Whilst Commerzbank is in itself a high quality operation, the turn in the credit cycle has increased the risks to earnings for all banks and caused us to revisit our models across the sector. Factoring in the likely increased cost of funding and a higher cost of risk, as well as the German government's insistence that the quoted banks should contribute to the bail-out of IKB, this has reduced the stock's value dramatically and we therefore sold our holdings.
Commerzbank was re-purchased after the shares fell, and the company posted a very solid set of results for the first quarter of 2006. Commerzbank's purchase of Eurohypo is yielding concrete synergies, and demonstrates good balance sheet management. The purchase was funded largely from the balance sheet, with shareholders also being diluted by 14% through new shares being issued, in exchange for a 47% boost to pre-tax profit and a significant hike in the company's return on equity. The latest results also show that the earnings quality remains high, driven by excellent relationships with Germany's Mittelstand companies.
| Sedol |
Type |
Price |
Date |
| 4325538 |
Sell |
EUR 27.372 |
14/09/2007 |
| 4325538 |
Buy |
EUR 28.065 |
13/10/2006 |
| 4325538 |
Buy |
EUR 28.692 |
18/05/2006 |
| 4325538 |
Buy |
EUR 31.095 |
16/05/2006 |
| 4325538 |
Buy |
EUR 21.457 |
16/09/2005 |
| 4325538 |
Buy |
EUR 17.75 |
08/07/2005 |
| 4325538 |
Buy |
EUR 17.84 |
06/06/2005 |
| 
