Major parts of the markets and commodities division sold to Société Générale have been transferred but the transaction is not expected to be completed before 2021.
Commerzbank has reported an operating profit of €990m in the first nine months of 2019, compared with €1 billion in the same period last year. Net interest income in the period under review, at €3.8 billion, was 7.2% above the prior-year level.
The discontinued operations business unit, which includes the income and expenses of the equity markets & commodities (EMC) division sold to Société Générale, posted a result after tax of €9m.
As at September 30 2019, the assets and liabilities of the discontinued operation amounted to €9.3 billion (previous year: €13 billion) and €11.1 billion (previous year: €12.4 billion), respectively. The assets and liabilities are mostly measured at fair value.
The transfer of the EMC division to Société Générale, which will be executed in several stages, was started in the first quarter and continued in the second quarter of 2019 with the complete transfer of the asset management business.
Major parts of the development and issuing of structured financial products business have also already been transferred in the second and in the third quarter 2019, with the opportunities and risks arising from the associated assets and liabilities initially being transferred ‘synthetically’ to Société Générale through the conclusion of corresponding derivative transactions.
However, the legal transfer of the relevant assets and liabilities, which also requires their derecognition from the balance sheet, will only take place at later stages in the transaction from 2019 onwards and is expected to be completed in 2021.
The economic transfer to SG will be largely completed within a year, ‘only legal transfers will then still follow’, according to the bank.
Commerzbank was the most active manufacturer of structured products in the first nine months of 2019, issuing just under 160,000 structured products between January 1 and September 30, ahead of Vontobel (144,296 products) and Citi (142,895), according to SRP data.
The vast majority were listed flow and leverage certificates which can be traded in Stuttgart and Frankfurt and at the Euronext Amsterdam and Paris exchanges.
The fact that the purchase agreement with Société Générale was concluded at the end of 2018 has so far not had any impact on the bank’s issuance, as the number of products launched during 9M2019 was up 34% from the same period last year.
Commerzbank raised a total of €7.5bn in long-term funding on the capital market in the first three quarters of 2019. The average maturity of all issues made during the reporting period was over eight years.
In the unsecured area, the bank issued two preferred senior benchmark bonds with a total volume of €2.25 billion and maturities of five years and seven years, respectively; two non-preferred senior bonds with a volume of €500m each; and €800m in private placements were also issued.
In the secured area, mortgage bonds (Pfandbriefe) with a total volume of €2.5 billion were issued, including two benchmark issues in January with a volume of €1 billion each and maturities of five and fifteen years, respectively. Private placements accounted for €500m.
Click the link to view the third quarter results, presentation, and the interim report.