COMMERZBANK AKTIENGESELLSCHAFT

To our Shareholders Corporate Responsibility Management Report Risk Report Group Financial Statements Further Information 129 185
127 71 Business and overall conditions
135 79 Earnings performance, assets and financial position
147 91 Segment performance
183 127 Asset Based Finance
137 193 Our employees
143 199 Report on events after the reporting period
144 200 Outlook and opportunities report
The ongoing sovereign debt crisis and major uncertainties on the real estate and capital
markets present Eurohypo AG with operating conditions which have permanently changed
and to which it must respond. Potential further escalation of the European debt crisis entails
the risk of another correction on real estate markets. Governments’ austerity packages, the
high and in part excessive indebtedness of private households, and the mostly stagnating
property markets are also subduing growth prospects for the target markets.
Focus on winding down the portfolio and reducing risk
In 2011, Commerzbank successfully continued its strategy of winding down assets on a
value-preserving basis and optimising the commercial real estate finance portfolio. The improved
results in the CRE core markets showed that the Bank chose the right strategy.
Activities still focused on winding down non-Pfandbrief-eligible or non-strategic parts of
the portfolio. In commercial real estate financing, segment assets (performing and nonperforming
book) as at December 31, 2011 totalled around €62bn, compared with €73bn in
2010, which corresponded to a reduction in the CRE portfolio of some 14% within a single
financial year. This means that the target of reducing the CRE portfolio by the end of 2012 to
less than €60bn will probably be reached sooner than planned. As a result of the substantial
portfolio reduction, the risk content of real estate business also decreased considerably, with
average risk-weighted assets (RWA) at year-end standing at €38.2bn, 22% less than the
2010 figure of €49.1bn.
In CRE, new business was limited to around €2.5bn in 2011, due mainly to the forced
winding down of the portfolio. Of this, around €0.8bn related to domestic commitments and
€1.7bn to foreign ones. In addition to new commitments, existing loans of €6.6bn were prolonged,
which corresponded to a reduction in the CRE portfolio of some 14% within a single
financial year. Overall, the business area provided its customers with loans totalling €9.1bn.
Outlook
In commercial real estate financing, we will continue to concentrate on resizing the credit
portfolio and reducing assets by year-end to less than €60bn in line with risk-income considerations.
The existing portfolio will contract further over the next few years. Against this
background, every individual commitment will be critically reassessed to determine whether
it is suitable for prolongation. Overall we assume that credit quality will continue to improve.
We will begin taking on new business again in the second half of the year at the earliest:
Given the risk-oriented portfolio reduction, risk-weighted assets are also likely to fall further.
Group Management Report