An indication of how much the debt woes of other countries may affect banks came on Wednesday as Commerzbank AG of Germany said its quarterly profit fell 93% once it had written down the value of its Greek holdings.
The bank’s net income dropped to 24.4 million euros ($34.4 million) during the second quarter of 2011 compared to 352 million in Q2 2010. Operating profit at its core bank, however, more than doubled.
Even though the bank recorded some 760 million euros in impairments in the writedown of its Greek bonds, “the second quarter of 2011 has again shown that we are on the right track,” said Eric Strutz, chief financial officer of Commerzbank, in a statement. “Our core business is well positioned; it is robust and profitable on a sustainable basis despite the impact of the European sovereign debt crisis."
Stutz, who announced Tuesday that he planned to leave the bank when his contract expires in March 2012, added that the markets currently look likely to stabilize only to a limited extent because of the sovereign debt crisis.
“Nevertheless, we are not predicting any significant repercussions on the core bank's business activities for the 2011 financial year,” he said. “An operating profit well above the figure achieved in 2010 is therefore expected.”
The group's results depend on the implementation of Commerzbank’s package of measures to tackle the European sovereign debt crisis, and the absence of any further escalation of the current situation, he said.