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Commerzbank has sold its Equity Markets & Commodities (EMC) business to Societe Generale as the bank reduces its overall complexity and frees up capital for investment in Commerzbank’s core franchise.
The business comprises the Commerzbank’s manufacturing and market making of flow and structured trading and investment products as well as its established exchange-traded funds (ETF) brand, Comstage, which is amongst the major retail products market makers and amongst the leading dealers of medium-term notes. The bank’s EMC business generated €381m gross revenues in 2017.
Marking a further milestone in the execution of the “Commerzbank 4.0” strategy, the transaction is subject to pre-clearance with competent tax authorities, approval by further relevant authorities and the employee representative committees as well as the finalization of legal documentation.
The Equity Capital Markets (“ECM”), the Equity Brokerage (“Equity Trading” and “Equity Sales”/”Brokerage”) businesses, and the hedging business for commodity risks will not be part of the transaction. These businesses remain part of its strategic client offering.
The deal includes the transfer of EMC’s trading books and client franchise, staff, as well as parts of the IT infrastructure to Societe Generale. The transfer of EMC front office employees and certain associated support function staff is subject to approval by employee representative committees.
EMC revenues are expected to fade out in the profit and loss statement of Commerzbank during 2019 as the transfer of trading books and associated balance sheet will gradually take place starting at the end of 2018. The sale of the EMC business will save Commerzbank at least €200m by year-end 2020 in expenses.
Martin Zielke, Chief Executive Officer (CEO) of Commerzbank, said:
“With this agreement, we are delivering a further milestone in the implementation of our ‘Commerzbank 4.0’ strategy. We are simplifying our business, we are contributing to our cost-cutting targets, and we are freeing up capital for the benefit of our core business with private and corporate clients.”
Michael Reuther, member of the Board of Managing Directors responsible for the Corporate Clients segment, commented:
“As a market leader for corporates in Germany, we will, of course, continue to offer the full range of capital markets products including commodity hedging products and brokerage services to our clients.”
Roberto Vila, Divisional Board Member Equity Markets & Commodities, said:
“Over the last 29 years, the Equity Markets & Commodities business has grown in Commerzbank to be one of the leading European manufacturers and market makers of financial products. I am convinced that with Societe Generale and Lyxor, leading Derivatives and ETF Houses, we have found the right new owners for this franchise to grow, innovate and be even more successful in the future. We will ensure a smooth and transparent transition process for investors who are holding our products.”