The main Irish unit of German banking giant Commerzbank has paid out more than €158 million to its Frankfurt-based parent in dividends and a capital redemption, new filings reveal.
The IFSC operation, which specialises in international lending to top-rated institutional and corporate clients, reported a reduction in pretax profits to €21.75 million for 2006 from €24.12 million a year earlier.
The Irish unit reduced its dividend payment by €1 million to €20 million.
However, its parent took advantage of a change in capital requirements in the rules of the Bank for International Settlements to redeem €138.43 million from the capital of the Irish bank.
The bank's share capital stands at €389.83 million following the redemption.
Managing director John Bowden said the redemption was made in advance of Commerzbank's adoption next January of the Basel II regulation on capital requirements on loans to highly- rated clients.
The bank will be required under the new system to maintain a risk rating of 20 per cent on top-rated loans, down from the 100 per cent risk rating under the old system.
"The amount of capital we're required to hold to support a treble A-rated asset is much lower. Obviously, it was decided that we could repay this capital to our parent and that's essentially what we did," said Mr Bowden.
"We did overall in 2006 increase the balance sheet by just over €300 million. Our strategy will be to continue to grow it, but within parameters of achieving a certain return on the assets."
Mr Bowden said the drop in profits should be seen in light of once-off gains in 2005 when the bank took advantage of a declining yield environment to dispose of a form of fixed-rate loan known as schuldscheine and realised additional profits of €4.52 million on such sales. Moves by the European Central Bank to increase interest rates on several occasions last year meant that opportunity was not open to the bank in 2006.
The directors' report with the accounts said the bank "continued its profitable business with highly-rated clients" as well as structured transactions such as asset-backed securities, asset swaps and credit default swaps.
