Confident Commerzbank pushes profits up by 20%

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The Independent Online
COMMERZBANK, Germany's third-biggest bank, increased its operating profits by 20 per cent during 1992, to reach DM2.2bn (pounds 880m), the company estimated yesterday.

Describing the estimate as conservative, Martin Kohlhaussen, the bank's chief executive, said that strong trading in the last two months of the year had boosted the performance.

Partial operating profits - excluding a contribution from the bank's own-account trading - rose by 15 per cent to nearly DM2.1bn from DM1.8bn.

Mr Kohlhaussen stressed the positive effects of the bank's internal restructuring, which kept cost increases down to 6.5 per cent.

The figures were released earlier than usual to improve the climate for Commerzbank's recently announced rights issue, scheduled to raise DM500m.

Rather than raise the 1992 dividend from the DM10 a share paid in 1991, Mr Kohlhaussen said the bank would be reinforcing its provisions.

Despite the difficult economic conditions, Mr Kohlhaussen was confident about trading prospects for 1993, and said the level of earnings per share, despite the capital increase, should be maintained. The effects on the bank's business of growing economic difficulties should be largely balanced out by the expected lowering of interest rates, he said.

Provisions for bad debts in the countries of the former Soviet Union are to be increased from 60 per cent to the 80 per cent level already adopted by the other big German banks.

In the cases of Olympia & York, where Commerzbank's exposure amounts to DM530m, and Hafnia, the troubled Danish insurance company, Mr Kohlhaussen said that he could already see the outlines of solutions that should 'not give rise to excessive pessimism'.