Investors’ Day 2003 - Commerzbank AG · investors‘ day september 10, 2003 3 Costs Operating...

The current retail-banking strategy of Commerzbank for a changed

environment

Martin BlessingMember of the Board of Managing Directors

Glashütten/Taunus, September 10, 2003

Investors’ Day 2003

1investors‘ day september 10, 2003

Turnaround achieved and strategy formulated – growth is possible

Turnaround achieved in Retail Banking and business line is on course to attain targeted return

Commerzbank with clear strategy for successful retail-banking operations

Growth is possible – Commerzbank can grow from internal resources


* before taxes

Already achieved/Extrapolation Medium-term planning

-14.9%3.2%

> 7%

> 11%

~2/3 of improvement

achieved after two

years

~1/3 of planned

improvement in results

Turnaround in Retail Banking and business line is on course to attain targeted returnROE* Retail Banking segment in %

~€600m

Targeted return 17.3%

2002 2003e 2004e2001 2005e


Costs

Operating profit (pre-tax)

--

2001 2002 2003e

-24353

>150 1,821

1,840 1,841

2,064

1,7871,691

Turnaround achieved through significant cost reductions and by holding earnings stable in difficult market environment 2003 resultin € m

Earnings (after risk)Stable earnings despite:

•Halving of DAX*•Key interest rates cut 2.5% since 2001

•Branch closures (>200)

Cost reductions:•Branch capacity adjusted

•Indirect costs and cost-cutting offensive at head office

≥≥≥≥ €400m

* between January 2002 and July 2003


1998 1999 2000* 2001 2002 2003 (e)

Costs in 2003 likely to match their 1999 levelDevelopment 1998-2003,in € m

2,000

Income after provisioningOperating expenses

1,672

* adjusted for placing of comdirect bank shares


Quarterly figures for 2001-2003 show clear, positive trendin € m

Q1 Q3 Q4Q2 Q1 Q3 Q4Q2

2001

267 220 251 231 281243

224 160 238 196 180220

491 380 489 427 461463

514 519 485 424 424454

255

228

483

507

-24 -23 -139

248

219

467

524

-57 4 3 379

223

240

463

430

33

2002

278 292 284 290 286296

-11 -72 -33 -59 -5-53

286

-31

279

-31

267

-44

2003

Q1 Q2

265

-44

221

227

477

393

84

Net interest income after provisioning

Net commission incomeand other income items

Income

Operating expenses

Operating profit

Net interest income

Provision for possible loan losses


Volume trend in Commerzbank’s Retail and Private Banking

Loans (average, € m)

Deposits (average, € m)

Individual items

- Home loans (fixed and floating)- Loans (floating interest rate)- Loans (fixed interest rate)- Consumer loans

- Sight- Time- Savings- Savings certificates

Portfolio volume (on reporting date)

- Equities (DAX*)

- Bonds

- Other

- Investment funds (incl. COBAS)- Other (incl. structured products)

12/00

23,6052,9468,0751,032

6,3804,5089,5551,164

18,886 (6,400)

10,324

564

20,1121,075

36,222

21,607

50,397

12/01

24,1852,8978,6551,024

6,5055,0109,822

712

13,891 (5,200)

9,291

625

20,5281,177

37,386

22,049

44,887

12/02

24,1142,5449,408

996

6,9374,574

10,365501

7,921 (2,900)

8,991

529

18,7671,111

37,591

22,377

36,790

6/03

23,6042,0359,983

956

6,8713,745

11,169368

8,801 (3,220)

8,573

470

20,3961,290

37,048

22,153

39,060

in € m

<-10%<-2%

>2%>10%

<2%

Change12/00-6/03:

* Index level at end of period


Margin trend in Commerzbank’s Retail and Private Banking

Loans

Deposits

Individual items

Annual averages in %

- Home loans (floating)

- Home loans (fixed)

- Loans (floating interest)

- Loans (fixed interest)

- Consumer loans

- Sight

- Time

12/00

2.30

1.03

4.92

1.04

5.19

3.45

0.48

1.42

12/01

2.54

0.98

5.15

1.01

5.23

3.34

0.40

1.28

12/02

3.34

0.96

6.18

1.06

5.51

2.53

0.38

1.26

6/03

3.72

0.92

7.59

1.06

5.19

2.05

0.40

1.18- Savings

<-10%

<-2%

>2%

>10%

<2%

Change12/00-6/03:




Commerzbank with clear strategy for successful retail banking operations



Business customers

Commerzbank well-positioned in important target segments Market shares, by customer groupin %

Segments

Retail customers

Affluent customers

Private-bankingcustomers

� Retail customers important for maintaining economies of scale

~2.9%

~6%

~5%

Average ~3.5%

� Above-average market shares in more profitable target segments

Positioning

~4-5%


Strategy based on four key pillars of business model

Innovative high-yielding full range

Optimal use of all channels with maximal accessibility

Further qualifica-tion of staff to make them into managers and sales experts

Optimized procedures and target costing

Products andservices

Process management

Sales channels

Staffqualifications

Positioning

Inno

vatio

nExcellence


•Home loans on best market conditions•Strengthening of short-term consumer loan business•Consumer loans online

•Home loans on best market conditions•Strengthening of short-term consumer loan business•Consumer loans online

Customer-oriented intelligent mix of products and servicesdesigned to achieve high returns

Credit

•New price models for accounts, cards and custody•Interest bonus (+75,000 new customers since mid-July)•Spar-Card with more cash dispenser functions

•New price models for accounts, cards and custody•Interest bonus (+75,000 new customers since mid-July)•Spar-Card with more cash dispenser functions

•Free choice of funds (open architecture)•Continual product innovations, e.g. guaranteed funds, hedge funds, Best Start certificate

•Free choice of funds (open architecture)•Continual product innovations, e.g. guaranteed funds, hedge funds, Best Start certificate

Products and services

Securities

Payments/Deposits

Bancassurance

•Broader range of CommerzPartner services•Insurance products combined with attractive credit offers

•Broader range of CommerzPartner services•Insurance products combined with attractive credit offers


Sustained investment in balanced staff qualificationsExisting and future qualifications

Staff qualificationsSales qualifications

Management qualifications

Specialist qualifications

• Three-month intensive training per branch

• 75 new sales trainers to ensure sustained impact New weekly management

instruments:-Sales management tool-Management discussion-Sales strategy discussion

-Activity planning

• Improved specialist training• Introduction of courses for specific

areas and functions

Present levelTarget level for qualifications


Optimized process management for creating sales capacity and sales focus and also to improve quality

Processmanagement

Organization

Structuring of processes

SalesSales Back officeBack office

• Goals&wishes form• Uniform advisory

processes• Reduced flood of

information • 150 new processes

• Credit processing centralized

• Central call-centre for sales support

• Commerzbank’s customer call centre and Commerz-Partner combined

• Central EB* hotline

• Electronic lending transactions

• Processes shifted to back office

* Electronic Banking


Innovative management of channels to secure market shares geared to growth Commerzbank’s primary sales channels

Sales channels

BranchBranch

Advisory centresAdvisory centres

Advisory unitsAdvisory units

CSGCSG

Internet branchInternet branch

Personal advice

Accessibility

Customer

•Personal advice and comprehensive range of products and services

•Call-centre and telephone banking

•Focus on advice and great flexibility•Lower administrative expenses•24-hour self-service •Nationwide presence

•Serving affluent, private-banking and business customers

•Banking services via internet

•Leading direct bank offering full banking services

New


New type of branch mainly for providing advice currently being tested in seven pilot branches

If customers respond positively,

roll-out planned nationwide in selected

branches

If customers respond positively,

roll-out planned nationwide in selected

branches

+ New type of branch ensures nationwide presence

+ Greater use of 24-hour self-service technology (incl. free internet access and cash deposit machines)

+ Hardly any administrative work or cash transactions; focus on advice+ Flexible advisory units,

maximum of three staff

Sales channels


Factors behind success of competitors

Status quo at Commerzbank

• Rigid compensation model for collectively negotiated salaries

• Incentives are the exception

• Sales staff have too many administrative tasks

• Focus on existing customers

Structure of compensation

Incentives

Focus on selling

Focus on customers

Even after turnaround, important areas remain to be tackled

• Performance-based compensation

• Business steered by incentives

• Sales the main task

• Focus on acquiring new customers




Commerzbank with clear strategy for successful retail banking operations



It is not size that is decisive...2002 result

Customers(in ‘000s)

Result(in € m)

Branches(total number)

3,500

3,000

4,000

2,100

1,100

727

320

OUTSIDE-IN

4,300 700

470

53

1,800


...but rather permanent improvement of the business model

• New positioning for business customers

• Full exploitation of bancassurance

• Optimization of direct sales

Tapping growth potential

• Process excellence

• Sales excellence

• Outsourcing

Achieving operative excellence

Products andservices

Process management

Saleschannels

Staffqualifications

17% + X RoE

• Development of new sales channels

• Nationwide presence improved by advisory units

• Greater special-ization of staff

• Implementation of performancestandards

• Providing incentives for success

Investors’ Day 2003 - Commerzbank AG · investors‘ day september 10, 2003 3 Costs Operating...

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