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
Market price risk fell significantly during the second
quarter. The fall was driven by two factors. Firstly, the financial
market situation eased a little after two particularly
turbulent preceding quarters. The steep declines in share
prices and substantial widening in credit spreads were
halted, and a correction ensued, with considerable rallies in
places. This was accompanied by a decline in the general
level of financial market volatility, which also led to a
reduction in value at risk. The second factor driving the
reduction in reported risk was that risk positions were
systematically managed down. As part of the integration
of Dresdner Bank, risk positions reducible at an early
stage were identified. This provided the basis for rapidly
and systematically reducing risks in selected areas in
response to the market recovery.
Since January 2009, a consolidated daily risk report for
Commerzbank and Dresdner Bank has been compiled to
monitor and manage market price risk. Since the merger on
May 11, 2009, the two banks have, in general, no longer
been treated as separate for reporting purposes, and the
report is now compiled on the basis of the new Commerzbank
structure. Value at risk and stress test limits for the new
structure were promptly introduced for daily monitoring
purposes.
Market risk in the trading book
A comparison between the VaR figures in Commerzbank’s
trading book at June 30, 2009, and those at March 31, 2009,
clearly illustrates the reduction in risk described above.
Credit spread risks still account for the lion’s share of the
total value at risk, but the breakdown of risks by asset class
has clearly improved.
The emphasis remains on reducing risks, which is done
with the active involvement of the risk function. To this end,
selected positions have been transferred to the Portfolio
Restructuring Unit (PRU), set up for the specific purpose of
VaR contribution by risk type /
VaR (99 % confidence level, 1-day holding period)
in € m 31.03.2009 30.06.2009
Credit spreads 38.2 28.8
Interest Rate 15.2 14.7
Equity 11.6 14.6
FX 3.6 2.3
Commodities 2.8 1.0
Total 71.4 61.4
risk reduction. The PRU is now responsible for a substantial
part of the credit spread risk. Nevertheless in other units
besides the PRU, the de-risking /optimization of portfolios
is still ongoing.
As conditions in some segments of the financial markets
remain difficult, it is still not possible to use mark-tomarket
valuation methods in all instances. Mark-to-model
valuation is therefore used for some risk exposures, in particular
for ABS positions.
Market risk in the banking book
Commerzbank also manages market risk in its banking
books. These are mainly credit spread risks in the Public
Finance portfolio with the positions held by subsidiaries
Eurohypo and EEPK and exposures in the Treasury portfolios
and equity price risks in the equity investments
portfolio.
Credit spread sensitivities
(downshift 1 bp) | in € m
Dec 07
Dec 08
Mar 09
Jun 09
The decision to manage down the Public Finance portfolio
continues to be vigorously implemented as part of the
de-risking strategy.
The graph shown here charts the development of credit
spread sensitivities for the Public Finance portfolio. The
decrease in sensitivities in the second quarter of 2009 continues
and can be attributed both to portfolio reduction
measures and to a tightening of credit spreads since the
beginning of the quarter. About €72m of the total sensitivity
are due to positions classified as LaR. These positions do
not have an impact on the revaluation reserve and P&L
respectively.
2. Liquidity risk
Liquidity risk in a narrower sense is the risk that Commerzbank
will be unable to meet its current and future payment
obligations as and when they fall due. In the wider sense it
includes the risk that, in the event of a liquidity crisis, funds
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