EUROPE - Standard & Poor's, the global rating agency has said that Commerzbank's weak performance in 2001 had been expected and reflected in its recent rating action.
Standard & Poor's expects a prolonged restructuring process, which is unlikely to be completed before 2003. Because operating profits are expected to remain depressed in 2002, progress of management's efforts to reduce the bank's unfavorably high cost base remains crucial.
Owing to the difficult economic and competitive environment, enhanced restructuring initiatives might be needed, however. Further deterioration of Commerzbank's financial profile might prompt a further downgrade.
Commerzbank's pretax loss of EUR189m in the fourth quarter reflects lower commission income, higher risk provisions, and a still high level of operating expenses, but also includes a restructuring charge of EUR283m. This was only partly compensated by profits from the sale of financial investments and the first-time application of IAS 39, which contributed to a significant increase in trading income.
As a result of tax repayments, the fourth quarter result was about break even. Net income for the full year was EUR92 million, which allows a reduced dividend payment.
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