Business

Commerzbank profits hit by Greek debt writedown

Commerzbank building
Image caption Commerzbank's second quarter profits were all but wiped out by Greek debt writedowns

Commerzbank, Germany's second largest bank, has seen its second quarter profits all but wiped out by a 760m-euro ($1.1bn; £676m) writedown of its Greek debt.

Second-quarter net profit fell by 93% from the same period a year ago to 24m euros after the debt revaluation.

The move reflects acceptance among lenders to Greece that they will not receive back the full value of loans.

Earlier this month the UK's RBS also wrote down around $1bn of Greek loans.

Commerzbank said it was still expecting full-year profits to beat last year's.

In a statement, the bank said it was expecting a "challenging environment characterised by a high degree of market uncertainty in the second half of this financial year".

Nevertheless it said it would make "well above the figure achieved in 2010", of operating profits of 1.39bn euros, excluding its Portfolio Restructuring Unit, set up to house troubled assets following the credit crisis, and its Eurohypo real estate financing arm.

Commerzbank also said it would "continue to pursue" its goal of reaching a 4bn-euro operating profit by 2012, adding targets were still conditional upon market stability.

Government stake

Commerzbank's main profit engine is its Mittelstandsbank (MSB) - which specialises in financing Germany's medium-sized companies, many of which are enjoying an export boom.

MSB accounted for 501m euros in operating profit in the second quarter.

Dirk Becker, an analyst at Kepler equities, said: "It you take out the Greece impairment, they earned 815m euros - that's quite a lot."

The German government has a 25% stake in Commerzbank, one of the worst exposed to the credit and eurozone crises.

Commerzbank recently paid back 90% of state aid worth 18.2bn euros that it received to survive the financial crisis and complete a takeover of Dresdner Bank, its troubled rival.

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