Company Valuation Under IFRS : Interpreting and Forecasting ...

Chapter Six – The awkward squad
4. Commerzbank Profit and Loss Drivers
2002 2003 2004 2005 2006 2007 2008
Interest received/average earning assets 2.99% 3.09% 3.19% 3.29% 3.39% 3.49%
Interest paid/average interest-bearing 1.20% 1.20% 1.20% 1.20% 1.20% 1.20%
liabilities
Growth in commissions received 3.68% 3.00% 3.00% 3.00% 3.00% 3.00%
Growth in commissions paid 24.66% 3.00% 3.00% 3.00% 3.00% 3.00%
Growth in trading profit 35.48% 0.00% 0.00% 0.00% 0.00% 0.00%
Profit on investments/investments 0.34% 0.34% 0.34% 0.34% 0.34% 0.34%
Operating expenses/interest and 117.84% 100.00% 98.00% 96.00% 94.00% 92.00%
commission income
Other operating result/total assets 0.04% 0.04% 0.04% 0.04% 0.04% 0.04%
Minority interest in profit 4.08% 13.34% 19.12% 21.24% 23.91% 27.38%
5. Commerzbank end 2003 economic capital (€ billion)
2003
RWA 140.8
Market risk (trading book) 0.8
Market risk (banking book) 0.7
Market risk (equity holdings) 2.9
Credit risk 4.3
Operational risk 0.9
Business risk 0.5
Total 10.1
Diversification effects -2.2
Economic capital after 7.9
diversification effects
Tier I capital 10.3
Implied surplus 2.4
Economic capital/RWA (%) 5.61%
6. Commerzbank Regulatory Risk Weighted Assets and Capital Ratios (€ million)
2002 2003 2004 2005 2006 2007 2008
Total book assets 422,134 381,585 388,869 398,805 409,085 419,719 430,722
Risk weighted assets (RWA) 160,190 140,829 145,542 149,261 153,108 157,088 161,206
Risk weighted assets/total assets 37.95% 36.91% 37.43% 37.43% 37.43% 37.43% 37.43%
Minimum Tier 1 ratio (%) 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Regulatory minimum total 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
capital ratio (%)
Core capital
Equity capital in balance sheet 8,808 9,091 6,801 6,763 6,703 6,609 6,467
Minority interests 1,262 1,213 1,300 1,437 1,603 1,810 2,073
Goodwill (1,040) (690) (580) (470) (360) (250) (140)
Adjustments 2,661 643 643 643 643 643 643
Tier I capital 11,691 10,257 8,164 8,373 8,589 8,812 9,043
Core capital ratio 7.30% 7.28% 5.61% 5.61% 5.61% 5.61% 5.61%
Target capital ratio 5.61% 5.61% 5.61% 5.61% 5.61% 5.61%
Target capital 7,900 8,164 8,373 8,589 8,812 9,043
Surplus capital 2,357 0 0 0 0 0
Supplementary capital
Core capital 11,691 10,257 8,164 8,373 8,589 8,812 9,043
Subordinated capital 9,237 8,381 8,381 8,381 8,381 8,381 8,381
Adjustments (1,475) (513) (513) (513) (513) (513) (513)
Tier II capital 19,453 18,125 16,032 16,241 16,457 16,680 16,911
Tier III capital 209 125 125 125 125 125 125
Total capital 19,662 18,250 16,157 16,366 16,582 16,805 17,036
Total capital ratio 12.27% 12.96% 11.10% 10.96% 10.83% 10.70% 10.57%
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