The ratings on Commerzbank AG reflect its sound credit-risk management, which compares favorably with many domestic peers, and the bank's domestic franchise among private and corporate customers that provides it with a sound and diversified funding base. The ratings also reflect Commerzbank's progress in executing a range of strategic and cost-cutting initiatives, which are expected to allow it to further improve its profitability levels despite a pretax loss in the third quarter of 2004 caused by its investment banking unit and restructuring charges. The primary negative rating factors are the bank's still moderate core profitability and modest market position in a highly competitive and structurally difficult domestic market environment. Overall asset quality is sound and, barring major surprises, provisioning needs
