House bank blues

6 October 2003

So why does Commerzbank still value its mortgage bank business at a fat premium to book? It is valued at 40% of book, while its biggest quoted rival is valued at 60% of book.

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HVB Group's real estate unit made its debut on the German stock market following its demerger from the troubled banking group. At midday, the shares were trading at E12 each, valuing the mortgage bank at E1.6bn or about 40% of book value.

Commerzbank merged its real estate subsidiary into Eurohypo last year in return for a 35% stake in the unit. It wrote up the valuedthe stake at E2.3bn in its books, implying a value of E6.6bn for the whole of Eurohypo – or 1.4 times its book value. Commerzbank declared an E700m profit on the transaction.

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