will spin off itsexchange-traded fund business with a view to ultimately selling it to reducethe lender's balance sheet risk, the FrankfurterAllgemeine Zeitung reported Oct. 6, citing Commerzbank CEO Martin Zielke.
"Wewill find a more appropriate owner for it," Zielke reportedly toldinvestors, saying this would happen "in the medium term" and that thebuyer would likely not be a bank. Another option would be to list Comstage, theunit that is responsible for Commerzbank's ETFs, Zielke added, according to theGerman newspaper.
Priorto the sale or listing, Comstage is set to be combined with Commerzbank'sdivisions focusing on emissions trading and other structured finance products,the FAZ added.The lender expects the sale and its retreat from other, unspecified investmentbanking business lines to result in a revenue decrease of €400 million a year,about half of which will likely be recouped through the related reduction incosts, the newspaper said, citing a company presentation.
BecauseETF trades generate low fee income, size is vital to make a substantial profit,but Commerzbank has only about a 4% share of Germany's relatively small ETFmarket, compared to BlackRockInc.'s almost 50% and Deutsche Bank AG's 23%, FAZ said.Commerzbank in March was reportedly Germany's market leader with regard toemissions trading, but has since dropped to seventh as its market share halvedand its outstanding volume fell by more than two-thirds to €4.5 billion.
Thepossible sale of the revamped and spun-off Comstage is part of Commerzbank'snew strategyand would allow the lender to redirect €500 million into its core business, Zielke reportedly said.At the same time, the bank's balance sheet risks would decrease by €6 billion,whereas keeping the business would result in the balance sheet risk growing by€8 billion in the next few years owing to changing regulations, he added.
Atthe end of September, Commerzbank also sold its headquarters at Germany'slargest office tower to Samsung SRA Asset Management, a subsidiary ofSamsung Life Insurance Co.Ltd. The size of the transaction was not disclosed, but the lendersaid it will stay on for at least 15 years as a tenant after completing thedeal in the summer of 2017, resulting in "significant savings."