Commerzbank ditches 2012 profit target after Greek losses

Germany's second-biggest bank Commerzbank abandoned on Friday its profit target for next year after writedowns on its Greek bond holdings pushed it deeply into the red in the third quarter. "We continue to be committed to our original operating profit target of 4.0 billion euros ($5.5 billion) for the group, but on account of the market environment we will be unable to reach this target next year," said chief executive Martin Blessing in a statement. Commerzbank had already warned back in August that its 2012 profit targets were "conditional upon stable markets," Blessing noted, saying the group was now simply projecting a "good operating result" for its core banking activities next year. "In the non-core areas the result for 2012 will be dependent to a great degree on how the European sovereign debt crisis continues to develop," he added. Turning to its third-quarter results, Commerzbank said additional writedowns on its holdings of Greek sovereign bonds had pushed it to a net loss of 687 million euros in the period from July to September. That was much deeper than expected: analysts polled by Dow Jones Newswires had been pencilling in a net loss of 585 million euros. Commerzbank booked bottom-line profit of 24 million euros in the preceding quarter and net profit of 113 million euros in the third quarter of 2010. The group attributed the bigger-than-expected loss in the third quarter of the current year to an additional writedown of 798 million euros on its Greek bond holdings. Commerzbank is one of the German banks most heavily exposed to Greek debt. "With a view to the ongoing uncertainty regarding Greece's financial solvency and with regard to the EU summit on October 26, the positions held by the bank were depreciated by 52 percent of their nominal value," it explained. At a crunch summit last month, EU leaders agreed that banks and private investors take a 50 percent loss or "haircut", slicing 100 billion euros off the 350-billion-euro debt mountain around Greece's neck. Commerzbank also said it was examining all options so as to meet the additional capital requirements of the European Banking Authority (EBA). In an immediate move to accelerate the reduction of risk-weighted assets, the group would temporarily suspend all new business at its troubled mortgage lender, Eurohypo; temporarily suspend all new loan business outside its core regions of Germany and Poland; speed up the sale of non-strategic assets; and examine the possibility of selling financial investments. But those would not include its online unit, comdirect, or its Polish subsidiary BRE Bank, "which are part of the core business," Commerzbank insisted. Commerzbank was biggest loser on the Frankfurt stock exchange on Friday, with its shares shedding 4.6 percent to 1.67 euros.