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Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Corporates & MarketsThe blueprint of modern Investment BankingInvestors’ Day 2012
1Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Corporates & Markets’ major milestones since merger and outlook
Synergies of the integration lifted(Full synergy potential of >€800m reached ahead of target in 2011 in less than 18 months)
Strategy – continue to focus on core strengths(Reprioritization of businesses ongoing, front-to-back cost savings of €150m p.a., freeing-up investment potential)
Top risk and RWA reduction achieved(RWA reduction by 56%, Credit VaR 33%, Loss Days by 56% despite adverse environment)
bild
Unique IB franchise established and modern investment banking implemented(“Reliable, transparent, prudent” culture – client centricity and sustainable compensation)
Outlook – providing upside potential and revenue diversification (Conservative risk approach limiting downside potential and providing attractive risk/return profile: revenue growth 4% p.a., CIR <65%, pre-tax ROE >15% by 2016)
5.
3.
2.
1.
4.
2Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
› CBK’s client-focused business model applied to DKIB
› Alignment of organisational structure› RWA reduction
› Full implementation of business model
› Harmonisation of IT, risk and finance systems
› Full profitability through realisation of front and back-office synergies
› Leveraged larger client base› Focused growth in selected business
areas
2009 2010 2011 / 2012
Synergies of the integration lifted – full synergy potential of >€800m reached ahead of target in 2011 in less than 18 months
Restructuring / HR implementation
Client migration
IT and back-office integration
Geographical reallocation
Positions migration
Ope
ratin
g ex
pens
es
Fro
nt O
ffice
IB
FT
Es
€m
Syn
ergi
es
>800
Other
Personnel
2008 2012 YTD
2008 2012YTD
2012YTD
€m
Business adjustments
-1,750(-51%)
Target~1,800
<€-800m(-36%)
FTE
3Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Top risk and RWA reduction achieved despite challenging market and regulatory environment, including implementation of Basel 2.5
12/09
51.8 10.9
4.7
-32.9(-56%)
29.935.6
09/12
30.847.7
58.6
4.3
12/11
21.4
12/10Pro forma
RWA C&M (eop)RWA C&M (eop)
€bn
Loss days C&M MarketsLoss days C&M Markets
days
12/1112/10
-62.0(-65%)
96
59
12/09
34
09/12
61
Market risk VaR in trading book 3),4)Market risk VaR in trading book 3),4)
Note: Structured Credit Legacy (SCL) / former PRU reported in C&M for the first time in 3Q 2012. 1) 99.91% confidence level, 1 year holding period. 2) Annualized.
Basel III pro forma impact
Credit VaR 1) C&MCredit VaR 1) C&M
~ 10
€m
164248
09/1212/1112/09 12/10
-27(-56%)2)
101
€bn-0.8
(-33%)
1.6
09/1212/1112/09 12/10
1.62.0
2.4
Basel III pro-forma impact
Actual, like-for-like numbers
3) 99% confidence level, 1 day holding period. 4) VaR at Commerzbank group level.
4.2
2.0
0.5
SCL impact BII.5 impact
4Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Unique IB franchise established by optimisation of business setup and connection to the group’s client base
1) Structured Credit (most ABS), Credit Flow (most Corp. Bonds and CDS) and Exotic Credit (CDO2 / Correlation Books) assets of €58bn / >70.000 positions were ringfenced in PRU.
PC
30%
14%2
6%
21%
MSBInternational
C&
M’s
reve
nues
with
clie
nts
of g
roup
seg
men
ts in
%
28%
C&M MSBGermany
MSBFI
57%/ 59%
29%
12%(1)
8%
22%
29%
2011
9M 2012
… have led to an optimised use ofown distribution channels
Changes to business setup during DKIB integration in 2009 …
EM
CF
IC
› Exiting non-strategic international locations and businesses
› Closing of Japan / broker dealer
› Sale of Brazilian presence Banco Multiplo
› Re-focusing European cash equity business
Successful implementation of client-centric businessmodel – interconnectivity with Mittelstandsbank
Exit of risk driven business
Reduction of complexity and streamlining of footprint
› Investment groups
› Systematic trading
› Arbitrage trading
› Proprietary market risk taking / correlation trading
› Agency lending
› Asset finance and structured credit
› Creation of internal bad bank PRU for run-down portfolio1)
2) Contains revenues with brokers and other intermediaries, where the end customer is a private client.
5Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Strategy: C&M’s value-add is highly regarded and recognised by its clients
Example of serving a MSB client – NORMA
Dr. Othmar BelkerCFO of Norma Group
From LBO to IPO: NORMA appreciates Commerzbank's support since its LBO in
2006
In short: a perfect combination of relationship banking and specific
expertise in C&M
On NORMA's way from a family owned
German Mittelstands-business acquired by
3i and funds in 2006 to a world market leader
for connecting solutions
› Commerzbank acted as Sole Mandated Lead Arranger, Bookrunner as well as Agent Bank in the original syndicate financing of the initial NORMA LBO in 2006
› Commerzbank actively covering NORMA from an equity research perspective
› Commerzbank supported the debt financing of the merger with the Swedish ABA group in 2006 and the acquisition of the US-American BREEZE-Torca in 2007
› In 2011, Commerzbank was Joint Bookrunner during the IPO process of NORMA Group AG and Mandated Lead arranger and security agent during the post-IPO financing of NORMA Group
› For NORMA’s German branch, Commerzbank Hanau has kept a close and trustful client relationship supporting all the daily needed banking products and processes in both family-owned and stock-listed environments
6Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Modern investment banking implemented by realigning of culture and compensation policy
Focus on continuing to be a reliable, transparent and prudent investment bank
Cultural change already achieved: risk awareness, client focus and team approach
Right corporate culture implemented
Compensation model adjusted ahead of competition
Deferred payments through introduction of Bonus Bank in 2009
Risk taker model introduced in 2011 (longer deferral periods / claw-backs for risk takers and senior executives) according to InstitutsVergV
Compensation model adjusted
Almost 90% of C&M revenues stemming from direct client business
Franchise setup centred around clients’ needs
Onion principle approach
Client centricity established
Transformation to risk-aware culture achieved
Q1 ‘12Q2 ‘12
Benchmark based on Commerzbank
Better ratio than Commerzbank’s, indicating a lower multiple
Worse ratio than Commerzbank’s, indicating a higher multiple
Global 4
Regional 2
Global 1
Global 3
Regional 1
Regional 4
Global 2
C B KRegional 3
Global 1
Global 2
Global 3C B K
Global 4
Regional 4Regional 1
0
2,000
4,000
6,000
8,000
0 50 100 150
Trading Book VaR (99/1)
Reg
. Cap
. For
Mar
ket R
isk
(m)
7Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Limited need for interest rate hedging productsFaster provision of simple solutions
Risk management tools
Advice
Financing / committing capital
Strategy: C&M is rapidly responding to regulatory challenges and is prepared for the changing environment
Reg
ulat
ory
envi
ronm
ent
Com
petit
ion
and
cust
omer
sM
acro
en
viro
nmen
t
Basel III
Dodd-Frank/EMIR regulation
FATCA regulation
Segregation of Corporate from Investment Banking (Liikanen report)
Financial transaction tax in Europe
Further deleveraging across banking industry and households ongoing
Consolidation trend and separation between “scale winners” and ‘focused winners”
Investor risk aversion - trend towards less complex flow products
Lower volumes in primary and secondary markets
Accelerated product commoditisation
Increased economic uncertainty / market volatility
Continuing low interest rate environment
Lower global growth OTC clearing for clients
Collateral transformation
Commerzbank’soffering
Further diversification of current offering into Asset Management products
Know-how transfer –providing regulatory adviceFinancial Institutions Advisory teamInternational conferences
Full spectrum of financing solutions, from loans to complex instrumentsCooperation with MSBAdapted Structured Capital Markets offering
Change in customer needs
Less risk appetite, equity markets suffering under uncertainty
Impact of regulatory changes, esp. for FIsOngoing internatio-nalisation and globalisation
Changing financing demandsIncreasing demand for sophisticated solutions
Investment products
3.
2.
1.
8Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Strategy: positioning as large international niche player rather than small global player – enhancement of offering ongoing
Fixed Income & Currencies (FIC)
Equity Markets &Commodities (EMC)
Corporate Finance (CF)
Credit Portfolio Management (CPM) 1)
Germany
Europe ex. Germany
AmericasAsia
Other
Germany
Europe ex. Germany
AmericasAsia
Other
Germany
Europe ex. Germany
AmericasAsia
OtherAmericas
Asia€475m€469m €353m €212m
Ope
ratin
g re
venu
es
ex L
LP, e
x O
CS
9M
‘12
1) Structured Credit Legacy (SCL) / former PRU reported for the first time in 3Q 2012. 2) YoY market share change 2010-2011; EMC excluding one-offs. Source: Oliver Wyman.
Strategic realignment of internal resources in light of regulatory and market changes for the benefit of the debt and institutional client businesses
Resource reallocation from exotics products to Asset Management products
Focus on market making of linear products
Lowering operating costs
Further increase of capital efficiency of CPM
Focus on integrating Counterparty Risk Mgmt
Continued reduction of SCL portfolio
Expansion of Structured Capital Markets offering to provide alternative funding (e.g. ABS)
Market share development2010-20112)
Financial Institutions
Credit Products & Sales
Asset Mgmt products
Exotic products
Str
ateg
yR
esou
rce
real
loca
tions
Fostering business with (non-bank) financial institutions
Interest Rates / Structured
Linear products
Struct. Cap. Markets
M&A / ECMStruct. Credit Legacy
CPty Management
Core loan products
Germany
Europe ex. Germany
9Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Core principles for a profitable nicheCommerzbank’s corporate equity model
Strategy: creating a focused, client-centric niche business –example of equity brokerage
Integrated IB approach across all elements of the value chain
Cross introduction of CEOs / CFOs to other IB products
Leveraging research and industry know-how into C&M and MSB
Integrated
Minimising platform / infrastructure fix costs via internal shared systems approach and external strategic alliances with leading industry partnersHub / satellite approach with FFM as hub - LON / NY as satellites
Lean
German specialist, perfect fit to the strength and strategy of CBKFocus on UK, US, D only - 80% of German equity holdingsBest in class broker for German corporates selling Germany to the World
Focused &
Best in class
Profitable, Non-profitable, Neutral, Refers to exit of Equity Brokerage, ECM, or Research.
Strong relationships
with corporateGermany
Leading in German ECM transactions
The #1 ranked house forGermany
The leadingGerman brokerage
business
ResearchCRM, MSB
ECMSales
Trading,Corporate
Access
Corporateequity
concept
Non
-inte
grat
edIn
tegr
ated
Global Local
Major awards testify successful customer-centric positioning Global or niche: no room for ‘stuck-in-the-middle’ concepts
CBK
Local
Global
Global
Local
Local
X XX
XX
Global
Global
Local
Local
XGlobalLocal
Local
Local
European
X
10Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Strategy: increasing front-to-back efficiency with €150m additional savings p.a. by 2016
Key optimisation measures ...
Further steps to align business portfolio towards new market environment for focused growth
Operating model simplification and further locationalconsolidation offsetting regulatory challenges
Complexity reduction in data landscape, IT applications and platforms
Reduction of direct operating expenses and focus on further improvement of end-to-end efficiency
Up to €150m p.a. / >10% savings based on current C&M total costs front-to-back annually (cost savings shown net of cost-to-achieve)1)
Full cost effect will be reached by 2016 with €125m already kicking-in by 2015
Cumulated cost savings of €400m until 2016, freeing-up investment potential for focused growth
... will lead to quick and sustainable results
Optimisation through systematic, concerted front-to-back cost initiative, freeing-up means for investments
2012FC 2013e 2014e 2015e 2016e
€m
1535
75
125
Savings of €15m for FY2012 expected since project start in April 2012
150
1) The cost run-rate might be higher due to growth, regulatory investments etc.
11Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Outlook: C&M providing significant upside for the Group during improved market conditions while limiting downside potential
› C&M crucial element in Commerzbank’s balanced business portfolio as an integrated universal bank
› Ongoing further optimisation of business model and organisational setup
› C&M’s business model driven by client activity (absence of proprietary trading)
› Limited downside due to low risk, client-centric business model with significant upside potential
› C&M demonstrated that it can earn its cost of capital throughout the cycle also in adverse markets
› Increasing interconnection with other group segments for improved product delivery to clients
12Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Corporates & Markets: ambition level for 2016
Maintaining current level of capital efficiency despite introduction of Basel III
Further improve cross-selling, increasing product delivery to clients
RWAs of under €45bn 1)
Pre-tax ROE of over 15% 1)
Increase cost efficiency, freeing-up €150m p.a. for focused growth
C&M represents the modern investment bank
› C&M transformed the IB business model in 2004 and during the merger with Dresdner Bank, adjusting businesses, risk approach, culture and compensation
› C&M provides Commerzbank with future growth opportunities , while limiting its downside potential due to its unique risk/return profile
Growth initiatives: 4% revenue growth p.a.
Target cost/income ratio of under 65%
Note: All KPIs before own credit spread (OCS). 1) Including full Basel III effect.
13Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
For more information, please contact Commerzbank ´́́́s IR team:
Michael H. Klein (UK / Non-Euro Europe / Asia / Fixed Income)P: +49 69 136 24522M: [email protected]
Dirk Bartsch (Strategic IR)P: +49 69 136 22799 M: [email protected]
Jürgen Ackermann (Europe / US)P: +49 69 136 22338M: [email protected]
Tanja Birkholz (Head of Investor Relations / Executive Management Board Member)P: +49 69 136 23854M: [email protected]
Ute Heiserer-Jäckel (Retail Investors)P: +49 69 136 41874M: [email protected]
Simone Nuxoll (Retail Investors)P: +49 69 136 45660M: [email protected]
14Michael Reuther | Member of the Board of Managing Directors | Frankfurt/Main | 8 November 2012
Disclaimer
Investor Relations
This presentation contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about Commerzbank’s beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates, projections and targets as they are currently available to the management of Commerzbank. Forward-looking statements therefore speak only as of the date they are made, and Commerzbank undertakes no obligation to update publicly any of them in light of new information or future events. By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, among others, the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which Commerzbank derives a substantial portion of its revenues and in which it hold a substantial portion of its assets, the development of assetprices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of its strategic initiatives and the reliability of its risk management policies.
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