GERMANY – First-half earnings at Commerzbank’s asset management division fell by almost half amid a steep rise in operating costs due to stock options for top executives.

Pre-tax profit at the division declined 45% to €54m in the first half of 2005, from €99m in the same period last year.

Commerzbank said higher operating costs - €117m in the second quarter from €22m in the first - were behind the profit decline. Of the costs, a Commerzbank spokesman said stock options for 200 of the bank’s top executives were the biggest, adding that they were a one-time charge.

“We think the important thing to stress is that revenues at the asset management division in the second quarter (€134m) were on par with those in the first,” the spokesman said.

“With financial markets showing signs of a recovery, we’re also optimistic about a better performance in asset management during the second half,” he added.

The steep profit decline in the first half was accompanied by €219m in investor outflows at Cominvest, Commerzbank’s German institutional fund arm.

Despite these outflows – for which no reason was given – Cominvest said its institutional assets under management totalled €29bn on June 30, up from €28bn on December 31 last year. Nearly 20% of the assets under management is money from pension funds.

A spokeswoman also said Cominvest was still confident that, for the full year, it would have €700m in net inflows to its funds.