Banks, Financial

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RBS share drop accelerates on stress test flop

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Categorized | Banks

Commerzbank plans thousands of job cuts

Posted on September 23, 2016

Commerzbank shares jump on reports of government mulling sale ...epa03788751 (FILE) A file photo dated 15 June 2010 showing a worker attaching the Commerzbank logo at a bank's branch in Frankfurt Main, Germany. Shares in Commerzbank jumped 15 July 2013 following reports that the German government was considering selling a stake in the partly state-owned bank to Switzerland's UBS. The government holds a 17-per-cent stake in Commerzbank, which was part of the 18.2-billion-euro bailout (23.7 billion dollars) that the Frankfurt-based lender received in 2009. The government's Financial Market Stabilization Funds (SoFFin) originally took a 25-per-cent stake in Commerzbank, which was reduced in May following a capital increase by the bank. According to weekend media reports, German Finance Minister Wolfgang Schaeuble has spoken to UBS chief Axel Weber about the Zurich-based bank acquiring a holding in Commerzbank. A Finance Ministry spokeswoman declined to comment on the reports. EPA/MARIUS BECKER©EPA

Commerzbank is considering cutting thousands of jobs as the German lender prepares to unveil a new strategy designed to boost its flagging profitability.

Martin Zielke, who succeeded Martin Blessing as chief executive of Germany’s second-biggest lender in May, is likely to unveil the plans next week once they have been approved by the bank’s supervisory board.

    Many of the staff cuts are likely to come in Commerzbank’s back-office operations. Germany’s Börsen-Zeitung reported on Friday that Commerzbank could shed as many as 5,000 jobs overall, which would equate to about 10 per cent of its 49,000-strong workforce. Commerzbank declined to comment.

    The lender is also considering overhauling its divisional structure and combining its investment bank with some of the activities of its core Mittelstandsbank, which serves the host of small and midsized businesses that make up the backbone of the German economy.

    As well as cost cuts, Commerzbank’s plan will also include measures to boost growth and drive greater digitalisation.

    After being the subject of an €18.2bn rescue during the financial crisis, Commerzbank has spent the past few years working its way back to health. It last year posted a net profit of €1.06bn, its best result since 2010, and reinstated its dividend after a seven-year hiatus.

    Meanwhile, its core tier one capital position, a key measure of financial strength, improved to 12 per cent at the end of December.

    However, 2016 has been more difficult. Commerzbank revealed in July that its core tier one ratio had fallen to 11.5 per cent at the end of June, and in August conceded that profits would fall this year.

    Like many German lenders, Commerzbank’s business model has come under pressure as the fierce competition between the country’s profusion of banks for loans and deposits has been exacerbated by the European Central Bank’s introduction of increasingly negative interest rates on excess deposits.

    “What Commerzbank did in its last strategic plan was to give an absolute target for flat costs, and aim for volume growth on top of that,” said Neil Smith, an analyst at Bankhaus Lampe in Düsseldorf.

    “They did a good job of that. I think they could do something similar again. But the problem is that, given the macro-environment, higher volumes may not necessarily translate into higher revenues.”

    Shares in Commerzbank, which have lost around a third over the past 12 months, were down 0.5 per cent at €6.29 on Friday afternoon.