COMMERZBANK SEES LOWER OPERATING PROFIT THIS YEAR
Commerzbank AG <CBKG.F> management
board chairman Walter Seipp said that from the present
viewpoint the bank must expect 1987 full operating profit to be
lower than in 1986.
    In the first two months of the year, partial operating
profit -- excluding trading on the bank's own account -
declined, he said, without giving details.
    The interest surplus fell 2.8 pct compared with 2/12ths of
1986 results, while the commission surplus, because of the
quiet stock exchange business, fell back still more strongly.
By contrast the personnel and fixed asset expenses increased.
    German banks do not report full operating profit. But Seipp
said last year the figure for the first time had topped one
billion marks for the parent bank, and the group result was
around 50 pct higher than this.
    Commenting on 1986, Seipp said, "we were able to raise the
full operating profit...Slightly above the record result of
1985 because own account profits increased slightly."
    He gave no concrete details but added that in January and
February, good own account trading profits meant that the drop
in full operating earnings was more modest than that in the
partial operating figure.
    The bank would, as a result, be more profit-oriented in
future, developing, for example, more into investment banking,
keeping a tight rein on personnel costs and dampening
expenditures on fixed assets.
    Turning to 1986 results, Seipp said by year end there had
been a strong growth in business volume.
    Over the year business volume rose by 9.9 pct to 93.2
billion marks compared with 1985, Seipp added.
    Group balance sheet volume rose by 8.0 pct to 148.15
billion. It would have been around five billion marks higher
still if currency relationships had remained unchanged.
    In the parent bank, the interest surplus rose nine pct in
the year, while the interest margin held roughly at 1985's 2.56
pct despite pressure on credit rates.
    The surplus on commission business, which had soared by a
quarter in 1985, rose by 11.6 pct last year thanks almost
exclusively to growth in securities commissions, Seipp said.
    Personnel expenditure was up 11.9 pct last year, at more
than 1.5 billion marks. Fixed asset expenditure rose by 9.6 pct
to more than 650 mln.
    As a result, the parent bank partial operating profit rose
by 3.2 pct to 752 mln marks.
    Parent bank tax payment rose to 244 mln marks last year
from 233 mln in 1985.
    Seipp said extraordinary earnings included a "high
two-figure million" in profit from the sale of the bank's AEG AG
<AEGG.F> shares to Daimler-Benz AG <DAIG.F> during the latter's
majority stake purchase booked last year.
    The ability of the bank to write off depreciations in
credit business against profits from securities trading and
earnings on the sale of stakes had been utilised, as in prior
years, to its full extent.
    Because of numerous insolvencies at home, by far the
largest part of the provisions were set aside for individual
write-downs from domestic business. Abroad, the circle of
problem debtor countries rose last year, although the ratio of
credit exposure to provisions improved further.
    Seipp said that because about half the group's exposure to
problem nations was in dollars, the bank had swapped into
dollars individual provisions hitherto held primarily in marks.
    "This means that no open currency positions exist any longer
on the amount of the provision that is made against an actual
default," he added.
    Despite the increase in concern over debtor nations in the
last few weeks, he said, the international banking community is
better armed than it was against payment problems.
    All banks had significantly strengthened their capital
base, most European banks had made considerable provisions
against bad debts while goverments and central banks were
better prepared for unforseen difficulties.
    He described debt-equity swaps as a very interesting new
approach to indebted nations' problems. There was a lot of
interest in direct investment via an equity participation in
Latin America, particularly from West German firms.
 Reuter
