Despite a highly unstable economic environment, Germany's Commerzbank posted a bottom-line net profit of 638 million euros ($846 million) in 2011.

While analysts viewed this as an achievement in itself, the country's second-largest bank announced on Thursday its profits last year dropped by 55.4 percent, down from 1.43 billion euros in 2010.

Commerzbank said in a statement that operating profit fell even more sharply, plunging 63.3 percent last year to 507 million euros. "2011 was characterized for the bank by a successful first six months and rather difficult market conditions in the second half of the year," said Chief Executive Martin Blessing.

Commerzbank wrote down the value of its holdings of Greek sovereign bonds to 26 percent. Its asset-based finance division booked an operating loss of 3.9 billion euros in 2011. But its core business fared much better.

Positive outlook

"In the light of the stable economic situation in the pivotal markets in Germany and Poland, revenues before loan loss provisions of the core banking division increased by 14 percent to 12.4 billion euros," said Martin Blessing.

The bank made big strides in meeting the requirements of the European Banking Authority which had been insisting on an increase in the banks' equity capital. Commerzbank still needs to raise 1.8 billion euros by the end of June, an amount which is down from 5.3 billion euros last September.

Looking ahead, the Chief Executive said Commerzbank was on track and well positioned strategically for the current year. He added the focus would be on improving operating profitability and reducing risks further.

Blessing admitted, though, that the high degree of uncertainty resulting from the ongoing European debt crisis would continue to pose major challenges.

hg/mll  (AFP, Reuters)