The CEO of Commerzbank AG, Germany’s second-biggest bank, said Thursday the €80 million ($112.2 million) in provisions for possible losses from the subprime crisis may not be enough.
Since the US subprime crisis exploded in July, Commerzbank AG had maintained that its exposure was likely around €80 million ($112.24 million) or so, with other German banks reporting similarly small amounts. But speaking at the bank’s investor day, CEO Klaus-Peter Mueller said that given the uncertainty that has enveloped world markets, “nobody can say if that is sufficient in the long term.” Mueller said it would be “irresponsible to constantly and publicly circulate estimated numbers concerning the amount of provisions presumed to be necessary. We closely monitor developments and we can, and will, do whatever it takes in respect to possible positions.” Regardless, he said the bank is still aiming for a net profit of €1.5 billion ($2.1 billion) in 2007, slightly lower than the €1.6 billion ($2.24 billion) it posted in 2006.
He also said the bank was looking at the possibility of not only boosting dividend payments but buying back more shares on the open market.“We are keeping all options open,” he said. “We have not decided whether to spend the extra money on internal or external growth, or on dividends and share buybacks.” Turning to foreign expansion, Mueller said the bank was still interested in acquiring a majority stake in Russia’s Promsvyazbank, but whether a deal for the right price can be had is still up in the air. Last year, the bank took a 15.3% stake in the institution. “We are interested in buying a bank in Russia and Ukraine, and we won’t wait forever for our Russian friends to agree on a price with us,” he said. Earlier this week, Commerzbank paid $600 million for a 60% stake in Ukraine’s Bank Forum. Shares of Commerzbank fell 1.21% to €28.55 ($39.89) in Frankfurt yesterday. (businessweek.com)