COMMERZBANK AKTIENGESELLSCHAFT

To our Shareholders Interim Management Report Interim Financial Statements
231 Business and economy
232 Earnings performance, assets and financial position
237 Forecast
240 Report on post-balance sheet date events
241 Risk Report
Compared to the first quarter of 2009 the increase in
default volume results from the segments Corporates &
Markets CEE and Mittelstandsbank. In the Mittelstandsbank
segment and especially in Central and Eastern Europe the
recession led to an overall increased number of defaults
while in the Corporates & Markets segment once again bulk
cases were the drivers of the higher default volume. In the
CRE segment no additional bulk cases occurred and the
default portfolio could slightly be decreased compared to
the first quarter of 2009. Also in the Private Customers segment
the inflow was more then offset by work out activities
and a slight net decrease was achieved compared to the first
quarter of 2009. Due to difficult conditions further increase
of the default portfolio is to be expected in the course of the
Counterparty default adjustments fell slightly in the
second quarter of 2009. In the case of monoliner counterparties,
the market value of some of the hedged positions
recovered in the second quarter, so that the CDAs in this
category were slightly reduced even though there was no
substantial improvement in the creditworthiness of the
counterparties.
Furthermore, hedges with credit derivatives product
companies (CDPCs) as the credit insurers are concluded.
Through rating downgrades and defaults of insured loans,
the liquidity and capital situation of the CDPCs during the
financial market crisis has considerably worsened so that
the insolvency of a few CDPCs cannot be ruled out. In the
second quarter, the Bank set aside a valuation allowance
for one of the two CDPCs, as this counterparty can no longer
be expected to meet its future liabilities in full. In return,
the CDA made for this counterparty was reversed.
second half of 2009 – influenced by specific bulk cases and
similar to the increase of impairments.
b) Counterparty default adjustments (CDA)
If the counterparty defaults, costs arise for closing positions
for derivative and repo transactions if a positive market
value remains after offsetting and collateral agreements are
taken into account. These potential replacement costs must
be factored in when determining the fair value of trading
positions. Commerzbank makes counterparty default adjustments
(CDAs) in this case. The CDAs correspond to the fair
value of the counterparty risk entered into by both
contracting parties.
in € m Mar 2009 Jun 2009
Market value CDA CDA Ratio Market value CDA CDA Ratio
Monoliner 3,318 1,750 53 % 2,959 1,651 56 %
CDPC 615 357 58 % 46 15 33 %
Other 176 66
Total 2,283 1,732
In the “Other” category, the reduction in CDAs was
mainly due to the recovery in the credit markets and the
narrowing in credit spreads.
8. Country risk management
When calculating country risk, Commerzbank measures
both transfer risks and the region-specific event risks determined
by politics and economics that affect a country’s individual
economic assets.
Country risk management includes all the decisions,
measures and processes that – drawing upon the information
provided by risk quantification – aim to influence the
country portfolio structure with a view to achieving business
and return targets.
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