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10 | ifr special report | September 2009 GERMANY


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In spite of strong performances across most business lines, and decreasing ABS- related losses, risk management remains cautious. At the same time as revenues are recovering quarter-on-quarter, credit loss provisions are continuing to mount. Across the whole firm, provisions hit €1bn in the second quarter of 2009, almost double the previous quarter and only fractionally less than the whole of 2008.


The end of Dresdner Kleinwort At Commerzbank’s new London offices, executives celebrated at the start of September the official rebrand of the firm’s corporates and markets division, en- compassing the areas that the firm has retained from the old Dresdner Kleinwort. The Allianz-sponsored Formula 1 car has been removed from the lobby, and no trace of DK branding remains in the building. But the event had more significance than a mere marking of an anniversary. If there is one message that Michael Reuther, CEO of corporates and markets at Commerzbank, is keen to press over all others, it is the importance of the London office as a key element of the bank’s investment banking strategy. Frustrated at constant sniping from some quarters – mostly disgruntled former Dresdner employees, say survivors of the merger – Commerzbank's management has been at pains to emphasise that the dis- appearance of the venerable Dresdner Kleinwort name does not represent a total retreat of the operation into Commerzbank's home market. As evidence of that, Commerzbank is retaining 600 front-office investment banking staff in London, mostly focused on equity derivatives structuring and commodities, FX trading and institutional sales, and ECM and DCM syndicate desks within corporate finance.


Frustrated at constant sniping from some


quarters – mostly disgruntled former Dresdner employees, say survivors of the merger – Commerzbank’s management has been at pains to emphasise that the disappearance of the venerable Dresdner Kleinwort name does not represent a total retreat of the operation into Commerzbank’s home market.





Reuther argues that far from the scare stories regularly circulating during the process, the integration of the two firms has focused on retaining talent where it already existed – whether in Frankfurt or London and whether at Dresdner Kleinwort or Commerzbank. Significant numbers of senior fixed-income staff, for example, are from the DK side. It also made sense to retain the ECM syndicate and convertible bond expertise that was in London, argue Commerzbank corporate finance executives.


Nevertheless, for all the talk of the importance of the London office, Commerzbank executives willingly agree that the overall operation will be resolutely German-focused in terms of clients. The bank reckons it has lent about double the amount to German corporates than Deutsche Bank has, but activities such as UK corporate broking and stock research are gone.


A tighter focus and more sensible control over the allocation of capital will allow the bank to take advantage of cross- selling opportunities that exist, argues Reuther, rather than tying up capital in trying to create a more global operation, as Dresdner had attempted to do. That said, the bank still retains about 100 front-office staff in New York, the same number in Central Europe and Asia, as well as the core of 800 in Frankfurt.


Bankers at the firm talk of a stronger pipeline than either of the two institutions would have had combined, but also concede that much of that remains to be proved publicly. Reuther also points to the potential to take advantage of the institu- tional sales capability of DK – a factor he has highlighted since the merger was first proposed.


Nonetheless, the bank can also point to concrete successes that have already been seen, such as being on the €5bn KfW benchmark deal in May, a first for the firm. Reuther's strategy is aimed squarely at profitability – an unsurprising ambition but one that he says has too often been forgotten in a quest for market share or global spread. With ABS losses continuing – although lessening dramatically – the corporates and markets division recently announced second-quarter losses of €231m. That was a big improvement on the first quarter but is evidence of how far there is still to go.


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