<br />
Through interest-rate swaps,<br />
interest-payment flows are exchanged<br />
(e.g. fixed for floating<br />
rate). Currency swaps offer the<br />
additional opportunity to eliminate<br />
the exchange-rate risk by<br />
swapping amounts of capital.<br />
Value-at-risk model (VaR)<br />
VaR refers to a method of quantifying<br />
risk. At present, it is primarily<br />
used in connection with market<br />
risk. VaR is only informative if<br />
the holding period (e.g. 1 day)<br />
and the confidence level (e.g.<br />
97.5%) are specified. The VaR figure<br />
then indicates the loss ceiling<br />
which will not be exceeded within<br />
the holding period with a probability<br />
corresponding to the confidence<br />
level.<br />
Volatility<br />
The term volatility is used to characterize<br />
the price fluctuation of a<br />
security or currency. Frequently,<br />
this is calculated from the price<br />
history or implicitly from a pricefixing<br />
formula in the form of the<br />
standard deviation. The greater<br />
the volatility, the riskier it is to<br />
hold the investment.
index<br />
Accounting 17, 54, 62, 90f., 94, 96f., 97f.,<br />
99f., 105f., 115, 172, 175<br />
Accounting and measurement<br />
methods 90-103<br />
Advisory mandates 25, 35<br />
Annual general meeting (AGM) 15,<br />
17, 23, 49, 86, 142f., 162, 175f.<br />
Asset Management 7, 10, 20, 24-27,<br />
71, 76, 103, 108, 114-121, 174<br />
Asset-backed securities (ABS)<br />
25, 35, 61<br />
Balance sheet 7f., 85, 90, 94f., 97-102,<br />
105f., 123-144, 149, 153f., 156-159, 172<br />
Bancassurance 21<br />
Basel II 30, 59-64, 69, 75ff., 79<br />
Basic earnings per share 84, 113<br />
Board of Managing Directors 14-17,<br />
40, 53, 55-59, 65, 73ff., 78, 102, 143, 161ff.,<br />
166, 171, 172-176, 180-181<br />
Bonuses 15, 136, 161<br />
Branch business 21f.<br />
Capital ratios 8, 157f.<br />
Capital reserve 7, 9, 84-86, 140f.<br />
Cash flow hedges 96f., 97, 100, 105f.,<br />
141, 153<br />
Cash flow statement 88ff., 172<br />
<strong>Commerzbank</strong> share 46ff., 102f., 162<br />
Company pension 40, 109<br />
Competition/competitors 31f., 46,<br />
66, 78<br />
Consolidated companies 83f., 93f.<br />
Cooperation 21f., 25, 32<br />
Corporate Banking 30-33, 37, 64, 114f.,<br />
174<br />
Corporate customers 10, 30-36, 49, 58,<br />
62, 114f.<br />
Corporate finance 32<br />
Corporate governance 14-17, 162,<br />
165, 175<br />
Cost-cutting offensive 9, 40, 109, 111,<br />
136, 174<br />
Cost/income ratio 10f., 48, 113, 115<br />
Credit derivatives 61, 68, 145, 160<br />
Creditworthiness 53, 61-66, 125<br />
Deferred taxes 95, 97, 99, 101, 106, 112,<br />
131, 141<br />
Deposit insurance fund 163<br />
Depreciation 9, 66, 99f., 106, 109f., 115<br />
Derivatives 35, 96ff., 100, 144f., 148f.<br />
Distribution see Sales<br />
Dividend 9, 16, 23, 46, 84, 89, 102, 140<br />
Economic capital 53ff., 57ff., 59, 63f.,<br />
68, 78f.<br />
Employees/staff 9, 14f., 20, 40-43, 48,<br />
101, 103f., 135f., 176<br />
Employee shares 48, 143<br />
Equity/capital 7f., 11, 32, 46, 48f., 54,<br />
57, 65, 77, 86f., 90, 94f., 97, 99f., 101f.,<br />
104f., 106, 115, 139ff., 159<br />
Equity investments 7, 36f., 49, 75,<br />
89, 93ff., 98f., 104f., 109, 111, 115, 124,<br />
128ff., 174<br />
Executives/managers 15, 41f., 103<br />
External trade 33<br />
Financial calendar 49<br />
Financial Institutions 33<br />
Foreign-exchange business 34f.<br />
Funds 10, 21, 24ff., 31, 35ff., 94, 155, 163<br />
Goodwill, amortization of 7, 9, 46, 99,<br />
105, 111, 115, 129<br />
Holdings in affiliated and other<br />
companies 167-171<br />
Income statement 8f., 12f., 83f., 90,<br />
95-103, 107-122, 172<br />
Information technology 25f.<br />
Internal auditing 59, 174<br />
Internet 14f., 17, 31, 48, 162, 165<br />
Investment Banking 30, 35, 37, 49, 64,<br />
67, 77, 114<br />
Investment and securities portfolio<br />
7, 9, 89, 93ff., 98f., 105f., 109, 111, 128, 141<br />
Investor relations 48<br />
Investors 47f., 69<br />
Leasing 36, 99f., 163<br />
Lending/credit business 7, 10, 20, 30,<br />
57f., 60-63, 66ff., 98, 150, 174<br />
Letter of comfort 164f.<br />
Liquidity 32, 54, 57, 73, 75f., 89, 97f., 99,<br />
105, 115, 159<br />
Maturities, by remaining lifetime 152<br />
Mergers & acquisitions (M&A) 35,<br />
115<br />
Mittelstand 30-33, 49, 64<br />
Mortgage banks 11, 65, 71, 74, 76,<br />
114-121, 123<br />
Multinational corporates 30, 32, 34,<br />
49, 64, 114f.<br />
Net commission income 9ff., 23, 48,<br />
78, 102, 108<br />
Net interest income 8, 10, 23, 48, 95f.,<br />
98ff., 102, 107, 115, 156<br />
Net loss 7, 9, 84, 113, 141<br />
Notes 90-171<br />
Online banking 22<br />
Online investment 23<br />
Operating expenses 9ff., 23, 40, 100,<br />
103f., 109f., 115<br />
Other operating expenses 9, 109f.,<br />
115<br />
Participations see Equity investments<br />
Payments 8, 23, 31, 33, 63<br />
Pension commitments 101, 105, 135f.,<br />
162<br />
Personnel expenses 9, 40, 109, 111,<br />
115<br />
Principles of consolidation 94f.<br />
Private Banking 24, 26, 114f.<br />
Profit-sharing certificates<br />
outstanding 139, 157<br />
Property/real estate 21, 36f., 109f.,<br />
114f.<br />
Property/real-estate funds 10, 37<br />
Provision for risks/provisioning 8,<br />
10, 23, 30, 48, 58, 66f.<br />
Provisions 9, 66, 100-103, 106, 110,<br />
135ff., 162<br />
Rating 21, 31, 59, 61ff., 65ff., 68ff., 98,<br />
104, 111<br />
Reserves 105f., 141, 153, 157<br />
Restructuring expenses 9, 101, 111,<br />
115, 136<br />
Retail banking 10, 20-23, 27, 49,<br />
114-121, 174<br />
Retained earnings 86, 105, 141<br />
Return on equity 10f., 34, 48, 64, 115<br />
Revaluation reserve 8, 95, 99, 104,<br />
105, 141<br />
Risk control 56-58, 60f., 69, 74f., 77, 79<br />
Risk management 8, 14, 32, 53, 56-59,<br />
61, 66, 68, 70, 76, 78f., 174<br />
Risk-weighted assets 7f., 107, 115,<br />
145, 157f., 160<br />
Sales 10, 20ff., 24, 26, 32, 34, 37, 43, 58,<br />
63f., 68<br />
Seats on other boards 201-205<br />
Securities 11, 34-36, 74, 114-121<br />
Segment reporting 10f., 20, 90, 114-122<br />
Shareholders 15f., 17, 46ff., 53, 106,<br />
143, 165<br />
Shareholdings see Equity investments<br />
Smaller businesses (SMEs)<br />
see Mittelstand<br />
Standard risk costs 64f.<br />
Strategy 7, 16, 22f., 34, 35, 46f., 48f., 173<br />
Subordinated capital 89, 102, 138<br />
Subsidiaries 9, 15, 23, 25f., 34, 36, 59ff.,<br />
65, 67, 71, 78, 69, 93ff., 97, 99f., 103, 109,<br />
124, 128, 130, 164<br />
Suggestions scheme 42<br />
Supervisory Board 14-17, 56, 59, 78,<br />
143, 161ff., 166, 173-178<br />
System of limits 65, 74<br />
Taxes 9, 101, 110, 112, 115, 137<br />
Trading activities/transactions 34f.,<br />
59, 65, 68, 70, 75, 96, 108, 115, 127, 148<br />
Trading profit 8, 11, 95f., 99, 106, 108<br />
Treasury 11, 57, 75, 114-121<br />
Valuation allowances 30, 66f., 98,<br />
125f.<br />
Value-at-risk 63, 71-74, 148f.<br />
Write-downs 7, 125<br />
211
212<br />
commerzbank group<br />
business progress 1968–2003*<br />
Business Total Customers’ Taxes Allocation Equity Total Staff Offices<br />
volume lending deposits paid to reserves amount of<br />
dividend paid<br />
7 bn 7 bn 7 bn 7 m 7 m 7 m 7 m<br />
1968 8.5 5.4 6.6 33.2 16.1 346 23.9 14,689 691<br />
1969 9.8 6.5 7.1 41.8 16.3 439 32.0 15,630 743<br />
1970 12.5 8.8 8.0 26.1 5.8 463 30.4 16,952 783<br />
1971 15.9 11.4 9.2 39.2 13.0 541 31.5 17,533 800<br />
1972 18.7 12.6 10.7 45.0 14.6 599 34.8 17,707 805<br />
1973 20.5 13.5 11.1 39.2 9.2 656 40.7 18,187 826<br />
1974 23.0 15.1 11.7 54.8 26.7 735 40.7 17,950 834<br />
1975 29.0 18.2 14.1 97.5 42.5 844 48.8 18,749 855<br />
1976 32.6 21.3 15.0 87.5 57.2 993 55.9 20,275 861<br />
1977 38.6 24.0 17.3 128.0 52.3 1,165 55.9 20,429 870<br />
1978 45.3 29.5 20.0 126.4 50.9 1,212 63.1 20,982 875<br />
1979 52.2 34.8 20.4 97.0 20.5 1,403 64.6 21,656 885<br />
1980 52.4 37.4 20.3 53.6 16.6 1,423 – 21,487 880<br />
1981 53.2 38.6 21.0 52.4 12.9 1,414 – 21,130 878<br />
1982 56.8 41.8 22.6 86.8 43.8 1,416 – 21,393 877<br />
1983 59.1 43.3 23.2 121.3 62.3 1,491 51.7 22,047 884<br />
1984 63.9 46.2 26.5 140.8 77.9 1,607 51.7 22,801 882<br />
1985 71.4 48.3 28.0 164.4 89.5 1,756 72.6 24,154 882<br />
1986 77.1 52.5 30.3 169.0 80.2 2,292 95.5 25,653 881<br />
1987 83.8 55.7 33.5 168.0 89.8 2,379 95.7 26,640 882<br />
1988 93.3 61.7 37.8 192.4 120.2 2,670 104.0 27,320 888<br />
1989 99.1 64.7 43.5 252.4 143.7 3,000 115.3 27,631 897<br />
1990 111.4 74.9 50.5 246.7 112.4 3,257 131.6 27,275 956<br />
1991 117.1 80.7 57.2 276.6 120.1 3,420 132.0 28,226 973<br />
1992 120.4 85.0 61.6 283.4 209.0 3,680 134.0 28,722 998<br />
1993 147.1 92.7 68.2 310.8 143.9 4,230 176.8 28,241 1,006<br />
1994 176.1 112.7 68.8 334.5 306.8 5,386 231.2 28,706 1,027<br />
1995 208.1 133.1 73.2 109.4 204.5 6,297 265.8 29,615 1,060<br />
1996 230.6 158.2 82.8 297.1 332.3 6,909 276.3 29,334 1,045<br />
1997 276.0 185.3 93.3 489.2 295.5 8,765 344.2 30,446 1,044<br />
1998 327.4 207.6 93.6 298.1 511.3 10,060 380.5 32,593 1,052<br />
1999 372.1 223.2 91.0 395.6 500.0 11,141 410.8 34,870 1,064<br />
2000 459.7 239.7 107.7 822.7 800.0 12,523 541.8 39,044 1,080<br />
2001 501.3 239.7 116.4 –114.0 –115.0 11,760 216.7 39,481 981<br />
2002 422.1 171.5 95.7 –103.0 –352.0 8,808 54.2 36,566 904<br />
2003 381.6 164.7 100.0 249.0 –2,320.0 9,091 – 32,377 884<br />
*) as from 1997, according to IAS
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<strong>Commerzbank</strong> AG<br />
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ISSN 0414-0443<br />
VKI02041
216<br />
SECTION 2<br />
INDIVIDUAL ACCOUNTS OF THE COMMERZBANK AG<br />
Pursuant to article 250 paragraph 3 of the Securities Code, the <strong>CMVM</strong> exempted <strong>Commerzbank</strong> from the<br />
disclosure of the individual accounts of <strong>Commerzbank</strong> AG. The account documents subject to this exemption are<br />
available for inspection, together with the remaining, in <strong>Commerzbank</strong>s’ registered office.<br />
SECTION 3<br />
EXTRACT FROM THE MINUTES OF COMMERZANK GENERAL MEETING OF MARCH 31<br />
RELEVANT POINTS OF THE AGENDA<br />
1. Presentation of the established Financial Statements and Management Report for the 2003 financial<br />
year of <strong>Commerzbank</strong> <strong>Aktiengesellschaft</strong>, together with the presentation of the approved Financial<br />
Statements and Management Report of the <strong>Commerzbank</strong> Group for the 2003 financial year and the<br />
Report of the Supervisory Board<br />
2. Resolution on the approval of the actions of the Board of Managing Directors<br />
The Board of Managing Directors and the Supervisory Board propose that the actions of the members of the<br />
Board of Managing Directors during the 2003 financial year be approved.<br />
3. Resolution on the approval of the actions of the Supervisory Board<br />
The Board of Managing Directors and the Supervisory Board propose that the actions of the members of the<br />
Supervisory Board during the 2003 financial year be approved.<br />
VOTING RESULTS - GENERAL MEETING OF MAY 12, 2004<br />
Altogether 278,169,635 shares or 46.53% of the Bank’s subscribed capital were represented at the AGM.<br />
TOP 2 Approval of the actions of the<br />
Board of Managing Directors<br />
Yes votes: 269,341,167 = 99.66%<br />
No votes: 923,737 = 0.34%<br />
The proposal was approved.<br />
TOP 3 Approval of the actions of the<br />
Supervisory Board<br />
Yes votes: 260,268,731 = 93.63%<br />
No votes: 17,721,566 = 6.37%<br />
The proposal was approved.<br />
Source: <strong>Commerzbank</strong> Website<br />
(https://www.commerzbank.com/aktionaere/haupt/2004/Voting_results_on_the_agenda.pdf)
217<br />
SECTION 4<br />
INFORMATION ON COMPANIES WITH SHAREHOLDING INTERESTS ON THE ISSUER<br />
Pursuant to the relevant provisions of the German Securities Trading Act (Wertpapierhandelsgesetz) the<br />
following holdings in voting rights have been notified to <strong>Commerzbank</strong>, as of 31 December, 2003:<br />
Group Assicurazioni Generali: 9.1%.<br />
Munich Re: 9.5%.