Analysis of Commerzbank 2014

Company: Commerzbank

Business: A German bank and more precisely the second largest bank in Germany. They claim to work in four business areas on the home page that they very poorly explains and in the annual report they very clearly shows five segments and those are: Private Customers (accounts, credits, wealth management etc.), Mittelstandbank (bank services for medium sized companies as well as institutions), Central & Easter Europe (with mBank that are expanding in especially Poland), Corporate & Markets (Corporate finance, equity, currencies etc.) and finally they one they try to hide which is Non-Core Assets (all the money loosing units such as Real Estate and ship-building or better put that gave credits for the shipping industry with heavy losses and probably the currently biggest concerns with Commerzbank... more so than what south of Europe is).

Active: Strongest focus in Germany, Poland and generally Europe. Have somewhat presence in 50 countries world wide.

P/E: 189-ish

For the previous analysis of Commerzbank please look here.

The P/E is still horrible since the have yet to improve their earnings and ended up at 188.9 but the P/B is very nice with 0.55. Still from Graham we receive a negative response on Commerzbank. The earnings to sales are bad with 1% and the ROE is horrible with 0.3%. As any bank the book to debt ratio is very low with 0.05. In the last six years they have had yearly negative growth of -6.8% which is awful and the motivated P/E would end up around 8 meaning that according to their current earnings they are highly overvalued on the market. They pay no dividend which I seriously do not like.

Conclusion: Graham says no to this one and for me it is a classical turnaround company. I still today consider the stock to be cheap but I personally see no reason to increase my holding any further. Especially since I expect it to take a couple of years until Commerzbank will have managed to sort out their financial situation. Looking back I stepped in far to early and would not advice anyone to step into Commerzbank today unless they start showing some good results again which they still have not managed to do.

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